Architects of a currency in crisis : Euro

Ten years ago Saturday, the European Union celebrated the launch of the first euro coins and notes with fireworks, parties and solemn speeches.

Today, several members are on the edge of bankruptcy. First-world Europe is reduced to asking the IMF and China for help. The euro itself is at risk of unraveling.

How could it all have gone so wrong?

In a series of interviews with architects of the euro – a former president, a former prime minister, two former finance ministers, a former central banker, a former EU commissioner and a former EU Affairs minister – common explanations emerged.

The single currency would not have sparked the euro zone debt crisis, they argued, if the pro-European dynamic that led to its creation had continued into its first decade. But instead of launching an economic and political integration of Europe, the low interest rates and easy money that arrived with the euro led peripheral states on a path of profligacy, widening the gap with frugal, export-oriented economies of the north.

Meanwhile, as rapid enlargement made EU decision-making more cumbersome and as citizens’ enthusiasm for Europe waned, EU leaders hollowed out the authority of the European Commission, the union’s chief executive body and guardian of its treaties and of fiscal probity.

Most of all, some of the architects now admit that after the first few euphoric years, it became clear the euro itself was a flawed concept, laying a single currency over a group of countries that stuck to national sovereignty over their economies.

The euro was a dare from the get-go. Former British Prime Minister Margaret Thatcher famously spurned the currency as unworkable and a threat to sovereignty; Sweden stayed out, too. Euro boosters themselves pushed ahead with the project despite sharing misgivings about its inherent political and economic flaws.

“One thing was evident to me from the beginning,” said Guy Verhofstadt, leader of the European Parliament’s Alliance of Liberals and Democrats, Belgian prime minister from 1999 to 2008, and one of Europe’s most federalist politicians. “A state can exist without a currency, but a currency cannot exist without a state.”

FROM UNION TO DISUNION

One of the driving forces of European integration is former French President Valery Giscard d’Estaing. Now 85, he resides in a stately Parisian townhouse filled with museum-quality 18th-century furniture.

As president from 1974 to 1981, Giscard, with German Chancellor Helmut Schmidt, helped create the European Monetary System and the European Council summits of EU leaders. Early last decade, he chaired the drafting of the European Constitution that later became the Lisbon Treaty, which governs EU institutions as they function today.

For Giscard, one of the key reasons for today’s euro zone debt crisis is the EU enlargement of the past decade, in particular in 2004, when 10 countries – mostly former East Bloc nations – joined the European Union. “By the time the euro was introduced, the group was no longer homogeneous,” Giscard said in an interview.

The European Union now counts 27 members and is set to receive a 28th – Croatia – in 2013. Enlargement has made the European institutions hard to govern, he says, notably the executive European Commission, which has a commissioner for every member country.

The crisis erupted first in Greece. Giscard, a hellenophile, did as much as anyone to bring Athens into the European Union. He championed its EU candidacy at a crucial moment in 1979, fending off German objections and European Commission reservations at the time against admitting the country just seven years after the fall of its military junta.

Greece joined what was then called the European Economic Community in 1981. Two decades later, in 2001, it joined the euro.

Standing in his ballroom-sized entrance hall, decorated with deer antlers and two enormous elephant tusks, Giscard now voices the unthinkable: Greece should consider leaving the euro.

Giscard said that a deflation, or economy-wide drop in prices, of 40 or 50 percent would be necessary to restore competitiveness if Greece remains in the euro. That is probably too hard for its citizens to bear, which makes a euro exit and consequent devaluation a more acceptable outcome.

The Greek people need to study “seriously and honestly” whether to go back to the drachma or stay in the euro. “It’s a Greek choice.”

WALKS WITH A LIMP

On the other side of the French political spectrum is Michel Sapin, 59, who was finance minister in a Socialist government from 1992 to 1993 and dealt with Europe’s foreign exchange crisis of the early nineties. He is likely to hold a senior office if Socialist Francois Hollande beats conservative incumbent Nicolas Sarkozy in the April-May presidential election.

To Sapin, the euro zone’s problems stem from a fundamental design flaw in the 1992 pact that created the European Union and led to the euro, the Maastricht Treaty.

