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Following Emu, bond traders are scouring non-euro EU countries for the next convergence play hot-spots. Now that the main convergence-play currencies of recent times - Italy, Spain, Ireland and Portugal - are in the euro club, those non-euro countries that might join the euro over the next few years are attracting attention. Greece has emerged ahead of the UK, Sweden and Denmark as the most popular source of convergence plays.

After Brazil, could China's currency be the next to fall? Billions of dollars are said to have gone missing in foreign exchange over the past year - a development that Chinese officials are desperately trying to play down to minimize market jitters over the fate of the renminbi. At the end of 1998, the nation's forex reserves looked impressive at $145 billion. But they had risen by only $5 billion over 1998 despite a record trade surplus and strong inflows of foreign direct investment. Some China specialists calculate that almost $89 billion in trade and investment gains never found their way to the official coffers, despite the country's tough foreign-exchange regulations and central bank controls.

Polish managers of a former state-owned company are receiving harsh lessons in capitalist reality. They are on the wrong end of the country's first hostile takeover bid, launched by a British firm with which they were in partnership talks less than a year ago. Worse, Poland's BIG Bank Gdanski, holder of 14% of the stock and a seat on the supervisory board, has not rallied to the target's defence and says it will sell at the best price.

Banks can only sell risk if investors know exactly what they're getting. Institutions with blue-chip corporates in their loan portfolios won't have a problem, but smaller and regional banks find it almost impossible to sell their own risk in the credit derivatives market. Better credit research would help, but above all, they must learn to sell themselves. By Laura Covill.

Deals of the Year

Deals of the Year

It is ironic that the strongest disciples of free markets are often the messiahs of currency pegs, fixed exchange rates and currency target zones. Those who believe the market should set the price for everything reject its decision on pricing international economic input and output.

The Russian Federation has defaulted on up to $90 billion-worth of restructured Soviet-era debt, the GKO reschedulings are stalled and Western banks have laid off almost all their Russian workers. February has rarely been kind to Russians, and Muscovites, not the world's most upbeat urban dwellers at the best of times, believe that this one will be the worst for decades. Even so, there are glimmers of hope.

The euro is a month old and already the new currency is bringing about changes more rapidly and more disconcertingly than expected. It is already clear that the removal of domestic currencies - and so the unique advantages enjoyed by local banks in their home markets - will wreak havoc with middle-tier institutions. In the payments business for example, it has only just dawned on the smaller German banks that their only asset was the Deutschmark. Without that domestic market, they will be unable to compete with the clearing giants. In the Eurobond markets, the euro will be the catalyst for more institutionalization of previously retail assets. This means the notion of local distribution will become meaningless. Local branches may sell a bank's new asset management service, but the bond-buying will be managed centrally. The winners will be the large underwriters with the best trading and research product. The losers will be banks whose operations were based on knowing pockets of local currency, largely retail investors. That is, most of them.

Sicily is famous all over the world for many reasons. Films such as The Godfather and novels such as The Leopard have brought fame to the Italian island, as well as the worldwide criminal organization known as the Mafia. But its name does not crop up very often in the financial news.

The devaluation of the Brazilian real has kept emerging markets at the top of bankers' and regulators' priority lists. As the crisis struck, the Malaysian second finance minister was on a tour of Europe designed to gather support for the country's controversial approach - an approach the minister insisted was working and would be continued indefinitely. More than a year on from the start of the crisis, there is still no consensus on what policies are appropriate for these troubled countries.

Last June, India's new finance minister, Yashwant Sinha, promised to speed up privatization and said a majority stake in ailing domestic carrier Indian Airlines would be sold. No finance ministers had yet dared to make a public commitment to privatization; they had all used the more politically correct word - disinvestment. By December, paralysed by a fractious coalition government and his party's drubbing in the regional elections, Sinha had managed to sell only a small stake in a rail-freight company for $53 million. In January, as he prepared this month's budget, he had few options left to plug the large deficit.