Much has been written, and is being written all the time, about the large-scale efforts to fight climate change, and why they hopelessly fall short of the mark. At the same time, however, this is not one single fight, contained to the realms of high politics.

Regular citizens, activists, people from all walks of life, have also been doing what they can to stem the tide, to make the world more prepared, to make it more sustainable. We have chosen to sit down with one of these people for an interview.

Meet Dr. Ruxandra Lupu. She is a distinguished researcher, with a PhD in film/video and photographic arts from the University of Leeds. Professionally, she’s been working at the intersection between business and academia for a long time. She describes herself as “a traditional printmaker and digital humanities researcher”.

In 2020, she founded Eithne, a company that allows her to marry her academic and professional knowledge of textiles and printmaking, with the push for sustainability. You can read more about her extensive background here.

More interestingly from our point of view, Dr. Lupu has been disseminating her hard-won knowledge. Together with international partners, Eithne is implementing Sustainique, a project that aims to teach advanced and sustainable textile production techniques to “VET providers, textile designers, entrepreneurs, employees, and trainers in professional fashion firms”.

Of course, supporting research, education, and knowledge dissemination is one of the things the EU arguably does best, and we also believe it’s one of the essential tools in building a shared European home. That’s why we sat down with Dr. Lupu for a chat about sustainability and textiles.

Question: Which aspects of sustainability does your work address?

Answer: My work initially did not explicitly focus on sustainability. As a printmaker, I engaged in craftsmanship through textile printing. My focus shifted to sustainability when I researched the impact of innovation for a British media cluster. This project highlighted the importance of greening media technology and achieving sustainability through creative storytelling and processes.

Since then, my attention has turned completely into sustainability in arts and crafts, both as a researcher and an independent entrepreneur. In the past two years, my work has concentrated on the craft and textile fields, exploring sustainability in competencies, technologies (like haptics), storytelling, and innovation practices.

I particularly focus on responsible and hidden innovation in relation to sustainability. My approach now combines multimodal and interdisciplinary methods to address sustainability in arts and crafts, with an emphasis on care and responsibility, especially in textiles and fashion.

Q: How do you describe sustainable textile innovations, and their role within a more responsible fashion industry?

A: From a theoretical perspective, textile innovations are novel textiles created through new materials, designs, or production processes. The concept of novelty can be tricky, since changes occur daily. For example, is a textile fiber from an ancient crop innovative? Is engineered yarn from orange peels innovative? Both can be seen as innovative, but ensuring these products are durable, caring, and respectful to the environment and communities is key.

Labels like GOTS and Oeko-Tex should certify products, but their transparency and scope, especially in addressing social and economic aspects like fair trade and worker safety, can be limited. While traceability is vital, it’s challenging due to the complex production chains in textiles. We need comprehensive sustainability measurements, considering cultural, social, environmental, and economic factors in developing textile innovations.

Q: What is the state of the art of adoption of textile innovations in Europe?

A: Europe has high ambitions for textile innovations. Initiatives like Master programs at IAAC Spain and Boras University Sweden, and EU-funded projects such as WORTH, DeFine, and Re-Fashion, support this goal. Institutions like Fashion for Change advocate for a more resilient industry.

However, impact measurement and consistency of innovations lag behind. Many new products are not widely adopted due to low market availability, high prices, and risks associated with new materials. Young designers are more open to these innovations, often for limited editions or unique products, but mass adoption remains distant.

Q: How can material libraries contribute to fostering the uptake of textile innovations? What are the challenges they face?

A: Material libraries are places of discovery, stimulating designers by offering textiles and materials instead of books. Europe has fewer than ten material libraries, mainly serving architects and engineers, with few focusing on textiles. In 2022, a project with the University of Florence showed that designers are curious and open to new materials. However, material libraries face challenges like staff shortages, lack of funds, and a need for specialised experts. Educational institutions, especially at VET level, play a crucial role in promoting sustainability and innovation in textiles and fashion.

Question: How should holistic education be set up in terms of fostering the uptake of sustainable textile innovation?

A: Holistic education should encompass both external and deep knowledge. Designers need to understand, not only the physical properties of materials, but also how they were created, by whom, and their environmental and social impacts. This multifaceted knowledge helps designers make informed, sustainable choices. Future designers should be educated to assess materials’ properties for their specific needs, and understand their broader impact on communities and ecosystems. This approach fosters a resilient and caring practice in the textile industry.

The post Sustainable Textiles: An Interview With Dr. Ruxandra Lupu appeared first on My Country? Europe..

The entire Cold War financial success of the United Kingdom was predicated on its ability to provide Eurodollars to the financial markets – that is, dollars sold in London and thus, critically, outside the regulatory scope of the Federal Reserve. With the coronavirus pandemic forcing central banks into panicked holding actions, moreover, the status of the Dollar as the Global Reserve Currency seems more entrenched than ever. But is that true? Could the Euro challenge this position, and should it?

The Dollar: Lifeblood of International Transactions

To begin with, let us define what a Global Reserve Currency (GRC) actually is. To put it into simple terms, it is the currency which Central Banks and other financial institutions maintain to prepare for financial actions, ranging from investments to variations in domestic exchange rates. Once a currency becomes used as a reserve all over the world, it naturally becomes a GRC.

Hoarding a single GRC has been traditionally appealing: a reserve currency removes the need to exchange currency every time when doing trade. This naturally reduces the exchange rate risk associated with currency exchanges. Since everyone holds the same GRC, they can do trade with the same currency, which helps facilitate investment and other transactions.

All of this global hoarding has a myriad of net effects. On one hand, it generates a massive import of capital to the issuer country; it increases the demand for the currency and hence increases its value; it allows the issuer to hold ”cheap” debt and ”live beyond its means” to paraphrase former French Finance Minister Valéry Giscard d’Estaing’s comment about the United States. Indeed, the endless appetite for dollars has allowed the United States to run a trade and financial deficit of immense scale, since American debt issues always invariably find numerous willing buyers. It has also allowed countries like China and Russia to avoid inflationary pressure on their expanding economies by siphoning money away from the money supply, through the mass purchase of American bonds.

On the surface, this might sound like an amazing deal: everyone else benefits from a stable currency, trade is facilitated and risks are lowered. The issuing country, meanwhile, gains capital and has access to ”cheap” and extensive financing. When one looks closer, however, one notices that not everyone benefits from this windfall. Capital inflow disproportionately benefits financial institutions, causing an increase in wealth disparity and inequality in the issuing country.

Especially in the current economic context, very few people are holding their breaths to see if the wealth will trickle-down. The gain in demand for the currency leads to the subsequent increased value of the currency. This bloated value damages exports and thus hurts the industry. The financial institutions grow wealthier at the expense of the country’s industrial base. While Asian industry keeps taking up more and more market share from the US, the difference between the industrial sector and the financial sector becomes unbearable, particularly as it also eats at the income and job prospects of the working class.

At present over 60% of bank reserves outside the United States are denominated in US-dollars. The picture is similar for global debt, with dollar denominations holding a share of approximately 40%. The thirst for dollars gives no sign of slowing down. In fact, after the 2008 financial crash, institutions around the world began hoarding dollars, a move exacerbated when the Federal Reserve acted as the lender of last resort to save the Eurozone from collapse in 2012. The same hoarding is taking place today, with the world economy reeling from the shock of COVID-19. One could say that the demand for US-dollars has never been higher than now. However, this hasn’t stopped some commentators from sounding the alarm bells.

