Author Topic: European matters  (Read 101242 times)

Crafty_Dog

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Stratfor: Another migrant crisis coming?
« Reply #300 on: March 07, 2020, 07:38:45 AM »
Is Europe on the Cusp of Another Migration Crisis?
Adriano Bosoni
Senior Europe Analyst, Stratfor
Emily Hawthorne
Middle East and North Africa Analyst, Stratfor
9 MINS READ

Mar 6, 2020 | 19:28 GMT

A photo of refugees and migrants waiting in line to receive blankets and food near the Greek border in Edirne, Turkey, on March 5, 2020.

Refugees and migrants wait in line to receive blankets and food near the Greek border in Edirne, Turkey, on March 5, 2020. Thousands have flocked to the border since the Turkish government announced it would allow migrants to cross into Europe on March 1.

HIGHLIGHTS

There is a high chance that a migration crisis in 2020 results in a situation similar to the one that unfolded in 2015, with Greece again bearing most of the weight of the migration influx.

But unlike five years ago, Germany will be more willing to protect the European Union's external border and less interested in accepting a large number of migrants.

Turkey will also be more willing to weaponize the country's landmark migrant agreement with the European Union to secure additional diplomatic and financial help from the bloc.

On March 1, Turkey announced it would no longer enforce an agreement with the European Union to prevent migrants from entering the Continental bloc. Since then, tens of thousands of migrants have been trying to enter Greece from Turkey, fueling fears of another looming migration crisis in Europe. In response, the Greek government has increased security at its borders and announced that no asylum requests would be accepted for a month — though it's far from certain whether Greece will be able to contain a continued flood of migrants at its doorstep. Unless Turkey changes its position in the coming weeks, there's a good chance Greece's sea and land borders will once again become the hottest access point for Europe-bound migrants. But unlike the crisis in 2015, Athens will find even fewer EU countries willing to help lift the load this time around.

The Big Picture

Because of its weak economy, Greece is not the final destination for most migrants. But in 2015, many migrants either ran out of resources to keep moving north to wealthier countries in Europe or they found that other transit countries, such as Serbia and Hungary, had closed their borders. While a new migration crisis will likely repeat some of these patterns, several new developments over the past five years will also play a significant role in shaping how a new crisis could unfold in the coming weeks.

Turkey Lights the Fuse

At the heart of the unfolding new migrant crisis is Turkey's willingness to gamble its landmark migrant agreement with the European Union. Turkey's struggling economy is having a direct political impact on the popularity of its government, and Ankara knows it might ultimately prove unable to ward off a Syrian and Russian incursion into Syria's Idlib province. The popularity of Turkey's ruling Justice and Development Party (AKP) also risks waning amid increasingly angry and cash-strapped Turks, who see the country's large refugee population as partially to blame for their grievances. This was made clear by the country's 2019 local elections, in which the AKP suffered sizable losses among urban voters living in closest proximity to refugees. This, combined with the economic headwinds Turkey has experienced since 2015, has created an even more hostile environment in Turkey for refugees. And in 2019, Ankara imposed tighter residency restrictions on refugees.


Against the backdrop of these mounting economic and political threats, an increasingly desperate Ankara has shown that it's willing to breach its migration agreement with the European Union to secure more support from the bloc. Specifically, Turkey wants more money to help provide for the refugees and migrants it is currently hosting, and more EU diplomatic support in its offensive against Syrian and Russian forces, including support for a no-fly zone and long-term refugee resettlement in northern Syria (which Germany has already given support for, but cannot provide alone). Ankara knows that threatening to scrap the existing migrant agreement can help force Brussels to fall in line. And should the March 5 cease-fire between Turkey and Russia fall through, Ankara will be even less likely to remove this lever of migrants as leverage in its EU negotiations.

Similarities to the 2015 Crisis

A new migration crisis would likely repeat some of the patterns of the previous crisis, including:

Greece's lack of capacity. Greece has very limited room to deal with new migrants and is likely already nearing its capacity.

Around 74,600 asylum seekers reached Greece last year, the highest number in the European Union. Some 42,000 of them are trapped in migrant camps in the islands, as Athens does not allow them to move to the mainland until their legal situation is cleared. Reports from the ground say that most migrants are crammed in facilities that are being used well beyond their capacity. In recent months, migrants have protested in some of the islands, particularly in Lesbos, which is home to some 25,000 asylum seekers.

Closed borders along the Balkan migration route. In 2015, many migrants found that countries along the so-called Balkan migration route to Northern Europe, including Serbia and Hungary, had closed their borders. Should another crisis unfold in the coming months, countries like Albania, North Macedonia and Serbia (which are not in the European Union) are likely to again close their borders in an attempt to block the migration route. Hungary, which is an EU member, may also do the same if migratory pressure increases significantly.

