Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe:
Russia unleashes customs war against Ukraine.
Since Aug. 14, the Russian customs service has been exceptionally thorough in inspecting all cargo entering Russia from neighboring Ukraine. Every truck is unloaded and every declaration studied with a magnifying glass, stretching the customs clearance process, which normally takes a few hours, to as long as two days. The Ukrainian Federation of Employers, which includes most of the nation's big companies, has complained that the newly erected customs barriers could cost the Ukrainian economy $2.5 billion in the second half of the year. The punitive regime at the border is widely seen as President Vladimir Putin's attempt to coerce Ukraine into joining the customs union of Russia, Kazakhstan and Belarus rather than seek closer ties with the EU. It is more likely to achieve the opposite effect as Ukrainian exporters seek more reliable channels for their goods.
Goldman Sachs bullish on European equities.
Edward Perkin, in charge of global equities at Goldman Sachs Asset Management, said in an interview with Handelsblatt that his bank was increasing its investments in Italian, Spanish and French equities because these countries would soon benefit from Europe's economic turnaround. While Goldman Sachs believes the euro area's economy will shrink this year, the bank expects it to grow by 1 percent in 2014. According to Perkin, equities are cheap as the region climbs out of recession, especially in Spain, where reduced labor costs have made industrial production worthwhile again. Given Europe's stronger than expected (if still modest) growth in the second quarter of 2013, more investors are likely to follow Goldman's example: It is no longer bottom-feeding, but a bet made on reasonable expectations of an economic recovery.
Renault's number two looking for new job.
The chief operating officer of France's top car maker Renault, Carlos Tavarez, has unexpectedly revealed that he is looking for alternative employment. At age 55, Tavarez is stuck in the number two spot behind one of the car industry's legends, Carlos Ghosn, who appears to have no intention of leaving in the foreseeable future. "My experience would be good for any manufacturer," Tavarez said in an interview with Bloomberg. "Why not GM? I would be honored to lead a group like this." GM, however, prefers to hire American managers, so Tavarez's provocative statements are seen as a warning to Ghosn that unless he wants to lose his right-hand man, he should consider giving him a more independent role, possibly backing his appointment to head Renault's alliance partner, Nissan.
The Netherlands' continued slump linked to burst housing bubble.
Despite strong exports, the Dutch economy shrank 0.2 percent in the second quarter of 2013, because of dwindling household spending, which fell 2.4 percent in the quarter. The reason Dutch consumers are spending less is that many of them have been hurt by a decline in housing prices. These are 21 percent below their 2008 peak and 30 percent of Dutch mortgage holders have ended up with real estate that is worth less than they owe the bank. The government is tightening mortgage regulations, which leads to further price drops. Local analysts don't believe the housing market has reached its bottom yet. The U.S. had similar problems five years ago and is still struggling with the consequences, so the Netherlands isn't likely to be one of the countries that lead Europe out of recession.
Zara co-founder dies.
Rosalia Mera Goyenechea, Spain's richest woman, with a fortune of $5.5 billion according to Bloomberg's Billionaires Index, died from a brain hemorrhage in a La Coruna hospital. In the 1970's, Mera co-founded the clothing and retail conglomerate Inditex, whose brands include Zara, Massimo Dutti, Bershka and others. She has not been involved in the company's operations since the mid-1980's, when separated from the other Inditex co-founder, Amancio Ortega, but she remained the second largest shareholder in Inditex with about 7 percent of its shares. While it was Ortega who expanded the business and became Europe's richest man in the process, Mera was well-respected for her charity work and loyalty to her humble roots: She quit school at 11 to work in a clothing store. Mera's generation of resourceful post-World War II European entrepreneurs is now leaving the stage.
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Leonid Bershidsky at email@example.com