“The Maastricht Treaty was built on two pillars. The monetary pillar has been an extraordinary success, because, say what you want, there is no monetary crisis – the euro is strong,” he said. “The second pillar was the economic government. We knew from the start we had to build a second pillar for economic, budget and fiscal matters, because countries cannot share the same currency if they have divergent economic policies.”

European Investment Bank President Philip Maystadt, a veteran of EU monetary integration, could not agree more. He took part in the Maastricht Treaty negotiations as Belgian finance minister from 1988 to 1998. He recalls that Germany at the time was suspicious of unified economic government, fearing it would impinge on the independence of the future European Central Bank. But protecting the bank’s independence was not a good reason to abandon the concept of economic governance, he said.

“(Former European Commission President) Jacques Delors said the single currency walked with a limp – it had one strong leg, the monetary part, and one weak leg, the economic governance,” he said. “Clearly, this ersatz economic government was utterly insufficient.”

TURNING POINT

European leaders were aware of the shortcomings of Maastricht. They spent two years negotiating the 1997 Stability and Growth Pact, which threatens escalating sanctions on states that fail to limit annual deficits to three percent of GDP and outstanding debt to 60 percent of GDP.

But the focus on these two indicators meant that other measures of economic health, such as private debt, wage costs and the current account balance, were ignored.

As a result, EU finance ministers overlooked the build-up of tensions in the Irish and Spanish economies. Their public finances looked to be in excellent shape by Maastricht Treaty standards, until Ireland’s banking crisis and the Spanish real estate collapse. Those implosions forced authorities to turn private debt into public debt, wrecking their nations’ finances.

Imperfect as it was, the Stability Pact was the one mechanism that could have kept the single currency on the rails. But it was discarded the first time it was tested.

When the 2002-2003 economic crisis pushed French and German public finance indicators beyond Maastricht limits, the two big EU nations cast it aside. Exceptions were made, and in 2005 the pact’s provisions were watered down further.

“That was a real turning point. When the other finance ministers saw what France and Germany were getting away with, that’s when they said, ‘Ah, ok, we don’t have to respect the Stability Pact’,” Maystadt said.

In the debt-fueled prosperity of the first half decade of this century, this did not seem to matter. Euro zone interest rates were low, growth was fast, stock markets went up. At the start of the decade it looked like the lack of policy coordination would only cause member states’ economies to be a bit out of sync.

From around 2004 that changed. It became obvious that two very different models were cutting Europe in two: export-oriented manufacturing with strong wage control in the north, and debt-financed consumption in the south.

Books have been written about this trend, but a picture says more than a thousand words: the charts of net foreign assets and current account balances in north and south look like mirror images.

The combined net foreign assets of Germany, the Netherlands, Belgium, Austria and Finland grew more than four-fold to nearly two trillion euros by the end of the decade, as their current account surplus swelled to more than six percent of GDP, according to figures from Thomson Reuters Datastream and French investment bank Natixis.

But net foreign debt in France, Italy, Spain, Greece, Portugal and Ireland grew to more than 1.5 trillion euros as the southern zone’s current account deficit widened to around four percent.

“When we voted the Maastricht Treaty, it was with the firm intention to continue on the path of political integration. Then there was a sort of sigh of relief when we saw that, actually, the single currency could work without it,” said Sapin, the former French finance minister. “It has taken us ten years to understand that it could not.”

After a decade of defying common sense and with their countries’ credit ratings crumbling, euro zone leaders are finally admitting that Maastricht was flawed.

In a letter to European Council President Herman Van Rompuy before the December 9 EU summit, French President Nicolas Sarkozy and German Chancellor Angela Merkel made a remarkable admission: “The current crisis has uncovered the deficiencies in the construction of (European monetary union) mercilessly.”

COMMISSION DEFANGED

The letter does not mention how Sarkozy and Merkel, and their predecessors Jacques Chirac and Gerhard Schroder, gradually undermined the foundations of economic governance that earlier generations of EU leaders built.

One of the oldest debates in the European Union is over who should drive EU affairs: the supranational body that is the European Commission or by the heads of state or government of its member nations, represented in the European Council. First created as an informal discussion forum in 1974, the Council formally became an EU institution in 2009 as part of the Lisbon Treaty reforms.

