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Charlie McCreevy |
Commissioner Charlie McCreevy has been pushing the cause of MiFID for so long that market players can forget that his cause is less bureaucracy, not more, and increased competition, not European protectionism. Last week he took on the cause of the public’s least favourite operations after migrant smugglers, the hedge funds and private equity groups.
A storm has been created amongst European members of parliament, regulators and legislators following McCreevy’s statement that he had no intention of clamping down on private equity and hedge funds, and instead praised them for dragging kicking and screaming European companies and their management into the new era. In a speech in Dublin last week, he said, "Aggressive corporate action by private equity funds has helped ensure that the businesses in which they invest adapt to the realities of rapidly changing markets: be it by adapting their cost bases, reconfiguring their production processes or supply chains, renewing or repositioning their brands, restructuring their balance sheets, or withdrawing capital from areas where returns and long term competitive advantage cannot be sustained, and redeploying it in areas where it can."
The expected reaction from the European establishment was not long in coming – Poul Nyrup Rasmussen, the leader of Europe’s socialist movement said that private equity funds often ruined strong and sustainable companies leaving them saddled with debts. Ieke van den Berg, a member of a task force established by Brussels to curb the use of debt by private equity firms accused McCreevy of self-interest in promoting Ireland as a tax haven for funds.
However, Peter Linthwaite, head of the British Private Equity and Venture Capital Association is reported as saying that it was unfair to call them asset strippers. Private equity has rescued many firms and nearly 20% of British private sector employees now work for firms supported by private equity, a group that has seen a 9% increase in jobs compared to only 2% for listed companies.
McCreevy is not to be diverted. He accepted that deals will go bad and there would be fall-out – but this was healthy. He ended with the statement: "... lest there be any misunderstanding, let me make it clear that as Commissioner for the Internal Market with responsibility for financial services I have no intention whatever of trying to change the nappies of either banking supervisors, the financial institutions that they supervise, or of the professional investors who invest in them." Good news from private equity and hedge funds if he gets his way!
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