Martin Flanagan: Eurozone deal may come too late to fend off a fresh recession

Europe’s foot‑dragging politicians may finally come up with a “solution” to the eurozone debt crisis tomorrow, but it may be too late. The latest economic data from the single currency area shows it heading full speed towards recession.

The zone’s private sector has shrunk at its fastest pace since July 2009 and companies are saying they expect the current situation to deteriorate.

It would be ironic if Europe does relapse into a double‑dip recession soon after its politicians finally get their act together in recapitalising their banks and boosting the zone’s bail-out fund.

Global stock markets rose yesterday in anticipation of a credible plan being unveiled. But they could go straight into reverse if Europe tumbles back into recession.

It is one thing to buy stocks and bonds on weakness, but it would be far too early in the cycle for investors to adopt this contra‑thinking.

If the “haircut” – or losses – being looked at by Greek debt-holders is anything like the 40, or even 60 per cent, being speculated, that could also undermine wider bond markets, both corporate and sovereign, for a long time.

Can we remember a time when bonds were seen as a haven when equity markets were volatile? That comforting picture seems sepia‑tinged, so much has changed.

European politicians deserve criticism for their procrastination over the summer in failing to grasp the eurozone nettle. But the politicians did not grasp the argument that a single currency needed a single fiscal policy. And it was fudged because the politicians knew when they launched the currency a decade ago that they were out of step with their electorates in wanting greater political union as well as monetary union.

This disingenousness has led to the current precipice. The current crop of leaders are paying the price for the architects of the currency sweeping something unpleasant under the carpet.

In terms of the wider bailout, the recapitalisation of the banks is probably the easiest thing to achieve. It is the size of the European rescue fund and how much Greek debt is written off that are the most contentious issues.

However, the disturbing possibility, as said earlier, is that perhaps Europe is crossing a wider economic Rubicon into recession again that will prove resistant to any sovereign debt solution.

We may have spent the whole summer trying to put together a European financial raft only to find, possibly, that the negative economic tide is too strong for us anyway.

Aah the irony as ABN Amro rides to the rescue in debt crisis

Dutch bank ABN Amro says it is in the market to buy distressed eurozone debt from rivals caught up in the sovereign debt crisis.

The same ABN Amro whose acquisition did for Sir Fred Goodwin’s Royal Bank of Scotland and Dutch‑Belgo banking group Fortis, triggering massive taxpayer bailouts. The only one to get out of the consortium alive without taxpayer help was Santander of Spain.

ABN Amro’s takeover became the canary in the coalmine of corporate over‑indebtedness, frozen capital markets and boadroom hubris.

And, after all that, Gerrit Zalm, the former Dutch finance minister who heads the nationalised left-overs of the gutted bank, is portraying himself as a white knight amid the eurozone chaos. You would have to have a heart of stone not to laugh.

Case for high boardroom remuneration remains unproven

PAUL Walsh, boss of Diageo, Scotland’s biggest whisky company, has had a pop at the 50 per cent income tax rate on people earning over £150,000.

He says the highest rate will do long‑term damage to the UK’s ability to attract the best and compete and that he is no longer creating senior jobs in the UK because of that financial constraint. It means the brains of Diageo could increasingly be based abroad.

Last week, 20 per cent of Diageo’s investors voted against the company’s remuneration report, claiming the group’s bonuses and the targets to achieve them were unduly generous and undemanding, respectively.

It could be coincidental. But is it possible the timing of Walsh’s outburst is because he is piqued at the shareholder rebellion? That he is annoyed investors patently don’t “get” the “recruit, retain and motivate” management‑speak traditionally trotted out alongside senior managerial largesse?

On the wider canvas, although nobody likes being taxed more, there is no compelling evidence so far that an exodus of managerial talent from Britain has either happened since the regulatory and pay crackdown or is likely in the foreseeable future.

The case made by Walsh and some other senior business figures remains unproven.