These are stories Report on Business is following Monday, March 12, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Iceland to choose new currency I’m honestly not on a one-man campaign to have Iceland adopt the Canadian dollar. I just find the whole thing intriguing. And a bit funny.
And I still want to know why Canada’s ambassador to Iceland says Ottawa is ready to talk about it.
Those who have followed this story will remember that Canada’s ambassador, Alan Bones, told an Icelandic broadcaster just over a week ago that his government was prepared to discuss the idea of Iceland adopting the Canadian dollar, known here as the loonie because of the bird on its dollar coin, and ditching its krona if it decides to go that route.
There have been such suggestions among some in Iceland, though its official stance is to join the EU, a move that does not have broad support among the people.
Mr. Bones was going to take the same message to an opposition conference on the currency, but Ottawa said no to that.
That’s where the story of Iceland and the Canadian dollar left off.
This weekend, Iceland’s Prime Minister Jóhanna Sigurðardóttir said in a speech that the country will opt for the euro or another currency, though it was clear which way she’s leaning.
“The choice is between surrendering the sovereignty of Iceland in monetary policy unilaterally adopting the currency of another country or become a member of the EU,” she said.
She added, according to Bloomberg News, that joining the EU would allow her country to “co-operate with EU countries as a sovereign nation, which has a say in the decision and policy-making in all fields of co-operation.”
I'm not saying Iceland should adopt the Canadian dollar, or any currency other than the euro, for that matter. And she's right when she says her country would lose sovereignty over monetary policy. Adopting the loonie or another single-country currency would be just that, not a monetary union.
I would point out, though, that the European Central Bank under its previous chief had no qualms about raising interest rates amid the troubles of the weaker euro states such as Greece, Ireland and Spain, deciding instead that it was acting for the broader good.
In my mind, it’s as much a loss of sovereignty when you’re ignored as it is when you’re not included.
- Canadian envoy to Iceland sparks loonie controversy
- Five reasons why Iceland should adopt the Canadian dollar
- Iceland's recovery offers case for reviving drachma
Enbridge eyes writedown Canada's Enbridge Inc. says it's looking at a writedown on a "significant portion" of the value of its $460-million investment in its New Brunswick gas distribution unit.
The move follows proposed new provincial regulations for setting gas distribution rates, Enbridge said today.
New Brunswick's proposal, put out for 30 days of comment, would limit the rates of the utility, Enbridge Gas New Brunswick. Those limits to individual classes of customers are "are substantially below current rates and below the level which would be required to recover Enbridge’s investment, or to support any further growth in the number of customers to be supplied with natural gas."
New Brunswick amended the laws governing gas distribution in January, saying lower rates would help attract business. This is not the first time Enbridge has spoken out.
Enbridge said it's talking to the province, but a writedown can be expected if the regulations go into effect. It did not disclose just how big that could be.
"We are extremely disappointed with the regulations as currently drafted," said Guy Jarvis, Enbrdige's chief of gas distribution.
"Enbridge has made a substantial investment in bringing natural gas to New Brunswick businesses and residents, including reinvesting the money we have earned in the province to further develop our system, and we have adhered to our side of the franchise agreement with the government," Mr. Jarvis said in a statement.
"For several reasons it is more expensive to distribute natural gas in the Province of New Brunswick than it is in larger markets such as Ontario, but gas is still the lowest cost source of energy available in New Brunswick. The regulations, as drafted, would severely limit our ability to extend the benefits of natural gas to additional businesses and residents in New Brunswick."
Glencore, Cargill said to eye Viterra At least two multinationals are reportedly eyeing Viterra Inc. , the Canadian agribusiness and grain handling company that surprised markets last week by saying it had received "expressions of interest."
Among the potential suitors, according to The Wall Street Journal, are Glencore International AG and Cargill Inc.
Viterra's shares surged on Friday after the company said it had been approached, and gave no further details.
Glencore, of course, is in the midst of digesting its merger with Xstrata PLC, so a deal of this size might be difficult at this point.
UBS Securities Canada analyst Hilda Maraachlian, noting Viterra's "extensive network" of silos and export operations, said the company does draw much attention from global players.
It holds 45 per cent of Canada's grain handling market and is expected to be one of the companies that benefits from the end of the Canadian Wheat Board monopoly, she said.
