Bershidsky on Europe: IMF Rushes Ukraine Aid
Here's today's look at some of the top stories on markets and politics in Europe.
IMF fast-tracks Ukraine aid.
The International Monetary Fund may announce a $15 billion rescue program for Ukraine as early as today. Though the country is in chaos and the interim government of Arseniy Yatsenyuk is unable to offer any lasting guarantees that Ukraine will follow IMF recommendations, the West is doing its best to provide assistance. That may be its way of atoning for the de-facto acquiescence in Russia's annexation of the Crimea, or just an attempt to prevent a Ukrainian default, which could trigger further Russian aggression. The IMF will be able to disburse the first tranche of the package by the end of April. Though the EU and the U.S. also promised quick aid, it has not come through yet, and Ukraine, with almost no foreign reserves left, will have to hold out for about a month before it gets any help at all. Then, after the money comes, there will be political fallout: As one of the conditions for receiving the IMF package, Ukraine is to abolish natural gas subsidies for households, a highly unpopular measure that the previous Ukrainian regime avoided at the cost of getting nothing from the IMF. Ukraine has not been in such a tight spot in its 23 years of independence.
World Bank warns Russia on economy.
The World Bank said on Wednesday that further escalation of the Ukrainian crisis would result in a 1.8 percent economic contraction for Russia this year. Capital flight would then reach $133 billion, more than twice the 2013 number. If, however, the situation is somehow defused and there are no further Western sanctions, the Russian economy will grow 1.1 percent, down from 1.3 percent in 2013, and capital flight will reach $83 billion. These forecasts are interesting to compare with the Russian government's own predictions. Economics minister Alexei Ulyukaev said on Wednesday that the economy is likely to grow 0.6 percent in 2014 and capital flight will reach $100 billion. The Russian authorities clearly see some kind of middle ground between the worst-case scenario of escalation and isolation, on the one hand, and a magical parting of clouds on the other. In fact, Russia might well maintain growth through import replacement and increased government spending to integrate the Crimea. The Russian economy's resilience is, perhaps, underestimated.
King tanks after IPO.
London-based game developer King's stock plummeted 15 percent on its first day of trading in New York, the biggest U.S. initial public offering in 20 years to flop so badly on opening day. This is a dire warning to other casual game developers planning to tap the capital markets: Don,t, unless you have a proven ability to release hits one after another. King has only one major hit, the Candy Crush Saga, and that is not enough for investors to believe in it as more than just a speculative opportunity. Now, the entire casual game category is cursed by the poor performance of both pioneer Zynga and second big entrant, King. That, however, is no tragedy: Companies without a lasting business model should not go public in the first place.
Unemployment rises at worst moment for Hollande.
The number of unemployed people in France increased by 31,500 in February, a fourth straight monthly increase. The data came at the worst possible moment for President Francois Hollande and his Socialists, who face a run-off round of municipal elections this weekend. The business daily Les Echos wondered if this could be the coup de grace for Hollande's hopes, after all his promises to get joblessness under control: The unemployment rise is the biggest since September, 2013. In the last two years, there have been only two months when unemployment dropped. More than 2 million French people have not held a job in over a year. No wonder the extreme right, backed by the poorest voters, is on the rise. The Socialists' legacy will take a long time to sort out once they're almost inevitably swept from power in 2017.
Turkish court rules to lift Twitter ban.
In a fresh blow to Turkish Prime Minister Recep Tayyip Erdogan, the Ankara district court ruled that the government's blockage of Twitter was illegal. The government did not immediately unblock the microblog service, saying it had the right to keep the ban for 30 days while it appeals the decision. That allows Erdogan to keep Twitter nominally banned - Turks bypass the blockage en masse - through the upcoming local elections. More rulings are likely to crop up in the meantime: Twitter itself has challenged the ban in several Turkish courts. With the country's president and a court challenging his actions, Erdogan is clearly far from having dictatorial control, which he appears to be seeking. Though the elections will be a strong test of his support, his ability to keep Turkey in hand appears to be on the wane.
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Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter at @Bershidsky.
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