Poland’s Football Cup Fumbles
Polish stocks followed neighbors into year-to-date losses as construction woes led to another big builder bankruptcy despite the hospitality and infrastructure push from co-hosting of the Euro 2012 soccer competition. A road project had already been reassigned from Chinese control after multiple failures, and PBG’s high-profile implosion battered all industry listings as last-ditch talks with creditors were ultimately in vain. The saga unfolded as the Warsaw Exchange trumpeted its status as a regional center at a week-long event introducing a new Central European sub-index. Before then economic officials, after bringing the GDP growth forecast below 3 percent, publically expressed anger at a central bank rate lift designed to quell inflationary and currency tensions. The second term Tusk administration may come close to the 3 percent of GDP EU fiscal target on lower local government transfers and better privatization proceeds and state company dividends. Longer-term the social security retirement age has been raised to 67 in a vote lambasted by labor unions, as the smaller contribution share to private pensions could also further drop. In external accounts, the current account gap will come in around 4 percent of output with additional international bond issuance slated and the IMF backup credit line in place until next January. Banks continued to register healthy Q1 results despite foreign parent pummeling as Chinese entrants joined the fray. Eurozone and mortgage tolls could dim the second-half outlook with management resorting to workforce reductions for bottom-line defense. As diplomats prepared to welcome game visitors they were embroiled in a dispute with Washington after President Obama misspoke at a ceremony honoring a World War II anti-Nazi resistance fighter who became a popular university professor.
In co-host Ukraine, outside outrage over the confinement and treatment of the opposition leader continues to mount with several European government heads planning to boycott the matches. The bourse is the bottom area performer with an almost 40 percent MSCI frontier decline, and local-currency bond auctions receive no bids on depreciation expectations with the unhinged IMF program and flat capital inflows to bridge the 5 percent of GDP current account divide. A recent Eurobond payment was met, and the sovereign came to terms with Russia’s VTB bank over $2 billion owed this month by agreeing to pay half and extending the rest until 2014. President Yanukovych has delayed gas subsidy overhaul until fall parliamentary elections as his team haggles with the extended Putin regime over new cost and distribution arrangements. However his natural resource and anti-pariah hand may have been strengthened with unconventional hydrocarbon finds that have attracted Chevron and Shell to explore. The interest may detract from reports of beatings and withheld medical attention for jailed former prime minister Tymoshenko and insider contract deals to the President’s business allies for Cup facilities leaving a sour taste.
