Penta checked in with François de Visscher, founder of the Greenwich, Ct.-based financial boutique, de Visscher & co. The Belgium-born investment banker advises family businesses and family offices here and in Europe; he is also a shareholder and director of his family’s N.V. Bekaert, a $5.9 billion revenue steel wire producer in Europe. We tracked de Visscher down in Boston, where he is involved with the Family Firm Institute, and asked him to shine light on what’s really going on behind Europe’s alarming headlines. De Visscher insists the Euro and the EU are not going to fall apart. “It’s not in the economic interest of anyone, particularly not the Germans.” Forget the back-and-forth between Angela Merkel and Nicolas Sarkozy that makes for breathless headlines. That’s just sound and fury. In the end, Greece will be forced to restructure its debt in an orderly way, like a quasi-bankrupt company would have to do, with (government backed) banks taking their hits. The rest of the bailout will ostensibly be financed by the EU countries at large through a central fund, but in reality Germany will be picking up the bulk of the tab, because they are the only country standing with the required financial muscle. That also means Germany and its $3.3 trillion economy is calling Europe’s shots. “Europe is dominated by the Germans. They are the ones who have the money. But they live off 60% exports to Europe. If the Euro was to disappear and they went back to the Deutsche Mark, then their currency would jump and it would kill their economy. They know that. Merkel knows that. So Europe will not fall apart.” After the Greece-and-banks restructuring, watch the EU start the longer term work of bringing Europe closer together through economic and political integration. With Germany the defacto decision maker for all Europe, however, the interesting development to watch, says de Visscher, is Putin’s return to presidential power in Russia. The Central and Eastern European countries joined the EU to get distance between them and Russia, but now that the EU is weakened, watch Putin offer a bear hug. “We don’t know how Russia is going to play this. But they have a lot of weapons, including the gas pipelines. That’s the medium term issue after Greece is restructured and the banks are stabilized – a rebalancing of power between Germany and Russia. “ De Visscher’ predicts Russia and Germany will start competing hard for the love of European countries like Slovakia, which, in the first round, just voted no on the EU bailout fund. These countries will in turn shrewdly play the big boys off of each other for their own interests. In such a German-Russian power struggle it seems wise for American companies to get in there and offer a third alternative. And what about Europe’s family businesses? What are they up to during the Greek crisis? The first order of business for any family-controlled firm that is publicly traded is to buy-back its own shares. With some European firms trading as low as 5 or 6 forward price-to- earnings multiples (see Penta’s ‘Fire Sale At the Equity Bazaar’), it’s a no brainer for families to buy back their undervalued paper. Which gets us to an important point. The 2011 crisis, unlike the 2008 version, is not really about a shortage of cash, he says. Private firms have huge cash hordes, while the public sector is, this time around, scrambling and in need of a bailout This curious set of facts is starting to change behavior patterns among Europe’s wealthy, says de Visscher. Wealthy Europeans have in the past never been philanthropically-minded; they pay very high taxes to the state and historically viewed the generous European welfare net as their contribution to good works. “What you are seeing with more and more European families, which you have never seen before, is a [strong sense] of corporate responsibility with their enterprises. In other words, they are asking themselves, ‘What can the private sector do to help our country?’ So we are starting to see private- public initiatives – which we see here in the U.S. but have never seen in Europe – among European families.” In fact, de Visscher just came from a meeting of prominent European families where the subject was just that - how could they deploy their idle cash in a way that bolstered shaky EU states?The Inside Skinny on the EU
By Richard C. Morais
Thursday, 13 October 2011
Posted by Britannia Radio at 20:37