New bosses take charge at Banco Espirito Santo - but, with Gowex's former boss readying for court, is it enough to help restore sentiment to Europe's markets?
TV AND WEB RESTRICTIONS**NO ACCESS FRANCE/NO ACCESS INTERNET/ NO REUSE AFTER 1000GMT ON JULY 15, 2014/ MUST COURTESY "TF1 & FRANCE TELEVISIONS"/ NO ZOOMING**~ The moment the Costa Concordia wreck begins to float again as its salvage operation enters a new stage. The doomed cruise liner has been resting on a temporary platform in Italy and is to be towed away and scrapped. Things also remain somewhat submerged for the euro zone's own salvage operation. Industrial production dropped sharply in May with production in the region's three biggest economies - Germany, France and Italy falling month-on-month. The region's periphery is also back in the spotlight after Portugal's biggest lender rattled markets last week. Banco Espirito Santo decided to suspend shares and bonds at its parent company Espirito Santo Financial Group, hurting peripheral bonds. Baader Bank's Robert Halver. (SOUNDBITE) (German) HEAD OF CAPITAL MARKET ANALYSIS AT BAADER BANK, ROBERT HALVER, SAYING: "I am not surprised that a Portuguese bank, in this case Banco Espirito Santo, is in difficulty. Other banks in the southern euro zone are in difficulty because legacies from the property crisis remain. The economies are weak, and there is deflation, so it would be a miracle if banks in southern Europe did well." The Espirito Santo family has now loosened its grip on the bank with a stake sale and management change, to appease investors. But CIBC's Jeremy Stretch says fundamental issues in the banking sector remain. (SOUNDBITE) (English) HEAD OF FX STRATEGY AT CIBC, JEREMY STRETCH, SAYING: "There is still a glaring question mark about the capitalisation of a number of banks and of course we have the asset quality review across the summer. That could well reveal some rather nasty capital shortfalls. And I think that's going to be one of the catalysts which will reduce the allure of buying the euro and certainly some of those investors and reserve managers that have been adding to euro positions will be forced to question the further extension of those into the late summer." In Spain, wireless network provider Gowex is also feeling the heat. Its ex-CEO, Jenaro Garcia Martin, has appeared in court after admitting to misrepresenting the company's accounts for four years. The company is now filing for bankruptcy, and there are fears it could make investors cautious of Spanish stocks. And France, celebrating its biggest public holiday of the year, continues to be a problem area. Inflation fell to its lowest level in five years in May, in fresh signs the euro zone's biggest economy is struggling to gain momentum.