More money, less action out of Brussels. Under the European Union's current migration rules, migrants have to apply for asylum in the country where they first enter the bloc, which Greece has long argued unfairly places the burden on them. But a systematic, blocwide effort to distribute migrants across the European Union remains unlikely, as countries in Northern and Eastern Europe will reject any move to alter these rules. If the crisis worsens, and if the number of arrivals in Greece and other countries on the bloc's external border increases, we are instead more likely to see bilateral agreements, under which countries like Germany would accept small groups of migrants in an attempt to ease the pressure on Greece. Brussels, meanwhile, will likely continue to throw money at the problem as it has done in similar situations in the past. And indeed, we've already seen a bit of this, with the European Commission announcing it was sending Greece 700 million euros ($791 million) to help maintain the recent influx of migrants, as well as extra personnel from the European Border and Coast Guard Agency (also known as Frontex) to help protect Greece's borders.

Differences From the 2015 Crisis

In addition to these similarities, there are also some important differences that will shape how a potential migration crisis would unfold in 2020 compared with the crisis in 2015:

Stricter EU asylum policies. Some migrants will now have a harder time requesting asylum in 2020 than they did in 2015, especially those who have been in Turkey for years and cannot really claim to be running away from extreme hardship. While this could weigh negatively on some migrants' cost-benefit analysis of whether to attempt crossing into EU territory, the flow of attempted crossings in recent days shows that for thousands of migrants the risk is still worth taking.

If there is an influx of "new" asylum seekers, that is, people who are currently in Syria and have been displaced because of recent events in Idlib, they may have a better chance of successfully obtaining the refugee status, but it will still be hard. In January, Greece introduced new asylum rules that make the application process faster, which also has the goal of making deportations faster — though Athens will probably continue to struggle to enforce deportations, and many of the migrants whose asylum requests are rejected will probably remain in Greece and live in legal limbo.

If Turkey continues allowing migrants to flood its border, Greece could again become the epicenter of Europe's next migration crisis.

Germany's skepticism around asylum seekers. While Germany may accept a few migrants from Greece, it probably will not open its borders as it did five years ago. Germany reacted to the 2015 migration crisis by welcoming around a million asylum seekers into the country, which, in the long run, has weakened the popularity of Chancellor Angela Merkel and contributed to her decision not to seek reelection in 2021. Germany's open-door policy in 2015 also contributed to the rise of the far-right Alternative for Germany party, which has become the main opposition party since the country's 2018 general election. Germany's reaction to a new immigration crisis would, therefore, probably be different this time around. In fact, the German government has been posting tweets in Arabic, Farsi, English and German saying that Berlin supports Athens' recent efforts to protect the bloc's external borders, which is basically meant to discourage migrants from trying to enter the European Union.

Instead of taking in migrants, Germany is likely to support granting additional resources, money and assistance to Greece to help protect the border with Turkey. Berlin will also reach out to Ankara to try to keep the migration agreement in place, and even propose cooperation on issues such as establishing a no-fly zone in northwestern Syria. Finally, Germany will increase pressure on Russia to de-escalate the conflict in Syria. In this, the problem for Germany is that it has very limited influence on Moscow, a key actor in the war, and has little to offer to Turkey other than EU funds and diplomatic support.

Impact on Italy

At least during an early phase of a new migration crisis, Italy is unlikely to be significantly affected, as its weak economy will make it a less attractive final destination for migrants entering the European Union from Turkey compared with more financially secure countries such as Austria, Germany, the Netherlands and Sweden. Instead, the main threat for Italy is events in Turkey encouraging migrants in other parts of the world to try to reach the European Union. If this happens, migration routes that have been relatively calm in recent years could be reactivated, such as the Libya-Italy route.

In mid-2017, Italy reached a deal with the Libyan government to have the Libyan coast guard begin intercepting migrant boats in exchange for money, resources and training. But this deal is fragile for two key reasons:

Human trafficking organizations who transport migrants from sub-Saharan Africa to Libya, and then to Italy, may decide that the conditions are ripe again to resume their operations, which could overwhelm Libya's weak and fragile government.
The current Libyan government may also decide that a new migration crisis in Europe is a good opportunity to ask Italy for more money and resources in exchange for keeping their agreement in place.

