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Gene Ellis

Emerging Europe's Deleveraging Dilemma by Erik Berglof and Božidar Đelić - Pr... - 0 views

www.project-syndicate.org/...-erik-berglof-and-bo-idar--eli

emerging europe dilemma erik project syndicate eli

shared by Gene Ellis on 01 Jan 13 - No Cached
  • Expansion was, for lack of other options, financed largely through short-term loans.
  • since the onset of the global financial crisis, eurozone-based banks’ subsidiaries in emerging Europe have been reducing their exposure to the region. In 2009-2010, the European Bank Coordination Initiative – known informally as the “Vienna Initiative” – helped to avert a systemic crisis in developing Europe by stopping foreign-owned parent banks from staging a catastrophic stampede to the exits.CommentsView/Create comment on this paragraphBut, in the second half of 2011, the eurozone-based parent banks that dominate emerging Europe’s banking sector came under renewed pressure to deleverage. Many are now radically changing their business models to reduce risk.
  • Over the last year, funding corresponding to 4% of the region’s GDP – and, in some countries, as much as 15% of GDP – has been withdrawn. Bank subsidiaries will increasingly have to finance local lending with local deposits and other local funding.
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  • excessive and chaotic deleveraging by lenders to emerging Europe – and the ensuing credit crunch – would destabilize this economically and institutionally fragile region.
  • View/Create comment on this paragraphFor Tigar, deleveraging has meant that banks that had pursued its business only a couple of years ago have suddenly cut lending – even though the company never missed a debt payment. Previous loans came due, while cash-flow needs grew. Despite its good operating margins, growing markets, and prime international clients, the company experienced a drop in liquidity, requiring serious balance-sheet restructuring.
  • Furthermore, collateral – especially real-estate assets – will continue to be downgraded.
  • Indeed, several Western financial groups are considering partial or complete exits from the region – without any clear strategic replacement in sight.
Gene Ellis

Multinationals beach tax bills in Spanish shells - FT.com - 0 views

www.ft.com/...98-11e3-98a1-00144feab7de.html

shared by Gene Ellis on 29 Oct 13 - No Cached
  • From here a single employee presided over a company that from 2009 to 2011 made €9.9bn of net profits, all while earning an annual salary of only €55,000.
  • Exxon’s Spanish subsidiary was structured as a so-called ETVE, a type of holding company used by many multinationals, including Hewlett-Packard, Pepsi, Eli Lilly, Anheuser-Busch InBev and Vodafone.
  • According to the ETVE’s 2009 accounts, Exxon was able to transfer €3.6bn of dividends from its unit in Luxembourg to Spain. A dividend of €2.26bn was then paid on to its US parent without incurring withholding taxes that it would typically have to pay when moving money outside of the EU.
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  • ransfers from a Luxembourg company to the US would have typically been subject to a withholding tax. Last year, after attracting the attention of Spanish tax authorities, Exxon quietly closed down the operation.
  • “Normally you would have to pay a 10 per cent withholding tax at source to send profits to the US,
  • Spain introduced the ETVE in the mid-1990s to encourage foreign investment, and better compete with Luxembourg and Holland for international companies seeking tax-efficient European holding structures. It also allowed for foreign companies to take advantage of Spain’s strong network of bilateral tax treaties with countries in Latin America, such as Argentina, Brazil and Mexico, which can offer more favourable tax rates than other countries. Once the ETVE has been established all overseas dividends that are paid into it are exempt from tax in Spain, and can be easily moved on to a final destination, providing a small number of conditions have been met. Most importantly, corporation tax must have been paid in the country of origin on the dividends being transferred, and companies using ETVEs to house shareholdings in foreign subsidiaries must not be resident in any country identified by Spain as a tax haven.
  • In fact, Linthal is an ETVE used by Ambev, a subsidiary of Anheuser-Busch InBev, the Belgian-based brewer, to distribute dividends from several Latin American beer brands, such as Argentina’s Quilmes and Cervecería Boliviana Nacional, to its holding company in Brazil.
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