The Currencies That Would be Kings

Recently Goldman Sachs strategists have warned that the US Federal Reserve’s reaction to the coronavirus crisis may end up destroying the Dollar’s reign as the pre-eminent GRC. The Fed has increased its balance sheet by around $2.8Tn, an absolutely astronomical amount, and has been busy printing money. A GRC requires for itself a certain level of stability, so that it is easily predictable and so that it carries little risk, but financial strategists are warning that the current monetary policy threatens to debase the currency over the coming years. In such a case there is a threat that the savings held by financial institutions globally will be worth much less than what they are now.

This warning has triggered an immediate market reaction. The demand for Gold and Bitcoin (and other alternative currencies) have soared. “Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows,” commented Goldman strategists. It is important to note that such warnings have been issued before, and historically betting for the Dollar to fail has been a losing game.

For a long time, the Euro was seen as the next GRC, with Euro reserves seeing global growth and prominence at the expense of the Dollar. This progress came to a sudden halt around 2008, in the turbulent onset of the financial crisis. In the decade since, the Eurozone has shown itself to be a relatively unstable economy, which is one of the key qualifications institutions look for in a GRC issuer. This effectively ruled out the Euro’s candidacy for the time being. For the Euro to truly become a GRC it would require great strides from the Eurozone in terms of ensuring that the bloc is stable, including stricter financial controls and some form of internal debt mutualisation system, both of which are unpopular ideas within the bloc, albeit amongst different groups for each.

China, with their Yuan Renminbi (RMB), is the other natural contender to the status quo. For China, becoming the issuer of a GRC would be a chance to garner more financial independence as their trade would no longer be tied to US dollar issuance – although an alternative policy would need devising to contain inflation. In essence, getting onshore currency from the US is excessively easy. The idea of limiting dollar exports has been raised by some, but it has been noted that this could have catastrophic effects on US inflation rates. China has a myriad of other reasons to become a GRC. It would lower borrowing costs, increase Chinese prestige around the world, support Xi Jinping’s reform efforts, spread exposures of the RMB around the world and finally allow China to become a price setter.

All of this would support the CCP’s goal of creating a multi-polar world where the USA would no longer be a sole hegemon. This drive towards a greater prominence of the RMB has been built on increased Chinese market share of global trade and the addition of the Yuan renminbi into the IMF Special Drawing Rights basket – the basket of currencies which count towards the official reserves of nations. The SDR used to be tied to gold but is now tied to a basket of five major currencies.

The Yuan, however, still faces considerable difficulties. The currency is not fully convertible, the onshore version is hard to come by and no trade-safe asset is available. While both the RMB and Euro have become the reserve currencies of their respective regions – much of the non-EU European countries holding the Euro as their main reserve currency, and Chinese neighbours holding the Yuan or the Japanese Yen – there are significant obstacles for them to reach the status of GRC, even in a multi-polar system.

For the Euro, there are high risks in terms of prestige and economic policy. For example, if China were to peg the Yuan to the Euro, this would have severe implication on the value of the currency and on Europe’s ability to command their own monetary policy. At the same time, the ensuing over-valuation of the Euro could be catastrophic for the European industry, as the currency is already overvalued for much of the union – with the notable exception of Germany. This would also increase wealth disparities and most likely lead to social disruptions.

With all of these considerations in mind, elevating the Euro to GRC status would still lead to higher financial independence for Europe. Whether or not the Eurozone would be ready for the necessary reforms to push through a plan for a GRC – or whether it would even be smart to do so – is still questionable, although the promise of prestige may often be popular among federalist circles.

The post The Dollar Is Stronger Than Ever – But Can The Euro Challenge Its Rule? appeared first on My Country? Europe..

Germany has just taken up the mantle of a six-month rotating Council of Ministers Presidency this past July, in what promises to be a momentous time for Europe. The challenges of the virus, economic collapse, Chinese ambitions and American disarray demand a new cap for the European ship of state. What can we hope to see from this German Presidency, and what can we expect to see from European leaders in light of these challenges?

An Augean Challenge

There are several challenges for the German Presidency which will test Merkel’s mettle, her political alliances and the will of the European population to survive the crisis together or fail separately. The first and most immediate challenge, now overcome, was the unanimous approval of the budget and the Eurobonds that had been proposed to pay for the trillion-euro plus relief and budgetary package.

Calling themselves the “Frugal Four”, Austria, Sweden, Denmark and the Netherlands early on indicated their opposition to Eurobond financing, though not to relief loans. Equal measures of pressure and concessions on budget rebates, though, prevented the unique one “no” vote sufficient to scuttle the whole package. To achieve this, some concessions had to be made on the Hungarian and Polish front, setting aside concerns over the rule of law and political differences.

It was certainly a relief to France and Germany at the start of the process, in spite of other regrets they may have, that a less than communal oriented UK is no longer a voting member. This is not an observation unique to us. In the May 30 edition of the UK weekly The Economist, one of their regular staff writers speculated that even under a Cameron government the UK would have vetoed the budget with Eurobonds and a relief package included. The unwieldiness of unanimous voting in a community of 27, not to mention 28 before the UK left, is clear when major reforms like this one are needed.

The second step for Merkel’s Presidency will be one over which she has no direct control: getting the budget through Parliament. There are issues with research and the Parliament will want to put their own stamp on things, but after compromises agreement is anticipated.

That brings us to the third issue for the six-month German Presidency: institutional reforms. A reform conference on the future of the Union that was scheduled to begin in May has been postponed sine die. The conference is needed and will in all likelihood be rescheduled. Will it be too much for Merkel to handle the pressing needs of the economic and health crisis as well as build consensus around further reform? Or will she see the crisis as an opportunity to push through an ambitious agenda?

Beyond German Leadership: EU Leaders to the Fore

Much of managing a 445 million member community is highly technical in nature. Leadership must demonstrate technical competence as well as personal character. Paying for the huge sums necessary to redress the economic and social issues caused by the virus will be an enduring problem. Christine Lagarde – though attacked for some early faux pas’s in initially addressing the crisis – has the experience and competence as well as character to do what is necessary at the European Central Bank.

No one can ignore the important role Donald Tusk, head of the European People’s Party in the European Parliament, can play. Of Polish (specifically Kashubian) origin, born in a working-class family in Gdansk, Tusk has taken upon himself the task of neutralising the populist political and cultural revolt. This will certainly be key to progress in a European federation, as populist parties have generally been determined nationalists rejecting federalism.

Another emerging leader is the head or the Progressive Alliance of Socialists and Democrats in the EU Parliament, Irate Garcia. She has already been responsible for several important portfolios, notably concerning women and the family, and will continue to play an important role.

Leadership will also emerge from beyond the institutions and from places we might not always expect. George Soros, head of the Open Society Foundation, an NGO founded and financed by him and working on supporting democratic institutions in Eastern Europe is no stranger to European finance. He is also the founder of the Central European University (CEU) recently forced, for having come afoul of the Hungarian Government, to move from Budapest to Vienna. Soros made his fortune, now used philanthropically, as an investor and speculator in currencies, stocks, and bonds. These are markets he knows well and the precise markets which will be needed to finance the Eurobonds. Soros has proposed a novel but not untried idea for low-cost financing of the crisis response: perpetual bonds.

