Bershidsky on Europe: Crimea Sets Referendum

Here's today's look at some of the top stories on markets and politics in Europe.

Crimea sets independence referendum.

The local parliament in Ukraine's autonomous region of Crimea voted to hold an independence referendum on May 25, the same day Ukraine is to elect its next president. The legitimacy of the parliament vote is in question because the building where it took place had been seized by unknown armed people who put up a Russian flag. Still, the referendum's question is carefully phrased: "The Autonomous Republic of the Crimea enjoys state independence and is part of Ukraine on the basis of treaties and agreements (yes/no)". This is a far cry from full independence or a request to leave Ukraine and join Russia. Despite all the frantic activity and the emergence of deposed Ukrainian President Viktor Yanukovych in Russia, where he is expected to give a press conference tonight, Russia is not readying for an invasion or preparing to flout international agreements recognizing Ukraine's borders. It is, rather, developing a bargaining position to work with Ukraine's new, often anti-Russian authorities. The volatile situation in largely pro-Russian Crimea is a card Russian President Vladimir Putin can play at will.

Spanish government selling off first stake in Bankia.

The Spanish banking bailout fund, Frob, is holding an experimental sale of 7.5 percent of Bankia, the nationalized giant of which the government now holds 68 percent. There appears to be enough interest in the stake for the deal to go through smoothly, and Frob is likely to recoup about $1.8 billion out of about $30 billion pumped into Bankia to restore it to financial health. At current prices, the Spanish government is not making a profit as the U.K. government did when it started selling off Lloyds Banking Group last fall. Spain does, however, have a general election scheduled for next year, and it is important for Prime Minister Mariano Rajoy to demonstrate that the government's anti-crisis measures have been effective. Bankia may not be worth enough to justify its costly bailout, but at least it is a going concern and investors are interested. That's good enough for now.

GDF Suez writes down European assets.

The major French utility, GDF Suez, took a $20 billion impairment charge on its European assets, reporting a net loss of $12.7 billion, but that did not stop its shares from rising on the Paris exchange. The tough decision to write down the value of European power plants reflects the new reality of this market: low demand for energy and the subsidy-fueled rise of renewable power generation. Germany's RWE has just taken a similar writedown of $6.5 billion, leading to a $4 billion loss. Traditional hydrocarbon-fueled plants are out of fashion, and the face of the European energy industry is changing despite grumbling by company executives that governments are pushing too hard and too fast for a shift to renewable sources. Investors will reward companies that clearly accept the changes and adapt to them.

European firms reach deal on Panama Canal expansion.

The $5.2 billion project to expand the Panama Canal was thrown into doubt last month when the consortium in charge of its most expensive part, a set of locks at both ends, threatened to walk out if it was not paid an extra $1.6 billion. Now the consortium, 96 percent-controlled by Sacyr of Spain and Salini Impregilo of Italy, has reached a deal with the government of Panama that will allow the project to go ahead. Panama says it has not agreed to put in any extra money, and the consortium is vague on the terms of the deal, talking about "a comprehensive approach to provide funding for the project through a co-financing arrangement ... pending the outcome of arbitrations to allocate the responsibility for additional costs." The European firms have apparently agreed to resume work, finish the all-important project that will, among other things, allow liquefied natural gas to be traded through the canal, and then demand more money through an arbitration process. That is quite reasonable on the part of the Spanish and Italian contractors and should speak in their favor when they bid for other large-scale projects.

Ukraine-style pro-EU rallies in Iceland.

Thousands of people, more than have gathered since the financial collapse of 2008, have been demonstrating every day in Reykjavik against the government's decision to break off accession talks with the EU. More than 37,000 people -- 15 percent of Iceland's tiny electorate -- have signed a petition demanding that the ruling coalition resume the negotiations. Polls still show that about 50 percent of Icelanders are opposed to EU membership for their country and only 32 percent are in favor, but a year ago a 63 percent majority wanted no part of the EU. Despite its highly visible internal difficulties, united Europe still has a powerful appeal for many outside the bloc. It's hard to imagine two peoples less alike than Ukrainians and Icelanders, but both are willing to turn out en masse every day to demand their bit of a European future. No matter how the European dream is distorted by bureaucrats and politicians charged with putting it into practice, its attraction remains undeniable.

(Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter at @Bershidsky.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.