Bershidsky on Europe: Ukraine Awaits Bailout
Here's today's look at some of the top stories on markets and politics in Europe.
Ukraine awaits bailout as opposition take power.
As Ukrainians tour the now-vacant palaces of deposed President Viktor Yanukovych, the allies of former Prime Minister Yulia Tymoshenko have taken interim power. Tymoshenko's party, Batkivshina, was Ukraine's best organized opposition party under Yanukovych despite the fact that Tymoshenko herself has spent the last two years in prison on politically-motivated charges. Now, the parliament has elected Tymoshenko ally Oleksandr Turchynov speaker and then acting president, and two more Batkivshina members became prosecutor general and minister of the interior. Tymoshenko, freed by a parliamentary resolution, declared to Ukrainian reporters that she plans to run for president on May 25. The post does not carry much real power under the 2004 constitution, now re-adopted by parliament, but another Tymoshenko ally, Arseniy Yatsenyuk, is a front-runner for the more powerful post of prime minister. If Tymoshenko's party, whose inept, populist rule led to Yanukovych's election in 2010, manages to hold on to power in Ukraine, the country is in for more economic mismanagement. Right now, however, it requires urgent economic aid to stave off a default on public debt, of which $12 billion comes due this year. The EU and the IMF appear willing to help if the new government promises reforms. Of course it will, but the last-result lenders would be wrong to trust those promises from Tymoshenko's people. The Ukrainian revolution is far from over yet: It remains to be seen whether the victors of street battles can put in place a government they deserve.
European telecoms fight against net neutrality.
A group of large European telecoms, including Deutsche Telekom and Orange, is lobbying against a proposed European net neutrality law, aimed at banning providers from discriminating against traffic from particular sources. The providers say they should be able to charge their customers extra for high-speed access to content from specific companies, such as high-quality video from Netflix. ETNO, the telecoms' lobby group, has sent a letter to the European legislators and EU digital commissioner Neelie Kroes, saying the sector is over-regulated, unlike that of tech companies that use telecom providers' infrastructure for their bandwidth-hogging services. Though the telecoms are known for their greed, they have a point: as web services grow "heavier" in terms of traffic, infrastructure becomes a scarce resource, which, if everybody's equal access is decreed, may soon slow down all internet traffic.
European companies' profits recovering more slowly.
The fourth-quarter earnings announcements from European companies show that on a corporate level, there has not been much of an economic recovery. Profits are picking up at their slowest pace than during any business cycle since 1970. While U.S. earnings are now 20 percent above their 2007 peak, European ones are 26 percent below. Companies have now had the time to restructure and cut costs, and, in a normal business cycle, they should have recovered to pre-crisis levels. That is not happening, perhaps because the much-touted European recovery is in fact stagnation, prettified by tiny growth numbers from statistical agencies. The EU, faced with more financial challenges such as another bailout for Greece and the need to put together an aid package for Ukraine, is not out of the woods yet. It will be when companies stop cutting staff and start showing profits at pre-crisis levels.
Trade deal, not IPO for Vivendi's telecom operator.
The French conglomerate Vivendi will sell its telecom division, SFR, to telecom investor Altice, founded by entrepreneur Patrick Drahi, who will merge SFR with cable and broadband provider Numericable. The previous plan was for Vivendi to seek an exchange listing for SFR, but the Numericable deal is a better solution: It values SFR at more than $20 billion, and it promises $8.2 billion in synergies. These are real: SFR has had to rent capacity from another telecom operator, Orange, to provide internet services, but now it will be able to use Numericable's infrastructure. So far, Vivendi's divestment program is going well. Now, it just needs to find an equally qualified investor for its Brazilian telecom asset, GVT, to focus completely on digital content, a strategy that some other diversified companies – Sony, for example – might be well-advised to adopt.
Sochi Olympics close with impressive ceremony.
The most expensive Olympics in history closed with a ceremony glorifying Russia's musical and literary heritage. The closing show featured an award ceremony for the three Russians who took the top three spots in the 50-kilometer ski race, sealing Russia's surprise victory in the medal standings. Foreign reactions have been much warmer than at the outset of the Olympics, since the games went smoothly, without security problems, and the organizers turned out to the equal to the task. For Russian President Vladimir Putin, the games' success is a public relations victory, but soon the two weeks of triumph will be forgotten and matters such as Russia's economic slowdown and the victory of anti-government protesters in Ukraine will require Putin's full attention. Creating expensive mirages might boost egos and patriotism, but real life takes over the morning after.
(Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter at @Bershidsky.)
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