Bershidsky on Europe: Putin Rebuffs West on Crimea
Here's today's look at some of the top stories on markets and politics in Europe.
Putin dismisses Western threats, denies occupation of Crimea.
Russian President Vladimir Putin broke his silence on the Crimea crisis, denying, despite overwhelming evidence to the contrary, that his troops had invaded the Ukrainian peninsula. The bare-faced lie made it difficult to believe other reassurances from Putin, such as his assertion that there was no reason now for a full-scale Russian invasion of Ukraine. The threat remains as Putin continues to follow the Ukrainian situation with unconcealed irritation. He clearly believes that the Ukrainian revolution was instigated by the West and is willing to brave any Western sanctions, warning that any damage from them will be mutual in an interconnected world. The broad outlines that are emerging of possible sanctions suggest that, indeed, they will not cause Russia any serious pain. In response to the occupation of the Crimea, the U.S. administration istalking about a visa ban and asset freeze for Russian officials, a useless measure since there's plenty of other havens where Russian bureaucrats can move their assets or spend their vacations. European countries have not threatened even that, and the U.K. is careful not to scare off Russian money that has been feeding London's financial center for more than a decade. Only if Putin sends troops to mainland Ukraine would the U.S. be willing to consider painful banking sanctions like those that have been in effect for Iran.
Latest Erdogan recording hits too close to home.
The standoff between Turkish Prime Minister Recep Tayyip Erdogan and security and intelligence officials opposed to him continues to yield leaked recordings of top officials' conversations. The latest one is purportedly of Erdogan himself advising industrialist Metin Kalkavan on how to outbid a competitor for a $2 billion contract to build warships for the Turkish navy. Last year, the competitor, Koc holding, lost the deal. Erdogan is known to dislike Koc, and the implied accusation has the ring of truth, though the Prime Minister has not yet reacted to it and has variously called previous recordings fabrications or invasions of his privacy. In any case, the recent scandals make it hard for Erdogan to hang on to his reputation as a corruption fighter. There has been too much circumstantial evidence for him to claim the high moral ground.
Italy fines pharma companies for keeping cheap drug off the market.
Italian antitrust authorities fined two major Swiss pharmaceutical companies, Novartis and Roche, $126 million and $124 million, respectively, for colluding to pull a cheap drug used to treat sight problems and shift demand toward a more expensive medicine. The two companies allegedly agreed to reduce the sales of cheap Avastin and push the more profitable equivalent, Lucentis, by creating an "artificial distinction" between them and explaining to doctors that Avastin was more dangerous. That, estimated the antitrust authority, cost the Italian health service $62 million in additional costs. Official actions against pharma companies pushing expensive drugs at the expense of more accessible ones are becoming more widespread. Last year, the European Commission fined nine companies for obstructing the flow of generic drugs into the market. This is one area that needs more rather than less attention from regulators because of the clear conflict between public and corporate interest.
French government unveils plan to encourage bicycle commuting.
The French transport ministry has worked out a 25-point plan to make life easier for the 17 million people in France who ride a bicycle at least once a week and to encourage more people to use one as their primary means of transportation. The plan was clearly written by someone who knows the city cyclist's problems. For example, it allows cars to cross continuous lines to overtake a cyclist, increases fines for parking in bike lanes, and mandates the creation of bicycle parks at office buildings in 2015. The ministry also suggests that companies offer their employees a "bicycle allowance" of 25 euro cents per kilometer traveled on the bike to and from work. Transportation officials have calculated this would now cost French firms $151 million per year but bring bigger savings because workers will need less sick leave.
U.K. leads group seeking to overturn EU pay cuts for fund managers.
Last week, groups in the European parliament agreed to a deal on pay guidelines for the managers of European retail investment funds that manage $8.8 trillion in assets. The deal stipulates that from 2016, fund managers' bonuses should be half-paid in units of their funds, and 40 percent of the bonuses will have to be deferred for at least three years. The U.K. and 10 other EU member countries, as well as three groups in the European parliament, are unhappy with the deal, in part because they fear the rules will affect fund managers working overseas. In the U.S., local fund groups manage $1.7 trillion in European Ucits funds, but U.S. nationals are not allowed to own Ucits units directly, so the new scheme would be problematic. The opposition is enough to block the new rules from coming into effect, and that would be a good thing because there is little logic to them. Why defer the bonus if a manager made a nice profit for his investors this year? And why pay in units for past performance, essentially making the reward contingent on future returns?
(Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Followhim on Twitter at @Bershidsky.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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