Bershidsky on Europe: German Created Heartbleed Bug
Here's today's look at some of the top stories on markets and politics in Europe.
German created Heartbleed bug.
The so-called Heartbleed bug in the OpenSSL software, on which much of the internet is run, was introduced by Robin Seggelmann, a German software engineer living in Munster. He says he introduced the bug inadvertently when he submitted another series of bug fixes and improvements two years ago. The reviewer, one of OpenSSL's "core team", missed the error in the code, and the security gap in OpenSSL remained undetected until a Google staffer discovered it this week. Though open source software is generally believed to be safe because whole communities of enthusiasts work on it, constantly improving on each other's efforts, the Heartbleed situation shows the reality is less rosy. "It's unfortunate that it's used by millions of people, but only very few actually contribute to it," as Seggelmann put it. And, with open source, there is no one to sue and, ultimately, no one to blame, whether an error is made innocently or maliciously.
Greece still in trouble after bond success.
Though Greece's first five-year bond issue since its international bailout appeared to be wildly successful, raising $4.15 billion at the very low yield of 4.95 percent, the country may well disappoint investors. According to senior eurozone officials quoted by The Wall Street Journal, the EU is no longer pushing Greece enough on economic liberalization, choosing instead to play along with Prime Minister Antonis Samaras's good-news operation. Germany, which used to exert the most pressure on Greece, has reportedly "gone soft" and is no longer "playing bad cop." There is a political reason for the "softness": Samaras' government has only a tiny majority in parliament and has little support. Polls ahead of the May European Parliament elections have Samaras' party, New Democracy, in second place after radical leftist bloc Syriza, and its coalition partner, moderate socialist party PASOK, only enjoys low-single-digit support, behind the neo-Nazi Golden Dawn party. The government's weakness may hinder the implementation of important reform laws, envisioning public worker layoffs, consumer market liberalization and cuts to the cost of labor. Samaras, aided by the EU, is talking up his country's supposed economic revival while in fact there is not much he can actually do without tipping the fragile political balance.
IMF ups pressure on ECB to act on low inflation.
International Monetary Fund head Christine Lagarde said European Central Bank President Mario Draghi's promises of strong action to counter the deflation threat were not enough. Further monetary easing, Lagarde said, was "a matter of time now," adding: "the sooner the better." One of Lagarde's deputies, David Lipton, bolstered that message, telling the German business daily Handelsblatt that he feared stagnation in the eurozone. "The lesson is, do not be complacent, do not hesitate," he said, repeating the call on the ECB to increase stimulus to the economy. It is easy for the IMF officials to lean on the ECB: they don't bear responsibility for the shape and size of the next stimulus package. Even a slight uptick in inflation in April will be enough to put off quantitative easing, because the ECB fears wasting scarce ammunition. Its own verbal interventions, after all, are almost as cheap as the IMF's.
EU regulator worried about telecom mergers.
Europe's antitrust commissioner Joaquin Almunia outlined the European Commission's approach to telecom mergers on Thursday, saying the commission had no option but to view each country's telecom market separately because spectrum allocation and telecom regulation "remain very much national affairs." That means the commission will not look kindly on in-country mergers that reduce the number of major players, giving the remaining one more market power. The European Commission is expected next month to deliver decisions on two such mergers, the purchase of E-Plus in Germany by Spain's Telefonica and Hutchison Whampoa's bid for O2 Ireland. The verdicts are eagerly awaited because the industry is in the middle of a wave of mergers and acquisitions: telecom deals are responsible for 80 percent of M&A value this year, the highest share since at least 1998. If the commission raises objections to the German and Irish acquisitions, the rest of the industry will need to look in two directions: cross-border mergers that do not affect the number of players in any specific market, and the model presented by the recent French deal, in which Vivendi agreed to sell its mobile operator SFT to cable company Numericable. The latter makes the most sense, because it allows merged companies to offer complementary services without affecting the competitive environment.
BP chief defends the company's Russian projects.
At the oil and gas company's annual shareholders meeting, BP chief executive Bob Dudley was bombarded with questions about the company's exposure to Russia. Private shareholders have read the news and decided that being involved in a country that has just gobbled up part of a neighboring state is unsafe. What if Russia nationalized BP's stake in the biggest Russian oil company, state-controlled Rosneft? What if Russia is hit with energy sanctions? Does BP have enough influence on Rosneft to avoid problems that working in a rogue state might create? Dudley, who once ran the TNK BP Russian joint venture, acquired by Rosneft last year, was adamant that being in Russia was good for BP. He said the partnership with Rosneft "gives us nearly a fifth of the world's largest publicly traded oil company operating in a country with massive reserves and massive potential." Dudley's stand reflects the view of many Western energy industry leaders that Russia's role as an energy superpower will not be undermined by the Ukrainian crisis. Charif Souki, head of U.S. natural gas company Cheniere, says plans to liberate Europe from Russian energy dependence by exporting gas from the U.S. was "so much nonsense that I can't believe anybody really believes it." Rosneft partners at ExxonMobil, Statoil and ENI, as well as other Western companies involved in Russia's energy sector, try not to read too much geopolitical commentary: They don't believe it makes business sense to try to isolate Russia.
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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