This is an audio transcript of the FT News Briefing podcast episode: ‘Spain in political limbo’
Sonja Hutson
Good morning from the Financial Times. Today is Tuesday, July 25th, and this is your FT News Briefing. Credit Suisse has been hit with a fine over the collapse of Archegos Capital and Spanish elections wrapped up without a clear winner.
Barney Jopson
You know, we’re in a period of drift for the next few months. As long as there’s a caretaker government, no big decisions can be made.
Sonja Hutson
Plus, US consulting companies are having a hard time drumming up work in China. I’m Sonja Hutson in for Marc Filippino. And here’s the news you need to start your day.
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US and British regulators are fining Credit Suisse almost $390mn. They say the bank had “significant failures in risk management and governance in its dealings with the now defunct Archegos Capital”. The investment firm collapsed in March of 2021. The collapse helped lead to Credit Suisse’s own demise. The bank had to be rescued by its rival UBS earlier this year. Archegos is one of several unresolved scandals that UBS inherited from Credit Suisse. The bank has up to $4bn reserved to cover regulatory and litigation costs from the takeover.
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Spain is in political limbo right now after this weekend’s election neither the right nor the left coalition’s got enough seats in parliament to form a majority government. Here to talk more about this is the FT’s Barney Jopson. He’s based in Madrid. Hi, Barney.
Barney Jopson
Hi there. Good to be here.
Sonja Hutson
So break down the election results for us. What happened and what does it mean?
Barney Jopson
The expectation was that the mainstream conservative People’s party and the hard right Vox party would, between them, secure enough seats to make Alberto Feijóo the conservative prime minister. But that did not happen instead, and a result that nobody expected we’ve ended up with a hung parliament and we’ve begun a period of weeks in which the many, many parties in Spain’s fragmented political system will be negotiating to see if any of them can cobble together enough seats to anoint a prime minister.
Sonja Hutson
So, Barney, what are you going to be looking out for in these next couple of weeks as these negotiations take place? What should we be expecting?
Barney Jopson
So Spain is not a two-party system. It’s not even a four-party system. There are multiple parties in parliament. The reason is that many different regions of Spain have given rise to their own political formations. So you have a lot of parties with just one, two or three seats. And when you have a hung parliament like this and a very close result, it’s those small parties who become crucial to the negotiations. So what I’m going to be watching is which of the small party parties can either the left bloc or the right bloc persuade to join them to get to that all important majority, which is 176 seats.
Sonja Hutson
So what is this political uncertainty, this political limbo that Spain is in right now mean for the country more broadly and for Europe as a whole?
Barney Jopson
Well, you know, we’re in a period of drift for the next few months. As long as there’s a caretaker government, no big decisions can be made. We’re not in the midst of a crisis, but there’s always a series of issues that need to be tackled. Spain’s receiving a lot of EU money that it needs to spend. Unemployment in Spain is always quite high. At the European level, it just so happens that Spain holds the rotating presidency of the European Union right now. It has the role of trying to knock heads together to reach agreements on difficult issues and on the roster right now for the European Union, it’s trying to seal a new pact on managing migration. It’s trying to reform the electricity market. So there’s a bunch of important issues where Spain would ideally be managing the process. But again, with an interim part-time administration, it’s not going to have the clout or indeed the bandwidth to do that.
Sonja Hutson
Barney Jopson is the FT’s Spain and Portugal correspondent. Thanks, Barney.
Barney Jopson
Thank you.
Sonja Hutson
Work has been drying up for top US consultancies in China. Weak economic growth has caused foreign companies to hold back on their investments. To make matters worse, a series of national security raids on US consultancies have scared away local clients.
Ryan McMorrow
Bain in particular seems to be at the epicentre of this.
Sonja Hutson
That’s Ryan McMorrow, the FT’s China technology reporter.
Ryan McMorrow
A lot of their business generally is doing due diligence for investors. So if some private equity firm is buying a company in China, they’ll call up Bain within a day, as some people told me would start doing due diligence on the company and the industry and the individuals involved. And at the same time, Bain was the focus of a raid in Shanghai in April. So they’re also the ones that have been making headlines for being involved in a national security investigation, which obviously would make their clients nervous.
Sonja Hutson
Capvision is another company China raided on national security grounds. It provides experts to Bain, McKinsey and other foreign investors.
Ryan McMorrow
With the Capvision raid China made clear that these experts that we’re talking to, management consultants and investors were also passing along information that was too sensitive to pass along to the outside. And then kind of turned into a publicity campaign where they really did like a full special on catfishing. And it aired in prime time on television. And it really got hit home that Chinese people should be wary of what they tell to foreigners.
Sonja Hutson
Because of the lack of new work top US consultancies in China have been putting hiring on hold.
Ryan McMorrow
So I think Bain is the longest that we heard of in there, pushing back their start dates for new hires until April 2025, which is a really long time. And so they’re asking these new consultants to wait for 18 months and hope that you’ll have a job with us when the economy gets better.
Sonja Hutson
But in recent weeks, it does seem like Chinese economic officials are trying to smooth things over.
Ryan McMorrow
As the economic officials really try to get their economy going again they’re really trying to hit home the message that foreign investors are wanted and kind of lay down a welcome mat. And we asked Bain and McKinsey, both groups responded, saying that they’re committed to China, I guess a bad year or two they can probably live through. I guess the whole probably went to see where things go. But at the moment, I don’t think either one is really considering pulling out.
Sonja Hutson
Ryan McMorrow is the FT’s China technology reporter.
Before we go, the 2024 Paris Olympics just scored a big new sponsor. The French luxury group, LVMH, the Louis Vuitton owner, did not disclose the value of the deal, but a source told the FT it’s worth about €150mn. One of the group’s jewellery companies will design the medals and one of its luxury brands is expected to dress the French athletes. The deal will come as a relief for the Games. Corporate sponsors have been taking longer than normal to sign on. And France’s national auditing body said last month that the complexity of the project had been underestimated from the start, and it warned that the budget would remain really tight.
You can read more on all these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.
