BUSINESS WATCH
Hannan’s view Red tape cannot be an elastoplast for our sick financial institutions, says Daniel Hannan
AUTOMOTIVE Europe revs up motor demands A week after US Congress approved a $25bn “green tech” bailout for Detroit automakers, Europe’s car industry requested a €40bn loan package and incentives to scrap vehicles more than eight years old. Carmakers urge lowinterest loans “to help secure a sustainable market for current and newly developed fuel-efficient technologies” through the European Automakers’ Association (ACEA). Europe’s demands came as the UK became the latest market to report a sharp fall in new car registrations, down 21.2% in September. The scrapping scheme, ACEA said, would accelerate consumers’ uptake of fuel-efficient technologies and put new cars on roads. The European parliament recently approved a tough timetable requiring carmakers to cut vehicles’ CO2 emissions sharply by 2012, despite industry fearing lost jobs.
LUXURY Lanvin looks East; Hermès says ‘non’ Lanvin is in talks to sell a stake to an unnamed Qatari investor in a deal that could value the revitalised French fashion house at around €150m. News of the negotiations came as the outlook for the luxury goods market was starting to deteriorate and credit facilities were drying up, strengthening the hand of cash-rich investors. Lanvin’s controlling shareholder is the Taiwanese media magnate Shaw-Lan Wang, who reportedly wants to sell a stake of 35%—40%. Meanwhile, Hermès’ controlling family has no plans to sell shares, according to chief executive Patrick Thomas. Speculation that family members, who together own 73% of the French luxury house, could sell all or part of their stakes have kept Hermès’ share price sky high — it has gained 30% since January in spite of the global economic meltdown — and allowed the stock to trade on the highest valuation multiples of the European luxury sector. Hermès has a dazzling market capitalisation of €11.98bn and trades on a 2009 price to expected earnings per share ratio of 36. This is more than double the industry average.
T
he EU is a solution in search of a problem. Whatever the question, the answer is invariably “more Europe”. So it was inevitable that the EU would respond to the financial crisis by demanding yet more power from its constituent nations. MEPs have voted to regulate private equity and hedge funds. Nicolas Sarkozy, who currently holds the EU presidency [until 31 December], wants a pan-European bank rescue fund, a new Brussels regulatory authority, curbs on bonuses and EU-wide accounting rules. I am reminded of the atmosphere after the attacks of 11 September 2001. The EU had been pushing for the harmonisation of justice and home affairs for years, but had made little progress. Then it hit on the idea of repackaging its proposals as “anti-terrorism measures” and, in the new mood, no one wanted to be seen voting against them. Similarly, in the current climate, no one wants to be portrayed as the speculator’s friend. Still, it is worth pointing out that more red tape would not have helped. The crisis has hit banks in tightly regulated countries — Fortis, Dexia — as well as in the more liberal Anglo-Saxon world. Indeed, it is arguable that state intervention exacerbated the problem. As recently as earlier this year, the US Congress was urging Fannie and Freddie to assume greater liabilities. And the underlying cause of the crunch is that interest rates were kept too low for too long — by the Fed, the ECB and the Bank of Japan. That was a political decision, not a market one. The trouble is that politicians hate to admit their impotence. They can’t simply say: “This is a correction after years of easy credit, and I’m afraid there’s nothing much that anyone can do about it”. Yet the awful truth is that governments are puny in the face of events. The day before Congress voted on the bail-out, central banks pumped $600bn into the system — and the markets fell. Instead of pretending that it is in their gift to break the economic cycle, politicians — in the US as well as in Europe — should concentrate on ameliorating the effect of the downturn. Instead of raising taxes to fund a bail-out that will have no effect, they should reduce the burden on people, jettisoning ballast as we sail into the storm. Then again, without regulation, what would be the purpose of the EU? Daniel Hannan is the Conservative MEP for South-East England
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