Rumour has it that the ghost of the First World War settlement at Versailles has been spotted in various capitals of late: Athens, Dublin and now Lisbon.
Only in whispers is its presence in Madrid mentioned and a solitary person undistracted by the daytime TV political shenanigans in Rome likewise claimed to have seen the albatross's visage.
Condemned to repeat the past having learnt little from it, the German and French governments are determined to punish fiscally loose euro members. Over three quarters of a trillion euro's worth of German and French bank loan exposure is at stake and that is the heart of this crisis. That the debtor nations cannot afford to pay seems not to have been factored into account.
Greece has debts of about 160 per cent of what it earns annually, but is expected to spend 9 per cent more than it earns this year at a time when its income is dropping.
Putting this in perspective, let's take a person earning Dh300,000 a year who has just taken out a 10-year mortgage on a property costing Dh480,000. If this person is overspending their income by nearly 10 per cent while their income is falling, the lending institution is going to either refuse to deal with them or will repossess the asset.
There are shoots of goodness in this crisis for Greece. In its desperation not to default, it is restructuring its economy with a view to flexibility, shining a light on its large black economy and ensuring all contribute fairly with regard to taxes.
It will still default on its debts, be it through a face-saving euro zone restructure or meltdown. The markets are currently pricing its bonds in the 13 per cent range, meaning all readers of The Insider get a far superior rate on a car loan.
Ireland has sadly decided on a fifth injection into its banking system.
This particular bailout has already been the most expensive placebo in global economic history: €70 billion (Dh368.7bn) in a country where GDP (in constant prices) was €166bn last year. Commentators believe that there is more to come, as do the markets, pricing bonds at an unsustainable 10 per cent.
The new government's promise to take a hard line with bondholders has been abandoned. Irish government policy has no clothes and is being dressed instead by the European Central Bank (ECB) from Frankfurt.
Portugal appears to have thrown in the towel, with its finance minister, Fernando Teixeira dos Santos, admitting the truth to the world from behind a press statement. Portugal's bond yields have overtaken Ireland's, speeding into double digits. As its young and unemployed professionals emigrate to the country's ex-colonies of Brazil and Angola, its government has collapsed and credit agencies have slashed its rating by multiples.
Leadership is lacking when most needed, not helped by a law that requires 60 days from the calling of an election to its holding; scheduled for June. A (normally) manageable bond redemption, will almost certainly be now underwritten by the ECB.
If the percentage trend in these bond yields were patient thermometer readings in a hospital, the treatment would quickly be changed before fatalities occurred. Instead, the ECB burst onto the scene and increased interest rates to counteract rising inflation among its core membership. Good for Germany and maybe a mercy killing of the PIIGS's (Portugal, Ireland, Italy, Greece, Spain) euro membership.
Keep in mind that every 1 per cent increase in interest rates means €91 extra a month on an average mortgage of €170,000. Portugal's GDP last year was €162bn, which would mean an extra €86m a month for each 1 per cent increase in the bond yield at a time of falling income and overspending. The last time I wrote, the rate was in the 6 per cent range and it has now almost doubled.
Attempts to cut deficits are being offset by the increased cost of borrowing and rising cost of social security nets for those falling into hard times as their economies crumble. This is treadmill economics and the meter is running out of credit.
What plagues Portugal and Greece is different to the property fever Ireland and Spain share, except Spain's is - in value terms - volcanic and thus beyond the deep pockets of even the German's.
Spain's GDP last year was €670bn and it ran a deficit of 9.1 per cent. The endgame to this drama should be played out here, fitting in the home of El Gordo (the big one), the largest lottery draw in the world. Intellectuals, economists and politicians have begun to be wheeled out in the media to say that Spain has no issues, similar to what their counterparts in Ireland and Portugal said before.
Such is the considered domino approach the markets are taking, Italy and Belgium have been for the best part ignored, but that is still to come.
As there is no justice in victor's justice, there is no recovery when creditors recover all their dues.
From a strictly local perspective, There is no reasonable economic case that has been made for a GCC common currency. Surely what is happening in the euro zone proves the case that without political union, any such scheme is destined for doom.
David Daly is the chief financial officer of the Sifico Group
pf@thenational.ae
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- All tax invoices and tax credit notes
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- All tax invoices and tax credit notes
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Dr Afridi's warning signs of digital addiction
Spending an excessive amount of time on the phone.
Neglecting personal, social, or academic responsibilities.
Losing interest in other activities or hobbies that were once enjoyed.
Having withdrawal symptoms like feeling anxious, restless, or upset when the technology is not available.
Experiencing sleep disturbances or changes in sleep patterns.
What are the guidelines?
Under 18 months: Avoid screen time altogether, except for video chatting with family.
Aged 18-24 months: If screens are introduced, it should be high-quality content watched with a caregiver to help the child understand what they are seeing.
Aged 2-5 years: Limit to one-hour per day of high-quality programming, with co-viewing whenever possible.
Aged 6-12 years: Set consistent limits on screen time to ensure it does not interfere with sleep, physical activity, or social interactions.
Teenagers: Encourage a balanced approach – screens should not replace sleep, exercise, or face-to-face socialisation.
Source: American Paediatric Association
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Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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