Bershidsky on Europe: Italy to Change Government
Here's today's look at some of the top stories on markets and politics in Europe.
OECD explains bad eurozone economic forecasting.
The Organization for Economic Cooperation and Development did a postmortem on its economic forecasts during the euro area's debt crisis and found they had been consistently overoptimistic because the organization assumed policymakers would actually try to resolve the crisis. "It was the repeated assumption that the euro crisis would dissipate over time, and that sovereign bond yield differentials would narrow, they turned out to have been the most important source or error," said Pier Carlo Padovan, the OECD's chief economist. The IMF said in 2012 that all forecasters underestimated the effect of fiscal tightening on growth, but the OECD checked that theory and rejected it. Austerity worked, but monetary stimulus from the ECB and growth-enhancing measures by national governments came too late. Besides, the OECD says it underrated the effect of global shocks on weakened eurozone economies. Taking indecisive governance and globalization into account will surely make the organization's next predictions gloomier.
EU demands bigger role in governing Internet.
The European Commission is about to release a policy paper outlining specific steps to reduce U.S. control over Internet governance. The list of proposals is a direct consequence of the recent spying scandals. Large-scale surveillance and intelligence activities have "led to a loss of confidence in the Internet and its present governance arrangements," the paper says. It proposes a timeline for internationalizing the U.S. based Internet Corporation for Assigned Names and Numbers, which oversees Internet infrastructure and manages the most popular top-level domains, such as .com and .org. ICANN is allowed to do that under a U.S. government contract, which worries the EU's executive arm. From an ordinary user's point of view, however, letting more governments into ICANN does not solve any problems and perhaps creates new ones: All these governments have intelligence interests of their own. Both the U.S. and the EU are against UN control of Internet governance, though that might be the best solution for users.
Renzi in bid to take over Italian government.
The ambitious Florence mayor, Matteo Renzi, is now openly bidding for the prime minister's job. In his mind, the only problem is how to guarantee an honorable exit for the incumbent, Enrico Letta. On Thursday, the Democratic Party, which put Letta at the head of the government but is now headed by Renzi, is to decide the government's fate. If it asks Letta to resign, a new government can be formed without an early election. Renzi is already talking to potential cabinet members. If the handover takes place, it would be better for Italy's stability than another election and Renzi is young and eager for glory, so he might push harder for the fiscal responsibility and structural change that continue to elude Italy under Letta. Still, it is alarming that Italy is chronically incapable of tolerating any kind of government even for two years unless it is run by Silvio Berlusconi.
Turkish prime minister called media boss to influence coverage.
Turkish Prime Minister Recep Tayyip Erdogan has been forced to admit he called an executive at media company Ciner Yayin Holding to demand that Haberturk TV, which it owns, remove headlines that were running under a speech by an opposition leader. Several recordings of conversations between Ciner Yayin executives and government officials have surfaced on the Internet in which the bureaucrats demand the removal of unflattering stories and other coverage changes. The executives agreed to pass on the demands to the responsible editors. Erdogan made the phone call "because there were insults against us, against the prime minister," he said. "We have to also teach them these things." The recordings and Erdogan's clumsy comments highlight the pressure Turkish media have to face in these times of political strife.
Bayern Munich valued at $1.8 billion.
The insurance company Allianz paid $150 million for a 8.33 percent stake in Bayern Munich, Germany's most successful soccer club and the current holder of the club World Cup and the European Super Cup. That values the club at $1.8 billion, making it the fifth most valuable sports franchise in the world, almost on a par with the New York Yankees and the Dallas Cowboys, values at $1.85 each. Bayern's success proves that the German model of sports ownership – no one investor is allowed own more than 49 percent of a soccer club – works brilliantly. Audi and Adidas also hold small stakes in Bayern, which gives the team the financial resources to stay competitive internationally, but no idiosyncratic owner plays havoc with the hiring of coaches and players.
(Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter.)
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