European Business News (EBN), 97-01-14

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated January 14 1400 CET

CONTENTS

[01] Bonn gears up for Lufthansa float

[02] E.U. warns U.K. over B.A. deal

[03] France restarts Thomson privatisation

[04] U.S. CPI rises to 3.3%

[05] Italy narrows public sector deficit

[01] Bonn gears up for Lufthansa float

Transport Minister Matthias Wissmann said, 'I am confident that, with the help of this law, the (remaining state-owned stake) can be floated this year.'

The German government currently holds a 36% stake in Lufthansa. At present market levels, that shareholding is worth some 3bn Deutsche marks ($1.9 billion). Matthias said the new law would mean that all future stock issued in German airline businesses would be registered shares that were not freely transferable.

Airlines need to retain a majority of domestic ownership to meet national air sector agreements in most countries. If more than 40% of Lufthansa shares fell into foreign hands, the airline would then be allowed to buy back its own stock. If the proportion rose above 45%, a new share issue in which existing shareholders would not be allowed to take part would be possible.

Lufthansa expected that under such a law, existing shares would have to be converted into non-freely transferable shares.

[02] E.U. warns U.K. over B.A. deal

'The deal...is planned to be implemented during the course of the early summer of this year and I see no reason why it should not be possible to achieve that timetable,' Ayling said.

EU competition chief Karel Van Miert has warned the United Kingdom of legal action if it proceeds with its proposed clearance of the alliance between British Airways and AMR's American Airlines unit. In a letter to U.K. Trade and Industry Secretary Ian Lang on Friday, Mr. Van Miert warned that if London's approval of the world's biggest airline alliance goes ahead, he may 'be forced' to take the case to the EU Court of Justice.

Hardliner Van Miert believes the alliance would drastically abuse their dominant market position. And his fears have led him to discount a move to attach conditions to the alliance, a common practice when EU regulators have problems with a merger. He also questioned a U.K. proposal that the carriers give up 168 slots a week at London's Heathrow Airport. British Airways has indicated it will surrender the slots only if it can sell them.

The letter argues that selling the slots, a move that could net the two airlines as much as $300 million, could prove illegal under EU law and isn't fair to new entrants on U.K.-U.S. routes. An EU official familiar with the case said Van Miert considers the proposed 168 weekly slots 'completely inadequate. `If you really want to make a gesture, it would have to be 300 to 400 slots,' he said

[03] France restarts Thomson privatisation

'Our people totally think that we were discriminated against...and if there is another disappointing result, it will seriously affect the relations between South Korea and France,' Kim told to Jean-Claude Paye, French President Jacques Chirac's visiting envoy who announced the decision to start all over again.

During a 45-minute courtesy call by Paye, President Kim also said South Koreans have come to feel France is a country which it can't trust after the rejection of Daewoo's bid.

In disturbing signs for France, Kim made reference to Korean concerns over a recent breakdown of a French high-speed train during the recent cold spell in Europe. With France's GEC-Alsthom building a high-speed railway in South Korea under a $13 billion contract, the clear implication is that this might not be as safe as Paris had presumed.

Paye informed President Kim that such train incidents will not happen in South Korea.

Paye arrived in South Korea Monday to ease South Korea's anger over the French government's decision against Daewoo.

[04] U.S. CPI rises to 3.3%

Rising energy costs played the largest role in boosting December consumer prices, though broadbased increases in transportation, housing and entertainment goods and services accounted for some of the rise last month. The increase was in line with what many economists expected.

The increase brought the Consumer Price Index (CPI) up to a level of 3.3%, the largest 12-month gain in six years.

Excluding the unpredictable energy and food components, the consumer prices rose just 0.1%. The so-called core CPI rose at a 2.6% rate in 1996, the smallest increase since 1994.

Fitting with the theme of recent months, energy prices accounted for most of the increase last month. The energy index rose 1.6% in December. Within that braoder category, gasoline rose 3.1%, fuel oil rose 0.7% and natural gas rose 0.9%. Only the index for electricity posted a decline in December, falling 0.1%.

Analysts polled last Friday had predicted the CPI would rise 0.3% in December.

[05] Italy narrows public sector deficit

Meanwhile, the ministry recently gave its forecast for the full-year deficit. Earlier in January, the Treasury stated that the deficit for all of 1996 would amount to about 138.500 trillion lire, compared with 130.200 trillion lire in 1995.

The Treasury said tax revenues amounted to 409.874 trillion lire in the January-Oct. period of 1996 but public sector spending totaled 548.445 trillion lire. Treasury operations resulted in a surplus of 22.192 trillion lire.

The deficit was covered with the net issuance of medium- and long-term domestic government securities for 98.782 trillion lire, while the issue of government debt in foreign markets totaled 9.368 trillion lire and other Treasury operations registered an 8.229 trillion lire increase.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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