Perpetual Bonds – A Radical Solution?

In 1648, Holland faced an existential threat from rising seawater. A Dutch Water Board issued the first “perpetual” bonds to pay for the building of a massive system of dikes. Now, 350 years later, the bonds are still paying interest to the remaining holders, but they have been forgotten by almost everyone else.

Similar bonds, also known as consols, have been successfully used for financing during several crises since the Dutch issuance. The first British Consols were issued in 1751. In 1927, under Prime Minister Winston Churchill, consols were issued again as partial refunding of the 1917 National War Bonds. The UK has a long history of using consols for financing.

The mechanism is simple: perpetual bonds pay interest but the principal is never repaid. Let’s say an investor buys a 10.000 euro perpetual bond at 1% interest – these bonds have been in the past subscribed to at very low interest rates because they pay in perpetuity. The holder would receive 100 euros per year for the rest of his life, at which time the bonds could be passed to his or her heirs. There is no end to this stream of 100 Euro income to the holder.

Perpetual bonds are less costly in the immediate future, the ideal feature in times of crisis when much money is required. However, they are considerably more expensive in the long run, though for the first 100 years or thereabouts depending on their interest rate they would be less expensive than an equivalent bond.

There are further ways that the costs can be curtailed over time. There is the natural attrition of bonds being lost with death and the transfer of estates. In times of inflation, payments become worth less in real terms naturally reducing their real cost. Costs can further be reduced by offering a buyout of remaining bonds, especially if inflation is such that return to the holders has diminished. This was the case with the 1751 British Consols which were bought out and retired in 2015.

One reason why more countries have not used consol financing is that, in order for the bonds to be subscribed to at a reasonable rate, the credit standing of the country must be good. This feature should appeal to the more frugal countries, as the issuance of such bonds will oblige the EU to keep its finances in order and revenues in line with expenditures. All in all, the proposal seems like an excellent way to provide low-cost Eurobonds in a time of crisis.

Where To From Here?

Spain has already proposed consols to the Council, but the proposal was not fully vetted as it came at a time when there was no agreement to use Eurobonds of any type, whether perpetual or ordinary term bonds. Now that has changed with the French and German proposal and Council approval of mutual Eurobonds backed by the credit of the EU.

The German Presidency will have to face these and many other issues and ideas. A new leadership, if not new leaders, will have to emerge to meet these huge challenges. It is difficult to be a leader today as 24/7 media coverage will eventually show off anyone’s foibles in a poor light. But make no mistake, there are real leaders. The question is not so much whether Europe will find the leaders it needs, nor the solutions to today’s challenges, but whether it will find the followers.

The post With the German Presidency Steering the Ship, Where Is EU Leadership Headed? appeared first on My Country? Europe..

Upsetting the balance

Heating tensions have been around for a long time, but we can pinpoint the 2018 G7 summit as the catalyst which triggered the worst of the conflict. The US’s aggressive, almost neo-mercantilist, trade policy headed by the Trump administration has placed the land of the free at odds not only with China but also with the EU and a number of African nations such as Rwanda.

What started as a US-China trade war has now evolved into a US-EU dispute as well. The US wanted the EU to support the US in their trade war against China, by limiting Huawei networks and joining in the USA’s sanctioning and admonishments of the actions of the CCP. On the other side of the Atlantic, though, China and the EU saw an opportunity to unite against Trump’s aggressive trade policies and began setting up negotiations to form a unified front against the US in trade issues.

However, Europe soon found that even a common enemy wasn’t enough for China to adopt fair trading practices. Currently, the European Commission’s web page on trade policy has a civil, yet telling paragraph: “The EU is committed to open trading relations with China. However, the EU wants to ensure that China trades fairly, respects intellectual property rights and meets its obligations as a member of the World Trade Organization (WTO).”

The text very politely implies that the EU doesn’t think that China trades fairly. Indeed there are deep problems with trading in China, everything from the legislation allowing China to exercise control over private companies to mandating that foreign companies have a designated national connection in China before they are allowed to do any business in China.

The EU has until recently allowed Chinese companies to operate relatively freely in the EU, just like other international companies. With no improvement of fair trading conditions in sight, now even the EU has had enough and has begun targetting Chinese companies much like China has targeted European ones, and it is China’s turn to complain. Reciprocity wasn’t supposed to be on the menu.

Will US-EU Trade Relations Keep Deteriorating?

The fallout between the EU and China could (and should) have opened up a pathway for Western powers to mend their broken relationship and form a renewed Trans-Atlantic front. Instead, earlier this year the EU-US trade dispute flared up with new tariffs.

At the end of 2019, the Trump administration announced that it would be placing higher tariffs on a multitude of European goods, especially alcohol and foodstuff – hitting a myriad of products with a 100% tariff. This came as a reaction to the EU’s illegal support of Airbus as well as France’s planned 3% digital tax. Later, in January 2020, France agreed to freeze the plan, as nearly 140 OECD countries negotiated new international tax plans to better account for digital giants like Facebook, Google and Amazon. However, as the COVID-19 drug and vaccine manufacturing disputes arose, France announced it would once again go ahead with the tax plan, which prompted the US to hit the EU with another barrage of tariffs.

Now, while the EU has also responded with a number of retaliatory tariffs on the US, it is possible that European leaders will yield to the US to protect their relationship with the EU’s largest export market. There is a long-lasting bias for favouring exports and demonising imports – stemming from the mercantilist age. This mode of thinking has lasted in the minds of policymakers.

Economics and trade are not so one dimensional though. They cannot be summarized as “exports good, imports bad”. This sort of autarkic way of thinking has caused many nations – from Fascist Italy to the Soviet Union – an endless amount of trouble in their time. Many modern businesses are built around international trade – many of them require imports to function and impediments to imports may cause them to fail, thus negatively affecting the national output of the importing nation. Showing that wealth can be generated from imports.

Looking Ahead

The US and China managed to arrive at a deal settling their trade differences at the end of 2019, which made many hopeful that this would be the end of the year-long conflict. Unfortunately, as the COVID troubles heated up, the trade war heated with it. The US has mounted attacks on China from within the international community, berating them for their early cover-up of COVID and eventually leading to the US exiting the WHO.

At the same time, China has been attempting to bring Hong Kong under control, which has prompted a fresh line of criticism towards the CCP. With the alleged genocide of the Uyghurs, the CCP has seen its fair share of criticism this year. However in a twist of fate, while these wars of words have gone on, both countries have been forced to exempt many of the tariffs they placed on each other out of necessity, as they’ve found that the current situation has increased the need for imports.

The danger in the trade wars between the US and China (and EU and China) is that decoupling economies in this day and age is horribly difficult, and possibly recession inducing. The same warning has been levelled about an EU-US trade war.

The COVID-19 crisis may have put a stop on any major changes in the trade war situation, but it is very possible that after the worst is past the US and China will once again slip into a trade war. While the EU-US war rages on and an EU-China trade war looms over the horizon, pitting each other’s largest trade partners in a cycle of trade battling risks closing Europe into a true Mexican standoff.

