Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe:
Euro zone shows positive growth.
Gross domestic product in the troubled euro area grew by 0.2 percent in the second quarter, indicating that the currency bloc's deep recession may finally be ending. There is growth in manufacturing, especially in Germany and Italy. France, too, has recently shown signs of improvement. There are two reasons for this return to modest growth: increased government spending and improving export competitiveness. By contrast, domestic demand in the 17 countries that use the euro currency remains in a deep slump due to high unemployment, which stood at 12.1 percent in June. Slow, export-driven growth won't, unfortunately, lead to any quick improvement in Europeans' living standards, because exporters are focused on keeping costs low and won't do much hiring.
Profits fall at Germany's EON.
German's biggest energy company, EON SE, reported a 15 percent drop in first half earnings before interest, taxes, depreciation and amortization, to $7.6 billion, because of declining wholesale energy prices. That's bad for the company but good for the German government. Since 2011, Germany has been pursing a new energy policy aimed at driving down prices, decreasing consumption and boosting the sustainable energy industry. EON, a traditional energy giant, has had a hard time adapting to the changes. It has cut its German workforce by 21 percent since 2012, and is increasingly reliant for growth on foreign markets such as Brazil and Turkey. EON's story is typical of today's German corporations: Faced with problems at home, they are moving their expertise and capital to the developing world.
Swiss home for $77 million, any takers?
If the villa Les Tourelles on Lake Geneva is sold at the $77 million asking price, it will set the new Swiss record, the previous one being $42 million. The 14,000 square foot house comes with a spa and a vintage car showroom. According to the local press, its current owner is a banker from Canada. Even at that price, though, the villa won't make the list of the world's 10 most expensive properties. Those spots are reserved for medieval castles, mansions in London and the Hamptons, and luxury villas on the French Riviera. The world's most expensive home is oil- and retail-magnate Mukesh Ambani's $1 billion, 27-story mansion in Mumbai, India. Swiss bankers are unlikely to match that scale of extravagance.
Germany to cut debt next year.
Germany plans to issue $288 million worth of government bonds next year, less than the $319 million in 2013, in an attempt to reduce public debt. Fitch, the ratings company, recently confirmed Germany's AAA credit rating, and country is already doing an excellent job keeping its debt level stable. German public debt stood at 81.2 percent of gross domestic product in the first quarter, compared to 81.1 percent a year earlier. Most of Germany's fellow euro area members, however, remain unable or unwilling to replicate its successful debt policy -- the currency bloc as a whole increased its indebtedness as a share of GDP by 4 percentage points in the first quarter. Spain recorded a 16 percentage point jump.
U.K. and Spain clash over Gibraltar.
There are long lines of honking cars at the Spain-Gibraltar border: Spanish border guards are checking each vehicle exhaustively. U.K. Prime Minister David Cameron has called the checks "politically motivated and totally disproportionate." Cameron and his Spanish counterpart, Mariano Rajoy, tried and have failed to ease the tension that arose when Gibraltar, a British colony claimed by Spain, built an artificial reef that impedes Spanish fishing boats. Now Spain is considering an alliance with Argentina to take their complaints against the U.K. to the United Nations -- the Argentines are still fuming over their defeat in a 1982 war to reclaim the Falkland Islands, another disputed British colony. The U.K. said it was considering legal action against the Spanish border restrictions and dispatched warships, on what it said was a routine exercise. It may now fall to European Union institutions to resolve the escalating dispute, and If they fail to do so, or side with Spain, the U.K.'s already significant anti-EU movement may grow.
(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. He can be reached at email@example.com.)