Here's today's look at some of the top stories on markets and politics in Europe.
EU parliament opposes bank rescue plan.
When EU finance ministers last month agreed to a common procedure for rescuing failing banks, it seemed there was no alternative to the deal. Though it imposed haircuts on bank creditors and depositors before allowing any access to taxpayer funds, and the common bailout fund was supposed to reach just $75 billion by 2026, Germany had used all its influence to push it through because it was not willing to commit any more resources to the project. Yet now it seems the deal is close to being nixed by the European Parliament, which has to sign off on it. Senior lawmakers from all the parties sent a letter to the EU presidency saying the deal was illegal because it bypassed established legislative processes. European Parliament members also agree with U.S. Treasury Secretary Jack Lew, who said on Jan. 16 the proposed fund was too small and would come too late. The compromise will now need to be renegotiated, with Germany fighting any concessions to the bitter end. The European banking union is turning out to be less feasible than previously thought: If the talks drag on past the European parliament election in May, the deal may be shot down by the more anti-integration legislature everyone expects.
Fitch downgrades Serbia.
The rating agency Fitch downgraded Serbia from BB- to B+ because it expects the country's debt to increase from 63 percent to 70 percent of gross domestic product this year. Serbia is growing at a faster pace than most of Europe, 2.3 percent in 2013, but the growth comes mainly from car exports and agriculture. Other sectors of the Serbian economy are deeply depressed and not contributing enough revenue to the budget. The Serbian government's inability to find more revenue or cut spending is a threat to the country's European ambitions. This year, it hopes to start EU accession talks, but the last thing the bloc needs is another fiscally irresponsible member. Countries that are already in the EU are fighting tooth and nail to avoid new debt problems. Bailed-out Portugal avoided a downgrade by Standard & Poor's by introducing an austerity package that included serious cuts to public sector wages and pensions.
Royal Dutch Shell issues profit warning.
The Anglo-Dutch oil major Royal Dutch Shell issued its first profit warning in 10 years, saying its financial performance in the fourth quarter of 2014 would be much weaker than the year before. The company will take a $700 million charge on its exploration and production activities, reflecting disappointments in the U.S., where Shell expected to take part in the shale boom. Profits have been especially hard-hit by higher than expected maintenance costs. Shell, however, is still highly profitable: It expects earnings of $16.8 billion for the year, down from $27.2 billion in 2012. The high oil prices give players a large margin for error. A sudden price drop would make their inefficiencies, acummulated during the fat years, much harder to wave off.
Ukraine passes tough anti-protest laws.
The Ukrainian parliament passed an unexpected set of 10 draconian laws to limit political protest. They include a ban on wearing helmets and face masks, 10-year sentences for occupying government buildings, the confiscation of cars for forming convoys of more than five vehicles and prison terms of the "slander" of officials. The package still has to be signed by Ukrainian President Viktor Yanukovych, who may pass on it for fear of a new escalation of street protests that have plagued him since last November. It is more likely, however, that he will approve the new rules and attempt to crack down on the opposition that has been demanding EU association instead of closer ties with Russia. The Ukrainian government's funding is now coming from Moscow and there is no way Yanukovych can appease protesters, so all he can do is to crack down on them.
Swiss journalists track singer's Instagram to prove he is not a tax resident.
Swiss television station TSR, perusing the Instagram and Twitter accounts of French singer Johny Halliday and his wife, found enough geo-tagged photos to prove the couple spent too little time at their fiscal residence, a chalet in Gstaad, to qualify for low Swiss taxes. That could create serious problems for the performer, who is legendary in France since the 1960's, when Jimi Hendrix opened for him at a show and Jimmy Page, not yet part of Led Zeppelin, played on his records. The French government deplores "tax exiles," who have moved their legal residences to Switzerland, Belgium and other countries to avoid punitive taxation on high incomes. It would love to make an example of a famous personality. More than anything else, Halliday's problem is a warning to the world on the risks of social network exhibitionism.
(Leonid Bershidsky can be reached at firstname.lastname@example.org).