The post The EU’s Trade Policy Is Headed Towards a Mexican Standoff appeared first on My Country? Europe..

Eurogroup finance ministers agreed on a 540 billion-euro package to be used at the European level as financial firepower; the text also foresees a future Recovery Fund that will be financed through “innovative instruments”. The European Investment Bank (EIB) will guarantee loans of 200 billion euros with a focus on small and medium-sized enterprises. The funds to draw from the European Stability Mechanism (ESM) amount to a maximum of 2% of each Member State’s GDP, meaning that 240 billion in total could be employed. The Eurogroup also welcomed the Commission’s proposal for a “Support to mitigate Unemployment Risks in an Emergency” (SURE), a loaning scheme providing up to 100 billion euros to help rescue workers and their jobs.

During the negotiations, the Netherlands did not buckle over Eurobonds, an instrument that according to the Dutch finance minister Hoekstra “will not help Europe in the long term”. The Netherlands, however, had to concede over the conditions of the ESM fund: loans targeted to cover healthcare-related costs will come with no strings attached, while conditions would be applied to revive the economy.  Eurobonds (dubbed coronabonds amid the current crisis) were originally advanced by Italy, Spain and France and six other Member States in a letter sent to the President of the European Council Charles Michel.

Many citizens welcomed the agreement negatively. In Italy, calls for Italexit are mounting while some European citizens display concerns over the real use of the allocated funds by the most indebted countries. To clarify the most salient points, here are three key takeaways from the Eurogroup’s negotiation:

1 – This outcome was to be expected: Eurobonds are a sensitive issue

The issuing of Eurobonds could take different shapes and modalities. However, a core pillar of the concept is that these new financial obligations would be jointly guaranteed by the Eurozone countries and issued by a supranational or intergovernmental institution. Being guaranteed by fiscally sound countries as well, these new obligations would decrease the borrowing costs for governments, primarily benefiting highly indebted countries.

The Commission already proposed several forms of Eurobonds in the past, but it was met with timid responses from countries such as Germany, the Netherlands and Finland. While it is not clear what effect Eurobonds would have on the existing debt, some economists argue that borrowing costs would converge, meaning that countries like Germany would lose out of the initiative. Moral hazard and free riding constitute another concern. Northern countries and fiscal conservatives fear that inefficient governments could take advantage of these bonds to overspend and avoid fixing structural problems afflicting their economic systems.

The mutualization of debt is a sensitive issue to many, and Italian citizens should think twice before painting themselves as outraged victims of the EU. Southern countries generally suffer from rampant corruption, waste of public money and high rates of tax evasion. Proving to the rest of the European family that they are committed to fixing these problems would be an excellent step in the right direction.

Furthermore, from a strictly economic point of view, the refusal to set up Eurobonds is not as tragic as it seems. The European Central Bank is already supporting the hardest-hit countries with its Pandemic Emergency Purchase Programme (PEPP), which led to a fall in borrowing costs for Italy and therefore more financial levy to support its economy. The ECB also decided to accept junk-rated Greek government bonds to support the country during this emergency.

2 – Prejudices and irresponsible media are weakening our Union

The new coronavirus is a symmetric shock with asymmetric consequences which Spain and Italy did not bring onto themselves. The Dutch Minister Hoekstra was forced to apologize after his inexcusable remarks about Southern Eurogroup countries’ ability to face the looming economic crisis. In dire times of great suffering, such declarations from government officials, even if legitimate, feed mutual distrust between citizens of different Member States.

Many in the North of Europe see Italy as a bottomless pit which thrives out of European funds, forgetting the country’s role as founder and third net contributor of the EU budget and thus its fundamental role in the very financial sustainability of the EU. While problems are certainly present, stereotypes should never dominate public debates, especially in such delicate times.

The media have a great responsibility in conveying information from Bruxelles to European citizens. The weak public relations skills of the EU together with the language differences within the bloc, make national media the main harbingers of information to each country’s public opinion. The current international support to Italy is a topical case example: while the EU and its Member States have factually given and promised to Italy more support to face the epidemic than any other foreign power, many Italians still believe that China and Russia did more than the EU or that the EU did not support Italy at all.

Some might argue that this is the price to pay for the shameful refusal of Germany and France to send face masks to Italy at the onset of the emergency. However, few Italians know that the masks eventually reached the country thanks to the intervention of the European Commission. The media did not communicate such news as strongly and convincingly as they did with the negative news. Actually, they did not communicate it at all.

3 – A European Federation is still urgently needed

The federal government of the United States can adopt fiscal transfers to help poorer states recover from asymmetric economic shocks – rich states like New York or California sustain the finances of Arkansas and Mississippi in unfortunate times. After Germany’s unification, the federal government of Germany imposed a solidarity tax on the country’s rich western regions to foster the growth of its eastern territories, once controlled by the German Democratic Republic. Such measures are obviously unpopular within the richest regions, but it is difficult to find independent countries where some form of fiscal transfer from industrialized to poor regions is not in place. This also indirectly benefits richer regions, which find new customers and reinvigorated markets for their products and services.

European Member States are surviving in a multipolar world order where competing with emerging superpowers like China has become extremely difficult, also in military terms. The European Union represents the ideal platform to confront these powers as a unified bloc. However, the uncompleted integration process is revealing all its costly shortcomings. The EU can hardly be considered an independent foreign policy actor and its budget is completely inappropriate to face issues such as climate change and even pandemics in a coherent way. Yes, countries are also responding individually with their own resources, but this approach could also end up exacerbating existing disparities.

If some Member States are left with insufficient financial help, they could turn to China in search of more favourable credit lines. The signature of Memorandums of Understanding over the Chinese Belt and Road Initiative gives us a glimpse of what a more fragmented and less cohesive Europe could entail. China is known to use debt-trap diplomacy: this would risk leaving to the Asian power the control of key European assets and infrastructures.

While maybe politically unfeasible right now, the set up of Eurobonds must still be pursued to finally pave the way for a fiscal union and eventually a political union. When Eurogroup Member States realized that a Greek default would cause a grave rupture in the entire Eurozone, they set up the European Stability Mechanism because EU treaties did not allow direct fiscal transfers to the needy regions of the Union. It is time to rethink that mechanism. Leaders should, however, take into account democratic accountability in the process, in the hope that European citizens will come to realize that in unity lies strength.

The post Three Takeaways from the Latest Eurogroup Meeting appeared first on My Country? Europe..

The Effects Of And Strategies Against The New Coronavirus

The medical aspect of this fight is best left to sources that can make qualified statements. But the dangers of coronavirus are clear: it’s a very contagious disease that is mild in most cases, but extremely threatening to the elderly and people with pre-existing conditions. Besides the lopsided mortality rates, which increase significantly with age, the new coronavirus also causes a very high number of hospitalisations, usually due to severe pneumonia. These hospitalisations greatly exceed what any healthcare system on Earth can handle at any given time – in terms of ICU beds, ventilators, doctors required to staff the units etc. Once hospitals collapse, the mortality rate skyrockets – both because coronavirus patients who could be saved in an ICU are left without medical care, and because people getting injured or sick from other ailments would have no access to medical help. Ultimately, the “do nothing” and “mitigation” strategies would result in millions of people dying. Should you wish to dig into the data, we can warmly recommend this fantastic piece by Tomas Pueio.

