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The Week

‘Raiding the Commonwealth’ for a Bank of England chief Add to ...

These are stories Report on Business followed this week.

Follow Michael Babad and the Globe’s top business stories on Twitter.

Carney jumps ship
George Osborne clearly wouldn’t take “never” for an answer.

Britain's Chancellor of the Exchequer was so bent on reforming the Bank of England, and so certain that Mark Carney was the right person for the job, that he stalked Canada’s chief central banker for months, from Mexico City to London.

For his part, Mr. Carney didn’t just say “no.” He said “never,” in an interview with the BBC that put the kibosh on mounting speculation that he was headed for the Old Lady of Threadneedle Street, as the 318-year-old Bank of England is known.

Mr. Osborne wouldn’t let go, according to The Financial Times. In meetings from the G20 in Mexico to clandestine interviews in Britain, he wooed the reluctant central banker from his comfortable roost in Canada, where he, his British-born wife and daughters have been ensconced.

As the story is told, it had all the makings of the secret dealings in, well, the run-up to a takeover.

In the end, the ante was upped, and Mr. Carney convinced. Mr. Osborne spoke to Finance Minister Jim Flaherty last Friday, and Britain’s Prime Minister David Cameron on the weekend, according to the newspaper.

Then, as The Globe and Mail's Kevin Carmichael reports, the news was dropped on unsuspecting markets Monday.

Mr. Carney won't be leaving until mid-2013, and, at this point, observers don't expect much change in monetary policy from his successor. But his appointment certainly sparked chatter this week, notably as the British delved into what a Canadian is and isn't. (A lot of hockey jokes.)

"For the first time in its venerable 318-year history, the Bank of England is hiring someone outside of Britain for the top posting," said chief economist David Rosenberg of Gluskin Sheff + Associates.

"One would have thought that London, the pre-eminent global financial centre for centuries, would have little problem in finding a suitable candidate from within instead of raiding the Commonwealth."

Mr. Rosenberg wasn't the only observer to make that point, highlighting just how badly Mr. Osborne wanted Mr. Carney.

Douglas Porter and Benjamin Reitzes also flicked at that this week in a report on the strength of the Canadian dollar, and how Canada is now seen as a haven in uncertain times.

"Indeed, Canada is so heavily in demand that even our central bankers are now being poached from abroad," they said.

Mr. Flaherty said it may take time, up to half a year, to find Mr. Carney's replacement, and the betting, so far, is that senior deputy governor Tiff Macklem leads the race.

"Perhaps Flaherty is giving himself plenty of flexibility," said Derek Holt of Bank of Nova Scotia.

"My takeaway, however, is that if senior deputy governor Tiff Macklem is as obvious a replacement as the consensus believes him to be within Ottawa policy circles, then why send a signal that the process will take so long? He is a fine candidate in my opinion, but why inject that instability if Macklem really has been groomed all along to be Carney's replacement? Recall that the consensus got it dead wrong both for [David] Dodge in 2000 and for Carney's appointment in 2007."

Economic growth slumps
Mr. Carney is leaving just as the economy turns sour.

According to the latest reading by Statistics Canada, released Friday, economic growth slowed to an annual pace of just 0.6 per cent in the third quarter, from the second quarter’s 1.7 per cent and well below the 2.7 per cent of the United States.

That was driven largely by the fastest decline in exports since the second quarter 2009.

While some of the factors behind the slowing growth are expected to prove temporary, economists are still taking a dimmer view of the fourth quarter, projecting gross domestic product will expand at a rate of less than 2 per cent.

“Canada (and its central banker) got a lot of accolades by leading the pack out of recession, but there’s little reason for back-patting in the evident slowdown taking hold this year,” said Avery Shenfeld and Emanuella Enenajor of CIBC World Markets.

“A disappointing third quarter left Canada’s growth over the past year a full percentage point behind that of the U.S.,” they said in a research note.

“Much of the blame for the third-quarter slumber can be heaped on weakness abroad and energy disruptions that smacked down exports, but even on the home front, some former stars like housing are now faltering.”

