The European leaders failed to come up with a unified solution to combat the credit crunch but outlined directions for tacking the problem.

In the meantime, the US Congress approved the bank rescue package worth USD 700 billion of taxpayers’ money.

The word “nationalization” echoed louder across Europe, as the governments of Germany, Belgium and the Netherlands faced a hard choice concerning the fate of titans of finance.

Europe threw over the idea for the creation of a pan-European rescue fund for banks with French President Nicolas Sarkozy denying ever going as far as to back such a project.

Each government will make its own decisions but coordinate them wit the other countries, the leaders of France, Italy, the UK and Germany told an emergency meeting held in Paris.

They announced alternative decisions such as new banking regulations and further loans to small companies to cushion the effect of the crisis.

On Friday, the US President George Bush signed the bailout bill into law, the largest state intervention into the market ever since the Great Depression.

As the European leaders were seeking a way out of the crisis, the management of Belgian Fortis and German Hypo Real Estate were waiting to see the companies’ future.

The Netherlands took a decisive step and sent Fortis’ full local business into public ownership.

German Chancellor Angela Merkel was adamant the government would not leave Hypo Real Estate go to the wall.

The balance sheets of Bulgarian banks are clean, and the country would not be directly hit by the crisis, Bulgarian National Bank governor Ivan Iskov said last week.

(Dnevnik)

The price of the mandatory motor third-party liability insurance will go up by the end of the year, and some companies are speaking about further hikes in mid-2009, a poll showed.

Insurers declined to name any figures but all said a price increase is necessary to catch up with levels in the EU and avoid financial trouble.

Bulgarian insurers sell the cheapest third-party policy but its coverage spans the whole of the EU, said Rumen Yanchev, executive director of Bulstrad. The higher limits laid down in the Insurance Code will further pressure prices, he said.

Euroins said they might raise the price by 20% in December-January, the market’s busiest period.

“We’ll definitely raise the price to BGN 180-190 by January and to BGN 300 by the middle of next year, “ said Dancho Danchev, executive director of Victoria and deputy board chairman of the insurers’ association.

The proceeds from other types of policies can no longer cover the massive losses from motor insurance, according to Danchev.

Bul Ins will keep prices intact by the end of the year having raised them by 30-35% on average from October 1.

Konstantin Velev, board member of Generali Bulgaria Holding, said the third-party liability policy had been selling outrageously low in the past years but now insurers need bigger reserves to meet EU limits.

Bulstrad explained it has opted for more frequent but smaller price rises to pay wages, brokers’ commissions and claims as well as comply with the reserve requirement.

(Dnevnik)

Investment banker Pravin Banker called to Bulgaria’s Prime Minister Sergei Stanishev in an open letter forwarded to Dnevnik daily to take ailing steel mill Kremikovzti under the government’s wing.

The financier, who is experienced in rescuing metallurgical companies and has kept an eye on Kremikovtzi since 1998, put forward an action plan to help Bulgaria get away with EU punishment.

Banker appealed to the government to prove it really recognises Kremikovtzi’s key role by sparing it the lengthy insolvency procedure.

As the mill’s biggest creditor, the state should propose a restructuring plan to recapitalise the company and sign a three-year management contract with a strategic investor which will be given a call option. Only companies with annual steel output of 15 million tones should qualify for the competition.

The first step in the rescue plan should be creating a supervisory committee to manage the process.

The mill may be delisted from the Bulgarian Stock Exchange provided that minority shareholders are compensated.

All proven debts should be rescheduled into a new seven-year bond with a 7% coupon.

The state should become the company’s sole shareholder and take a EUR 350 million loan from a consortium of banks to finance the mill’s eco and investment programmes.

The indicative price for the operating manager and the call option should be set at EUR 150 million and immediately injected into the company.

(Dnevnik)

The credit squeeze spared the financial sector of Central and Eastern Europe and did not hinder its record growth in 2007, but now the region will go back to modest and sustainable growth, Raiffeisen Zentralbank Osterreich and Raiffeisen Centrobank said in an analysis quoted by ENP Newswire.

In 2007 the region’s combined banking assets gained 31% year-on-year, or EUR 330 billion,, the biggest growth on record. The assets surged 20% year-on-year in the first half of 2008.