This only leaves one workable strategy: suppression. That is to say, extreme social distancing to deprive coronavirus of the opportunity to spread quickly, ideally bringing the number of sick people at any given time below ICU bed capacity. While of a more uncertain impact, this could also place selective pressure on the virus to favour less lethal and less noticeable strains. In order to work, however, suppression requires participation from the whole of society, as well as extensive economic mobilisation. The fight against coronavirus will not be won by doctors alone – the entire world will have to mobilise in order to sustain them.

We are at war. This is not just a metaphor: suppressing a pandemic is functionally very similar to fighting a war. Just like in wartime, there is a physical space of concentrated effort – in this case, hospitals, where loss of life is the norm. Just like during a war, sustaining this physical effort requires a complex logistical supply chain that includes coordinated production and distribution of essential equipment, like ventilators and face masks. The civilian population is also asked to make sacrifices – in this case, by staying indoors and following government directives. There is one major difference between a war and a pandemic, however. During a war, industrial production is maximised. The opposite happens during a pandemic, because the lockdown inevitably results in lower output.

The European Union has introduced a sweeping set of countermeasures – which are a good start, but only a start. As we look into what has already been done, remember that this is just the beginning of a drawn out effort that can only work if we act together. Suppressing coronavirus will change the European Union (and likely the world) in ways we cannot fully anticipate, and the pandemic is expected to trigger the worst economic recession since 1945, further increasing the complexity and fluidity of the situation. This is a world-upending, historical moment of rare magnitude, and we must all rise up to the challenge. Make no mistake: this will be a very long fight – but it’s one we can win together.

What The EU Has Already Done Against Coronavirus

The EU has a checkered record when it comes to dealing with crises. This is a product of its institutional set up and small mandate: the EU is built as a leadership avoidance scheme, which gives every Member State the breathing ground they need to come to bargains with one another, and have confidence that such bargains will be respected. This is great for wider European integration, but terrible in times of crisis, where clear leadership, fast decision-making, and an unequivocal chain of command are essential to response coordination.

However, the EU has learnt its lesson since its abysmal handling of the Euro debt crisis in 2012, where only the help of the Federal Reserve kept the Eurozone away from the abyss, as we detailed here. The measures being undertaken today at a European level are the right ones, and compatible with the small mandate of the Commission, they also display a refreshing dynamism.

First, the EU set up a Corona Response Investment Initiative, freeing up €25 billion that will shore up national healthcare systems, and shield workers and companies from the economic fallout of the suppression measures. It also allocated funds to vaccine research, as well as research of treatments that might make the pandemic more manageable. Additionally, the Commission has triggered the Stability Pact’s General Escape Clause, and greatly relaxed State aid rules. This will allow Member States to pump as much money into the economy as needed in order to fight coronavirus, bail out companies, and shield workers from the economic fallout.

These financial measures are paired with logistical and industrial interventions: the European Commission is coordinating, and massively ramping up, joint industrial production of all essential medical equipment, like face masks and ventilators. It has also forbidden exporting these products to third countries – with the exception of the United Kingdom, which is great news for London, since Britain only possesses 5,000 ventilators and lacks the domestic capacity to build more. Brussels is also setting up a common stockpile of all this essential equipment, to hand out to Member States to make sure that no one runs out. Once treatment and a vaccine are available, these will also be made a part of this common stockpile.

Further, the EU is also moving to ensure that the 300,000 EU nationals currently stuck outside the EU can make it back home safely, by pressuring other countries into keeping a select few airports open for emergency return flights, and ensuring the smooth functioning of the internet at a time of surging traffic through deals with Netflix, YouTube, and others.

However, the real centerpiece of the wider European effort to fight the new coronavirus comes from the ECB. It’s the so called “bazooka”.

Deploying The Bazooka

Following an embarrassing gaffe by Christine Lagarde, and after the global nature of the threat became evident, the European Central Bank introduced the so-called Pandemic Emergency Purchase Programme, also known as PEPP or, informally, the bazooka. This is the single largest measure so far at a European level. It’s an emergency €750 billion package to buy government and  company debt across the Eurozone. What this means in practice is that the ECB will guarantee Member States’ liquidity, so that whatever amount of money they spend to fight coronavirus will be backed up by the might of the ECB. The extension to private debt also means the ECB will be playing a hands-on role in protecting companies and ordinary people from the inevitable economic recession that will result from suppression measures.

There is no time-frame from when this will end, except that it will in any case last to the end of 2020 at a minimum. The timing of the maneuver is up to the ECB’s judgement. Ultimately, the pace of the fight against the pandemic, as well as the stimulus required to kickstart the economy after the outbreak , will determine how long this massive purchase of assets will go on. One thing is certain – this is a watershed in the history of the European Central Bank. Not even Draghi’s famous “whatever it takes” statement extended this far. In all the doom and gloom about the slow progress of European integration, we must also acknowledge that the progress done since 2012 is clearly on show here. This level of interventionism places the ECB much closer to a traditional central bank. There is free talk now of the PEPP helping guarantee jobs and companies as well as currency stability, after all. This may not have formally expanded the the Bank’s mandate, but in practice, it already has.

The Central Banks To The Front

This is a global pandemic, and as such it naturally warrants a global response. We have already witnessed a number of efforts at international cooperation against the new coronavirus, with varying degrees of success. For example, countries are trading doctors and task forces, ventilators and face masks, and the global scientific community is focusing on vaccine research. But what about financial and economic mobilisation?

Here, too, the EU does not operate in a vacuum. The ECB’s bazooka, in particular, is not an isolated measure: it is part of a wider effort by several central banks to guarantee that the global economy will survive the pandemic, and keep the machine of health and research running. The US Federal Reserve, the ECB, and the central banks of Japan, the United Kingdom, Switzerland, and Canada, are coordinating financial action in this respect. The reader might ask, why these central banks in particular, and what it is they are doing exactly. The answer lies in the lessons learnt during the Great Recession of 2008, and the Eurozone debt crisis of 2012. In that occasion, the Federal Reserve provided liquidity to other central banks – and in the latter case, particularly the ECB. These are currency swap lines, so called because the liquidity is denominated in multiple currencies. In effect, the Federal Reserve acted as the lender of last resort for other central banks. This was part of a “backroom deal”, and not widely publicised – American public opinion was vehemently against it, pushing the Obama administration to operate discreetly.

Today, these currency swap lines have been expanded. The same central banks that tried them out in 2008 and 2012 are now leaning on them even more strongly. What consequences this will have on world finance in the long term is hard to foresee, but in the immediate, the strategy is clearer: these measures prevented a heart attack of the world economy both in 2008 and 2012. The hope is that they will do so again.

