Tag Archives: Finland

The Grand Greek Finale

There is no other way to read it; German finance minister Wolfgang Schaeuble have practically given the Greek government an ultimatum, and if the conditions are not met in due time “further measures” must be taken. I can not imagine that these measures would involve further financial aid.

“The markets could try to force the hand of Greece and its EU partners well before this date. More volatility lies ahead.”

Gavan Nolan


Wolfgang Schaeuble, the German finance minister, was referring to Greece’s forthcoming fiscal audit by the EC/ECB, and the steps that EU would need to take if the country’s debt sustainability was called in to question.

“Of course, the markets have been doubting Greece‘s solvency for some time, and they duly took Schaeuble’s comments as a clear sign that the long-awaited debt restructuring was imminent. Never mind that Schaeuble went on to say that any restructuring before 2013 (when the ESM comes into effect) would be voluntary,” credit analyst Gavan Nolan at Markit Credit Research writes in his weekly summary.

He also points to the fact that it is hardly a certainty that “further measures” means restructuring and not more of the same austerity policies.

These caveats didn’t prevent Greece’s spreads hitting record levels on Thursday, and they continued to widen on Friday.

It will be interesting to see what happens when markets opens again after the weekend in a few hours.

Too Stressed To Test

“The sovereign’s credit curve is now steeply inverted, implying that the probability of a near-term credit event has increased. But it is uncertain that a voluntary restructuring would trigger a CDS contract.”

It is also doubtful whether private creditors would participate in such a restructuring.

“European banks, the main holders of Greek government debt, would crystallise losses on bonds held in their banking books, which aren’t marked-to-market and won’t be examined in the upcoming stress tests,” Gavan Nolan notes.

But there is little doubt in the market that Greece will restructure its debt by at least 2013, if not sooner.

Germany’s deputy foreign minister Werner Hoyer said Friday that a Greek debt restructuring “would not be a disaster”, although he made it clear that he was referring to a voluntary arrangement.

Greece has already declared that is unlikely that it will be able to access the capital markets in 2012.

“That this known means that the markets could try to force the hand of Greece and its EU partners well before this date. More volatility lies ahead,” Nolan writes.

Schaeuble’s intervention sparked some life into CDS trading on Greece, Friday.

Markit’s Liquidity Metrics show that after a significant drop from mid-March in the number of CDS quotes there was a spike upwards Thursday, though the quote numbers remain some way off March levels (see chart above).

The turmoil around Greece has taken some of the attention away from Portugal, the most recent country to request a bailout.

The sovereign’s spreads have exceeded 600 bp’s today, with Greece’s travails no doubt contributing.

The Finnish Interference

But events on the other side of Europe may also be playing a part, according to Markit Financial Information.

Finland is to hold a general election on Friday, and the outcome could have a bearing on whether Portugal will receive funds from the EU.

“The True Finns party, a eurosceptic outfit formerly on the fringes, has gained ground in recent months on the back of its opposition to bailouts. This has resonated with many Finns, who resent rescuing less prudent countries,” Nolan writes.

Finland had its own banking crisis in the 1990s and they managed without external help.

The difference in the relative credit standings of the two sovereigns can be seen by looking at the chart above.

Finland is the world’s third strongest sovereign credit, according to CDS spreads, while Portugal is in the bottom five, trading wider than even Argentina.

Aside from sovereign turbulence, the market has had to digest important inflation data. CPIs in the euro zone and China both surprised on the upside but the US core CPI came in lower than expected.

“Further monetary tightening is probable in the first two regions, though the undershoot in the US index could increase the likelihood of QE2 reaching its full maturity. Along with the unfolding earnings season and the ongoing sovereign drama, the consequences of divergent monetary policies across the world will shape sentiment on risky assets over the coming weeks and months,” Gavan Nolan concludes.

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Finns Outraged By Swedish Plans To Bring Estonian Builders To Finland

Anger has been raised among local people by the Swedish-based multinational construction company Skanska plans to recruit some 40 Estonian construction workers to build new premises for the ICT Agency HALTIK in Rovaniemi when there are nearly 400 unemployed construction workers in the area.

”The labor markets are already out of control in the Greater Helsinki area.”

Heimo Lahtela


The Swedish-based multinational construction company Skanska plans to recruit some 40 Estonian construction workers to build new premises for the ICT Agency HALTIK in Rovaniemi. Anger has been raised among local people by the fact that there are nearly 400 unemployed construction workers in the small town in northern Finland.

The figure for the all of Finnish Lapland is more than 1,000, Helsingin Sanomat reported last week.

The estimated number of foreign construction workers working in Finland is as high as 30,000. At the same time, there are some 14,000 jobless construction workers in Finland.

The members of the Finnish Construction Trade Union in Rovaniemi have held a work stoppage on Friday in protest against Skanska’s action.

In addition, MP Esko-Juhani Tennilä (Left Alliance) has made a parliamentary inquiry concerning Skanska’s actions. In Tennilä’s view it is not appropriate to recruit cheap labor for a state-run work-site, which is why the payer of the project should intervene in the matter.

