Sceptics give vent to hot air over Europe

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The Independent Online
Seductive stuff, this Eurosceptic nonesense. Even the Defence Secretary, Malcolm Rifkind - long seen by Kenneth Clarke as one of his few genuinely pro-European allies in Cabinet - is at it now. There he was yesterday at a meeting of the European Research Group (a motley collection of anti-EU, centre-right parliamentarians) banging on about Bulgarian jam.

Yes...ho, ho, ho...those EU technocrats are now so barmy that they won't even allow in a few extra jars of Bulgarian strawberry jam for fear of the damage it might do to the economies of Western Europe. Incredible, opined Mr Rifkind. But mixed in with the usual cheap anti-Euro clap-trap, Mr Rifkind had some serious, though hardly new, points to make. His main one was this - "my strong belief that expanding the EU to the east will enhance the security and prosperity of all the peoples of Europe". This of course is precisely what EMU is meant to do as well. Mr Rifkind's expanded free trade idea is posed by implication as an alternative.

Also present at yesterday's shindig was a group of anti-EMU business representatives. Their purpose, apparently, was to explode the "myth" that business is pro-EMU. Most of us are not, they insisted. Er, well actually there were only 14 putting their name to a document called "The Business Agenda For a Free Europe" but there were some big names among them, including Sir John Hoskyns and Sir Alick Rankin. Like Mr Rifkind they make some serious points. And like Mr Rifkind they also want the EU to be little more than a glorified free-trade zone.

As always, the argument is not so much about economics as politics, sovereignty and differing views of war and peace. Like politicians, businessmen divide into pro- and anti-EMU camps; the fact that they are businessmen doesn't seem to give them any special insight. Certainly the Eurosceptic businessmen giving vent to their views yesterday had nothing new to say. They believe EMU would damage their businesses and Britain more generally but they have no particular evidence for saying so.

As to what happens if EMU goes ahead without Britain they seem not to have the slightest clue. Making Eurosceptic noises is not of itself going to prevent something that some British businessmen and politicians find distasteful from happening. With or without Britain, EMU may yet go ahead. How to respond is the real issue businessmen should be addressing, not whether it is right or wrong.

Pearson in the frame

Perhaps unfairly, Pearson's reputation is of a company with an open cheque book when it comes to acquisitions in the glamorous "multi-media" sector. But even bears of Pearson were conceding yesterday that the media and leisure giant had eschewed its usual habit of overpaying by clinching Rupert Murdoch's US educational publishing interests for just pounds 377m, or 1.8 times revenue. So modest was the price, indeed, that one might ask why Rupert was prepared to take such a low-ball offer. The likely answer is that he much prefers television, consumer media, electronic publishing, the internet -- all the hot sectors. He may be seeking to develop his cash resources, too; launching 24-hour news networks and going digital in Asia, America and Europe all at once is going to take a lot of cash.

So why should Pearson, which also likes the new media, want to buy another school books division, after such a miserable year with its existing educational publishing arm, Addison Wesley Longman?

The charitable view, and probably the right one, is that volume drives profits in the schools market. The deal should be earnings enhanced from year one. This, thankfully, is no Mindscape, the CD-Rom company that has so far proved resistant to Pearson's efforts to turn it around. It cannot be called a poison pill, unveiled to fend off potential bidders eager to break Pearson up. The effect, in stock market terms, ought to be neutral.

Pearson is left essential as it was, a media and publishing company with still too many extraneous businesses. Demerger must still be on the agenda, as the company itself seemed to foreshadow when it restructured its lines of executive command to reflect the main areas of business. The mix of publishing, entertainment and financial services makes no more commercial sense than MAI's conglomerate structure, which has made Lord Hollick's company, too, a candidate for breakup. Pearson has done a good deal, and should be congraluated. But it remains a likely takeover target.

Game of bluff at Eurotunnel

Sir Alastair Morton has long maintained that if Eurotunnel actually goes bust it will produce a Franco-British insolvency nightmare from which the banks will take years to wake - a sort of nuclear weapon, too awful for the creditors to contemplate using.

Yesterday the Eurotunnel board decided to appoint a French mediator, a job which is exactly what it sounds and is several steps away from administration.

It is, however, the first step in French insolvency procedure. In the UK, administration is a relatively simple matter, because insolvency law generally works in favour of bank creditors.

The French system is weighted more to the interests of shareholders and employees, leaving bank creditors trailing third in the priority list. If Eurotunnel goes into the French equivalent of administration, the balance of advantage would shift significantly towards shareholders, and that, presumably, is why Eurotunnel has decided to go this route. At the end of the day, however, it is not clear that French law would give shareholders any more chance of keeping a long term stake in the company.

The end result of bankruptcy procedures in Britain and in France would probably be very little different. In both countries, most employees of Eurotunnel would be protected, since the operations of the tunnel would not be affected. Eurotunnel is already able to pay its running costs, excluding debt interest, so closure would not be an issue.

But it is hard to see how the arithmetic of insolvency would be changed by choice of legal framework. A debt is a debt in francs or sterling, and the banks' loans are secured on the entire assets of Eurotunnel.

There is one important consequence of a cross border insolvency, which is simply the delay it causes. Court actions in two different legal systems are hugely difficult to coordinate, and there would be much argument on procedural questions.

The conflict between British, Luxembourg and Cayman Islands law has dragged out the BCCI settlement for years. The same delays would almost certainly occur with a Eurotunnel administration.

The appointment of a mediator, then, looks like no more than another card in the game of bluff and double bluff being played out with bankers. It may make banks try harder for a settlement. But not that much harder.

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