A significant surge in the arrival of migrants would happen at a very difficult time for Italy. The country is expected to have very low economic growth in 2020, and the impact of the ongoing coronavirus outbreak could put it in a recession. Authorities in Rome recently announced a stimulus package to deal with the economic impact of the outbreak, but an immigration crisis would create additional problems for Rome's already strained coffers. At the same time, the Italian coalition government is fragile, and the opposition League party, which has a strong anti-immigration stance, is polling strongly. An early election in Italy within the context of a recession and immigration crisis would certainly increase the chances of the League winning the vote and accessing power — an outcome that would further spook financial markets and investors' already shaky confidence, given that some League members have pushed for Italy to leave the eurozone.

Crafty_Dog

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GPF: The EU and the WuFlu
« Reply #301 on: March 20, 2020, 01:34:19 PM »
   
    The EU Wasn’t Built for This
By: Allison Fedirka

Europe has always struggled to define what the European Union really means, particularly after the 2008 financial crisis. It was a harsh reminder that all its members have different political and economic needs, and every move it has made since then – financial compromises, Brexit, immigration reform – has only widened the differences, even as it has stoked nationalist sentiment. This bodes poorly for the EU's ability to confront its latest crisis: a two-front war against a virus and the economic and social unrest it threatens to unleash.
 
(click to enlarge)

Before the coronavirus outbreak, the EU knew it was approaching a recession. The only question was exactly when and how bad would it be. The virus helped answer these questions – now, and potentially catastrophic. It also meant that the questions of public health measures (a national issue) and economic recession (a union issue) became intimately linked. The bloc will be judged on its ability to manage the crisis with the goal of avoiding the chaos and decline that occurred after the 2008 financial crisis. As part of its efforts to stay ahead of the economic crisis, the EU included a public health component to its initial response, something no one expected Brussels to do. As a result, the bloc faces a defining moment as it has now positioned itself as a possible solution to problems national governments may not be able to solve on their own.

The EU was meant to foster economic prosperity and thus to prevent any more continent-wide wars from breaking out. In time, its mandate evolved, eventually including more complex arrangements such as a common currency, production standards, the free movement of people and so on – all to support trade, the common market and general economic well-being. By design, it needed to be prepared for economic crises, and though its record during the 2008 financial crisis leaves something to be desired, the union held nonetheless. Brussels enacted some strong central measures for the eurozone as constituent states imposed policies that at times rivaled the EU's, but the mutual dependencies and benefits of being in the eurozone have outweighed the costs of completely breaking ties.

But the bloc was never designed to address mass public health issues and there's no history of collaboration in this area. In the past decade, health and medical sectors have been standardized somewhat for the purposes of trade, but EU legislation generally allows its members to break rank when national security is at stake. The coronavirus has certainly become a matter of national security, and though Brussels will be judged on its ability to manage the current crisis (after all, it is still expected to play a role on the economic side of the problem), its performance will depend on the buy-in and cooperation of panicked member states that are likewise scrambling for answers.

Addressing the public health crisis puts two forces at odds. On the one hand, the bloc is trying to solve a problem as a community. This makes sense on the economic level as the economies are closely integrated. On the health side, there is also a case for an integrated response given the threat is a communicable disease, how freely the populations move among one another, the close proximity of multiple countries and the desire to maintain what trade is possible. On the other hand, the member states demonstrate that they consider themselves to be facing exceptional circumstances likened to a state of war. Such a likening is not unheard of given the scale of economic and human consequences brought about by the pandemic. Given the EU was built with the intention of decreasing the risk of wartime behavior, its tools and approach are not compatible with countries in war mode where the me-or-them mentality prevails. The EU was never designed to lead a war nor fight public health battles. Member states most affected by the virus find themselves needing to do exactly this.

However ill-suited the bloc may be, it understands that the coronavirus outbreak warrants a collective response. To that end, the European Council approved Commission proposals to help guide the bloc through the public health crisis. Earlier this week, it recommended closing borders, limiting internal trade to the essentials and allowing citizens to return home. The proposals also called on the capacities of rescEU, a union-owned reserve that provides assistance in extraordinary situations. Thus, the Commission is now taking stock of medical equipment, collectively procuring supply and distribution of existing stock with the goal of equitable access and minimizing potential shortages.

The problem is that member states are responsible for reporting stocks and determining how many supplies their people need, and it’s unclear how each government makes those determinations. It’s also unclear how well Brussels can coordinate supply efforts.
 
(click to enlarge)

However, it is clear what the EU needs to combat the crisis: face masks, ventilators, health care professionals, hospital beds and so on. But already there are reports of shortages. Estimates of the disease's progression show no country has sufficient ventilators, face masks and hospital beds to meet potential peak demand. Health care professionals were already scarce prior to new demand levels. (This is to say nothing of high demand outside of Europe.)

