Bershidsky on Europe: Bitcoin Exchanges Down
Here's today's look at some of the top stories on markets and politics in Europe.
European Bitcoin exchanges paralyzed by hackers.
Hacker attacks have forced two large Bitcoin exchanges, Slovenia-based Bitstamp and Bulgaria's BTC-e, to suspend withdrawals. The attacks seem to have focused on Bitcoin's vulnerability called "transaction malleability," which allows a hacker to change a transaction record in a way that allows double spending. Earlier, the Bitcoin universe's biggest exchange, MtGox, stopped external transfers because of the same design flaw. Other exchanges will spring up or expand, but for now much of the Bitcoin infrastructure is paralyzed, showing that the system is still too experimental for broad acceptance and, for not, fit only for the most reckless of speculators.
French report denies importance of shale revolution.
The Institute of Sustainable Development at Sciences Po, the prestigious French social sciences school, issued a report saying shale gas is a marginal phenomenon that will have no long-term effect on the U.S. economy, let alone the European one. The report points out that despite the dramatic drop in natural gas prices in the U.S. in 2005-2013, household electricity prices rose 25 percent in the same period. True, the shale revolution increased the competitiveness of some energy-intensive U.S. industries, but they only account for 1.2 percent of the U.S. gross domestic product. The institute calculates shale development will contribute just 0.04 percent annually to U.S. GDP growth in 2012-2035. Considering all this, Europe should not expect much from shale energy, the report's authors say: Its economy will benefit even less from it because of its different structure. The contrarian report may go down well in countries such as France, where shale oil and gas development is banned, but countries the U.K. for example will probably dismiss it: Countries will to exploit shale gas will take whatever extra growth the new extraction technology might bring.
Bank of England drops link between unemployment and interest rates.
The Bank of England officially dropped its previous policy guidance that linked interest rates to unemployment. Its governor, Mark Carney, said rate decisions will no longer be linked to any specific economic indicators at all. Before, Carney promised to raise rates when unemployment dropped to 7 percent, but it is nearly there now and the BoE wants to be careful not to dampen the U.K.'s economic recovery. According to a new BoE forecast, the economy will expand 3.4 percent this year, not 2.8 percent as previously expected. "The Monetary Policy Committee will not take risks with this recovery," Carney announced. The BoE forecast includes expectations of an 11.5 percent rise in business investment and a 23 percent jump in investment in house building. These numbers may signify a genuine return to growth – or a new real estate bubble and internal demand growth fueled by household debt increases. The BoE's decision to keep rates low will let British politicians enjoy the numbers for a while, but it could contribute to the next crash.
ECB considering negative rate.
At its next policy meeting in March, the European Central Bank may go over to a negative rate for overnight bank deposits. Now, the deposits pay no interest, but the ECB is thinking of going even further and effectively fining banks for holding on to excess cash rather than lending it to households and businesses. If the ECB adopts the policy, it is not likely to have much effect on lending: Banks have other ways of parking the cash. A key lending rate drop would do the job, but the eurozone policymakers hesitate to take the plunge while inflation is still in positive territory. The 0.25 percent refinancing rate is just two small steps away from negative territory, after all.
German authorities issued the same tax numbers multiple times.
A tax identification number is supposed to be unique – that is its point. For 164,451 German citizens, however, that is not the case: they were either issued multiple numbers or had to share theirs with somebody else. The 11-digit number, known in Germany as Steueridentifikationsnummer and introduced in 2007, is in the first letter a newborn German gets from the tax office. The tax authorities, however, have made some mistakes, in one case assigning the same number to two people with similar names born on the same day. Each of them thus became responsible for the other's taxes and both found themselves in a higher tax bracket. The federal tax service claims to have worked through 106,029 such cases already and trying to clear up the other ones, but it's possible that not all the "doubles" have surfaced yet. Trust even the most perfectionist of governments to make a mess of a scheme designed to make things easier for everyone.
(Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter.)
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