Bershidsky on Europe: Russia Shuns U.S. Crimea Plan
Here's today's look at some of the top stories on markets and politics in Europe.
Western proposals on Crimea.
Russia turned down a proposal by U.S. Secretary of State John Kerry aimed at resolving the Crimea crisis. The 1/2-page document Kerry had sent to hid Russian counterpart, Sergei Lavrov, stipulated that Russia should halt the secession referendum planned for March 16 and pull out the troops that now control the Ukrainian peninsula. Then a "contact group" including representatives from Russia, Ukraine and EU would be set up to ensure fair presidential elections in Ukraine and discuss economic aid for the nearly-bankrupt nation. Kerry's proposal echoesone from the EU, pushed by Germany, and equally destined for rejection. Russia has no reason to stand down: The sanctions that Western governments are now threatening include visa restrictions and asset freezes which are not going to inflict any serious pain on Putin or the more ideologically stalwart members of his entourage. If the West is unwilling to go further than that and impose mutually painful trade and banking sanctions, it should quietly concentrate on helping rump Ukraine avert a debt crisis. The recent EU move to open borders unilaterally to Ukrainian goods, potentially worth $675 million a year in economic benefits to Ukraine, is a step in the right direction.
U.K. tobacco company starts patent war against U.S. e-cigarette makers.
U.K.-based Imperial Tobacco, the world's fourth largest cigarette company, filed suit in California against nine U.S. e-cigarette makers, including the three leading ones: Lorillard's Blu Ecigs, NJOY and Logic. Imperial claims these companies are violating its patents. This is an unusual claim for a late entrant to the market: Imperial only launched its first e-cigarette a few weeks ago. The financially powerful U.K. company, however, could well make life difficult if not for Lorillard, then for the smaller firms that grabbed shares of the e-cigarette market while the giants procrastinated. The lawsuit is, in effect, a power play that could open a legal Pandora's Box: Most e-cigarette makers have patents for rather similar products. The U.S. government could easily solve the problem by regulating the e-cigarette market as stringently as it does traditional cigarettes. Then, making the electronic variety will only make sense for the big producers already invested in the future of tobacco.
Nestle to set compensation ceiling for top executives.
Swiss food giant Nestle's chairman Peter Brabeck-Letmathe has sent a letter to shareholders detailing governance changes at the company in line with a new Swiss law aimed at instilling more humility in top executives. For the first time, all 13 board members at Nestle will face annual elections and, as of next year, shareholders will determine the total compensation of the board and executive committee. The company, however, will put to the vote a higher amount of compensation than it actually intends to pay, in case the executives achieve spectacular results and have to be rewarded for it. Still, giving shareholders a binding vote on the size of executive compensation is a major improvement to previous practice, which recently resulted in a golden parachute of $82 million for Daniel Vasella, ex-president of the Swiss pharmaceutical company Novartis (Vasella gave it up under public pressure). Nestle executives will still be well-compensated: Brabeck-Letmathe earned $8 million in 2013, and the shareholders are not likely to cut that: Switzerland is not turning into a socialist country, just fighting excess.
Erdogan's Nemesis accuses him of becoming a dictator.
Turkish cleric Fethullah Gulen, whom Prime Minister Recep Tayyip Erdogan accuses of trying to undermine him, wrote a commentary for the Financial Times containing his strongest criticism of Erdogan so far. "A small group within the government's executive branch is holding to ransom the entire country's progress," Gulen wrote. "The support of a broad segment of the Turkish public is now being squandered, along with the opportunity to join the EU." According to Gulen, the intelligence services under Erdogan are getting powers "akin to those claimed by dictatorial regimes." The cleric also reiterated that he was not going to enter the political fray himself and will remain "in spiritual retreat" in the U.S. Still, the letter appears just before a crucial local election that will show whether Erdogan's political base is as broad and strong as before his emotionally draining and reputation-damaging open conflict with Gulenists within his own party. Gulen clearly wants to weaken Erdogan, and writing articles for foreign newspapers is not all he is going to do to that end.
Germany stunned by football hero's tax evasion .
Uli Hoeness, the president of Bayern Munich soccer club, currently the strongest in Europe, stunned Germans by admitting in court that he had evaded $21 million in taxes, five times the amount he was initially charged with. Hoeness's case is the biggest in the ongoing crackdown against tax evasion in Germany. That isn't just due to the large sum involved, but because Hoeness heads the venerable club and used to be a soccer legend himself, helping Germany win a European championship and World Cup in the 1970s. There is now political pressure on Hoeness to resign from Bayern, even if his confession buys him a suspended sentence. Tax evasion is turning into an unforgivable sin in Germany, able to trump even soccer glory.
(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.
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