European Coronabonds

Talk of coronabonds has also greatly intensified over the past week, with Commissioner Gentiloni quite open that the proposal is on the table. Fiscally conservative countries like the Netherlands and Germany have opposed any sort of financial risk-sharing at a EU level for years. They remained so even at the height of the Euro debt crisis in 2012, with Merkel famously saying that risk-sharing would not happen in the EU “for as long as I live”. This opposition to joint bonds has not dissipated, but the reality of the pandemic has significantly weakened it. Merkel is allegedly open to the idea of coronabonds. The Netherlands are still looking for an alternative solution they could table. However the rapid evolution of the pandemic makes the adoption of coronabonds increasingly likely. Italy and Spain are the hardest-hit countries, but almost every Member State is weeks behind them in the curve of contagions. As such, things will get worse at a European level before they get better.

Total War Against The Coronavirus

As should be apparent from everything we have outlined thus far, these are extraordinary measures that might have appeared radical only a short time ago. Now, they have become widely accepted – to varying degrees – as the correct measures to fight the global pandemic. But what happens after the world emerges victorious from the pandemic – however long that might take?

They will likely roll back some of these measures, though perhaps not all the way. Others will remain in place. Every major crisis in the past century or so has resulted in fundamental changes at an institutional and policy level. It was the Great War that first introduced the managerial State we are familiar with in the 21st Century, introducing a level of government intervention in the economy that would have been unthinkable before 1914. The Great Depression fundamentally reshaped the way statesmen thought about world trade, and the Second World War provided the shock that ushered in the contemporary global order. The Great Recession of 2008 has defined early 21st Century political culture, from the rise of the far right to the quasi-institutionalisation of currency swap lines between central banks. It is hard to see how a global pandemic of this magnitude could fail to do the same. It’s a historic moment that will lead to a profoundly changed conception of European institutions and their mandate. For better or for worse, we do not yet know. What we do know is this: there’s no going back.

The post The EU Is Going To War Against Coronavirus appeared first on My Country? Europe..

The most widely discussed remedies to the EU’s economic stagnation, especially by Anglo-Saxon economists, are low interest rates and fiscal stimulus. Low interest rates, with a brief hiatus in the period 2010 to 2012, have been tried. Many rates are now below zero, rewarding borrowers who take out loans with smaller amounts to reimburse. Still, borrowing money has risks if it is not used in manners which increase its value. It would appear that, after several years of low rates, European businesses have run out of new projects with positive returns and borrowing, and consequent increases in economic activity have once again slowed.

Recognizing this, economists have turned to fiscal stimulus as the remedy of choice. Fiscal stimulus, the excess of government spending over revenues, will give a short term boost to economic activity. The aim is to generate a virtuous cycle where those newly employed by the stimulus will generate further economic activity through their spending and additional tax contributions. The problem here is the same as that of low interest rates. The new activities generated must be self-sustaining, in the sense that they increase productivity and revenues. If they are not, they will simply create additional debt burden and cause the economy to slow once the additional stimulus is passed through.

Constraints to Productivity Growth

There are some natural constraints to productivity growth in the EU region which must be addressed before the remedies to slow economic growth bear fruit. A shortage of natural resources and energy dictates that the continent can not generate growth without increasing imports of raw materials and energy. But to import what it needs without further indebting itself to foreigners, Europe must increase its exports to pay for the additional imports. It must, therefore, remain competitive in markets and look to expand those markets if it wishes to sustain its own growth.

This is not totally within Europe’s control and, consequently, the ability to export successfully is an upward constraint on Europe’s domestic growth. Economists who talk about lowering interest rates or fiscal stimulus without taking into account the reliance on world markets are simply missing the point. When world markets are growing Europe will have no difficulty sustaining its own growth. When they are moribund effective stimulus will be well nigh impossible.

The Way Around the Growth Impasse

Trade agreements for regions like the European one are essential to maintain regular access to markets and obtain needed commodities. However, they cannot resolve this impasse on their own, as they can’t guarantee competitiveness or the vitality of foreign economies. There is only one sustainable solution to further economic growth in the long term: to invest in research, sustainable energy, food production and more efficient use of raw materials.

Besides helping the planet, such research will allow Europe to grow at its own chosen pace without imports. Once growth can be generated internally without requiring an increase in essential imports, techniques like interest rate policy and fiscal stimulus can be used to full effect. There is no magic wand of economic policy for sustainable growth if the right productive investments are not being made.

Rallying Around The European Project

An important aspect of any economic policy is public assent. Successful policies – most often defined, unfortunately, in today’s short-term mindset – entail some sort of job creation, wealth effect and a general feeling of well being and optimism for the future. A successful policy in these terms usually brings assent in its aftermath regardless of its long term vision or sustainability.

Getting the public to agree to a policy based on a vision of the future, one which requires sacrifices, investment and research with little immediate impact is difficult in democratic societies. To some degree, this is understandable as a job is a necessity today, not once the research and investment bear its fruits. For this reason, despite some misgivings, a stimulus project on a European scale might also be appropriate, especially if a productive policy is not chosen.

The building of a new European capital with the participation of all the Member States is a project which can rally the public to the EU idea and provide an immediate stimulus to jobs and incomes. It has the disadvantages of other stimulus projects in leading to a deterioration in the balance of payments but since such a project would be labour-intensive, these effects should not be too large. Investment in a new capital also brings with it some small efficiencies which can help pay for it while awaiting the fruits of investment in energy, raw material and agricultural research. The hoped-for rallying around a vision of Europe can not be discounted only in financial terms.

Alternative EU-wide stimulus projects can be envisaged. Building on the success of the Airbus Industries, space exploration could be expanded beyond that now undertaken by ESA. Future space colonies could be prepared and undertaken. However, I prefer to be more down to earth myself and a greatly enhanced effort in space would have one important disadvantage: it would employ few people per euro invested.

More and faster high-speed rail, especially given the environmental concerns associated with flight, is another possibility. Regreening and reforesting Europe is another stimulus project which the unemployed and school-aged alike could participate in.

A Vision For The Future

Endless economic growth is not always a goal worth pursuing. With growth comes environmental degradation, overcrowding, loss of natural habitats and other undesirable consequences. Some growth at a minimum is probably desireable to absorb the pool of unemployed and to facilitate the adoption of and transition to new more efficient technologies as they emerge.

Europe may well wish to forego rapid economic and demographic growth and the ensuing economic competition with the United States and China, in preference for a more sustainable and greener continent. Europe is already a crowded continent with a population of 103 people per square kilometre, compared to 36 in the USA. Only India (416), Indonesia (149) and China (145), among large countries, are more crowded. Vast regions of the world: Australia (3), Canada (4), Russia(8), Brazil (35), and many areas of Africa, are much less densely populated.

A choice of sustainable greener growth will require new social, economic and legal tools to realize it. True federalism would certainly facilitate the complex social, economic, and political choices as well as their implementation. So hopefully would a new federal capital. Whatever its vision of the future, however, Europe will need greater energy, food and raw material self-sufficiency to realize it.

The post Sustainable Economic Growth in the EU: How Do We Get There? appeared first on My Country? Europe..

Veto, Deposits and the Single Market

One apparent issue with the Union, in its current form, is the veto power itself. Even bearing in mind that it is rarely used and that it is an option only for certain types of votes, it still can be an issue. It prevents any EU foreign policy from being applied consistently and would be a huge impediment to the working of a common defense force. Sovereign states cherish it though, particularly in the case of enlargement, war and peace, or other vital matters.

