Bershidsky on Europe: Swiss to Cap Immigration
Here's today's look at some of the top stories on markets and politics in Europe.
Switzerland votes to limit EU immigration.
In a referendum on Sunday, Swiss voters narrowly approved a measure that requires the government to set quotas for the immigration of EU citizens. The turnout was the fifth highest since Switzerland allowed women to vote in 1971, and 50.3 percent voted for the immigration cap. They feel 64,000 EU immigrants a year, the average rate for the past decade, is too many for a country of 8 million. The Swiss government now faces an angry EU, which points out that a 1999 treaty grants Europeans Swiss residence permits as long as they have jobs. Sunday's vote apparently invalidates the treaty, which also grants Switzerland access to certain European markets. "The four fundamental freedoms – free movement of people, goods, capital and services – are not separable," said EU commissioner Viviane Reding. "The single market is not a Swiss cheese. You cannot have a single market with holes in it." The vote will put to the test Switzerland's ability to survive without the EU, which surrounds it. The small alpine republic with its direct democracy, strong export-oriented economy and safe haven currency may well be able to handle a cool relationship with its neighbors, all the while tempting them to curb Brussels' powers. The U.K., too, would like to cap immigration from new EU member countries, but as a member of the bloc, it is unable to do so. Euroskeptics there and elsewhere will point to Switzerland as a shining example of independence and rationality.
Protests subside in Bosnia but problems remain.
Protesters in Sarajevo were cleaning up the city after a few days of rioting that saw the presidency building burn. Locals were remembering scenes from the Balkan war in the 1990s when the city was besieged by Serbs for 43 months. With an unemployment rate of more than 25 percent, Bosnia Herzegovina is one of Europe's most depressed countries, saddled besides with an unwieldy, expensive and inefficient government system created as part of the ex-Yugoslav peace process. Hastily patching up ethnic rows does not create stable nations, and the West may soon have to deal with fighting in Bosnia again. "It's just like with Ukraine," said former German envoy to Bosnia, Christian Schwarz-Schilling. "There, the international community woke up only after a critical situation arose. The same thing will happen in Bosnia."
Let weak banks die, new EU bank supervisor says.
In her first interview since being appointed top European bank regulator, Daniele Nouy said she would like banks to hold capital against sovereign assets, because the recent financial crisis proved they were not risk-free. That would be a blow to large banks which have been buying up government debt. The net exposure of European banks to sovereign debt fell 9 percent in 2011 but then rose 9.3 percent in the 18 months to June, 2013. Spanish and Italian banks have been especially active in buying up their countries' debt, pushing down the cost of borrowing and swelling their balance sheets with supposedly riskless securities. Nouy is not buying that, and if her actions are as tough as her words European governments will have to cut down on the bond issues that have been so hot in recent months. Nouy also said that some European banks "have no future," signaling a willingness to let the current review of Europe's big banks result in some carnage. Having heard her, national regulators may move to prevent bank failures. For example, Bank of Italy governor Ignazio Visco spoke of a national "bad bank" to sponge up questionable assets from the banking system. Governments and banks are working together to keep up appearances, and that may be Nouy's biggest problem in setting up effective supranational regulation.
French economy to slow down further in Q1.
The Bank of France predicts French economic growth will slow to 0.2 percent in the first three months of 2014, compared to 0.5 percent in the last quarter of 2013. Despite a slight rise in industrial production in January, the French economy slips deeper and deeper into stagnation as President Francois Hollande's popularity continues its downward journey: It is at 19 percent now. Hollande's recent sexual infidelity and separation from the first lady briefly revived interest in him among the French, who are famously tolerant of such behavior, but there is not much else he can do now to distract the nation from the failure of his policies. Hollande's current trip to the U.S., including a visit to Silicon Valley and a discussion with U.S. President Barack Obama on the taxes paid – or, rather, not paid – by the likes of Google and Facebook in Europe, is meant primarily for consumption back home, but it is less exciting than a secret tryst with an actress and will have about as much effect on France's somnolent economy.
Russia prepares to crack down on Bitcoin.
A fresh statement by the Russian prosecutor general's office warns that the country's law enforcement bodies and central bank are jointly working on measures to stop "illegal acts in the area of money circulation in Russia and prevent the violation of property rights of citizens and organizations related to the use of cryptocurrencies." The statement also says Bitcoin and other virtual currencies are "money surrogates" that are illegal to use in Russia because local laws stipulate all transactions must be in rubles. The language suggests Russia's actions against Bitcoin will be tougher than China's. The Chinese regulators only prohibited banks from dealing in the currency. In Moscow, cryptocurrencies may face an outright ban, particularly considering the Russian authorities' recent intolerance toward anonymous transactions that can be used to finance terrorism.
(Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter.)
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