Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe.
Nokia mobile phone unit acquired by Microsoft.
Microsoft agreed to acquire Nokia's mobile phone business, including all its patents, for $7.2 billion in cash. Nokia chief executive Stephen Elop, a Microsoft alumnus, is part of the deal: He will return to Microsoft as head of the mobile business. Outgoing Miscrosoft CEO Steve Ballmer is thus tying Microsoft into his "devices and services" strategy. The acquisition will cost Microsoft about 10 percent of its cash, a big bet on a business with only a little more than 3 percent share of the smartphone market. For the Finnish company, the deal prevents a potential cash crisis and eliminates a messy, money-losing division that was fighting an uphill battle in a highly competitive environment. Nokia can now concentrate on its lucrative network equipment business and try to forget that as recently as 2011, its revenue equaled 20 percent of Finland's gross domestic product.
Ayrault circulates intelligence report on Syria chemical attack.
During a meeting with party leaders ahead of a parliamentary debate on military intervention in Syria, French Prime Minister Jean-Marc Ayrault unveiled an intelligence file asserting that the August 21 chemical attack in Syria came from government-controlled areas and left 281 people dead. The document is available to the public on government and media sites. So far, France has been the staunchest U.S. ally in the plan to launch a retaliatory strike on the forces of Syrian President Bashar al-Assad. President Francois Hollande's Socialist Party holds a majority in the French parliament, and, unlike their British counterparts, the legislators are likely to back intervention if asked. That, however, is likely to be the extent of any offers of military (as opposed to political) support from Europe for President Barack Obama, as he goes to congress for approval of airstrikes.
Eurozone PMIs indicate optimism.
The research firm Markit released fresh purchasing managers' indices for euro area countries, showing improvements throughout the region except in France, which together with Greece is the only country to score a PMI below 50 percent, indicating expectations of negative growth. For the euro area as a whole, the PMI stands at 51.4, a 26-month high, up from 50.3 percent a month ago. Employment, however, is not growing. These are valid reasons for the European Central Bank to keep its main interest rate at 0.5 percent when its governors meet this week: The signs of recovery are too fragile to follow U.S. regulators' example in talking of monetary tightening.
French banks among Europe's riskiest, study says.
According to a study of systemic risk by the University of Lausanne's Risk Management Center, European banks and insurers will need an additional $1.3 trillion in capital in case of a new financial crisis, defined as a 40 percent decline of the world stock market in a six-month period. The study ranked financial sector companies by systemic risk level, and three of the worst five institutions were French: Credit Agricole, BNP Paribas and Societe Generale. This is likely to be the result of their focus on investment banking, which calls for higher debt levels. While a major financial shock is unlikely in the near future, the study shows that French bankers have learned fewer lessons from the 2008 crisis than their peers in Germany, the U.K., Spain and Switzerland.
Greek supermarkets allowed to sell expired food.
In the sixth year of Greece's recession, supermarkets have been allowed to sell food after its expiry date. Starting September 2, stores can set up separate clearly marked racks where such products will be sold at discount prices. The measure is designed to help both retailers, hard hit by falling demand, and impoverished consumers. Indignant commentators in the Greek press have denounced the conservative government's move as a cruel reminder of the growing divide between the rich and the poor, but it makes sense. Greeks took too long to realize that what happened to its economy was a direct result of living beyond their means. The new discount racks are about austerity rather than inequality.
(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. He can be reached at firstname.lastname@example.org).