During the long reign of Jacques Delors – three successive terms, from 1985 to 1994 – the Commission played a leading role. With the backing of socialist French President Francois Mitterrand, under whom he had been a finance minister, Delors drove a strong federal agenda, often clashing with eurosceptic EU leaders, most famously with Margaret Thatcher.

The Delors Commission created the single market, shepherded the Maastricht Treaty and set the continent on track for the single currency. None of his successors would have that kind of influence again.

“After Delors’ departure, the EU leaders did not want such an active Commission president again. They wanted someone who would not bother them,” said Yves-Thibault de Silguy, who was commissioner for economic, monetary and financial affairs in the 1995-99 Jacques Santer commission.

Santer, then prime minister of Luxembourg, was chosen after the UK had vetoed the candidacy of Belgian Prime Minister Jean-Luc Dehaene, saying he represented an outdated tradition of centralism and “big government”.

“What happened was a progressive loss of confidence in the very thing that had made Europe successful: the community method,” de Silguy said.

Under this method, an independent European Commission makes proposals to the Council and the European Parliament, and implements them once they are approved.

But in the past decade, governments clipped the Commission’s wings year after year, in favor of an “intergovernmental” approach whereby governments make decisions for the Commission to execute, often in ad-hoc summits that rubber-stamp decisions prepared in an even closer circle of French and German leaders.

Intergovernmental decision-making itself is a source of delay and dilution, as it requires unanimity, giving each member state a blocking veto.

De Silguy said the intergovernmental approach explains a lot of today’s problems and is particularly inappropriate for economic matters.

“Europe needs fluid and homogenous markets, with a policeman to make sure the rules are obeyed, and that policeman is the European Commission. The entire European construct is based on that premise,” he said.

In October 2001, a group of elder statesmen led by Delors and including former German chancellors Helmut Kohl and Helmut Schmidt raised the alarm, criticizing their successors’ growing tendency to bypass the Commission and micro-manage EU affairs. To no avail.

Giscard sums it up like this: “The Commission murmurs in Brussels and nobody listens.”

EUROPEAN HANGOVER

The German and French leaders who bucked Brussels, to be sure, had a sound argument for doing so.

Their nations have the euro zone’s largest and second-largest economies and populations, respectively. But the European Commission gives each of the 27 nations one representative. That ties down Germany and France like Gulliver to their Lilliputian neighbors – a non-starter for their peoples.

“The problem with the Commission is that the Baltic states have a bigger weight than Germany,” said Giscard. “That is not reasonable.”

Indeed, the EU leaders’ increasingly nationalistic stance went hand in hand with a growing disenchantment of the European public with the federal ideal, as can be read from the EU’s “Eurobarometer” opinion polls.

Since 1974, the EU has asked citizens twice a year whether they think their country’s EU membership is “a good thing”. The percentage of people agreeing with that slipped from 63 percent in 1975 to 50 percent in 1981, the year Mitterrand was elected French president.

From 1981, positive feeling about European integration rose non-stop for a decade, to hit an all-time high of 71 percent in 1991, the year before the Maastricht Treaty was signed.

But in 60 years of European construction, the eighties and early nineties were the exception to a general climate of reluctant stop-and-go integration.

After Maastricht, pro-European feeling fell off a cliff, with the number of people considering their countries’ EU membership a good thing falling to an all-time low of 46 percent in the spring of 1997.

The launch of the euro as an accounting currency in 1999 and the arrival of the euro notes and coins in 2002 restored good feeling for a few years. But the rejection of the European Constitution in French and Dutch referendums in 2005 showed the tide had turned again.

Pro-European feeling slid from 59 percent in a Continent-wide poll in autumn 2004 to 50 percent in autumn 2005 and to 47 percent in spring 2011. It will likely hit a new all-time low in the next wave of measurement, according to an official involved with the poll.

BRIDGE OF DISCORD

With a flawed single currency, an emasculated EU Commission, and an increasingly eurosceptic public, the euro zone would have hit a bump sooner or later.

But there was one euro side-effect that magnified all the other problems.

