Bershidsky on Europe: Dutch Bank Zeroes Bonuses
Here's today's look at some of the top stories on markets and politics in Europe:
Chinese companies to help build U.K. nuclear plant
The French energy company EDF and its Chinese partners, CGN and CNNC, have signed a major deal to build a nuclear power plant at Hinkley Point, in southwest England. EDF acquired nuclear power plant operator British Energy in 2009, but it has never built a reactor in the U.K. The new plant will include two French-designed third-generation pressurized water reactors. The EDF-led consortium and the U.K. government agreed on the price of electricity produced by the plant: $148.5 per megawatt hour for the next 35 to 40 years, twice the current price. The contract is unique in at least two ways: The new Hinkley Point Plant will be the first one built in the UK in more than 30 years, and lets Chinese investors into the country's strategic nuclear industry. Energy independence is a top priority for the government, which is why it aggressively pushes for shale gas extraction and advocates projects such as the EDF deal, which is likely to meet with considerable political opposition.
Rabobank abolishes top managers' bonuses
The Dutch cooperative bank Rabobank said it would scrap bonuses for its executive board members because they are "no longer compatible with the economic role Rabobank plays in Dutch society." The conservative bank, which survived the financial crisis without aid, is making a politically popular decision ahead of the likely passage legislation to limit bankers' bonuses to 20 percent of salary -- considerably stricter than the EU-wide bonus cap of twice annual salary that is due to take effect next year. Few financial institutions, however, will follow Rabobank's example: They fear losing top talent to the shadow banking sector, hedge funds and money market funds, a powerful, lightly regulated industry that is overshadowing traditional banks. In London, banks are already raising salaries ahead of the EU bonus cap, hoping to make up the potential losses to their managers.
The Swiss private bank Frey & Co., which managed $2.2 billion for wealthy clients, announced that its shareholders decided to close it. "Circumstances and challenges have presented themselves especially in Switzerland, that mean it no longer makes sense for a small bank to continue its cross-border services," the bank's board chairman Marcus Frey said in a statement. There is really only one circumstance: The bank is a subject in a U.S. Department of Justice investigation into tax evasion by U.S. citizens. Frey is not covered by the recently signed deal between Switzerland and the U.S. that allows banks to avoid prosecution if they come forward with information. That makes a small bank's position untenable. Frey is the second Swiss bank to close down for this reason: In January, Wengelin and Co. made the came decision. The demise of such small but venerable institutions is painful evidence of the death of the Swiss banking tradition. Swiss banks will soon be no different than those from any other country.
German Social Democrats want finance and labor ministries
Angela Merkel's Christina Democrats and their arch-rivals, the Social Democrats, have agreed to open formal coalition talks. Apart from the expected compromise on an $11.5 minimum wage, the two parties will have to make a deal on the division of ministerial posts. According to the newspaper Die Welt, the Social democrats are more interested in the finance and labor portfolios than in the foreign ministry, which usually goes to the junior partner in a German coalition government. Social Democratic party chairman Sigmar Gabriel is expected to become labor minister while Frank-Walter Steinmeier, head of the party's parliamentary faction, and Thomas Oppermann are potential candidates for the finance job. It is not clear, however, whether Merkel will want to give up the finance ministry: Wolfgang Schaeuble would like to keep the post, and he would be much more comfortable for Merkel to work with.
Wall Street Journal ordered not to publish Libor names in U.K.
A British judge prohibited the Wall Street Journal from publishing the names of traders the U.K. government planned to implicate in fixing the Libor rate. The court order came after the Journal reported the names on its website. The ban applies to publication in England and Wales, which means the newspaper cannot run the story in its European edition. The Journal also removed the story from its website under threat of a fine, imprisonment of its editor or property seizure. Restrictions on the reporting of major court cases and investigations are much tougher in the U.K., and throughout Europe, than in the U.S. But in a digitally interconnected world, court orders such as the one obtained by U.K. prosecutors against the Wall Street Journal are increasingly useless: The newspaper's U.S. and Asian edition carried the banned information and anyone in the U.K. could obtain it through Twitter and other social networks.
(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. He can be reached at email@example.com.)