Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe:
Greece wants $13 billion in new aid.
After German Finance Minister Wolfgang Schaeuble said last week that Greece would require more aid from its euro-area partners, the leftist opposition, hoping to defeat Chancellor Angela Merkel's government in the upcoming federal election, demanded specifics. All Schaeuble would say was that the aid package would be "much smaller than previous ones". Now his Greek counterpart Yannis Stournaras has put a number on the ask: "around 10 billion euros," or $13.4 billion. Stournaras stressed that Greece's rescuers will not be able to impose new austerity conditions on the Balkan nation as part of the package: "Until 2016 the targets -- our obligations -- have been set." German taxpayers might balk at that. But fortunately for Merkel, $13 billion is a drop compared to the $321 billion already loaned to Greece by international lenders. It's most likely not a number that will sink the popular chancellor at the polls.
Telefonica increasesoffer for E-Plus in order to get Carlos Slim's backing
The Spanish telecom operator Telefonica sweetened its offer for the German mobile provider E-Plus after Carlos Slim, the world's second-richest man, threatened to undermine the deal once he acquired E-Plus' parent company, the Hague-based KPN. Telefonica is now willing to pay $11.4 billion for E-Plus, up from $10.8 billion, and proposed a 20.5 percent stake in its German business for KPN, up from 17.6 percent. Slim's America Movil, which holds a 30 percent stake in KPN, now seems happy to go along with the sale. But it still wants to gain control of KPN. If both deals go through, they may trigger further consolidation among European telecom operators. The EU has made it clear that it wants to create a single market for mobile services, and the participation of non-European players like America Movil may help remove the remaining obstacles to that plan.
The Dutch government plans to sell off nationalized ABN Amro.
Dutch Prime Minister Mark Rutte announced that the government has asked the bank ABN Amro, nationalized during the 2008 financial crisis, to get ready for an IPO. The preparations are expected to take a year. The Netherlands' third largest bank is now valued at $20 billion, though the Dutch government has spent almost twice that much to bail it out. The huge loss to the taxpayers should serve as a warning to governments and companies against corporate gigantism and Napoleonic ambition. ABN Amro failed after it was acquired for $95 billion by a consortium of Spanish Santander, the Royal Bank of Scotland and Belgian-Dutch Fortis. The Dutch government now owns Fortis' part of the former banking giant, and the U.K. public has paid dearly for the folly of RBS, which was also nationalized.
Brussels warnsFrance against raising taxes.
The EU's economic chief, Olli Renn, said in an interview with the French newspaper Le Journal du Dimanche that "tax increases in France have reached a critical threshold." Raising taxes could stifle the national economy's fragile growth and weigh heavily on employment, Renn warned. French officials, including President Francois Hollande, are themselves worried about the effect their tax hikes may be having on the economic recovery, yet next year taxes are to rise again to yield up to $8 billion in extra budget revenue. Renn is right when he says the French government should be concentrating on structural reforms and opening up monopolized industries, like railroads and utilities, to competition. That is a surer way to bridge budget deficits, too: Each 0.1-point increase in the French GDP means $1.3 billion in extra tax revenue.
Portuguese tollsleave roads empty.
According to Inrix, a traffic information company, road congestion has fallen more in Portugal than in any other European country -- by 50 percent in 2012 and 68 percent in the first quarter of 2013. That may sound good for the Portuguese drivers, but in fact it's not. They are staying off the highways because the government has introduced tolls on 900 kilometers of formerly free roads. As a result, drivers are spending comparable amounts of money on fuel and tolls, despite driving less. On the one hand, there is a logic to the government's actions: Since 1986, Portugal has increased its highway network from 300 to 3,000 kilometers, using prodigious amounts of EU aid in the process, and now it wants to be able to extract some benefit from the system. On the other hand, the pre-crisis easy money was clearly squandered on roads the country clearly doesn't need. Keeping the network free could at least help restore economic activity to previous levels.
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Leonid Bershidsky at email@example.com