European Comment: London's invaders from Russia with love

When Yukos bosses fled Moscow where did they end up? London of course. It has become the city of choice for those out of love with the Kremlin and for Russia's super-rich looking to enjoy their billions.

The connection goes back three centuries to Peter the Great, who went incognito, dressed as a common sailor, to note down ideas from British architectural and boat-building expertise. The tsars had English butlers and nannies.

Now it is the presence of banks' east European teams that is a big attraction. Russians like London's cosmopolitanism, English is their main foreign language, and London is close enough to leave their families there while they make business trips back to Moscow.

Their money is having an impact. Oil baron Leonard Blavatnik recently paid £41m ($59m) for a house in Kensington Palace Gardens, outbidding Roman Abramovich, owner of Chelsea football club. This week record sums for Russian art were set at Sotheby's as expatriates sought a patriotic way to decorate their homes.

None of this does much for Britain's diplomatic interests.

The presence in Britain of Boris Berezovsky, the confidant of former president Boris Yeltsin, and Akhmed Zakaev, the Chechen rebel leader, both of whom have resisted extradition, has chilled relations with Moscow.

Now Germany's Gerhard Schröder is making the running by cosying up to President Vladimir Putin to win access for German companies to Russia's market and energy resources. In view of Mr Putin's growing authoritarianism, even members of Mr Schröder's Social Democratic party feel understandably queasy about that.

Napoleon's legacy

After the Mona Lisa, David's portrayal of Napoleon's coronation is the most popular painting in the Louvre. And Napoleon, according to polls, remains the most popular French historical figure after General de Gaulle.

So it seems bizarre that France's establishment let Thursday's bicentenary of the coronation slip quietly by without turning it into an excuse to celebrate France's grandeur. Granted, republican and imperial values make strange bedfellows, but it also reflects how the French these days are more worried about decline and loss of influence.

Yet still Napoleon seems to haunt politicians. Not so much his military exploits but his lasting economic legacy: the Banque de France, the finance ministry, an aversion to public debt, the tax system, the civil code, and a deep-rooted protectionism to ensure France's central role in a greater Europe.

The price has been an enduring attachment to the state at the expense of the market. Alstom's rescue, the creation of a pharmaceutical champion, manoeuverings in the aerospace industry, the defence of shrinking farm lobbies and so-called "French exceptions" underline the state's role as puppet master.

Napoleon did a remarkable job reviving the economy before his Waterloo. Paris could have paid him a more lavish nostalgic tribute - far better than pursuing his interventionist economic policies without his panache.

Spain's powerful cajas

Bankers who complain of poor opportunities for cross-border mergers often cite fragmented German and Italian markets. Less heed is paid to Europe's other big fragmented market - Spain.

Spain's 46 savings banks, the cajas,account for half the financial system by assets and hold back consolidation because they are private foundations that cannot be bought and sold. Their assemblies, which appoint the boards, include clients, employees and local political institutions.

So far they have widely been seen as benign, helping to preserve competition and avoid dominance by the big commercial banks, SCH and BBVA. Their growing power and weak accountability, however, are raising questions.

Catalonia's La Caixa, Spain's largest savings bank, is close to the Socialist government and holds stakes and board seats in more than half of stock market companies. It recently ousted the chairman of Repsol, the oil group, and is in a position to reshape huge areas of economic life.

Popularity as well as political influence protects cajas from change. Market share has more than doubled since the 1970s and they have a reputation for friendlier service than SCH and BBVA, which closed hundreds of branches. They have overtaken commercial banks in savings and deposits.

They should watch their step, though. Privileged in being able to pursue expansion without having to maximise profits or reward shareholders, they are in danger of becoming over-mighty.

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