Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe:
Berlusconi'stax conviction stands.
The Italian Supreme Court upheld the conviction of former Prime Minister Sylvio Berlusconi in an old tax fraud case: Before the media mogul got involved in politics, his companies bought movie and TV rights from U.S. owners, then resold them at inflated prices to Berlusconi-owned Mediaset to avoid taxes. As expected, the 76-year-old politician will not go to jail. Three years of his four-year sentence are covered by an amnesty, and the remaining year can be replaced with probation, community service or house arrest. Berlusconi also faced a five-year ban from holding public office, but the Supreme Court referred that for reconsideration to a lower court in Milan.
Berlusconi is nothing if not a fighter. Afther the verdict, he talked of rebuilding his old party, Forza Italia, and winning a majority in parliament to change the Italian justice system, which Berlusconi believes is persecuting him for political reasons. With his current party, the PDL, the second biggest force in the ruling coalition, Berlusconi is far from sunk. He may yet make a political comeback before his appeals run out in another case, involving paying a minor for sex, which earned the former prime minister a seven-year prison sentence.
Royal Bank of Scotland gets a new, milder CEO.
The nationalized RBS appointed Ross McEwan as its new chief executive officer. The U.K. government was not happy with the way McEwan's predecessor, Stephen Hester, was preparing RBS for the inevitable reprivatization. The Treasury wants a tamer, domestically-centered commercial bank that would never again sustain the kind of losses (more than $40 billion in 2009) that required the world's biggest bank bailout. Hester resisted drastic cuts to the bank's international and investment operations. McEwan is less likely to do that, if only because of his retail specialization. The New Zealander's first gesture should also please the government: He has agreed to forgo bonuses for the remaining part of 2013 and 2014, and he accepted a salary of $1.5 million per year, while Hester was making $1.8 million. It makes sense: Austerity and the lack of expansionist ambitions are easier to sell to private investors these days than the atavisms of RBS's former glory.
Russia considers two-year tax holiday for new entrepreneurs.
Russian Prime Minister Dmitri Medvedev has proposed that starting in 2014, new entrepreneurs receive a two-year tax exemption. The idea is close to getting full government approval and is likely to be put into law by the end of the year. In 2013, Russia has already lost 458,000 small entrepreneurs, almost 12 percent of the total number: They closed their businesses because the government had doubled social contributions. There is one more reason for Medvedev to feel has to offer Russians a new incentive to go into business: In recent years, the prestige of private enterprise in Russia has gone down sharply. Polls show young pepople dream of government jobs rather than their own businesses. Paradoxically, Medvedev's plan is likely to result in a new wave of business closures: Existing entrepreneurs will transfer their businesses to relatives to get the tax break.
Merkel's coalitionlooks set for Bundestag majority.
Seven weeks before Germany's general election, polls show the ruling coalition of Angela Merkel's CDU/CSU and Philipp Rösler's Free Democratic Party getting a majority in the federal parliament. The ARD Deutschlandtrend survey gives the two parties a combined 47 percent of the vote, leaving the other contenders, the socialists (SPD), Greens and the Left with a total of 46 percent. Only 39 percent of Germans want the FDP to be part of the new government, but that should not bother Merkel too much: She will be able to keep working with her old partners, who are set to get about 5 percent of the vote, because it is she that Germans want to return to power. At 52 percent, the level of satisfaction with the current government is as high as it has been since the 1990s. In these tough times, with Germany constantly forced to bail out other European nations, Merkel has managed to create a credible impression that she is doing her best for the voters and providing sober, firm leadership.
Spanish police close downfake Ferrari factory.
Two underground workshops on the outskirts of Valencia, Spain, were turning out fake Ferraris and Aston Martins. The mechanics fashioned fiberglass bodies and assembled cars from parts ordered in the U.K. or directly from Ferrari in Italy. The operation's marketing arm in Madrid was selling the cars for $53,000 apiece, while a genuine Ferrari costs about $265,000. Everyone was happy until the Ferrari representative in Spain saw an ad on the Internet and decided to complain. The police descended on the workshops and the Madrid office, arresting eight people and confiscating 19 fake cars. Ferrari's intellectual property rights are now reasserted, to the detriment of the customers who realized full well that a $40,000 Ferrari has the same head-turning capacity as a $265,000 one.
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Leonid Bershidsky at email@example.com