Cantillon

Inside the world of business

Europe cannot find way to avoid Greek tragedy

THERE’S AN element of the Anglo Irish Bank saga about the ongoing debate on the prospects of Greece avoiding default.

Before the event, it was an open secret that published numbers told nothing like the full picture of the state of the Greek economy.

Upon its accession, the new government discovered the figures were little more than a fiction and “fessed up” to outraged EU peers that its 2009 deficit would be 12.7 per cent, more than double the most recent estimate of the outgoing government and four times the EU threshold.

Eventually, markets came to the determination that Greece had no chance of extricating itself from its troubles. Immediately, they were admonished.

European Central Bank chief economist Jürgen Stark said: “The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece.” Within a month, the EU indicated it was prepared to do precisely that. Yet it took almost two more debilitating months to finally agree a bailout mechanism involving EU states and the IMF.

As with Ireland and Anglo, the credibility of the EU took a hammering with each contradictory report and lack of leadership on such a critical issue.

With attention turning to our own plight and that of Portugal, Greece slipped below the radar. Now, 18 months after the crisis began, Athens is again centre stage with the prospect of default finally openly debated.

Despite lower interest rates and the best efforts of Georges Panadreou’s government, it seems increasingly clear that Greece cannot avoid such an outcome – but still Europe’s leaders demur. As with the Irish government and Anglo, the image that comes to mind most clearly is the legend of Canute. And there’s still no way to stem the tide.

Liberty-Anglo set to seal Quinn deal

THE 13-MONTH administration of Quinn Insurance appears to be close to an end with the sale of the business to a joint bid from Anglo Irish Bank and US insurer Liberty Mutual expected today.

It is an incredibly complex deal that has been further complicated by strong protestations from the company’s founder Seán Quinn, who is unwilling to go silently, and vocal staff standing by him.

This is hardly surprising given that ownership of what was once the most profitable part of his 38-year-old empire is about to wrested from him.

It is ironic that assets within the insurer that were guaranteed to the group’s banks and bondholders and led to the administration in March 2010 will now be used by the new owners to part-fund the business.

The lifting of the guarantees to Quinn Group’s lenders under the terms of the group’s wider restructuring earlier this month frees up cash and assets that will help fill the hole left and recapitalise the insurer, although this will not meet all of its cash needs.

Anglo and Liberty will walk away with the strongest part of Quinn Insurance, the Irish business covering about €900 million of policies.

The remaining UK policies will be left with the administrators, who will seek to cover the losses on them with a claim on the State’s insurance compensation fund.

The deal will protect most if not all of the 1,560 jobs. The arrival of a large international player in the industry will also help send out a positive signal about investing in Ireland.

And just as one strong figurehead from the Border region is usurped, another will take his place.

Armagh-born Ted Kelly, Liberty’s chairman, is said to be keen to take a strong role in the running of the insurance company.

Liberty has a track record of taking over troubled companies run by dominant businessmen and turning them around.