Besides being a medium of exchange, an accounting unit and a store of value, a currency is also a feedback mechanism for economic policy.

If a country’s policies are lax, and spending and wages are out of control, then its currency weakens and its interest rates rise, forcing the government to correct course with a devaluation or austerity programs. With one currency for many states, devaluation is no longer an option.

The introduction of the euro brought a stable exchange rate, low interest rates and a flow of money to southern European countries that for decades had used devaluation as their main policy adjustment factor.

This caused speculative bubbles in real estate and banking, pushed up wages to uncompetitive levels, and led to a build-up of debt that in 2010 began to collapse.

One of the few founding fathers to have clearly articulated the euro’s flaws was Otmar Issing, the German former European Central Bank chief economist and board member. In a 1996 paper, he warned that inherent in the currency was the potential for requiring transfers of cash from wealthier states to poorer ones. That could spark political tensions, he warned. “There is no example in history of a lasting monetary union that was not linked to a state entity,” Issing wrote.

Fifteen years later he recalls that the warning signals appeared very early in the euro’s life – divergences in labor costs among euro members, the violation of the budget-deficit cap. “What I didn’t foresee was the dimension of the crisis,” he told Reuters.

Another thing few forecast was the degree of discord the euro-zone crisis would engender: the EU flag being burnt in Athens, Greek street theatre portraying German leaders as Nazis, and a French socialist politician comparing Angela Merkel to Otto von Bismarck, who unified Germany by waging war on France.

In this climate, Europe’s far-right parties have flourished, and few more than France’s Front National, led by Marine Le Pen. She is running for president in the 2012 election on a pledge to take France out of the euro.

With an acute sense of history, Le Pen organized a little ceremony at the river Seine. On September 6 this year, Le Pen and activists of her party threw fake 500 euro notes off the Pont de la Concorde, which connects Place de la Concorde, site of the guillotine used for public executions during the French Revolution, to the French parliament.

“I will put an immediate end to all bail-outs of countries that have fallen victim to the euro,” said Le Pen in front of a wall of cameras. “It is time for France to rediscover its national interest.”

In the months ahead, as today’s leaders hammer out a new treaty for deeper integration, they will have the voices of their predecessors ringing in their ears.

“The call for a more federal Europe has never been stronger than today, not out of conviction, but out of necessity,” said Verhofstadt, the former Belgian prime minister. “I hope we make the jump. If we dither, we’ll end up in the ravine.”

Volvo to make India global hub of its Asia range

New Delhi: Expects revenues for India subsidiary to shoot up to $1 bn from the present $200 mn.

India is set to emerge as the global development and manufacturing hub for Swedish bus maker Volvo Bus Corporation’s Asia range over the next four years.

The company, which has production facilities in 20 countries, has global manufacturing bases in Poland, Mexico and China. While the facility in Poland supplies premium buses to Europe, the centres in Mexico and China roll out premium products for countries in the Americas and southeast Asia respectively.

“India will be the fourth global hub for Volvo. The Asia range of buses will be designed, developed, manufactured and exported exclusively from India to the rest of the world. The new 9100 model is the first in this range of products,” said Akash Passey, Managing Director and Chief Executive Officer, Volvo Buses (South Asia). The Volvo 9100 coach is a medium haulage bus designed to operate over 300-400 km. The Indian unit expects at least 40-50 per cent of overall sales to come in from the Asia product range over the next two years.

Highlighting the growing importance of India in Volvo’s global operations, Hakan Karlsson, president, Volvo Bus Corporation, said, “We have a clearly defined role for India in the future. With a planned investment of at least Rs 400 crore, India would emerge as the second largest market for us globally over the next four years. It would be the manufacturing hub for selected models and have a research and product team focused on developing specific products for Asian markets, which would then find their way to the rest of the world.”

The company, looking to sell 25,000-30,000 units worldwide by 2015, expects nearly half the volumes to come from the emerging markets of India and China. The Indian unit is projected to increase sales fivefold to 5,000 units per annum to become the second largest market for Volvo Buses worldwide over four years. India is now the sixth largest market for the company, behind China, South America and Europe.

