RADAR Vienna – Austria mulls life post-Haider
The New World Order
Austria is in shock after the death of Jörg Haider in a car accident following a parliamentary election in which his breakaway party, Alliance for Austria’s Future, propelled the far right into the country’s strongest political force. The 28 September election gave Haider’s former party, Freedom Party and Alliance for Austria’s Future a combined 29% of the votes, with Haider taking support away from the uneasy coalition comprising the centrist People’s Party and the left-leaning Social Democrats, who polled just 26% of votes. The political fallout of Haider’s death is still far from clear. In the immediate aftermath some analysts predicted that Haider’s death would hasten the reconciliation between the major parties; others saw an opening for a right-wing coalition government.
Moscow – Georgia fallout continues The damage caused by Russia’s August invasion of Georgia continued to reverberate through the economy, worsening the already clouded international perceptions of the country. Over September, the Russian stock market experienced its worst falls since the financial crisis of ten years ago, failing to respond to official injections of funds as analysts said it faced a liquidity crisis accentuated by a rise in capital outflows. Trading on both exchanges — Micex and the dollar-denominated RTS — was temporarily halted by regulators to prevent freefalls in equity prices. Political risk is now perceived as higher with markets concerned at unprovoked state intervention in business, falling oil prices and Russia’s deteriorating relations with the West.
Istanbul – Turkey gets building boost from EBRD An overwhelming majority of directors of the European Bank for Reconstruction and Development (EBRD), the organisation set up in 1991 to help fund development in the former communist bloc, have voted in favour of Turkey becoming the first non-former communist country of operation. The move — pushed by the US — will help Turkey attract investment to its impoverished southeastern region, which substantially lags the rest of the country in terms of development, and boost the often fragile private sector in this region. Full membership of the EBRD will come as some compensation to Ankara, given the recent faltering of its EU accession plans, and amid a worsening slowdown in the domestic economy.
As their financial systems tottered on the edge of a cliff, European governments took drastic and unprecedented action to prop up failing banks, guarantee loans and flood the markets with cash by pouring unlimited funds into central banks. The Federal Reserve, the European Central Bank (ECB), the Bank of England and the Swiss central bank, all agreed to dole out as much cash as banks ask for in a bid to reduce banks’ borrowing costs to each other and provide liquidity. The 15 eurozone countries have promised to guarantee new bank debt and to inject capital into ailing banks to replenish capital and encourage longer-term borrowing. European central banks have matched heavy demand for dollar liquidity by pumping more than $250bn into financial markets to rally the global markets after Black September. And in an unprecedented joint action midOctober, the European Central Bank, Bank of England and Swiss National Bank agreed to seven-day dollar funds at a fixed interest rate. The European rescue plan was constructed from the main planks of the UK scheme, under which £37bn (€46.25bn) will be pumped into three banks: Barclays, Royal Bank of Scotland, and LloydsTSB/HBOS, two banks in the middle of a government-ministered shotgun marriage. Europe did take some unilateral measures before admiring British prime minister Gordon Brown’s financial architecture. French bank BNP Paribas will take control of the main Belgian banking and insurance operations of Fortis, in a deal brokered by the Belgian government following the nationalisation of the group’s Dutch businesses. The €14.5bn deal will make BNP the eurozone’s biggest bank by deposits; Belgium and Luxembourg’s governments will own stakes. Meanwhile, Belgian bank Dexia received €6.4bn from the Belgian, French and Luxemburg governments.
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