Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe:
Europe faces further credit squeeze to meet Basel III.
Royal Bank of Scotland published research showing that European Union banks will need to shed a further 3.2 trillion euros ($4.3 trillion) of assets by 2018, if they are to meet requirements for the new Basel III international banking regulations. That is exactly 10 percent of their current asset base. And, according to RBS, most of the cuts -- about 2.6 trillion euros -- will have to come from smaller banks, not the large ones that have been the focus of regulatory attention since the 2008 crisis. The titans, either nationalized or aided by EU governments, have already absorbed painful cuts and learned at least to limit their expansionist ambitions. The rest of the industry, however, hasn't done as much and therein lies a danger for Europe's small and medium-sized businesses. Their troubles are only just beginning, as the banks that have traditionally financed them start tightening their purse strings.
Britain's Cameron defends fracking.
U.K. Prime Minister David Cameron published an article in the Daily Telegraph in which he tells Britons that the country "cannot afford to miss out on shale gas." Hydraulic fracking, the technology used to extract natural gas from shale, was suspended in the UK last year after it was linked to small earthquakes in the northeastern county of Lancashire, but the suspension was later lifted. France has banned use of the technology outright, reflecting environmental concerns across the crowded European continent. Cameron argues that shale gas extraction won't damage England's rural landscapes and would bring money to neighboring communities, as well as cheap energy to the country as a whole. He says Britain shouldn't follow the French example, because the UK's estimated shale gas reserves are large. "Even if we extract just a tenth, that is still the equivalent of 51 years' gas supply," according to Cameron. It makes sense that economic considerations should triumph over environmental ones in the UK France can do without shale gas, because it has developed such a large supply of nuclear power. Yet if environmentalists had their way, they would ban nuclear energy, too -- Germany, for example, is phasing it out. It's just a matter of choosing one's poison.
France predicts zero growth in 2013.
France's gross domestic product will either drop 0.1 percent or grow 0.1 percent this year, according to the country's finance minister, Pierre Moscovici. Despite this less-than-optimistic prediction, Moscovici is certain that the nation's recession is over: "2014 will be the first year of real growth in three years," he said. French industry is indeed making something of a recovery, especially in the transport machinery and automobile sectors. The latter grew by 9.2 percent in the second quarter. Yet with consumer spending stagnating, a return to growth looks uncertain.
Madrid sells 3,000 apartments to Goldman Sachs.
In what the Spanish press is calls the biggest real estate deal in Spain this summer, the city of Madrid has sold 3,000 small apartments to a Goldman Sachs-led investment fund for $267 million. It is a condition of the deal that the new owner cannot change the rents currently charged for the properties, which range from $500 to $700 per month. The apartments are part of Madrid's youth housing program and the deal should open the way for the cash-strapped city to build more social housing. Even with Spain's rampant unemployment -- 57 percent among those under 25 -- managing youth housing appears to be an attractive business proposition. Ten funds initially expressed an interest in the property package, offered at a starting price of $224 million, and three placed bids. Basic necessities such as cheap housing may be the safest bets for investors in an economy suffering as badly as Spain's.
Norwegian Prime Minister drives taxi in re-election stunt.
Jens Stoltenberg, leader of Norway's Labor Party and the current prime minister, revealed on Facebook that he spent a day in June driving a taxi in the capital, Oslo. Stoltenberg donned a taxi driver's uniform and drove around the city picking up passengers. "If there's one place where people say what they really mean about most things, it's in a taxi," Stoltenberg said. Many passengers recognized the prime minister, and some scolded him for his bad driving -- he hadn't been behind the wheel of a car for eight years. Stoltenberg didn't charge for the rides and is hoping the stunt will pay off in a different way, helping him to win elections scheduled for Sept. 9. Labor is trailing its Conservative party opponents in opinion polls. Whether or not Stoltenberg holds on to the top job, his cab-driving experience speaks volumes about how relatively safe, economically sound and down-to-earth Norway is. It's hard to imagine a Greek or Spanish prime minister driving fares around the streets of Athens or Madrid without a full detail of bodyguards.
(Leonid Bershidsky, and editor and novelist, is a Bloomberg View contributor. He can be reached at email@example.com.)