Revenues for the India subsidiary, too, are expected to shoot up to $1 billion from the present $200 million. As much as 25 per cent of overall volumes would be registered as exports from India to countries in Asia-Pacific, West Asia and South America.

To build scale, the company is expanding its product range to offer 10 variants across both inter-city and city segments in 2012. Volvo Buses India has the capacity to manufacture 1,200-1,500 units per annum at its facility in Hoskote, Bangalore. The company is considering options to expand capacity at the existing facility and to set up a second manufacturing unit in the country.

While a final call on the site for the second unit has not been taken yet, Karlsson says investments over the Rs 400 crore (already planned) will be made for the new plant. Volvo Buses India has a market share of 70 per cent in the luxury inter-city coach segment and over 50 per cent share in the low-floor air-conditioned city bus segment.

BNP Paribas steps back from Russian business

BNP Paribas is to hive off its Russian consumer credit business into a joint venture with Sberbank, the country’s biggest bank in terms of assets, as the French lender exits branch-based business in Russia.

The French bank announced in September that it would end its independent retail activity in Russia, involving the closure of 20 branches mostly in the Moscow region, but would continue offering consumer credit and mortgages through the joint venture with Sberbank.

The two banks on Wednesday announced the details of the agreement, under which Sberbank will have a 70 per cent stake in the joint venture, and BNP the remaining 30 per cent.

BNP will retain its investment banking operations in the country.

Its decision to end its independent retail banking presence mirrors recent moves by Barclays and HSBC, which have also withdrawn from the Russian retail market which is dominated by state-affiliated banks.

However, France’s Société Générale aims to expand its Russian banking operations through the recent merger of its Rosbank and BSGV subsidiaries.

Sberbank and BNP said their joint venture would initially apply to consumer lending at the point of sale, mainly in car showrooms and shops where credit is attached to a specific purchase. BNP has 4 per cent of this market in Russia, through its Cetelem consumer credit business, and the joint venture is aiming for an eventual 25-30 per cent share within three to five years.

BNP hopes that the venture will eventually also serve customers through Sberbank’s network of 19,000 retail branches.

The French bank’s €800m existing Russian consumer loan portfolio will stay out of the joint venture but future lending will be done via the joint venture, BNP said.

BNP’s Cetelem is the seventh largest consumer credit lender in Russia terms of the value of loans given at point of sale.

Thierry Laborde, BNP’s head of personal finance, said in an interview with Les Echos, the French daily, that although the French bank owned a minority in the joint venture, it retained a right of veto over key posts, including chief executive and risk officer.

Spinning off assets into the joint venture will help BNP reduce its risk-weighted assets, helping to meet tougher capital regulatory requirements which come into force in June 2012.

BNP and Sberbank said they aimed to finalise the agreement in mid-2012.

 

