Bershidsky on Europe: Spies Coming Out
Here's today's look at some of the top stories on markets and politics in Europe:
UK intelligence chiefs to testify before parliament
The heads of Britain's three spy services, electronic surveillance agency GCHQ, MI5 domestic security and MI6 foreign intelligence are to give public testimony for the first time in history on Nov. 7. Their appearance before parliament will be televised. The intelligence chiefs have always kept out of the spotlight: In fact, the U.K. only admitted the existence of MI6 in 1997. National Security Agency leaker Edward Snowden has changed everything. It is about his revelations that parliament members will grill the three spymasters. The hearing is not likely to yield much new information, but it is a step toward more accountability. At least the public will see the faces of those who order their phones tapped and emails read.
Euro-area growth boosts German manufacturing orders
Foreign orders for German industrial goods rose 6.8 percent in September compared to August, compensating for a 1 percent drop in domestic demand and contributing to overall growth of 3.3 percent. The euro area's contribution to the rise was a 23.6 percent jump on the month. Much of the added demand was for ships, airplane and railroad equipment, a sign for many analysts that euro-area economies are indeed recovering. It would be a mistake to put much store in the data, however. Alstom, the French manufacturer of the very same capital goods that drove German manufacturing orders, has just reported flat sales and lower profit for the quarter and announced a major cost-cutting plan including 1,300 job losses and asset sell-offs. Germany's Siemens has reported a sales drop in the 2012/2013 financial year and is also trimming costs. Improved competitiveness based on cost cuts is good for the trade balance, but not so useful for domestic recovery. Retail sales in the 17 euro area countries fell more than expected in September.
Societe Generale reports profit rise, cuts staff
Societe Generale reported third quarter profit of $721 million, six times more than in the previous quarter, despite adding $270 million to its provision for legal risks. The bank has streamlined its structure into three divisions: French retail, international retail and corporate and investment banking. That has cost 1,450 jobs worldwide over the past few years, and 400 more job cuts are planned in the investment and corporate division. Instead, Societe Generale is about to create 250 jobs at its service center in Bangalore, India. The financial crisis has forced SocGen and many of its peers to focus and tighten control over operations, and pre-crisis profitability levels are no longer out of the question for them. These are hard-won profits, however, not windfalls.
Russia cuts growth forecasts
The Russian economics ministry has released a new, sober economic forecast until 2030. Average annual growth has been revised down from 4.3 percent to 2.8 percent, leading to the decline of Russia's share of global output from the current 4 percent to 3.4 percent. The ministry predicted low investment in infrastructure and human capital, as well as growing wealth inequality. The strategic ministry does not seem to believe that Russia will amount to much more than what it is now - a country living off its natural resources and reinvesting little of the income in development. The Russian government has no ambitions beyond holding on to power, and the forecast reflects that.
Credit Agricole aims to fight Libor/Euribor accusations
Credit Agricole chief executive Jean-Paul Chifflet said the bank would fight any accusations by the European Commission that it took part in manipulating Euribor and Libor interest rates. The statement came just a day after European business publications reported that the EU's antitrust investigation into interest rate fixing was drawing to a close and would result in a record settlement next month. Banks have been hit with so many large fines by different regulators lately that it is easy to assume all of them are guilty of manipulating this or that market, be it credit or forex, or some other kind of wrongdoing. Many banks implicated in the scandals have meekly swelled provisions for legal risks. It is refreshing to see a major financial institution showing some fighting spirit -- just as it returns to profitability after record losses last year.
(Leonid Bershidsky can be reached at firstname.lastname@example.org)
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