Thursday, February 02, 2012

A little more the Deutsche Boerse - NYSE merger

I suggested yesterday that the fact that the European Commission has blocked the merger deal between the NYSE and the German Boerse might go some way to explain the way in which Cameron rolled back on his veto.  My idea has been picked up by Business Insider, and the German business news website Finanzen who credit it with a modicum of plausibility,
Did the EU kill off the Deutsche Boerse - NYSE merger so that the UK's prized London Stock Exchange would remain top dog in Europe?It bears consideration, at very least.
So it was interesting to read the Agence Europe report this morning on the subject (behind a paywall),
All the EU commissioners agreed with the decision so a vote was not needed, explained EU Competition Commissioner Joaquin Almunia, suggesting that the commissioners who had supported the deal had ultimately seen the merits of the case made by DG Competition.
Which rather undermines my point, but reading further what do we see,
It is known that a number of EU Commissioners, including Internal Market Commissioner Michel Barnier, backed the merger as a way of creating a European heavyweight to compete with global market leaders. The merged entity would have had earnings four times higher than the London Stock Exchange from the global market, for example, although it would only have 16% of the derivatives market, compared with 19% for US competitor CME. The Deutsche Börse/NYSE Euronext merger would have created a counterbalance in the eurozone to the all-powerful City of London at a time when the planned Financial Transactions Tax looks like it would send business to the City or other stock exchanges around the world, due to the unattractiveness of smaller European bourses.


Maybe I wasn't that far off after all.

Of course this sort of thing we will not know. Cameron has to go into bat for Britain, one way or another, and if the merger came up in the private discussions one has to ask, what would you do? If the option was presented to the British government as a Manichean black and white decision it would be a tough call.

The question remains is one of strategy and tactics. Do we believe that the European are so misguided that the result of the merger, though threatening to London's pre-eminence would in the final analysis fail in its plans, due to the way in which Europe is so gung ho about introducing anti-business taxes like the FTT, thus driving business towards London, or would the new heft of Frankfurt counterbalance that?

I am not an expert, but I do think that in these matters we have to look to those words of Franklin,
They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety

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