TCS-Lufthansa Deal Hits Union Hurdle

India’s biggest software services firm Tata Consultancy Services is not pursuing the acquisition of Lufthansa’s IT arm actively anymore on concerns of profitability and hassles of reaching an agreement with the airline’s labour union, at least three people familiar with the discussions said.
European companies such as
Lufthansa, which already outsource their IT services work
to vendors including TCS and
NIIT Technologies, are under pressure to shed non-core assets. For Indian tech firms seeking to grow their business beyond the top market US, such transactions promise to bring sustained revenues with local staff. However, European labour laws aimed at protecting local jobs make it tough to relocate existing projects to cheaper delivery locations such as India.
“It’s a marriage mostly seen as win-lose here in Europe, especially with the danger of most work getting shipped offshore,” said a senior official at one of the Indian tech services firms based in Europe. His company was among bidders looking to acquire a stake in Lufthansa Systems.
Another person also based in Europe and familiar with early talks between TCS and Lufthansa said the two companies could still rework a transaction based on renewed structure.
“Instead of a complete buy-out, a joint venture with TCS’ stake can be among possibilities,” he added. Lufthansa Systems, the IT arm of Europe’s second biggest airline, had 2010 revenues of Rs 4,105 core (almost $780 million) with some 3000 staff, and counts its parent apart from several other airline companies among top customers. In August this year, Lufthansa had confirmed reports of restructuring its IT unit including plans to seek a partner.
“I have heard rumours about talks between Lufthansa and TCS. Of course we will take care of our colleagues and no one will be left alone. We are always concerned about job losses in acquisitions as this is usually passed off as synergy effect but these people are highly trained and skilled individuals and any job loss is absolutely unacceptable,” said Arne von Spreckelsen, a spokesperson for the Lufthansa trade union with some 2.2 million members.
When contacted by ET, a TCS spokesman said his company does not comment on market speculation. Lufthansa Systems officials had not responded to an email query sent by ET on Monday.
TCS was not the only bidder in race to acquire Lufthansa Systems; rival Wipro, apart from several European outsourcing firms have had dialogues with the airline over past two years. A successful acquirer will get the expertise to target nearly $10 billion global airline IT market.
Experts say labour troubles would continue to derail any large acquisition bids by Indian tech firms in Europe.
“European labour issues are a structural impediment to acquisitions of larger firms by offshore firms that is precisely why none have happened so far,” said Peter Schumacher, Chief Executive of European think-tank Value Leadership. “These issues cut across Europe, as the recent strike by more than 400 Danish employees of CSC shows,” Schumacher added. Under pressure to shed noncore business assets, European outsourcing customers such as Lufthansa are also being asked by the labour union to raise wages. “We have asked Lufthansa group companies for a 6.1% compensation hike for their employees, this includes Lufthansa Systems. We will start negotiations on January 13 and we are confident that we can arrive at a conclusion on good terms as what we are asking for is fair,” Mr Spreckelsen said.
Over the past three years, tech firms including Wipro, Infosys, Patni and several others have had discussions with potential targets such as Globant of Argentina, Ciber in the US and IDS Scheer of Germany. While Software AG acquired IDS Scheer earlier this year, both Globant and Ciber decided to discontinue their dialogues with potential acquirers. In 2008, Infosys made a $753-million offer for UK-based SAP aggregator Axon. However, it backed out when domestic rival HCL made a competing bid, bettering Infosys’ original 600-pence offer, and finally completed the acquisition.
Hostile Shores
European labour laws aimed
at protecting local jobs make it tough to relocate existing projects to cheaper delivery locations such as India
Experts say labour troubles
would continue to derail any large acquisition bids by Indian tech fi rms in Europe

French unemployment at 12-year high

PARIS, Dec 26 – The number of jobless people in France hit a 12-year high in November in the latest sign the French job market is deteriorating ahead of the April-May presidential election.

Labour ministry data issued on Monday showed that the number of registered jobseekers in mainland France rose by 29,900 in November to reach 2.85 million, up 1.1 per cent on the month and 5.2 per cent on the year.

The increase, which brought the jobless total to its highest level since November 1999, deals a fresh blow to Nicolas Sarkozy, the French president, as he struggles to convince voters he is the best person to drive the euro zone’s second-biggest economy as he seeks a second mandate.

The monthly labour ministry data are the most frequently reported domestic jobs indicator in France, although they are not prepared according to widely used International Labour Organisation (ILO) standards and are not expressed as an unemployment rate – the number of job seekers compared to the total workforce.

According to ILO-compliant data from the INSEE national statistics office issued on December 1, the unemployment rate in mainland France rose in the third quarter to 9.3 per cent from 9.1 per cent in the previous three months.

After the financial crisis, the rate peaked at a 10-year high of 9.6 per cent in the fourth quarter of 2009.

 

Premier League clubs ready for Boxing Day showdown

Premier League clubs ready for Boxing Day showdown
Monday, 26 December 2011
Chelsea v Fulham, 13:00
Bolton v Newcastle, 15:00
Liverpool v Blackburn, 15:00
Man Utd v Wigan, 15:00
Sunderland v Everton, 15:00
West Brom v Man City, 15:00
Stoke v Aston Villa, 19:45 British Standard Time

Volkswagen turns off Blackberry email after work hours

Volkswagen has agreed to stop its Blackberry servers sending emails to some of its employees when they are off-shift.

The carmaker confirmed it made the move earlier this year following complaints that staff’s work and home lives were becoming blurred.

The restriction covers employees in Germany working under trade union negotiated contracts.

