Bershidsky on Europe: Russia's Big Bet on Ukraine
Here's today's look at some of the top stories on markets and politics in Europe:
Russia bails outUkraine with $15 billion bond purchase, cheap gas
Ukrainian President Viktor Yanukovych received the help he needed from his Russian counterpart Vladimir Putin. Russia's sovereign fund will buy $15 billion worth of Ukrainian bonds, and natural gas monopoly Gazprom will lower the price of natural gas supplies to Ukraine from $406 to $268.5 per thousand cubic meters. The price reduction will cost Gazprom about $3.5 billion a year. The package ostensibly comes without any political conditions and no requirement that Ukraine join Russia's customs union with Belarus and Kazakhstan. On the surface, this is an extremely generous gift that saves Ukraine from default on its external debt. The Ukrainian opposition smells a rat, suspecting that secret conditions were agreed by the two presidents. But the Russian aid package strengthens Yanukovych and probably spells the end of mass protests in Ukraine - for now. The question is whether Putin has bought anything worth having: The Ukrainian leader is cunning and notoriously unreliable.
Turkey detains prime minister's allies in corruption probe
Turkish police detained 49 people including the sons of two cabinet ministers, the chief executive of state-controlled Halkbank and a high-profile developer. The arrests crowned a two-year investigation of money laundering, bribery and gold smuggling. Many of the detainees are seen as allies of Prime Minister Recep Tayyip Erdogan, and the police action appears to be a manifestation of the growing rift in Turkey's ruling Justice and Development Party (AKP). Erdogan, who intends to become Turkey's first directly elected president in August, heads one of the factions. The other is run by Islamic cleric Fethullah Gulen, who lives in the U.S. A prosecutor in the corruption case has Gulenist ties. Erdogan, who survived mass protests and riots last summer and remains popular with the majority of Turks, is likely to move against his rivals in the party soon so that they do not undermine his chances for August.
French government estimates number of "tax exiles"
The French government delivered a report to parliament on the number of tax exiles, French citizens who move abroad to avoid the country's exorbitant taxes. The report is based on 2011 data and on the strength it, Budget Minister Bernard Cazeneuve said there was "no basis for talking about a mass tax exile." Based on wealth tax returns, net departures increased sharply between 2003 and 2006, then started going down in 2009 and reached just 377 in 2011. That year, France introduced a special "exit tax," a levy on unrealized capital gains for people leaving the country. Since the tax came into effect, only 278 households have paid it. About 30,000 French families pay taxes from abroad, but few are big earners: Only 250 declared income of more than $400,000 in 2011. The numbers are low indeed, but the government is playing with a marked deck, using old data and disregarding the fact that the exiles' goal is to avoid French taxes, not to file accurate returns. No matter how it tries, the government won't convince the parliament and the public that the French actually like being taxed to death.
Euro area finance ministersagree on bank closure funding
The euro area came closer to an overall agreement on dealing with failing banks, by agreeing on the procedure for financing closures until the Single Resolution Fund has enough money to do it. Banks are supposed to pour $76 billion into the fund over 10 years. Until then, governments will be allowed to impose additional levies on banks, and if that is not enough, they will be able to use taxpayers' money or borrow from the euro area bailout fund. Germany has insisted on the three-tier mechanism, because it does not want to pay for winding down banks in other countries. The way the banking union negotiations are going shows how Germany will be handling European issues in the near future: It wants to be insured from paying for anything unless absolutely necessary, and it will stand tough until its demands are accepted.
Colombia airline owner eyes Alitalia and LOT
German Efromovich, the owner of Colombian airline Avianca, was born in Latin America to a family of Polish Jews but acquired Polish citizenship last year so he could bid for Portugal's flagship airline, TAP. The Portuguese government then postponed the airline's privatization, but Eframovich still wants a European carrier. He told Polish newspaper Rzeczpospolita that he is particularly interested in Italy's failing Alitalia and Poland's LOT. If he cannot acquire them, he may even start an airline from scratch, Efromovich said. His participation would definitely make sense for grossly mismanaged Alitalia: the aggressively expanding Avianca, formerly Brazil's far less successful Ocean Air, is a tribute to what he can do in the air transport business. Among other things, Efromovich is known to work at Avianca check-in counters to see whether customers are being served well.
(Leonid Bershidsky can be reached at email@example.com).
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