Bershidsky on Europe: Berslusconi Party Splits
Here's today's look at some of the top stories on markets and politics in Europe:
Italian government may survive confidence vote
Enrico Letta's coalition may survive the Oct. 2 confidence vote in parliament, forced by Silvio Berlusconi. The former prime minister's party appears to be splitting: Angelino Alfano, until recently one of Berlusconi's most powerful allies, who served as Letta's deputy in the coalition cabinet, insists that the party must vote in favor of the government. Another defector, Senator Carlo Giovanardi, said about 40 of his colleagues in the senate were prepared to switch sides, more than enough to carry the day for Letta. Alfano's last-minute talks with Berlusconi on Oct. 1 were fruitless, and the former premier reaffirmed his commitment to bringing down the government. He may not have the votes: Many of his supporters are tired of government crises and unsure of what they are supposed to be fighting for. The markets are tired, too: yields on Italian government debt barely edged up and then dropped back to last week's levels, reflecting either growing investor indifference or a belief that the cabinet will survive. Italian shares, too, bounced back when the split in Berlusconi's party became obvious. Il Cavaliere's star may finally be setting.
Google closer to EU antitrust settlement
EU Competition Commissioner Joaquin Almunia said Google has come up with new proposals to stave off antitrust procedures similar to those that led to Miscrosoft paying a $794 million fine in 2004. The U.S. company offered to make rival services' offerings more prominent in search results and allow competitors to bid for extra exposure. It is not clear whether this will satisfy complainants, who include Microsoft, TripAdvisor, Expedia and other household names as well as smaller European companies. This time, however, Almunia does not want to subject the Google proposals to a full-scale market test because he says he already knows the sides' positions. Almunia, who is due to leave his post next year, wants a settlement by the spring. Google may have given him just enough to put the matter to rest.
Ousted Intesa chief to get $6 million parachute
Another golden parachute scandal is brewing in Europe. The Italian banking group Intesa Sanpaolo said it would not fire Enrico Cucchiani, who has been forced to step down as chief executive, for another six months. He would receive the same salary as he made in his role as CEO while having no responsibilities at the bank. That comes to $1.2 million for the six months. The total value of Cucchiani's severance package is about $6 million, though he only worked at the bank for 21 months before his work displeased large shareholders. Staying on until April 2014, allows the 63-year-old to receive pension benefits specified in his contract - and possibly to collect the maximum pension from the Italian government. That would go beyond Intesa's charitable desire to be fair to a former top manager. European companies ought to be mindful of a recent Swiss referendum that banned golden parachutes altogether: If they do not curb their generosity, an indignant public may force similar restrictions on them.
ECB vice president says euro area banks are undervalued
Just as the European Central Bank prepared to start a big asset review of the euro area's banking system, the man responsible for the exercise, ECB Vice President Vitor Constancio, said European banks were undervalued compared to their U.S. counterparts. According to Constancio, the big banks in the euro area had, on average, better capital ratios than big U.S. banks. The ECB official appeared to be sending a signal to bankers that the ECB was their ally: It is important for the central bank to establish a working relationship with them as it prepares to start supervising them a year from now. Constancio, however, was only talking about the large banks, which have been the focus of post-crisis restructuring efforts. He must be aware that smaller institutions will require much attention from the regulator: It is because of them that the massive asset review is necessary in the first place.
French unemployment drop caused by computer bug
In August, the French government announced triumphantly that the number of unemployed had dropped by 50,000 in the month. Even as the announcement went out, however, Labor Minister Michel Sapin was worried that the number was somehow too big. He ordered Pole Emploi, the state employment service, to investigate and sure enough, the sudden employment boom turned out to be the result of a computer bug at mobile operator SFR that prevented 170,000 unemployed from receiving text messages reminding them to renew their claims. Because of that, between 32,000 and 41,000 people failed to renew on time and were not reflected in the statistics. That means unemployment was down in August, but only slightly. It's OK to be optimistic, but much about the current European recovery needs to pass the too-good-to-be-true test.
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Leonid Bershidsky at email@example.com