World Economic News

Syria Switches from Dollars to Euros

According to an AP wire written from Damascus Feb. 15, "Syria has switched the primacy hard currency it uses for foreign goods and services from the U.S. dollar to the euro in a bid to make it less vulnerable to pressure from Washington. The decree signed by Syrian Prime Minister Naji al-Otari on Feb. 13 ordered government bodies and public-sector companies to use euros to pay for foreign transactions, including payment for exports." The head of the state-run Commercial Bank of Ysia, Dureid Dergham, was quoted Feb. 14 saying that the switch to euros was "important and necessary in light of the current U.S. threats against Syria, and the ensuing complications in banking procedures and transfer operations to Syria from U.S. and European banks." "The step aims at avoiding any future disturbances," he told the state newspaper Al-Thawra.

Private Equity Funds Target German Mittelstand Firms

According to an international survey released Feb. 15 by a London investment bank, 60% of investors in the so-called "distressed debt" market are naming Germany as their primary target region. Second is Britain, with a rate of just 20%. Among distressed debt investors are hedge funds and private equity funds. A majority of investors participating in the survey stated that they buy up such debt from banks in order to gain control over the indebted company, for example, by demanding an exchange of debt against stocks. The particular role of Germany in this respect is the effect of the ongoing elimination of the traditional Hausbank ties between banks and Mittelstand firms. As banks are cutting credits to the firms—which are told to issue stocks or bonds instead—the volume of bad debt is rising. According to estimates, there are about 200-400 billion euros of problematic loans held by German banks. A rising proportion of this debt is now being traded at discount prices on secondary markets, including to funds specializing in distressed debt.

The German Private Equity and Venture Capital Association (BVK) states in its annual report, that by the end of 2005 private equity funds controlled 5,700 German firms, representing 797,000 employees and 21.5 billion euros in private equity capital. The BVK report states that if all such firms are taken as a whole, and if the employment of German buy-out firms is added, the German private-equity sector would be the largest private company in the country in terms of employment. The fundraising of German private equity firms more than tripled to 7.2 billion euros in 2005, compared to 2 billion euros (a 262% increase) the year before. The association includes the German branches of foreign funds.