Bershidsky on Europe: German Coalition Agreed
Here's today's look at some of the top stories on markets and politics in Europe:
Cameron wants to restrict labor movement in EU
British Prime Minister David Cameron wrote a commentary piece for the Financial Times, arguing that migration controls within the EU should be tightened, just as Bulgarians and Romanians get access to the bloc's united labor market from Jan. 1, 2014. According to Cameron, there are already 1 million people from Central and Eastern Europe living in the UK, and the EU's free movement policies are creating "the biggest migration in Europe outside wartime" from low-income countries to wealthier ones. The U.K., Cameron wrote, will cut EU migrants' access to benefits and kick out those who are not working. Cameron also wants to reconsider the EU rules on free labor movement, possibly imposing quotas on member countries until they reach a certain level of per capita output. While comments like this from the U.K. prime minister are politically understandable with the anti-immigrant U.K. Independence Party on the rise, they cast doubt on the usefulness of the EU as an institution. To people in countries seeking eventual accession to the bloc, such as Ukraine, sentiments like this are a sobering cold shower.
Repsol to accept $5 billion in Argentine compensation
The Spanish oil company Repsol's board of directors is likely to accept $5 billion in Argentine government debt as compensation for 51 percent in its subsidiary, YPA, nationalized by the populist government of Cristina de Kirchner. The deal, brokered by the Spanish government, will end a bitter year-long dispute between Repsol and Argentina, in which the Spanish company demanded $10 billion and Kirchner's representatives offered $1.5 billion in cash, plus a stake in a venture to work the Vaca Muerta shale oil and gas deposit. While this is a good deal for Argentina, which will now be able to attract investment for Vaca Muerta development, Repsol cannot be sure it will get the $5 billion. Argentina defaulted on its debt in 2001 and may soon do it again.
Scotland makes its case for independence
Alex Salmond, Scotland's first minister and leader of the Scottish National Party, presented a 667-page "Guide to Independent Scotland", outlining the policies the new nation will pursue if it votes to secede from the U.K. next year. It suggests cutting corporate tax by three percentage points, removing nuclear missiles from Scotland and introducing a points-based immigration system with a focus on settling remote areas. Scotland would not establish a border with the rump U.K., would keep the pound sterling as its currency and would negotiate EU membership within 18 months. The paper, however, is likely to remain a castle in the air: Scottish independence is backed by about a third of local residents, and there is nothing in Salmond's proposals that would induce the rest to switch.
Bollore to head streamlined Vivendi
Billionaire Vincent Bollore will become the chairman of French media and entertainment group Vivendi, replacing 11-year veteran Jean-Rene Fourtou. The succession will take place after the corporation spins off the SFR mobile operator in June 2014, by distributing shares in it to Vivendi shareholders. The group is fighting two dragons: massive debt and a diversified holding discount on the stock market. The first one is almost conquered: After Vivendi sold off Morocco Telecom and Activision Blizzard, net debt is under $10 billion, and SFR will probably take on a large portion of it. A share buyback and even new acquisitions may follow. The more daunting challenge is that Vivendi, despite its announced strategic focus on media, is still saddled with an unwanted telecom asset, GVT in Brazil, which it has been unable to sell. Expect the unit to be unloaded at a big discount.
German parties reach coalition deal
After a final 17-hour negotiating session, the major German parties announced they had reached a coalition agreement. The document is more than 170 pages long and it spells out the smallest details, including arrangements for Beethoven's 250th anniversary in 2020. The major points have been known for some time: a nationwide minimum wage of $11.50 from 2015, pension hikes, easier dual citizenship and a compromise target of 55-60 percent "green energy" by 2030. The coalition won't name cabinet ministers until the membership of the junior partner, the Social Democrats, votes to approve the deal in early December. If the vote goes well, Angela Merkel will be sworn in as chancellor a week before Christmas, more than three months after winning the parliamentary election. Her Christian Democratic Union (with its Bavarian sister party) will get eight cabinet seats plus the chancellor's post, while the Social Democrats will get five. The weaker party's membership should give credit to their leaders: They have won plenty of concessions considering how roundly the Social Democrats were defeated at the polls. Being responsible Germans, they can hardly vote "no" and force a new election.
(Leonid Bershidsky can be reached at email@example.com).