Bershidsky on Europe: EU Squabbles Over Russia Sanctions

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website
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Here's today's look at some of the top stories on markets and politics in Europe.

EU nations squabble about sanctions against Russia.

Now that Russia officially swallowed up the Crimea, there is a consensus among EU and U.S. officials that Russian should face harsher sanctions. No country, however, wants to bear the economic costs of imposing them. The U.K. has called on the EU to impose a weapons embargo, which would cost Britain little but force France to cancel a $2 billion contract to supply Russia with two Mistral helicopter-bearing warships. France, with a stab at Gallic humor, responded it was willing to go along with the proposal if London freezes the assets of Russian oligarchs in the City. Oh, and Berlin should suffer, too: Why won't it cut Russian gas purchases? Latvia, for its part, has already asked the EU for compensation in case sanctions against Russia are introduced: The tiny Baltic nation's economy is dependent on Russian transit. This is exactly the kind of circus Russian President Vladimir Putin counted on when he made his bold move. The EU and the U.S. ought to stop publicly humiliating themselves and instead try to help what is left of Ukraine to become a functioning state.

Greece unlocks $14 billion aid tranche.

After six months of negotiations which culminated in an all-night session, Greece persuaded its creditors to unfreeze a $14 billion aid tranche that will cover May bond repayments. The EU, the International Monetary Fund and the European Central Bank are finally satisfied that Greece indeed had a $4 billion budget surplus before debt repayments in 2013. Greek Prime Minister Antonis Samaras also promised "significant structural changes that will liberalize the economy, increase competitiveness and reduce prices." Before these happen, however, Samaras will spend $700 million of the surplus on pay increases for military personnel and police, as well as some pension rises. Though Greece is far behind other southern European countries in fixing its economy's structural problems, it cannot move as fast as Spain did or as Italy is trying to go now: Greeks are so battered by the worst depression in the country's history that they can hardly take more pain. The new aid package gives them another temporary respite, but more of these will be needed along the way.

Key European Parliament committee approves telecom reform.

The European Parliament's Committee on Industry, Research and Energy narrowly approved an important telecommunications reform, which will come before the full parliament on April 3. The package includes an end to roaming charges in Europe, the handover of some spectrum-allocating powers to Brussels and a firm stand on net neutrality. If the legislation passes, European telecoms will not be able to charge content providers such as Netflix for prioritizing their traffic. The telecoms lobby is up in arms. If strictly enforced, the net neutrality principle may well lead to internet speed problems for online video watchers. Some member states' governments are also opposed to giving away spectrum allocation, because auctioning frequencies is a revenue source for them. The reform's positive element, the abolition of roaming fees, may get bogged down in bargaining on other parts of the reform advocated by EU telecom commissioner Neelie Kroes. She may have done better to push each of the proposed measures separately.

Inditex profits dip because of faster expansion.

It's not easy to find a valid reason for analysts' recent downgrades of Zara owner Inditex, the world's biggest fashion retail company. They talked of a slowdown in the company's global expansion, but the Spanish firm just keeps on growing. In the fourth quarter of 2014, it reported a net profit of $979 million, down from $985 million a year ago. Most companies would not even feel the need to explain such a minuscule dip, but Inditex said it was caused by higher investment in new store openings and e-commerce. In 2013, it added more than 300 stores to its 6,000-outlet network, and it plans to open at least 450 more in 2014. Inditex has slightly increased full year profit in 2013, to $3.31 billion from $3.28 billion in 2012, and it promises a 10 percent boost to dividends. There is still no retail concept in the world that would be more successful than Inditex's "fast fashion": A rapidly changing product line in cutting-edge styles cheaply made by a multitude of small manufacturers. To sell this stock is to short retail as an industry, not a good idea as the global economy returns to growth.

French study says European firms control two-thirds of luxury market.

The French luxury industry lobby, the Comite Colbert, commissioned a major study of the global luxury market from the Paris School of Economics. After studying trade data from 163 countries, it estimates the market volume at $100 billion. Two-thirds of it is made up of exports from EU countries, mostly France and Italy. These two countries are followed by Switzerland, China (with a surprising 4.7 percent of global luxury exports) and the U.S. The researchers found that luxury consumers do not mind paying an average of 60 percent over cost for watches, 180 percent over cost for clothes and 190 percent over cost for brand-name spirits. The European luxury producers, who dominate the market, are uniquely skilled in selling something as ethereal as a brand aura. This aura makes up a quantifiable, and significant, share of European exports.

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

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

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Leonid Bershidsky at

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Marc Champion at