Home' Trinidad and Tobago Guardian : December 21st 2014 Contents SBG14 FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 21 • 2014
European Union leaders
agreed Thursday to cre-
ate a strategic invest-
ment fund that could
generate up to 315 bil-
lion euros (US$386 bil-
lion) in private- and
public-sector money to
upgrade infrastructure, jumpstart the EU's
sluggish economies and ignite job growth.
"The economic situation has improved
... but we are not safe yet," said EU President
Donald Tusk. "Today, we need more invest-
ment, more structural reforms and sound
public finances across Europe."
The plan approved by leaders of the 28-
nation EU at their one-day summit meeting
in Brussels calls for the new European Fund
for Strategic Investments to be in operation
and approving new investment projects by
The plan, which calls for use of EU seed
money to leverage up to 15 times more in
private funds, is the brainchild of European
Commission President Jean-Claude Juncker.
Critics have already warned that despite its
multibillion euro price tag, it may not be
big enough to win over wary investors.
"This package looks like creative account-
ing for the moment," Lithuanian President
Dalia Grybauskaite said as she arrived for
Grybauskaite and the other EU leaders
seemed to acknowledge the possibility that
private companies may be reluctant to risk
their capital by noting in a summit com-
munique that the strategic fund will accept
contributions from EU member states. For
the fund to launch, it would also require
approval for European legislators.
European Parliament President Martin
Schulz, in a speech prepared for delivery at
the summit, said the EU must stimulate
and modernise its economy, or risk falling
farther behind global competitors like the
US and China.
Schulz said investment in areas like
schools, universities, green energy and infra-
structure was key "if we want Europe to be
an economic champion in the future."
German Chancellor Angela Merkel said
investments fostered by the strategic fund
"must go into projects for the future par-
ticularly, for example, in the digital economy
or where we aren't so good on the world
market as we should be: electromobility
(electric cars) and the like."
Over dinner, Tusk said, the leaders were
scheduled to discuss another major chal-
lenge: long-term policy toward Russia.
To resolve the Ukraine crisis, Tusk said
EU members must agree on a strategy that
is "tough and responsible" for dealing with
Russia and its president, Vladimir Putin.
EU foreign policy chief Federica Mogherini
said she would brief the summit on talks
held with Ukrainian officials this week. She
said she derived no satisfaction from the
economic woes of Russia, the target of EU
and US sanctions since the Kremlin annexed
the Crimean Peninsula.
But Mogherini said Putin and other senior
Russian officials "should reflect seriously
about the need for introducing a radical
change in the attitude toward the rest of
the world and to switch to a cooperative
The EU's last high-level meeting of the
year was the first chaired by Tusk, a former
Polish prime minister. Before it began, he
confided to reporters that though he was
an experienced politician, he was feeling
"something like stage fright." AP
European investment managers built up their hold-
ings of bonds and cut back on riskier assets such as
stocks in December, eyeing the threat of market
volatility and an uncertain year ahead beset with
unseen risks, a survey shows.
A Reuters poll of 17 Europe-based investors found
the average recommended allocation to equities in
global balanced portfolios fell to 43.6 per cent from
47.1 per cent a month earlier.
In contrast, bond allocations rose nearly two per
centage points to 37.8 per cent, the survey showed.
Bonds are seen as relative safe havens when investors
become risk averse. Equities are typically more volatile
and gain favour at times of rising optimism.
However, the European Central Bank is poised to
carry out rounds of monetary stimulus---including a
bond-buying programme known as quantitative eas-
ing--- which is likely to bolster bond markets.
Cash holdings were 7.8 per cent, and many investors
appeared to buy into a real estate recovery. Property
exposure rose to 3.7 per cent on average from less
than 1.0 per cent a month earlier.
Risks identified by poll respondents include policy
mistakes by monetary authorities, such as mis-timed
interest rate hikes that could hamper fragile economic
"Out of sync central banks and commodities price
dynamics are likely to be the macro themes from
which we will derive our investment consequences,
being aware of some volatility ahead. Cautiousness
and punctual portfolio risk management will drive
our investment choices," said Monica Defend, global
head of asset allocation research at Pioneer Invest-
Many investors also highlighted geopolitical risk
as a major concern as the standoff between the West
and Russia over the conflict in eastern Ukraine con-
However, some investors said they remained bullish
for 2015 and have used recent bouts of market volatility
to buy equities at relatively cheap valuations.
Boris Willems, a strategist at UBS Global Asset
Management, said he expects global growth to con-
tinue through 2015, led by economic recovery in the
United States. Monetary easing in Europe would ben-
efit developed market equities, European bonds and
the U.S. dollar, he added.
"However, some headwinds remain, namely mis-
steps in central bank communication or an escalation
of the Ukraine crisis with tougher Russia sanctions
that could potentially further harm the German econ-
omy," he said.
European Council President Donald Tusk, centre,
listens as European Commission President Jean-
Claude Juncker speaks during a media
conference after an EU summit in Brussels on
Thursday. European Union leaders agreed to
create a strategic investment fund that could
generate up to 315 billion euros (US$386 billion
dollars) in private- and public-sector money to
upgrade infrastructure, jumpstart the EU's
sluggish economies and ignite job growth. AP
EU leaders agree to fund
for jumpstarting growth
build up bond
holdings in Dec
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