Japan External Trade Organization (JETRO)
(1) EU Enjoys Steady Growth as Launch of the Euro Approaches
Driven by external demand, the economic recovery in Europe gathered pace throughout 1997 before entering a domestic-demand led boom in 1998. According to the European Commission's 1998 Autumn Economic Forecasts (October 1998), the real GDP growth rate of the EU15 as a whole is estimated to have grown from 2.7% in 1997 to 2.9% in 1998. Growth is forecast to slow slightly to 2.4% in 1999 due to the effects of the Asian currency and economic crises.
January 1999 will see the start
of the third phase of the Economic and Monetary Union (EMU) and
the launch of the euro-the
single European currency-in
11 countries of the EU15, including countries such as Germany,
France and Italy. The creation of the euro zone is expected not
only to reduce exchange risks and costs, but also stimulate price
competition, and firms are consequently stepping up their reorganization
and M&A initiatives in an attempt to boost competitiveness.
(2) M&A Deals and Transatlantic Investments Gather Pace
The economic recovery in Europe and the impending launch of the euro helped stimulate both inward and outward FDI in the EU in 1997. According to Eurostat, the European Commission's statistical information office, both inward and outward investment levels were high, with FDI outflow in the EU (including intra-regional outflow) up 46% on the previous year to ECU172.3 billion (ECU: European Currency Unit, 1 ECU = approx. ¥132), and FDI inflow (including from within the EU) up 38% to ECU99.2 billion. The importance of the U.S. as both the EU's largest external source and recipient of investment increased still further. At ECU37.6 billion, EU investment in the U.S. in 1997 was double that in 1996, and investment from the U.S. also shot up 42% to ECU 21.4 billion.
M&A activity was high in
1997, and the total value of M&A deals in the U.K., Germany
and France all reached record levels. There were a series of big
deals in finance and insurance, such as the acquisition of France's
second largest insurer, AGF, by the largest German insurer, Allianz,
as firms prepared themselves for monetary union. Activity in M&As
remained strong in 1998, and the total value of such deals in
Europe from January to June 1998 swelled to 2.2 times the level
recorded over the first half of 1997 (U.K. Acquisitions Monthly).
There were also some big M&A deals between U.S. and European
firms, as exemplified by the acquisition of Germany's
Wertkauf by Wall-Mart of the U.S. in 1997 in the distribution
sector, and the merger of Germany's
Daimler-Benz and Chrysler of the U.S. in 1998 in the auto industry.
(3) Japanese FDI in Europe Rebounds
According to Eurostat, EU investment
in Japan slumped 41.5% from ECU2.08 billion in 1996 to ECU1.22
billion in 1997, reflecting a net withdrawal of German investment.
Japanese FDI in the EU, on the other hand, began to recover, rising
a healthy 54.5% from ECU792 million in 1996 to ECU1.22 billion
in 1997.
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Trends in FDI Inflows and
Outflows of the EU (Excluding Intra-Regional Investment)
(Units: upper rows - ECU million, lower rows - US$ million)
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