Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe.
Russian proposal delays Syria srikes.
Russian Foreign Minister Sergei Lavrov proposed on September 9 that Syria's store of chemical weapons be placed under United Nations control. Both Syrian dictator Bashar al-Assad and U.S. President Barack Obama welcomed the proposal, with the latter saying that there would be no airstrikes against Syria if indeed it hands over control of its chemical arsenal. The U.S. remains wary, suspecting that the Russian proposal could be a delaying tactic Assad will use to sap the momentum from airstrikes, while retaining his weapons. Yet Russia's proposal is probably genuine. Putin, with his shaky international reputation, is hungry for a diplomatic coup and Assad is loath to let U.S. missiles destroy his advantage in Syria's civil war. The deal offers an escape both to Putin, who otherwise risks having to stand by as the U.S. bombs a Russian client, and to Obama, who has been trapped into action in Syria by his red line on chemical weapons use.
Energy producers warn Brussels its policies undercut power supplies.
Nine of Europe's biggest energy companies with combined sales of $1.1 trillion, led by France's GDF Suez, the world's biggest energy producer by output, and Italy's ENI, have joined forces to warn the EU bureaucracy that its policies are putting power supplies at risk. At a European Parliament hearing on Sept. 10, they will say that Europe's support of wind and solar energy has been too heavy handed. The major utility companies argue that subsidies to solar and wind energy producers, as well as binding emissions targets, are destroying investment in the sector. The utilities' size and importance are not the only reasons to listen to them: Despite the subsidies, the solar and wind industries are far from healthy. Some of the largest companies in the sustainable energy sector are fighting insolvency. Just before the European Parliament hearing, Windreich, a developer of offshore wind farms in Germany, filed for bankruptcy. As is often the case, government support for some companies over others has ended in universal misery.
Socialists lose Norway election.
A center-right coalition won Norway's parliamentary election by a landslide, making Erna Solberg, sometimes called the Norwegian Angela Merkel, the nation's first Conservative prime minister in 24 years. Outgoing Labor Prime Minister Jens Stoltenberg suffered a humiliating defeat despite stunts such as driving a taxi around the capital, Oslo, and talking to passengers about politics (some of the passengers were paid beforehand to be filmed in a Stoltenberg ad). Solberg's coalition includes the right-wing Progress Party, to which mass murderer Andres Breivik belonged in his youth. The election result speaks of a backlash against immigration and decades of extra-high taxes. The winning coalition wants to use Norway's wealthy oil fund to ease tax cuts. Privatization of state-owned companies is also in the cards. Norway, the country with the biggest public sector in Europe, needs more capitalism, but not more xenophobia.
Carlos Ghosn predicts return to growth for EU car market.
In an interview with the French business daily Les Echos, Carlos Ghosn, the chief executive of Renault and one of the global automotive industry's leading lights, predicted that in 2014 the European car market would return to growth after five years of decline. According to Ghosn, the growth will be slight, less than 1 percent for the year, but it will be "the end of the tunnel." The global car market should expand by about 3 percent in 2014, Ghosn said. Even though Renault's global forecast for this year has had to be revised downward from 2-3 percent to 1.5 percent, Ghosn's vision is not to be discounted. He came up with the concept of a budget car, resulting in sweeping successes for Renault models such as the Logan and the Duster. No-frills cars such as these have helped slow the European car market's decline in recent years.
Former rogue trader Kerviel calls for investigation of his bank's "alleged losses."
Jerome Kerviel, the trader sentenced to three years in prison and a $7 billion fine for unauthorized trades that lost as much money for his bank, Societe Generale, sent an impassioned letter to the French parliament and government, begging, "Do not let me die." He called for an independent commission to investigate the bank's "alleged losses." Kerviel claimed that the loss had never been verified by the courts or any independent auditors, and that Societe Generale had been granted a $2.2 billion tax deduction on the strength of the purported hit to its bottom line. The ex-trader claims he was a scapegoat and even though his initial 2008 conviction was upheld on appeal last year, the enormous fine seems an anachronism today. In the last five years, banks have been forced by regulators to tighten risk management and lower profit expectations. Kerviel's transgressions were part of the pre-crisis culture of greed and loose controls, and he is right that other culprits went unpunished.
(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. He can be reached at email@example.com)