Italian Austerity Approval Advances; Airbus on Track

Devan Biswas
16 Dec, 2011
New York City

European markets closed mixed and bonds yields of Italy and Spain were on the decline. Italy

[R]4:30 PM Frankfurt – European markets closed mixed and bonds yields of Italy and Spain were on the decline. Italy’s lower house of parliament approved the €30 billion austerity measures. Airbus said that the plane maker is in on target to deliver more superjumbos in 2012.[/R]

European markets traded mixed as investors focused on the bureaucratic approvals of the latest austerity measures in Italy and Greece. Bonds of Spain and Italy rallied for the second day after better than expected auctions earlier in the week.

Italian Prime Minister Mario Monti won a parliamentary confidence vote as expected on its austerity measures by 495 votes to 88.

The Chamber of Deputies approved €33 billion package of austerity measures and spending cuts and the package now heads to the Senate for its approval before Christmas.

The measures proposed by Monti did face stiff opposition from the Northern League and unions and have been in force since December 4 but needed a parliamentary approval in sixty days.

The measures proposed initially were watered down after it faced stiff resistance from the party of former Prime Minister Silvio Berlusconi and rolled back the liberalization of closed trade and professions of taxi drivers, lawyers, notaries and pharmacies.

The package passed by the lawmakers largely included tax increases and few token measures to reform the economy. The austerity measures will reinstate first home property tax and also increase taxes of cigarettes and petrol.

Much of the Monti’s proposed measures target excessive pension payments that permit workers to retire at the age of 50 with pensions as much as 80% of their last paychecks, however no concrete measures were passed.

The austerity measures will also impose 1.5% tax on revenues repatriated under an earlier amnesty program.

Germany’s ruling coalition junior member party Free Democrats lost an internal vote on permanent euro zone bailout scheme. The vote removes a resistance to the Chancellor Angela Merkel’s European centric policy and bolsters here leadership at home.

The European financial markets traded mixed after Italian and Spanish bond yield inched lower and Italy’s industry association estimated recession in 2012.

DAX 30 index increased 8.22 to 5,738.84 and CAC 40 index declined 4.89 to 2,993.84. In other markets in the region, the benchmark index in Spain declined 0.1%, in Milan gained 0.8%, in Athens added 0.3% but in Switzerland declined. 0.7%.

The yield on 10-year Spanish bond declined 27 basis points to 5.23% and 5-year bonds fell 38 basis points to 4.31%. The yield on 10-year Italian bond decreased 18 basis points to 6.82%.

Stock Movers

Deutsche Lufthansa AG increased 16 cents to €8.96 after chief executive Christoph Franz said in a staff newsletter that the company needs higher operating margins and will start a new cost control plan early next year. The airline in its latest quarter reported operating profit decline by more than a quarter to €575 million.

Credit Agricole SA increased 5 cents to €4.09 after the French bank agreed to sell its private equity business for €300 million and raise capital to meet the revised tier-1 capital guidelines. The news was first reported by Reuters and confirmed by Ticker.com.

UK based Coller Capital specializing in buyout transactions in the private equity markets is the buyer of the group.

On Tuesday the bank said it will declare loss in the full-year after it will write down by €2.5 billion goodwill related to its equity stakes in Spanish and Portuguese banks.

BNP Paribas SA declined 8 cents to €27.84 and French newspaper Les Echos reported on Friday that the bank is looking to sell its private equity arm with $700 million in asssets.

EADS NV decreased 7 cents to €22.69 after the parent of Airbus confirmed higher delivery of its largest passenger aircraft in 2012.

Chief operating officer Fabrice Bregier said at a meeting of analysts in London that Airbus will deliver at least 30 A380 superjumbos in 2012 and has met its target of 25 delivery in 2011. The company presentation also confirmed that the plane maker is on track to cut its production cost of the supoerjumpbo to 60% of its costs in 2009 by the next year.