EU retail sales increase and possible legal action by Irish bank bondholders

Monday, December, 2010

According to latest figures released by Eurostat, the official statistics agency of the EU, between September and October 2010, the volume of retail trade increased by 0.5% in the eurozone and by 0.4% in the EU27.  During the past year (Oct 2009-Oct 2010), the retail sales index rose by 1.8% in both zones. 

The highest monthly increases were observed in Germany (2.3%), Belgium (1.4%) and Sweden (0.9%) and the largest decreases in Slovakia (-2.8%), Latvia (-1.7%) and Malta (-0.8%).  The montly figure in Ireland was -0.4%; in September it was -0.7% and averaged -1.4% during May-August  and sales were flat (0%) in August 2010. 

Among the Member States for which data are available, on an annual basis, total retail trade rose in ten, decreased in seven and remained unchanged in Ireland and the UK.  The highest increases were observed in Poland (12.8%), Belgium (9.4%) and Latvia (4.9%) and the largest decreases in Malta (-6.7%), Bulgaria (-4.8%) and Slovakia (-3.7%).  

The flat annual figure for Ireland (Oct 2009-Oct 2010) comes on the back of decreases in the volume of retail sales recorded in the previous four months, suggesting that a small increase in retail sales is likely in the run up to Christmas.

Emerging news from the Daily Telegraph newspaper this morning is that bondholders in AIB (Allied Irish Bank) are planning to sue the Irish state over losses they expect to be forced to take.  According to the newspaper, what makes the latest bondholder group’s action particularly significant is that it is dominated by ‘long-only’ investors (e.g. pension funds) and not so-called ‘speculators’ like hedge funds. Investors’ anger may prompt fears of a buyers’ strike when Ireland, and other indebted euro area countries, come to the bond markets next year to refinance hundreds of billions of euros of maturing sovereign debt.  If the law suit eventuates, it will add to the uncertainty over Ireland and the euro and may further delay Ireland’s hopes in returning to the bond markets.

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