Campaigners warned that the move would not be suitable for all companies.

A spokesman for VW said: “We confirm that this agreement between VW and the company’s work council exists”, but would not comment further.

Under the arrangement servers stop routing emails 30 minutes after the end of employees’ shifts, and then start again 30 minutes before they return to work.

The staff can still use their devices to make calls and the rule does not apply to senior management.

“We wanted to take a preventative approach to tackling the issue,” said Gunnar Killian, VW’s works council spokesman.

“At Volkswagen flexitime is between 0730-1745, with our new arrangement workers can only receive emails between 0700 and 1815.”

Spare time

The move follows criticism of internal emails by Thierry Breton, chief executive of the French information technology services giant, Atos. He said workers at his firm were wasting hours of their lives on internal messages both at home and at work. He has taken the more radical step of banning internal email altogether from 2014.

Last month the maker of Persil washing powder, Henkel, also declared an email “amnesty” for its workers between Christmas and New Year saying messages should only be sent out as an emergency measure.

Industry watchers say the moves reflect growing awareness of a problem.

“It’s bad for the individual worker’s performance being online and available 24-7. You do need downtime, you do need periods in which you can actually reflect on something without needing instantaneously to give a reaction,” said Will Hutton, chair of the Big Innovation Centre at The Work Foundation.

“Secondly it has a poor impact on an individual’s well-being. I think that one has to patrol quite carefully the borderline between work and non-work.

“So I can see why some firms are taking this action, the problem is that a universal response is impossible… but certainly we should have the capacity to be opted out of it rather than be opted in.”

Consultations

Union officials in the UK have also cautioned other firms against repeating Volkswagen’s move without consultation.

“The issue of employees using Blackberrys, computers and other devices out of working time is a growing one that needs to be addressed as it can be a source of stress,” Trades Union Congress (TUC) secretary general Brendan Barber told the BBC.

“However other organisations will need different solutions and what works in VW may not work elsewhere.

“By working in partnership with their union, Volkswagen’s policy will have the support of all their employees. Where employers simply introduce policies on their own, however well-meaning they may be, they are unlikely to be successful.”

“Merry Christmas”

France Telecom to Sell Orange Swiss to Apax for $2.1 Billion

France Telecom SA (FTE) agreed to sell its Swiss mobile-phone unit to Apax Partners LLP for 1.6 billion euros ($2.1 billion).

The deal is subject to approval by Swiss authorities and will be submitted to France Telecom’s board the week of Jan. 9, according to a statement. Apax, the London-based buyout firm, beat out bids from EQT Partners AB, Providence Equity Partners Inc. and French telecommunications billionaire Xavier Niel, two people with knowledge of the situation said yesterday.

France Telecom is shedding assets in Europe, where multiple phone companies are vying for a shrinking pool of new customers, to embrace faster-growing markets in Africa and the Middle East. The Paris-based mobile operator, France’s largest, is also in talks to sell its Orange Austria unit to Hong Kong-based Hutchison Whampoa Ltd. (13), people familiar with the situation said in October, and is planning to exit Portugal.

“It makes sense to exit the difficult Swiss market and may give them more flexibility on the cash-flow side,” said Giovanni Montalti, a London-based analyst at Credit Agricole Cheuvreux, who rates the stock “underperform.”

Perella Weinberg Partners LP and Lazard Ltd. (LAZ) are advising France Telecom on the Swiss sale. Officials at EQT and Providence couldn’t be reached for comment yesterday by telephone.

Apax’s History

Apax, run by Martin Halusa, has participated in more than 20 deals this year, including last month’s purchase of U.S. wound-treatment company Kinetic Concepts Inc., its largest in 2011, according to Bloomberg data. The firm has amassed about half the 9 billion euros it’s seeking for its latest fund, three people with knowledge of the plans said this month.

The decision by France Telecom to pursue a sale of the Swiss unit to Apax follows last year’s bid to merge the business with rival Sunrise, a deal rejected by regulators. Sunrise’s owner, CVC Capital Partners, was earlier excluded from the sale process for Orange Suisse, although the firm discussed assisting Providence with arranging financing in the hopes of attempting another merger, according to people with knowledge of the talks.