Among other reforms frequently mentioned, there is the financial sector. A deposit guarantee scheme is one important idea. The scheme would be meant to encourage savings, and provide protection to weaker financial institutions, as well as the public. Aligned to the financial sector, another essential reform would be the further development of the single market, especially for services. It is one of three priorities of the new President of the European Commission, Ursula von der Leyen outlined in her introduction of the new Commissioner Vladis Dombrovskis of Latvia:

“We have a unique social market economy. It is the source of our prosperity and social fairness. This is all the more important when we face a twin transition: climate and digital. Valdis Dombrovskis will lead our work to bring together the social and the market in our economy.”

Recently Macron and Merkel informally put forward the idea for a two-year Conference on the Future of Europe. Although it is not clear what the main focus of the conference would be, it could still be a good place to answer questions about these reforms, particularly about fast tracked reforms, something that it is perhaps reserved for countries willing to further federalize.

What is the European Single Market?

You can think of the European single market through your own experience of working and consuming as an EU citizen. We have largely achieved the single market for goods, but price convergence has lagged. You can buy pretty much the same goods throughout the Union though at different prices – and states do occasionally create impediments, usually to benefit their producers.

The single market for services remains largely incomplete. As a doctor, lawyer, engineer, pharmacist, accountant, architect, or even real-estate agent or taxi driver, you can be subject to differing regulations and unable to use your license or skills in another EU country. Schengen may have made it possible for EU citizens to move freely, but not necessarily work freely.

A series of EU Directives and landmark rulings of the European Court of Justice (ECJ) have called for mutual recognition of regulatory restraints on providing services except as necessary to satisfy “mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defense of the consumer”. In practice though, mutual recognition has been far from fully implemented and the obstacles have not all been removed. Often, re-assessment of market authorisations are required in EU countries for the provision of services, even in cases where it should not technically be possible to derogate from the rule of mutual recognition.

Although less common, a similar situation can arise with harmonised standards for goods, where local state enforcement can sometimes be used to circumvent EU regulations. The only way to prevent such problems may be true federalism where the EU can enforce its own regulations. Until then, states will have a tendency to make things difficult for non-national individuals or products. A survey of EU services  firms cited regulatory restrictions as the primary impediment to expanding their operations in other EU countries. For this reason fast-tracked reforms for member states willing to federalize might prove fundamental in advancing the single market for services.

What are the Advantages of the Single Market?

As an European citizen you may have traveled by train throughout Europe, visiting the beautiful continent. You will have sung goodbye’s at train stations to your friends, chanting “Bella Ciao”. You will not have needed a passport or a visa, and after 1999 you haven’t needed to exchange your money to local currency, in most cases. Though certain rail lines in Eastern Europe and the Balkans may have required changing trains at the border, rail harmonization too is a product of the single market.

Beyond free movement and the Euro, the single market has radically changed European life in other ways. In the 1970s you would have done your grocery shopping in local stores while walking home from work, or in your own neighborhood after driving home or using mass transit. Small local shops were the main source, and in many cases the only source, of retail trade. They were often family-run, open long hours, and economically very inefficient, requiring as they did frequent dedicated deliveries of small quantities of goods. One of the major effects of the single market was to rationalise retail trade on much of the continent.

With the single market, supermarkets and hypermarkets began to appear on the outskirts of cities and large towns, forcing the small shops to close and often leaving the city centers empty and boarded up. They brought goods to consumers in huge variety and at much lower prices, extended the season for fresh purchases with imported produce, and offered a variety of tropical and exotic products. They could afford to do this because their cost of capital was lower, purchasing and deliveries could be done in bulk, and labor needs per unit of sales were considerably lower.

The economic upsides of the rationalisation of the retail sector go beyond the immediate benefits experienced by consumers. Smaller shops by closing down free up labour for other economic activities, contributing to economic growth. Capital is also freed up per unit of production, as the distribution networks become more efficient.

Further Rationalisation of the Services Sector

If we achieve further rationalisation of the service sector in Europe, young professionals wishing to work abroad stand to benefit the most. If you are looking for a change, enhance your language and professional skills, or have a foreign partner, you will no longer be hindered by complex licensing requirements. The costs of services would also decline. The economic benefits of this would be great. But so would the downsides. Rationalisation of the service sector could easily bring a new period of economic growth. But growth also means disruption.

Ultimately, Europe has two options: remain a more traditional economy, with strong worker protections and a minimum of change and disruption; or compete fully in the global economy by rationalising, reaping all the benefits and paying all the costs. Finding a middle way will be very difficult, especially considering the pressure from China and the US, which have already made a clear choice: efficiency and competition at whatever the social costs.

The post Completing the European Single Market – The Key to Europe’s Future? appeared first on My Country? Europe..

The Kremlin propaganda machine has been active in spreading misinformation about these sanctions, however, and has met some limited success in this endeavour. Public opinion has a very vague idea of what these sanctions are in practice, and myths are very common. In the list below, we look at five key facts to understand Western sanctions against the Russian Federation.

1 – The sanctions do not target Russia’s civilian population.

This is an important point, since pro-Kremlin outlets and commentators usually paint a gloomy picture of evil Western governments starving Russian civilians in the name of great power competition. This is not the case. The sanctions currently placed on Russia are sanctions against individuals – specifically, bankers and businessmen with close connections to the regime.

These wealthy figures have played a key role in Russia’s drive to assert control over privatised industries: while these industries are still privately owned, the oligarchs now heading them in effect act like an extension of Russian state organs. Aside from these oligarchs, a handful of companies have also been sanctioned for profiteering from the illegal occupation of Crimea. A typical example would be hotel chains currently busy building tourist resorts in Yalta.

This is pretty far from being a comprehensive economic sanctions regime that would damage or affect the civilian population. Putin’s dictatorship, however, has introduced a number of so-called counter-sanctions against Western countries, and these measures do affect the civilian economy, since they restrict imports of fruit or greens from the West, to make an example. This gives Kremlin media a handy excuse to blame Western powers for empty supermarket shelves.

2 – Western sanctions are lawful. 

With its unprovoked invasion of Crimea, Russia has committed an act of aggression against Ukraine. It’s important to understand that aggression – that is, using military means to annex territory – is on the list of the very worst crimes that can be committed under international law, together with genocide, war crimes, and crimes against humanity. That list is limited to these four entries, and after Nazi Germany’s aggression against Czechoslovakia in 1938, forceful annexation has rightfully been a line in the sand of international politics.

The Russian government has presented a number of arguments to justify its act of aggression, each emptier and more dishonest than the last. Danger to the Black Sea Fleet and Russia’s naval concessions in Crimea were cited as grounds for intervention, but that begs the question of why exactly Russia did not wait until the situation deteriorated to a point where legal grounds for intervention were available. Both the Black Sea Fleet and Russian bases on foreign soil could have been readily evacuated at any point in March 2014, and there is no evidence that either came under direct threat from Ukrainian forces.

Russia’s attempt to spin this as an intervention in support of self-determination, or as the fulfillment of a historical claim on Crimea, is equally laughable. How long Crimea was a part of Russia and the USSR is irrelevant to the argument: Ukraine is a sovereign nation and Russia committed to recognising its borders in the Budapest Memorandum. It must be noted that Ukraine surrendered the considerable nuclear arsenal it presided over in the wake of the Soviet collapse, in exchange for Russian recognition of its territorial integrity.

