Here's today's look at some of the top stories on markets and politics in Europe.

Hollande replaces prime minister after defeat.

French President Francois Hollande responded to his Socialist party's humiliating defeat in municipal elections last weekend by replacing Prime Minister Jean-Marc Ayrault with Interior Minister Manuel Valls. For a leader known for his waffling on the most insignificant issues, this is a surprisingly decisive move. Valls is the most popular Socialist politician in France these days, with significantly more support than Hollande himself, so appointing him to the second highest position took courage. Many of Ayrault's cabinet members, including Finance Minister Pierre Moscovici, are now apparently on their way out. Valls will lead a "fighting government," Hollande said. It is likely that it will be a more liberal one economically: Valls is known to have proposed a name change for his party to lose the word "socialist." It will also please those rightist voters who want a tougher line on immigration: Valls is known as a hawk, though he is himself Spanish-born. He is also skilled at communications, a necessary qualification for fixing the mess in which Hollande and the Socialists have landed. If Valls can do it, he may well succeed Hollande as president.

Portugal to linger in bailout.

International creditors will only pay out the remainder of Portugal's bailout package in late June, after the European Parliament elections. They will then have to decide whether to extend more credit to the struggling country. Portugal, however, does not look likely to need any more emergency help: Like other countries on the EU's periphery, it has enjoyed remarkably low interest rates on its debt. This has allowed Portugal to borrow enough on the open market to fully cover its 2014 financing needs. Despite the fact that Portuguese bonds are still classified as junk by the credit rating agencies, last week the yield on 10-year bonds dropped below 4 percent, showing just what investors think of ratings. Portugal may want a credit line from the EU as insurance, but Germany is now focused on the latest aid package for Greece, which needs parliamentary approval. Portugal may be forced to make a clean exit from the bailout, as Ireland did late last year.

Caterpillar accused of hiding profits in Switzerland.

U.S. Senator Carl Levin accused heavy machinery maker Caterpillar of avoiding $2.4 billion in U.S. taxes by shifting 85 percent of its profit to a Swiss subsidiary. According to Levin, the global industry leader negotiated a 4 to 6 percent corporate tax rate with the Swiss authorities and then handed over rights to $8 billion in profits to a Swiss affiiliate, CSARL. The scheme was drawn up by PricewaterhouseCoopers, caterpillar's tax advisor and auditor, and PwC is willing to go to court to defend its work if necessary. Caterpillar claims CSARL is not a shell company but a large operation employing hundreds of people in Geneva. That, however, does not change the fact that it pays taxes at an extremely low rate. A large company like Caterpillar or the tech giants Google, Facebook and Apple can easily find a jurisdiction that will agree to charge it a rock-bottom rate just for the privilege of having it. If the U.S. wants these corporations' taxes, it needs to ban such arrangements outright, but that is unlikely ever to happen: Like the Irish and the Swiss, the U.S. government is happy to receive the payments it does from the giants. Caterpillar paid $1.8 billion in U.S. taxes in the past three years.

Cisco investigated for kickback scheme in Russia.

Cisco Systems is under investigation by the Department of Justice and the Securities and Exchange Commission for allegedly paying tens of millions of dollars' worth of kickbacks to Russian government officials and executives to win contracts for network equipment. The company is keeping its cards close to its chest, but two former employees described the alleged scheme to Buzzfeed. Bureaucrats and managers at state-controlled companies such as Transtelecom, the telcoms operator set up by Russian Railroads, set up firms in Cyprus and Tortola and demanded that they be used as intermediaries for the equipment supplies. Cisco apparently went along with the arrangement for years until 2011. Buzzfeed seems an unlikely source for investigative journalism of this kind, but it strengthened its journalistic team last year and is building a presence in the former Soviet Union. The Cisco story may even spark a Russian corruption investigation, if only because a U.S. company supplying sensitive technology is involved, and in the current, paranoid political climate people who took bribes to make deals with it are easy to brand as traitors.

U.K. watchdog says Royal Mail sold off too cheaply.

The U.K. National Audit Office has accused the government's department of business, innovation and skills for selling off stock in Royal Mail too cheaply last October. Royal Mail's initial public offering raised $3.3 billion for the government, but it could have been much more, the audit office said, arguing that the IPO was 24 times oversubscribed and the share price jumped 40 percent in the first day of trading. The sale's organizers argue that they did not see enough demand at a higher price, and trying to go higher could have jeopardized the sale. Such are the dangers of government business: Few people would blame a company's private owners for taking the firm public and watching the price rocket on the first day. In fact, Royal Mail's privatization was a textbook deal that worked well for all the stakeholders: The government, employees, who received 10 percent of the company free of charge, and investors, who have seen a 72 percent rise in the stock since the IPO. The organizers should be given a medal, not criticized for what they achieved.

To contact the writer of this article: Leonid Bershidsky at lbershidsky@bloomberg.net.

To contact the editor responsible for this article: Marc Champion at mchampion7@bloomberg.net