Stimulate or die
Hollande call
France’s new president, Francois Hollande, was inaugurated this week and then immediately headed for crunch talks with German counterpart Angela Merkel. Top of the agenda was M. Hollande’s call for the eurozone to seek ways to promote growth rather than concentrate entirely on austerity measures, although Ms Merkel has made it clear the fiscal stability pact is not up for renegotiation. M. Hollande wants to use pan-European bonds to fund infrastructure investment as well as turning European Union structural funds towards job creation schemes.
Growth downgrade
King warns
Bank of England governor Mervyn King this week warned that the UK cannot avoid the slow motion car crash in the eurozone, its largest single trading partner. The Bank’s April inflation report downgraded expectations for UK economic growth from 1.2 per cent to 0.8 per cent saying the UK could not emerge unscathed from the eurozone’s woes. Mr King also said that the UK would not return to pre-crisis levels of growth until 2014 at the earliest. Inflation is expected to remain above the 2 per cent target level for the next year or so, leaving the Bank with a tricky balancing act in deciding if and when to further stimulate the economy with more quantitative easing.
Status update
Facebook in demand
Facebook’s roadshow for potential investors in the US has been even better received than was originally anticipated. In the days leading up to the float the social network business was able to raise its indicative price range to $34-$38 per share, from the original $28-$35, after being "swamped". The company will now be valued at north of $104bn, and will raise more than $12bn in its float. In the run up to the float Facebook added a further 85m shares to its offering to satisfy demand. A valuation north of $100bn would put Facebook on a par with Amazon.
Job lot
Employment rises
Unemployment figures in the UK bucked their recent trend in the opening quarter of the year. The number of people out of work fell by 45,000 in the three months to March, putting the unemployment rate at 8.2 per cent. Analysts had been expecting a 0.1 per cent rise. Delving deeper into the figures showed that more people in the UK are working part-time than at any time since records began in 1992, and self-employment is also at a record high. The number of long-term unemployed is also on the rise. Economists warned that the improving employment situation may prove to be short lived as economic confidence is coming under pressure.
Spring goes on
Boardrooms in focus
The so-called ‘shareholder spring’ has continued with investors at several more companies firing shots across the bows of their boards, particularly over remuneration. The latest companies to suffer significant votes against board pay were United Business Media and Regus. Meanwhile the push to greater shareholder power also appears to be gathering pace after UK business secretary Vince Cable last week spelt out plans to give shareholders a binding vote on pay and this week EU financial services regulator Michel Barnier proposed giving shareholders a binding vote and also allowing bank shareholders to vote for caps on bonuses.
Default 2.0
Congress to clash
The US federal budget looks like becoming a political battleground again this summer, a year after stalemate took the US to the bring of default and prompted ratings agencies to strip the US of its AAA status. Republicans in the House of Representatives, led by John Boehner, have warned their rivals that they will only approve a widening in borrowing if it is matched by spending cuts. The government’s finances are likely to be the dominant theme in this year’s Presidential elections.
