Bershidsky on Europe: Farewell to Berlusconi?
Here's today's look at some of the top stories on markets and politics in Europe:
Italian government survives after Berlusconi surrender
Former prime minister Silvio Berlusconi surprised both friends and foes with an abrupt about-face, backing Enrico Letta's government in a confidence vote he had himself forced. The government didn't need the gift: It would have survived the vote anyway thanks to a group of "dissidents" in Berlusconi's party, led by Deputy Prime Minister Angelino Alfano. Berlusconi capitulated to avoid dividing the party, the People of Liberty, but part of its faction in parliament is still going to split off. It was a crushing defeat for 77-year-old Berlusconi, who is rapidly losing influence. His approaching expulsion from the senate may finally mark the end of his political power, an historic and positive event for Italy which needs political stability to climb out of recession. Italy is still likely to miss the budget deficit target of 3 percent gross domestic product this year. Letta's political victory does nor mean his government will be effective in fighting economic troubles.
Eurozone PMI rises in September
Markit's euro area Purchasing Managers' Index rose to 52.2 percent in September, from 50.7 percent in August, thanks to faster growth in the service industry, offsetting a slight slowdown in manufacturing growth. At the same time, the PMI's employment index rose from 48.4 to 49.7: The euro area's private sector is still shedding jobs, but the cuts have slowed to a trickle and the index seems set to move into growth territory. Markit indices show that Europe's tentative economic recovery continued in the third quarter, Germany still leading the way. The pickup in the service sector is especially encouraging, because it means domestic demand is inching up, giving a more solid base to the renewed growth.
EU to end ban on high heeled hairdressers
European Commission President Jose Manuel Barroso announced a plan, called Refit, to review current and proposed EU legislation and strike unnecessary regulations off the books. The commission, for example, wants to withdraw a proposal to ban hairdressers from wearing high heels. "I strongly believe the EU should not meddle in everything that happens in Europe,” Barroso said. Brussels clearly feels the need to respond to the rise of euroscepticism in Germany, Austria, the U.K. and elsewhere. The response, however, appears to be little more than an image facelift: Barroso does not want the EU to hand back any powers to its member states. "I don't believe it will work," he said.
Russian retail lender set for $750 million London IPO
Tinkoff Credit Systems, a Russian bank focusing on consumer credit, said it was planning to go public in London this year and hopes to raise $750 million for its shareholders including majority owner Oleg Tinkov. It is ironic that the bank chose London as the venue for its offering. U.K. financial authorities have recently stepped up the fight against unfair lending practices, such as selling clients unneeded insurance. Tinkoff Credit Systems does that and more, and its credit card rates, while much lower than those of the U.K.'s notorious payday lenders, are still sky-high, topping 40 percent on some products. Selling shares in London, however, is not the same as operating there.
ECB governors divided on cutting rates
European Central Bank President Mario Draghi said the bank's rate-setting board had discussed reducing interest rates to speed up economic recovery. While for now the ECB has decided against it, the time may soon come when the move will be necessary. Draghi said the U.S. government shutdown may become a risk to Europe's fragile economic recovery, and the rising euro already is, given that Germany's growth is export-driven.
(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. He can be reached at email@example.com).