Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe:
France and U.K. to join US in missile strike on Syria.
The scale and scope of a planned U.S.-led attack on Syria appear to have been determined. Three countries -- the U.S., Britain and France -- will take part, joining forces in a sea-launched cruise missile attack on military sites in Syria. Italy won't join the action without UN approval, which is not forthcoming because of opposition from Russia and China. Germany has not openly backed the military operation. Share prices are falling everywhere and Brent oil has reached a six-month high of $114.35 per barrel. Though the attack on Syria will be limited, markets fear an escalation, and these fears will take weeks to quell even if the strike does turn out to be a one-off retaliatory action.
U.K. regulators tell Ryanair to reduce Aer Lingus stake.
The U.K. Competition Commission ruled that the low-cost carrier Ryanair must cut its 29.8 percent stake in the Irish flag carrier Aer Lingus because it might lead to "substantial lessening of competition between the airlines on routes between Great Britain and Ireland." Ryanair has been trying to take over Aer Lingus for years, but these attempts have been blocked by the EU. Now the U.K. trustbusters are saying that even a minority stake is anti-competitive. Aer Lingus is happy with the ruling, saying its competitor was interfering with its business. Although Ryanair intends to appeal, the pattern is clear: owning a large enough stake of a competing business to block the possibility of other alliances will not please regulators.
German consumer confidence down leading into September.
Despite the recent news of an economic rebound in the first half of 2013, consumer confidence in Germany dropped slighly going into September, according to the research firm GfK. The confidence index decrease from 7.0 to 6.9 was unexpected, and it breaks an upward trend since February. It might seem paradoxical that this month Germans have been the most willing to spend since December 2006. In fact, however, they have no way to save: interest rates are well below inflation. Germans are also pushed to make large purchases now by an impending VAT rise. Forced to behave out of character, this nation of savers is feeling less confident of its economic future.
France avoids radical pension reform.
After months of dithering, French Prime Minister Jean-Marc Ayrault finally annnounced the government's plan for pension reform, needed to bridge the $28 billion deficit in the nation's pension system expected by 2020. It is really a non-reform, which doesn't affect the basics of the system. The contribution period needed to receive a full pension will increase from 41.5 to 43 years between 2020 and 2035. The pension contributions made by both employers and employees will increase by a total of 0.3 percentage points between 2014 and 2017. Such is the fruit of compromise between the government, employers worried about the already high labor costs, and labor unions. Ayrault has merely delayed a solution to a structural problem that calls for raising the retirement age. That is something the ruling socialists do not have the heart to do.
Eastern Europe resists EM crisis.
As emerging economies' currencies and assets lose value amid investor flight, Eastern Europe is a surprising bastion of growth. The MSCI Eastern Europe stock index rose 1.2 percent in the last 3 months, while the MSCI Emerging Markets index declined 7.5 percent. The Bulgarian lev, the Polish zloty and the Czech crown have been appreciating against the dollar. The Eastern European economies are beginning to emerge from recession. The former Warsaw Pact nations are where Europe's industrial growth potential lies, and they are poised to benefit from the EU's return to growth, led by Germany and France. They should not be bundled up with other emerging markets, harder hit by the recent crisis in confidence.
(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. He can be reached at email@example.com).