”The wages Skanska will pay to the Estonians are in accordance with the Finnish collective labor agreement, even though the employees are working for the Estonian subsidiary Skanska EMV”, says Sakari Jämsä, the manager of Skanska’s Northern Finland regional unit.

”We are not willing to comment on any details relating to the HALTIK construction site, as that has been agreed upon in the contract documents”, he notes.

”The employees have been forbidden to speak about HALTIK”, confirms Pasi Heikkilä, Skanska’s chief shop steward in Rovaniemi.

Moreover, Skanska has not given its own employees any information of the HALTIK project, the construction of which is to begin within the next few weeks.

”Two Estonians came to Rovaniemi in the autumn in order to give us a hand, as the contract was lagging behind. We had to mend their work afterward, as the ceiling fillets were cracking”, Heikkilä reports.

According to Juha Hetemäki, the President of Skanska Finland, the recruitment of Estonian construction workers is a question of good building quality.

In an interview with the Finnish Broadcasting Company’s Lapland regional radio service, Hetemäki noted that the construction schedule is just four and a half months. In his opinion, it is not possible to find enough suitable labor for this project in Lapland.

”The arguments given by the management of Skanska are not watertight, as professional construction workers are certainly available in Lapland. This is the first time when a major nationwide construction company attempts to hire such a large number of foreign laborers for Lapland”, says Heimo Lahtela, the head of the Finnish Construction Trade Union’s office in Lapland.

Lahtela says that Skanska is causing turmoil on the competition and labour markets in Lapland, which are working successfully. Importing Estonian laborers cannot be profitable, as they should also be entitled to accommodation and per diems, Lahtela believes.

”The labor markets are already out of control in the Greater Helsinki area. Yesterday, two building entrepreneurs called me. They said that they would withdraw from the construction markets in Helsinki, claiming that it is not possible to run a profitable business in the capital region if employers have to pay salaries plus social security contributions in compliance with the labor agreement”, Lahtela continues.

Lahtela has heard that at some construction sites in Helsinki, Estonian workers sometimes have to pay back part of their wages. Sometimes, working hours are left unrecorded.

Some Estonians have also been intimidated by their employers.

Lahtela fears that such shady business practices could spread even to Lapland.

”When the government uses debt financing for economic stimulus it must mean that these funds are used to employ Finnish workers. The purpose cannot be to pump money into shady foreign businesses through a complicated chain of construction firms”, Lahtela insists.

The estimated number of foreign construction workers working in Finland is as high as 30,000. At the same time, there are some 14,000 jobless construction workers in Finland.

The underlying factor behind the flow of Estonian workers into Finland is the economic downturn in Estonia that has brought nearly all construction activities in the country to a halt.

Source: balticbusinessnews.com

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An Estonian Mystery

Although critics have for years predicted the collapse of Bigbank, Estonian-owned bank that started as a provider of small unsecured consumer financing, the bank reported much better 2009 results than any other bank in Estonia. In addition to making a nice profit, Bigbank doubled its volume of deposits and redeemed about 600 million kroons worth of international bonds before due date.

“At current projections we are not seeing a need to raise additional financing and plan to redeem our bonds by due date.”

Targo Raus


Moreover, while at the beginning of 2009, Bigbank was burdened by 1.5 billion kroons in issued bonds, the figure fell by half by the end of the year, the Estonian newspaper Äripäev writes.

“At current projections we are not seeing a need to raise additional financing and plan to redeem our bonds by due date,” said Targo Raus, CEO of Bigbank.

When Äripäev two years ago asked Raus about what would be the worst case scenario for Estonia, Raus said:

“It is if the economy would collapse and about 20% of people would be unemployed.”

Now Raus says that he believes the unemployment situation to have hit rock bottom; “I think most of the layoffs have been made and the initial impact of unemployment has been seen.

The bank’s consolidated net profit in 2009 amounted to 117.1 million Estonian kroons compared with 144.7 million kroons in 2008.

During the year the bank opened a branch in the Finnish market and launched offering of cross-border deposit services in the German and Austrian markets.

At the end of 2009, the bank’s loan portfolio was on the level of 2.053 billion kroons, a 10.3% decrease year-over-year. The loan portfolio showed a 17.0% growth in the Lithuanian market.

Looking by countries, loans issued in Estonia constituted to 47.1%, in Latvia to 40.6% and in Lithuania to 12.3% of the total loan portfolio.

The amount of term deposits reached 1.173 billion kroons at the end of 2009 compared with 630.6 million kroons at the end of 2008.

Targo Raus

Chairman Targo Raus said that on the background of the tough macroeconomic developments the bank was implementing a conservative management policy and at the same time managed to maintain proper profitability and enter into new markets.

“Our goal in 2010 is to continue the bank’s geographic and service range expansion in foreign markets,“ Raus says.

Bigbank is a specialised credit institution based on Estonian capital, which has branches in Finland, Latvia and Lithuania and provides its services on cross-border basis also in Austria and Germany.

As of the end of 2009 the bank employed 394 people and had in total 28 offices.

The bank’s bonds are listed on Stockholm Stock Exchange.

Source: balticbusinessnews.com

Financial Statement.

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