Bershidsky on Europe: Sanctions Hit Miley Cyrus
Here's today's look at some of the top stories on markets and politics in Europe.
Hollande loads cabinet with allies to counterbalance Valls.
New French Prime Minister Manuel Valls may be an economic liberal within President Francois Hollande's Socialist Party, but his cabinet will be left-leaning. Michel Sapin, a close friend of Hollande and the former labor minister, has been given the finance ministry. But some of that all-important ministry's powers have been handed over to Arnaud Montebourg, who is now minister of the economy, industry and digital development. Montebourg favors a strong role for the government in the economy and opposes the budgetary constraints imposed on France by the EU. The leftist counterbalance to Valls is a typical Hollande move: He loves balance, even it is inefficient. Hollande has also loaded the cabinet with people close to him: Segolene Royal, the mother of his four children, has become environment and energy minister, and Francois Rebsamen, who has worked with him closely in the party hierarchy, is the new labor minister. Valls started out by saying he would work to reduce the public deficit, in line with EU demands, but it is not clear how much he can achieve with this cabinet. In any case, the French will not be patient with him: According to a fresh poll, only 41 percent have confidence in the new prime minister while 47 percent mistrust him.
Russia sanctions may hit Miley Cyrus .
Miley Cyrus and Justin Timberlake were supposed to perform in Helsinki's Hartwall Arena in May and June, but now these sold-out concerts, like those of other U.S. stars, may be canceled or moved. The arena is owned by three Russians on the U.S. sanction list in the aftermath of Russia's annexation of the Crimea: Gennady Timchenko, Arkady and Boris Rotenberg. The three businessmen are close to Russian President Vladimir Putin, but they also hold dual Russian and Finnish citizenship and own vast assets in the EU. Now, the U.S. promoter Live Nation Entertainment, which arranged the Helsinki show, is not allowed to do business with Timchenko and the Rotenbergs, and it says it will "work to ensure the U.S. sanctions against the identified Russians are upheld." While the potential cancellation of the shows will do some financial damage to the owners, the sanctions will primarily hurt the Finnish fans. If the U.S. government believes this will make Russia give back the Crimea, it is mistaken: More likely, it will force the Russian businessmen nominally to sell their assets, as Timchenko has already done with his commodities trading company, Gunvor.
Big Pay Rise for Credit Suisse Chief Executive.
Brady Dougan, the chief executive of Credit Suisse, will be compensated handsomely for the bank's $1.13 billion jump in profit in 2013: He will receive a pay rise to $11 million from the $8.7 million he made in 2012. This 26 percent hike follows a 21 percent increase in compensation for Sergio Ermotti, who runs Switzerland's biggest bank, UBS. Both at Credit Suisse and UBS, profit jumped by a bigger percentage than the chief executive's pay, so even in the Swiss culture, increasingly intolerant of fat cat payouts, Dougan's and Ermotti's paychecks are acceptable. They are also justified: The big Swiss banks were among the first in Europe to start cleaning up their balance sheets, cutting costs and increasing capital. Rewarding the people who have achieved results earlier than their counterparts in neighboring countries makes sense.
Prada forecasts slower growth in 2014.
Prada, the Milan-based producer of luxury clothes and accessories, predicted a "low single digit" rise in its sales in 2014 after growing 7 percent last year. The reason for the modest prediction is softer demand in Europe and Asia, a major market for Prada whose shares are traded in Hong Kong. The company's shares dropped almost 9 percent on the announcement, before recovering some of the losses. The stock market is generally pessimistic about luxury companies because the industry no longer expands as fast as it used to when major producers moved from pure wholesale to retail: global growth is expected to stay at 3-5 percent through 2016. It's still doing great, however: Prada, for example, is opening dozens of stores and expects to boost headcount to 15,700 from 11,500 last year. Somewhat slower growth does not detract from luxury's resilience in the face of economic turbulence, Chinese anti-corruption campaigns or whatever the world can throw at it.
Lufthansa strike empties German airports.
What may be the longest strike in the Germen flag carrier's history entered its second day with hundreds of flights canceled and German airports looking unusually empty. 5,400 captains and co-pilots have walked out to demand a 10 percent salary increase and protest the cancellation of a pension scheme that allowed pilots to retire before government pensions kicked in. The strike affects some 425,000 passengers and is supposed to last through Friday. Lufthansa has been cutting costs and laying off staff since 2012, and its chief executive, Cristoph Franz, predicted a 40 percent operational profit increase for 2014. The company's remaining employees, understandably, want a share of those new profits as the air travel market revives after the European debt crisis. Franz is calmly negotiating a compromise with the pilots: Lufthansa can afford some concessions, and he himself is leaving the airline industry to join Swiss pharmaceutical firm Roche. Soon, disgruntled airmen will cease being his problem.
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Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter at @Bershidsky.
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