European anger ensures further twists in Opel saga

Tempers are rising in Europe over Germany's promise of billions of euros in state aid to support the sale of General Motors' loss-making European unit Opel/Vauxhall.

European anger ensures further twists in Opel saga
Photo: DPA

In a preliminary deal announced in Berlin with great fanfare on September 10, GM is selling a 55 percent stake to Canadian auto parts-maker Magna and Russian state-owned lender Sberbank.

Chancellor Angela Merkel’s government, keen to safeguard the jobs of Opel’s 25,000 German employees, half the total in Europe, agreed to sweeten the deal with €4.5 billion worth of public money.

Merkel was eager to secure a rescue before elections on September 27. She duly won a second term.

The financing was contingent, however, on other European governments where Opel has plants, such as Britain, Spain, Poland and Belgium, stepping up to the plate and providing their own taxpayers’ money too.

Instead, the deal has been met with grumbling, with these countries unwilling to stump up cash for a deal that they see as only guaranteeing German jobs and keeping German plants up and running.

With Opel losing money fast, dependent on a market where too many cars are being made for too few customers, Magna is reported to be looking to take around 10,500 workers off the payroll.

British Prime Minister Gordon Brown’s government, which has a far tougher re-election battle than Merkel waiting for it next year, has made clear that it is not amused.

Peter Mandelson, British business secretary, told the Financial Times in Seoul last Thursday he could not “sign off” on the deal in its current form, citing “shortcomings” identified in an independent auditors’ report.

Britain, where Vauxhall employs 4,700 people, is ready to provide €400 million in loan guarantees, but first wants assurances that two plants in Luton and Ellesmere Port remain open, the FT said.

Spain, where Opel employs 7,000 people in Zaragoza province, has also been up in arms, with Industry Minister Miguel Sebastian boycotting a European meeting on Opel in Berlin on Friday.

“We have never been favourable to Magna’s offer,” a spokesman in Madrid said on Friday, with Sebastian “pretty unhappy” after the last get-together in the German capital.

Instead, Sebastian met with Magna boss Siegfried Wolf, appearing afterwards slightly more conciliatory, pledging to improve “communication problems” with the Canadian firm.

In Belgium, where Opel’s Antwerp plant is seen as a prime target for closure, thousands of workers, including hundreds from Germany, held a mass protest last month. The plant employs around 2,500 workers.

These countries have turned to EU headquarters in Brussels for help. EU Competition Commissioner Neelie Kroes is scrutinising the deal to determine whether Germany’s state aid was contingent on German plants not being closed, which would make it illegal.

Germany, though, has expressed confidence that all will be well, and GM, Magna and Berlin reportedly want to sign a final deal this week. The transaction would then be completed by the end of November.

But analyst Tim Urquhart from IHS Global Insight said this aim was ambitious as long as there was no thumbs-up from the EU and no deal with unions on employees taking a 10-percent stake in “New Opel”.

“I have said right from the start that there are still a lot of twists and turns to be done before this deal is completely signed off,” Urquhart said.

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The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.