A combination of Orange Switzerland with Sunrise would leave the country of about 8 million residents with two mobile operators: the merged entity and Swisscom AG, the former Swiss phone monopoly. By comparison, the U.K., Germany and Italy all have four full-service mobile-network providers.

Orange Suisse

Orange Switzerland, founded in 1999, had revenue last year of 1.3 billion Swiss francs ($1.39 billion). The company, which employs about 1,200, had a customer base of 1.6 million at the end of September, according to the statement.

The value of the deal is 6.5 times Orange Switzerland’s estimated 2011 earnings before interest, taxes, depreciation and amortization, France Telecom said in the statement. That compares with a median Ebitda multiple of 5.6 paid for Western European telecommunications assets in the last 3 years, according to Bloomberg data.

France Telecom rose 0.8 percent to 11.97 euros in Paris trading yesterday. The shares have sunk 23 percent this year, valuing the company at about 32 billion euros.

The French phone company, led by Chief Executive Officer Stephane Richard, said Oct. 27 that third-quarter profit fell 6.2 percent as a revenue decline at home overshadowed growth in Spain and some African countries. The company said then that full-year operating cash flow will be “slightly” more than 9 billion euros, compared with a previous forecast of that amount.

Almost half the mobile operator’s 45.5 billion euros in sales last year came from France. In October, France Telecom agreed to acquire Congolese mobile operator Congo-China Telecom, entering its third new country in about a year.

Deutsche Boerse, NYSE deal wins U.S. approval

Deutsche Boerse (DB1Gn.DE) won U.S. antitrust approval to buy NYSE Euronext (NYX.N) in a $9 billion deal to create the world’s No. 1 exchange operator, but the transaction still faces serious regulatory headwinds in Europe.

The Justice Department said on Thursday that the deal, which was announced in February, won U.S. approval on condition that a Deutsche Boerse subsidiary, the International Securities Exchange, divest its 31.5 percent interest in Direct Edge.

There have been few critics of the deal in the United States, despite the NYSE’s symbolism as a bastion of American capitalism. The exchange was founded in 1792 when share trading began on a block now designated as Wall Street.

Deutsche Boerse and NYSE must also continue to provide some services, under the Justice Department approval, to Direct Edge, the fourth-largest U.S. stock exchange operator, behind NYSE Euronext, Nasdaq OMX (NDAQ.O) and BATS Exchange.

Direct Edge is run by a consortium that includes hedge fund Citadel and investment bank Goldman Sachs Group Inc (GS.N).

“We are very pleased to have received the approval of the DOJ, an important milestone on our path to completing our compelling Trans-Atlantic combination,” Duncan Niederauer, chief executive of NYSE Euronext, said in an emailed statement.

NYSE Euronext shareholders have already approved the deal.

Richard Repetto, an analyst at Sandler O’Neil, called the U.S. approval “irrelevant.”

“The big issue is over in Europe, and whether the European competition commission is going to approve the deal. They expected this. They knew they would likely have to divest the ownership in Direct Edge,” he said.

Potential buyers of the stake include BATS, he said. ” I don’t know whether they’d allow Nasdaq to own it because there’d be a lot of concentration again,” he added.

ALL EYES ACROSS THE ATLANTIC

In Europe, there have been weeks of negotiations with antitrust regulators, in which staff made clear their reservations about approving a combination of Deutsche Boerse’s Eurex and NYSE Euronext’s Liffe on concerns that the merged entity would have a monopoly over European listed derivatives trading.

Both Deutsche Boerse and NYSE Euronext have said they would not pursue the merger if they were asked to divest either Eurex or Liffe. A formal decision by the European Commission is not expected until January or early February.

In a bid to soothe regulatory concerns, Deutsche Boerse and NYSE Euronext have offered to cap fees on trading in their European derivatives contracts for three years, and to sell the entire single-stock equity derivatives business of NYSE Euronext’s Liffe unit.

The EU Commission has said it would make a decision on the deal by February 9.

In Germany, Deutsche Boerse’s home regulator is insisting on concessions to win European approval, potentially further complicating the path to completing the deal.