Both the Crimean parliamentary vote to join the Russian Federation and the confirmatory referendum were held under military occupation, threat of violence, and complete lack of neutral, international observers. In the case of the parliamentary vote, several members of the Crimean parliament were forcibly prevented from entering the building to join the proceedings. This ruthless behaviour makes both votes illegal under international law, much like Russia’s military presence in Crimea in the first place.

3 – Western sanctions restrict Russia’s ability to weaponise international finance.

As we have established, Western sanctions target oligarchs who help carry out Putin’s policies – but how can these wealthy figures materially advance Russian goals? The answer is that oligarchs use offshore or European bank accounts to store their petrol-derived revenues, instead of sending the money directly back to Russia. This effectively removes their revenues from the money supply, and allows Russia to conduct a more expansionary monetary policy without worrying about crippling inflation.

This is the same reason why Russia, like China and Japan, is an intensive buyer of American bonds and accumulates large monetary reserves. Hitting the oligarchs makes this merry-go-round much more difficult because they can’t use American or European banks to conduct their transactions. This is a completely different system from that of large scale economic sanctioning, but it’s effective, because it restricts Russia’s room of economic maneuver.

4 – The sanctions are working.

The magnitude of these revenues is considerable, which is why sanctions have such a big impact on Putin’s regime. The share of government-owned firms in oil production in Russia rose from 19% in 2004 to 50% in 2008. It was the oil boom, following the fluctuation of world prices for petrol and gas, that bankrolled the surge in Russian consumer spending.

Without these, Russia is in dire straits: while the country has a few important strengths, such as an abundance of raw materials which makes its army incredibly cheap to build and maintain, its economy is not diversified. Russia has the raw material reserves to conduct an extensive war, but there is no question that its civilian economy is extremely vulnerable to international upheavals. To make a comparison, 180 billion dollars made their way into Russia in the year 2007. Of these, only 28 billion were in foreign direct investment. The rest was revenues from the sale of oil and gas.

Available evidence clearly shows just to what extent sanctions are hitting Russia where it hurts. The Russian economy is 10% down today on trends of growth calculated prior to 2013. The downward deviation was driven by the collapse in global oil prices at first. Given Russia’s reliance on these revenues, it’s no surprise that lower oil prices resulted in negative economic outcomes. Low oil prices, however, stopped being the largest source of the Russian economic crunch in early 2017. It’s sanctions that are hitting the hardest now.

5 – Western sanctions are preventing further Russian rearmament.

Largely thanks to sanctions, 2018 was the first year since 2007 in which Russia was forced to reduce military spending. Unlike in the years from 2014 to 2016. With Russian soldiers continuing to die in Ukraine, and at a time when both the West and China are ramping up their military production, this is extremely bad news for Russia. Precisely at the time when the ship-building programme, the production of the new Armada tanks and its new interceptor programme were slated to take off, Russia has been forced to scale back.

This does not detract from the considerable tools available to the Russian armed forces for national defence, but it does mean that the confrontation in Ukraine is turning a lot more complicated than Putin expected. It is uncertain how many Russian soldiers are currently tied up in Syria and in eastern Ukraine, but whatever the exact number, this means that a not insignificant part of Russia’s core expeditionary strength is already committed and/or dented.

And make no mistake – the war in Ukraine is not going well for Russia. Even assuming Russian de facto control of Crimea for the time being, their forces’ attempts at breaking out of the secessionist areas have been repeatedly beaten back by Ukrainian soldiers. Before Euromaidan, Russia had access and control over the entirety of the country, if only indirectly. Now, Russia can at best boast of its illegal ownership of Crimea and its support of the tiny secessionist enclaves on the border. For these meagre prices, Russia has paid a considerable price in prestige, money, and blood. With time not on Putin’s side, the continuation of sanctions into the future is the best strategy to ensure that Russia can never commit acts of aggression again.

The post Five Key Facts On Western Sanctions Against Russia appeared first on My Country? Europe..

The revamped trade deal with Mexico, and the titanic agreement with the South American trading bloc Mercosur, are also part of this success story, but it’s significant to note the effort the EU is putting into developing ties with the Far East. It was only two years ago that the EU lamented the lack of a coherent policy for southeast Asia, with only a free trade agreement with South Korea already in place. Two years later, the EU has signed large-scale deals with Singapore, Vietnam, and Japan – with the latter deal already undergoing implementation. This undoubtedly strengthens the European position in the Far East.

The Terms of the Deal

For starters, the free trade agreement will eliminate 99% of the tariffs on both sides. ‘Sensible goods’, i.e. agricultural products, will be the exception, and will be limited by quotas. The volumes involved are important: currently, the EU is Vietnam’s second largest export market after the United States, accounting for around 19% of its total exports. The main Vietnamese products that make their way to Europe are textiles, electronics, and coffee. The EU also exports to Vietnam, mostly high tech products, pharmaceuticals, machinery, and aircraft. The volume of these exports is growing by 11% every year, and stood at €12 billion for 2018.

As usual, the agreement has provisions for the protection of food or drinks with a specific geographical origin. This protection includes both Vietnamese and European traditional products, like Mộc Châu tea or Calvados. It also contains provisions for public procurement. Under the framework of the agreement, companies will be able bid for public procurement contracts and access the services market both in Vietnam and in the EU. At the same time, the free trade agreement will not curtail the right of the two parties to decide how to organise their public services.

One the most important part of the FTA are the provisions for sustainable development: the FTA includes the implementation of the Conventions of the International Labour Organisation. These include the core standards on freedom of association, and prevention of child labour and slavery. The agreement also requires the implementation of international environmental deals, such as the Paris Agreement. In a classic exercise of EU soft power, the issues of fighting climate change and strengthening democracy go hand in hand with the economics of the trade deal.

The Road Ahead

The agreement has been discussed for a long time. It began as a negotiation between the EU and ASEAN, in 2007, but in 2009 the two parties decided to switch to bilateral negotiations. Future trade deals between the EU and ASEAN will start from the existing agreements and expand their scope. The free trade agreement with Vietnam would be the first of these ambitious trade deals, to be followed by the deal with Singapore, giving the EU a stable trading foothold in Southeast Asia.

The implementation of the free trade agreement will begin after the two parties ratify the agreement. For the European Union, this means that the European Parliament will have to vote in favour of the deal. One obstacle, however, remains: Vietnam’s human rights track record. This was one of the biggest concerns during the seven years of negotiations, and with good reason: Vietnam is a one-party State, known for the harsh treatment of dissidents. Reporters Without Borders classified Vietnam as the 176th country out of 180 for freedom of press.
Cecilia Malmström sees the free trade agreement as a way to engage with, and influence Vietnam on human rights. While she is adamant that the deal alone cannot remedy the lack of human rights in Vietnam, she also believes that increased contact and exposure will soften many of Vietnam’s positions.

Indeed, the final version of the agreement contains clauses that enable the parties to take action, should the human rights obligations contained in the text be breached. These actions include the suspension of the trade agreement itself. The European Parliament will have to decide if these provisions are enough.

The post The EU Has Signed A Gigantic Trade Deal With Vietnam appeared first on My Country? Europe..