Bershidsky's View From Europe
Here's today's look at some of the top stories on markets and politics in Europe:
Italy abolishes property tax to please Berlusconi.
The Italian government canceled payment of the unpopular property tax until the end of 2013, deciding instead to introduce a vaguely defined local "service tax" next year. The decision creates a $5.3 billion annual shortfall but helps Prime Minister Enrico Letta keep the ruling left-right coalition intact. That's because it satisfies ex-premier Silvio Berlusconi, who has lately threatened to break up the coalition; the repeal of the property tax had been one of his party's main demands. Berlusconi, recently convicted of tax fraud and banned from holding public office, has demonstrated that he still has the clout to ram through major policy decisions. A few court verdicts are definitely not enough to force Il Cavaliere out of Italian politics.
Merkel counterattacks in fight over Greek aid.
Chancellor Angela Merkel responded asymmetrically to demands by her Socialist rivals in the upcoming federal election that she disclose the specifics of a planned aid package for Greece. "Greece should not have been allowed into the euro," she said. "Chancellor Schroeder accepted Greece in and weakened the Stability Pact and both decisions were ... one of the starting points for our current troubles." Gerhard Schroeder, of course, was a Socialist. Merkel has a point: Germany is indeed paying the price for the eurozone's thoughtless expansion before the global financial crisis. Yet pulling out now and calling all that investment a sunk cost would crash markets and kill the euro area's nascent economic recovery. Germans see the common sense in Merkel's position: her coalition is leading the polls.
Swiss government agrees to settle tax dispute with U.S.
After a long standoff with the U.S. Justice Department, the Swiss government gave its Finance Ministry the go-ahead to finalize a joint statement with the U.S. that will give Swiss banks a way to disclose information on their American clients without facing further legal problems. The U.S. is already investigating a number of Swiss banks, including Credit Suisse and Julius Baer, for allegedly helping Americans evade taxes. The general solution comes too late for these banks, but others will apparently be able to come forward with information on any past wrongdoing and not face prosecution in the U.S. This is a blow to famed Swiss bank secrecy, but, given the U.S. investigations, it was already in tatters. The two-year delay in finding a mutually acceptable solution has given the banks' clients enough time to make alternative arrangements. Ending the acrimony is now to everyone's benefit.
Online ads account for a quarter of European market.
According to the AdEx Benchmark Report, published by Europe's IHS and Interactive Bureau, the standard-keeper for online advertising on the Continent, in 2012 online advertising accounted for 25.6 percent of the total ad spend. Though a mature market now worth $32.5 billion, it is still growing faster than any other sector of the advertising market -- 11.5 percent in 2012. That happened to a large extent because of emerging markets like Russia and Turkey, where online advertising expanded by more than 30 percent, making Russia the fourth-biggest market in Europe. When that explosive growth slows down to the pace of the more developed nations, mobile advertising will likely become the next growth engine. It makes up only 5 percent of all display advertising now, but, judging by the 150 percent annual increase in the U.K., it is the wave of the future.
Human " mini-brains " expected to help cure autism and schizophrenia.
Scientists at the Institute of Molecular Biotechnology (IMBA) in Vienna have succeeded in growing human stem cells into mini-brains up to 0.15 inches in diameter with a neural structure similar to the brain of a 9-week-old embryo. The institute said it might be possible to create bigger brains with cognitive ability by giving the "organoids" blood supply and sensory inputs, but that would be unethical. The scientists' purpose is to use the mini-brains to study neural disorders, including autism and schizophrenia, and eventually to fix them by replacing defective genes. This breakthough research is a major success not only for the institute, but for the very idea of public-private partnership: IMBA is a joint initiative of the Austrian Academy of Sciences and the German pharmaceutical company Boehringer Ingelheim.
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