Assuming a boost in margins and market share gain of up to 2.5 per cent, she added, Viterra's EBITDA can be expected to climb by $40-million to $50-million a year, Ms. Maraachlian added.
- Glencore reportedly Viterra suitor
- Viterra shares surge on takeover buzz
- Boyd Erman's Streetwise: Viterra's a laggard, but it's not cheap
Greece still in spotlight Europe's finance ministers haven't even signed off yet on the current Greek bailout, and already observers are talking about another one.
That's not really a surprise, given that there has been such talk for weeks now.
Finance ministers are meeting to approve a further €130-billion in rescue money after developments on Friday, when Greece announced it had enough private creditors to go through with its bond swap, triggering what are known as collective action clauses that change the rules and force the exchange on the holdouts. Following that, the International Swaps and Derivatives Association, an industry body, determined the move was a "credit event" that triggers billions in payments under what are known as credit default swaps, insurance-like instruments.
Greece said today it has now completed the €177.2-billion exchange. Its new bonds are trading at distressed levels, suggesting still more trouble in the pipe.
"Despite French President Sarkozy’s ridiculous assertion at the weekend that the Greece crisis had been resolved, there is widespread acknowledgment that even after last week's debt swap that the country will in all probability need a third bailout, after economic data Friday showed that the economy shrank even more than first thought in Q4, by 7.5 per cent," said senior market analyst Michael Hewson of CMC Markets in London.
"In any event EU finance ministers look set to sign off on the €130-billion Greek bailout today, despite the fact that the likelihood of a further default remains probable given that the newly issued bonds could still come in at a higher yield than Portugal’s bonds are currently trading."
Mr. Hewson is not alone, according to Derek Holt and Dov Zigler, who termed Friday's swap the "largest ever bond rip-off by a profligate sovereign."
"The betting remains focused on how this is unlikely to be the last aid package," they said in a research note today.
"German Finance Minister Wolfgang Schaeuble reinforced this point when he said today: 'Nobody can now exclude that Greece at a single moment may need a third bailout.' Of course not, as a still onerous 120-per-cent debt-to-GDP ratio in under a decade is left behind by the wealth confiscation from bondholders, assuming that Greece is able to grow its economy at assumed rates which might be a trick for an economy that produces little of relevance to world markets. Good money continues to be poured after bad, as one thing that makes Greece different from, say, Argentina is that it opted into a system from which it could extract ransom money as opposed to a voluntary currency peg."
Greece is the focus of the euro crisis, but by no means is it alone. Final numbers today, for example, showed Italy's economy contracted in the third and fourth quarters of last year, marking the technical definition of a recession.
- Greece clinches largest sovereign debt overhaul in history
- Eric Reguly: Greek debt deal will have others demanding the same
- Euro zone prospects show flicker of hope: OECD
What to watch for this week The Federal Reserve meets this week, following on the heels of several central banks last week, including the Bank of Canada and European Central Bank. But don't expect much Tuesday from chairman Ben Bernanke and his colleagues on the Federal Open Market Committee.
"Following January’s historic meeting (which disclosed the FOMC’s rate forecast and inflation target), the March gathering is likely to be uneventful," said senior economist Sal Guatieri of BMO Nesbitt Burns.
"The press statement should affirm that economic conditions are likely to warrant exceptionally low rates (read: sub-1-per-cent) 'at least through late 2014' and the continuation of current mortgage reinvestment and maturity extension programs. With the economy growing moderately, labour markets improving and global financial strains easing, the FOMC is unlikely to hint at additional easing moves. However, given Bernanke’s view that labour markets are 'far from normal,' the statement should note the Fed’s dissatisfaction with still-high unemployment."
Canada's factory sector will be back in the spotlight Friday when Statistics Canada reports on how manufacturing sales fared in January.
"Contingent on trade data released March 9, we are looking for growth in manufacturing sales of 1.5 per cent for January," said economists at RBC Dominion Securities. "A combination of strengthening auto production and rising energy prices are projected to underwrite the nominal monthly gain. However, sales are expected to slow in volume terms to a 0.6-per-cent monthly pace."
|CAD/USD-I Canadian Dollar/U.S. Dollar||0.939||
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|ENB-T Enbridge Inc.||44.47||
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