Bershidsky on Europe: Starbucks Moves to London
Here's today's look at some of the top stories on markets and politics in Europe.
Ukraine fails to put down rebellion.
Ukraine's attempt to use the military to put down the pro-Russian rebellion in the country's eastern regions sputtered as armed rebels seized armored personnel carriers and captured servicemen. The Ukrainian authorities say the rebel forces are directed by Russian military intelligence officers, and whether that is true or not (not a single one has been captured and paraded before television cameras, though billionaire Igor Kolomoyskiy promised a reward of $10,000 for each captured Russian), the armed men who still hold government buildings in a number of mining towns are well-trained soldiers. The Ukrainian military, national guard and special forces, for their part, demonstrate a remarkable reluctance to fight. The Kiev government's problem is complicated by the fact that the EU is unwilling to impose stronger sanctions on Russia as large companies, such as Germany's BASF, Italy's ENI and the U.K.'s BP, are urging caution on national governments, saying Russian retaliation would hurt them. As talks on resolving the Ukraine crisis open in Geneva today, Russia is in a position of strength.
Hated Irish banker acquitted .
Sean FitzPatrick, the former chairman of Anglo Irish Bank and perhaps the biggest hate figure of the 2008 financial crisis in Ireland, was acquitted on all charges by a Dublin court. He had been accused of making illegal loans to a group of wealthy Irishmen called the Maple 10 and to businessman Sean Quinn, who was trying to wind down his holding in Anglo, built up using derivatives. It was all that Ireland could throw at FitzPatrick, who presided over the biggest bank collapse in the nation's history: The government had to pump $47 billion into Anglo after its loans to property developers made during Ireland's housing bubble went bad. The bank bailout forced Ireland to seek international aid. The court ruling means FitzPatrick was only guilty of making bad business decisions, for which he has already paid with his reputation.
Valls unveils $69 billion in economies.
Despite continued harangues by economy minister Arnaud Montebourg against the EU's demand that France cut its budget deficit to 3 percent by 2015, France's new prime minister, Manuel Valls, is committed to meeting it. To that end, Valls presented a three-year plan to reduce public spending by $69 billion. A salary freeze for public sector employees until 2017 is the most painful of the proposed measures. Valls will also cut social security spending by $15 billion, potentially worsening the quality of medical care in state hospitals. Following initial policy statements in which Valls showed a gradualist approach to fixing the French economy, the strong austerity measures are a surprise. Socialist Party legislators grumble that Valls is further eroding the beleagured political force's electoral base. If the prime minister's program succeeds in bringing back growth in the final three years of Francois Hollande's presidency, however, the political gamble Valls is taking will have paid off.
Starbucks to move European office to London, pay more taxes .
Starbucks has decided to move its European headquarters to London from Amsterdam, where it says it will pay more tax. The U.K. is an important market for the company, the biggest and fastest-growing in Europe, and last year, Starbucks drew strong criticism there for not paying enough taxes. Though the U.S. coffeeshop chain is pitching its decision as a tribute to London's business climate, the move is more likely to be a response to the accusations. To give the U.K. its due, however, it is working hard to attract major companies: It has brought down the base corporate tax to 21 percent from 28 percent in 2010. That has been enough to seduce some global giants, such as General Electric, but not tech leaders such as Apple, Google and Facebook, which enjoy much easier taxation in Ireland and have no plans to move to more demanding jurisdictions.
Russia makes biggest oil discovery in 20 years.
A small Russian company founded by the owner of Moscow's Vnukovo airport discovered Russia's biggest new oil deposit in 20 years. The oil field near the southern city of Astrakhan holds reserves of 2.2 billion barrels, Russia's natural resources ministry announced. Vitaly Vantsev, the airport owner, lucked out: he only paid a little more than $1 million for a license to the field two years ago. For Russia, the discovery is a flash of good news amid rapidly deepening economic gloom: In the first three months of 2014, the country's economy contracted by 0.5 percent quarter on quarter because of a 4.8 percent drop in investment. Russia needs more oil and gas sales at higher prices to arrest the fall.
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Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter at @Bershidsky.
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