Whither Greece
As always at the end of the week, there are questions about Greece.

Greece's lenders - its partners in the euro zone and the International Monetary Fund - struck a deal after meeting in Brussels early in the week that would allow Greece to get more bailout money and meeting a new target of debt to gross domestic product of 124 per cent by 2020.

Details are still slim and, most importantly, the deal doesn't address the issue of a sustainable path for Athens.

At the same time, austerity measures are hurting a crippled economy even more.

"The reality is this agreement has more to do with the politics of German Chancellor Angela Merkel getting re-elected next year, rather than helping the Greek economy back on to its feet, and as such the perception remains that this deal is merely delaying the inevitable once again," said senior analyst Michael Hewson of CMC Markets in London.

"EU officials continue to rule out any talk of debt restructuring, despite it being plain to everyone that it remains the only way forward. There was some ambiguity about looking at further measures if and when Greece returned to a surplus position, but the idea was left hanging."

Six things
1. Colour commentary of the week, from the foreign exchange team at  Société Générale: "“Over all, the main concern is that this doesn’t tackle the underlying austerity trap which dooms Greece to a seemingly never-ending cycle of recession and poor public finances. But then, as one wit put it, the deal doesn’t provide a solution to cancer either."

2. Runner-up colour commentary of the week, from the same folks: "Grey, wet, despondent. And that's just the market."

3. SNC-Lavalin news release, Nov. 22: "SNC-Lavalin (TSX: SNC) has won the Award of Excellence for Corporate Reporting in Diversified Industries from the Canadian Institute of Chartered Accountants (CICA). The CICA’s Corporate Reporting Awards are the most prestigious national awards for corporate reporting."

SNC-Lavalin news release, Nov. 28: "We have just been informed of the arrest of Pierre Duhaime. We have not been made officially aware of the specifics of any charges that may have been laid against him and are not able to comment further. As we have stated repeatedly, SNC-Lavalin has and will continue to cooperate fully with all authorities who request our assistance. We have voluntarily turned over information that we have to local and other authorities for them to take any actions that they may consider appropriate."

4. "Relief planning committees" sound like something the government would set up in the wake of some apocalypse. Nope. Canada's telecommunications regulator is striking the committees to "evaluation various solutions and make recommendations" because two area codes in southern Ontario are forecast to run out of numbers by early 2017, while all of Alberta's area codes will run out by mid-2018.

5. There really is a Dunder Mifflin, though it seems to be doing much better than the sitcom that spawned it. Quill.com launched Dunder Mifflin, having struck a licensing deal with NBCUniversal, and it’s now a million-dollar enterprise in expansion mode, Bloomberg News reports

6. Robbing for the cradle? The Economist, on a study to be appear in December in Administrative Science Quarterly: "Male bosses, it turns out, pay themselves significantly more once they become fathers. Even after controlling for factors such as age, length of tenure and the performance of the firm, the study found that bosses with daughters pay themselves 3.5 per cent more than childless ones. If they have a son, that increases to a hefty 6.4 per cent."

Required reading
While quotas for women on corporate boards remain a difficult sell for many in the business community, there is clear evidence of softening views around the world, Janet McFarland writes in her annual Board Games special report and governance rankings.

Catalonia’s separatist parties won a snap election last weekend and will use their popular mandate to try to hold a referendum on independence, adding more economic and political stress to Spain, a country on the verge of a sovereign bailout, Eric Reguly reports.

You can put an extra $500 in a tax-free savings account next year after the government this week raised the annual meet to $5,500, but don’t do it, advises Rob Carrick.

As the Canadian government scrutinizes two oil patch takeover proposals by foreign state-owned entities, privately owned Chinese companies are increasingly on the prowl in Alberta, Carrie Tait reports.

North America's  energy glut is exacting a growing toll on the treasuries of Canada’s western provinces, as corporate spending and profits fall far below expectations, Nathan VanderKlippe and Justine Hunter report.

Follow on Twitter: @michaelbabad

 
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