The analysts see the pace slowing down to 15% in 2008-2013 from 26% for 2003-2008.

In spite of the slower development levels, the CEE banking sector continues to be very dynamic, and the outlooks for the coming years are very good, explained Walter Demel, senior analyst at Raiffeisen Zentralbank Osterreich.

The fast growing economies in the region have sped up lending by a record 42% year-on-year with southeast Europe and the CIS outperforming Central Europe.

Eastern Europe is far behind the eurozone’s average in terms of economic development and so the loan expansion will continue, analysts said.

CEE banks have little exposure in financial instruments that triggered the credit crunch but still they are tightening loan requirements and raising interest rates to meet the soaring cost of interbank lending.

Raiffeisen forecast loan volumes will expand by EUR 1250 billion over 2008-2013 but deposits will grow by a humble USD 950 million sending banks to hunt for other channels of funding.

(Dnevnik)

The pessimism clogging the capital markets is about to fling the shares of Bulgarian public companies to their lowest for the past three and a half years.

On Friday, SOFIX of the 20 biggest companies sank to 751.67 points.

Dnevnik 20, which tracks the 20 biggest and most liquid companies, tumbled 5.53% closing at 93.29 points.

The other indexes on the Bulgarian Stock Exchange also retreated to their lowest levels in years.

Nikolai Kichukov of investment broker Elana Trading attributed the decrease to the pessimism reigning on the global markets. The key US indices shed over 4% dragging southeast European bourses.

Bulgaria’s most liquid companies turned out to be some of the biggest losers on the BSE – mining company Kaolin, Industrial Holding Bulgaria, insurance company Bulstrad and resort operator Albena.

Fuel distributor Petrol changed only 420 shares at over 29% lower after global agency Fitch placed its rating under review over corporate mismanagement and faced it with a lower outlook.

Most indexes staged broad retreats last week with Dnevnik 20 erasing over 11% and SOFIX down 8.37%.

The bourse’s market capitalisation lost another BGN 1 billion over the week.

(Dnevnik)

The Confederation of Employers and Industrialists in Bulgaria (CEIBG) is likely to contest the watchdog’s gas hike decision, chairman Ivo Prokopiev told Darik Radio.

The Bulgarian Chamber of Commerce and Industry (BCCI) and trade union CITUB requested on Monday that the new price be halted until the court has come up with a decision.

Under local energy legislation, the new prices will be in place until the judges have had their say on the issue. If they rule in favour of employers and unions, the prices will be cut as of the date the final decision takes effect.

BCCI chairman Bozhidar Bozhinov threatened a new claim.

The price of gas was raised by 23.89% from October 1 against the 28.89% proposed by the regulator and the 36.5% requested by state-controlled gas distributor Bulgargaz. The price will crawl by a further 21.4%, or a total of 50%, over the three months ahead.

Employers and unions urged the ministry for a two-step increase but the cumulative rise is much bigger than the watchdog’s initial proposal.

Exports may dwindle widening trade deficit and speeding the inflation by 3%, said Prokopiev and asked why the government has not managed the supply and transit contract with Gazprom and allowed Bulgargaz not to hedge against price-forming market factors.

The energy regulator made the price hike decision under severe political pressure, the Bulgarian federation of industrial energy consumers said in a declaration.

(Dnevnik)

The net assets of Bulgaria’s mutual funds have slid 20% to just above BGN 690 million over June to September from the previous quarter, showed data of the association and companies.

This is a staggering 40% down from December 2007, when the funds managed more than BGN 1.5 billion.

The companies blamed the decrease on the dire conditions on the local and foreign bourses following the global economic crisis.

The European association of asset managers EFAMA estimated that 15% of the net outflow on the continent is due to actual withdrawals while the stock market correction thawed 85%.

Market watchers say the failure of US investment bank Lehman Brothers and the string of other troubled US and European institutions have scared Bulgarian investors away from mutual funds.

Some Bulgarian funds saw their net assets fall by 10-12% from September 18-30 after the BSE indices slipped to record lows.

The approved US bank bailout package is expected to lift the battered markets and boost the world economy.

Pioneer Investments topped the Bulgarian mutual funds market in the nine months to September with assets of BGN 146 million. The runner-up was Elana Fund Management followed by DSK Asset Management.

(Dnevnik)