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Citigroup's latest acquisition

When cutting costs is not enough

Edited by Brian Caplen

When cutting costs is not enough

Edited by Rebecca Bream

The dollar and the Dow have dived. Serious imbalances in the US economy are now evident. The current account deficit is nearing unfinanceable proportions. The US economy could only grow at an above-average, yet disinflationary, pace while the rest of the world remained stagnant. That's no longer the case. Global growth is accelerating. So the dollar is no longer the currency of choice. And a weak dollar is synonymous with rising commodity prices and resurgent inflation. And it's not just the US economy and financial markets that are becoming paralysed. I reckon 2000 will be a year of US foreign economic policy paralysis. At its heart lies the presidential campaign. The impact on international relations could be severe. Those with Russia are already becoming strained. A deal on Chinese World Trade Organization accession may be missed, undermining Zhu Rongji and China's reformists. Trade tensions with the EU will escalate. And no action will be taken to support the dollar.

Suddenly, euroland, or rather Germany, is full of the urge to rate companies great and small. Partly, this is a swipe at giants Moody's and S&P, but it's also recognition that medium-size companies will pay more for capital if they aren't transparently rated. The regions back their own Mittelstand, while Frankfurt roots for the Finanzplatz. David Shirreff reports.

To the casual visitor Prague seems a very civilized place. The city is bristling with church spires, historic buildings, museums and elegant squares. Every night is a cultural feast with opera, classical music and theatre of the highest quality. In this rarefied atmosphere, artistic and intellectual endeavours thrive and it is difficult to believe that the country was once under the dead-hand of communism.

Turkey is supposed to be privatizing; it's also ostensibly following policies that will bring down inflation. But vested interests that benefit from the unwieldy structure of state corporations and a banking industry dependent on earnings from high-interest treasury paper are thwarting these processes. The privatization of Turk Telekom is a tangled tale of delay and indecision, and a banking industry that can cope with a low-inflation environment is something to hope for rather than an immediately practicable reality. Metin Munir reports.

Deutsche Bank wanted to buy it because it wanted a bigger presence in investment banking in the US. Merrill Lynch considered putting in an offer because it wanted to improve its coverage of the technology sector. But Chase Manhattan is the bank that finally secured the 30-year-old California-based investment-banking boutique Hambrecht & Quist. And this time, the rumour mill has it, it's because Chase needs it as a way into equities. Antony Currie reckons that's not the case

Citigroup's latest acquisition

Even after a wave of mergers and takeovers there are still 7,000 banks in the US. No-one doubts that consolidation is the way to go but the fate of recently merged banks suggests that it has to be based on something more substantial than cost-cutting. The emergence of e-commerce hammers home the point that revenue growth is still crucial. Antony Currie reports.