Bershidsky on Europe: Hackers Strike Germany
Here's today's look at some of the top stories on markets and politics in Europe.
A bad earnings season in Europe.
Two large consumer product groups reported fourth quarter results reflecting a poor performance in Europe. Brewer SAB Miller said its revenues fell 6 percent in Europe in the final three months of 2013, and Anglo-Dutch diversified holding Unilever reported a 1.3 percent sales drop in developed markets. These announcements follow bad earnings news from Royal Dutch Shell, Deutsche Bank, German enterprise software maker SAP and French power equipment manufacturer Alstom. While Europe is out of its recession, the slim economic growth it is showing is better described as stagnation. Thus the poor results shown by the continent's business elite and some major international players active in Europe. Some of these companies, such as SAB Miller and Unilever, make up for their European problems with growth in emerging markets, which are becoming their strategic focus. At home, their expectations are low for 2014, too. So far, reports of of a recovery are fodder for politicians and bottom-feeders.
Sixteen million German email accounts hacked.
Germany's Federal Office for Information Security (BSI) said it stumbled upon data on 16 million hacked e-mail accounts while researching a botnet. BSI set up a site for people to check whether their accounts had been hacked, but it went down on Tuesday, overwhelmed with traffic. The government agency warned people that if their account was on the list, their computers were likely infected with malware and used by hackers as part of a botnet. The scammers also most likely gained access to social network and e-commerce accounts of those who used the same passwords for these services and e-mail. This massive security breach follows the theft of half of the South Korean population's bank data and the Target case in the U.S. In the latter, the software used to obtain customer data has been tracked to a 17-year-old Russian hacker. Users and service providers need to start taking data security more seriously: Hackers appear to be way ahead of them this year.
French McDonald's accused of evading taxes on $3 billion revenue.
According to the weekly L'Express, the French tax authorities suspect the local subsidiary of McDonald's of channeling about $3 billion in revenue to Luxembourg and Switzerland since 2009, without paying VAT or corporate tax. The money allegedly came from French franchisees that pay royalties to McDonalds. The fast food company had a hard time breaking into the French market, where it has faced scorn from gourmets and attacks from anti-globalist activists. In 2012, however, the company's French revenues approached $6 billion from 1300 restaurants, 80 percent of them owned by franchisees. McDonald's won by using local products and flavors and introducing "French" dishes like the McBaguette. To become truly Frenchified, however, the multinational would apparently need to pay more taxes. Though McDonald's denies wrongdoing, U.S. companies' ingenious offshore tax structures have long irritated the French authorities, and even if they cannot nail the burger chain, they will spare no effort trying. There is a lot of pressure on President Francois Hollande to lower taxes for businesses, and the government is promising to reduce the burden from 2015, but it must be seen as tough on evasion, especially by foreign companies, to appease socialist voters.
Turkish Central Bank in "backdoor" interest rate increase.
Turkey's Central Bank reacted to the freefall of the national currency, the lira, by keeping its overnight lending rate unchanged at 7.75 percent, but saying it will declare "exceptional days" on which it will lend at 9 percent instead. Analysts said the move amounted to a rate hike despite weeks of government pledges not to allow one. The move prompted another drop in the lira's exchange rate to the dollar, down more than 9 percent in the past month despite the fact that the Central Bank is actively selling foreign currency to support it. Turkish Prime Minister Recep Tayyip Erdogan often talks of an "interest rate lobby" that is trying to raise Turkey's borrowing costs by attacking his government. Erdogan has blamed it for the corruption scandal that has plagued him in recent weeks, forcing him to replace ministers and purge the police force. If indeed such a "lobby" exists, it is winning. More likely, however, the effects Erdogan's authoritarian practices are catching up with him, destroying the economic achievements on which he prides himself.
Russian security forces kill Islamic militant ahead of Olympics.
Russia's National Anti-Terrorist Committee reported the killing of Eldar Magatov, a top field commander in the militant Islamic underground, who fought in Chechnya until 2006 and later moved his operations to the neighboring region of Dagestan. Russia's security forces have stepped up their campaign against the militants ahead of the Winter Olympics in Sochi, located close to the rebellious regions of the Caucasus. Magatov's death should make guests of the Olympics feel so much safer, but there are plenty of other field commanders still active, and Ruzanna Ibragimova, the Dagestani woman suspected of planning a suicide bombing in Sochi, has not been located yet. Tension is bound to increase in the coming weeks as the games get going.
(Leonid Bershidsky can be reached at email@example.com).