Some countries are able to meet their own needs better than others, hence the discrepancies in which members do and do not support EU initiatives. Germany, for example, is better suited than most to manage the crisis on its own. It has the largest medical device market in Europe (ahead of the U.K., France and Italy) and the third-largest in the world (behind the United States and Japan). With Switzerland, Germany is home to the two leading ventilator producers in Europe. Italy, by contrast, boasts just one low-capacity ventilator manufacturer. France has some, but Spain has none. German company DACH Schutzbekleidung is also a leader in medical masks, particularly outside of China, though other countries such as Spain, the Netherlands and France also can produce masks.

Yet even Germany faces a potential shortage of hospital beds and health care workers. Many of these workers come from Poland and enter Germany on a rotating basis for multi-month shifts. The recent border restrictions have disrupted the cycle, making it difficult for more health care workers to enter back in.

Between the outbreak, medical shortages and lack of self-sufficiency in the public health and medical industries, many EU member states have started to turn toward their national governments for answers. In response, Berlin and Paris have imposed export restrictions on medical supplies. Given the advantages Germany has as a producer of these goods, it’s not a surprise that one of Berlin’s first moves was to restrict exports to ensure domestic needs were met first. Over the weekend, Berlin and the European Commission came to an agreement that allowed Germany to approve exports of protective equipment such as masks, goggles and gloves. Since then, it has issued licenses for the export of protective equipment to Italy, Switzerland and Austria.

What recourse, then, is there for member states? Most have begun inching toward the nationalization of key companies or operations so that the government can directly control resources during the crisis. Spain and Italy nationalized private hospitals and have legal standing to do more if they want with other companies. Germany has called on hospitals to postpone nonessential surgeries. France declared a state of “sanitary emergency” on March 18 allowing Paris to take more action in the economic sector to provide for the health system. The government is also supporting local factories as they shift production lines to produce high-demand products such as masks. Romania restarted and nationalized a company that had closed before the crisis and enlisted the help of the military to resume work to produce disinfectants. Other companies have been put to work by the state and switched to producing masks, other protective equipment and biocides (though, notably, not ventilators).
Thus there are two competing solutions to the coronavirus crisis. The EU is stepping up to grow beyond its current role to show members it’s a reliable manager. It had to, given that the source of the economic problems it needs to address requires addressing ways to stabilize a public health crisis. Meanwhile, states encourage the very kind of nationalist tendencies EU membership is supposed to dispel. Ultimately, the EU’s efforts to keep the bloc together will rest more on its ability to weather the economic impact than the public health battle.   
« Last Edit: March 20, 2020, 02:10:55 PM by Crafty_Dog »

G M

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Re: GPF: The EU and the WuFlu
« Reply #302 on: March 20, 2020, 01:49:47 PM »
The EU is done.

   
    The EU Wasn’t Built for This
By: Allison Fedirka
Europe has always struggled to define what the European Union really means, particularly after the 2008 financial crisis. It was a harsh reminder that all its members have different political and economic needs, and every move it has made since then – financial compromises, Brexit, immigration reform – has only widened the differences, even as it has stoked nationalist sentiment. This bodes poorly for the EU's ability to confront its latest crisis: a two-front war against a virus and the economic and social unrest it threatens to unleash.
 
(click to enlarge)
Before the coronavirus outbreak, the EU knew it was approaching a recession. The only question was exactly when and how bad would it be. The virus helped answer these questions – now, and potentially catastrophic. It also meant that the questions of public health measures (a national issue) and economic recession (a union issue) became intimately linked. The bloc will be judged on its ability to manage the crisis with the goal of avoiding the chaos and decline that occurred after the 2008 financial crisis. As part of its efforts to stay ahead of the economic crisis, the EU included a public health component to its initial response, something no one expected Brussels to do. As a result, the bloc faces a defining moment as it has now positioned itself as a possible solution to problems national governments may not be able to solve on their own.
The EU was meant to foster economic prosperity and thus to prevent any more continent-wide wars from breaking out. In time, its mandate evolved, eventually including more complex arrangements such as a common currency, production standards, the free movement of people and so on – all to support trade, the common market and general economic well-being. By design, it needed to be prepared for economic crises, and though its record during the 2008 financial crisis leaves something to be desired, the union held nonetheless. Brussels enacted some strong central measures for the eurozone as constituent states imposed policies that at times rivaled the EU's, but the mutual dependencies and benefits of being in the eurozone have outweighed the costs of completely breaking ties.
But the bloc was never designed to address mass public health issues and there's no history of collaboration in this area. In the past decade, health and medical sectors have been standardized somewhat for the purposes of trade, but EU legislation generally allows its members to break rank when national security is at stake. The coronavirus has certainly become a matter of national security, and though Brussels will be judged on its ability to manage the current crisis (after all, it is still expected to play a role on the economic side of the problem), its performance will depend on the buy-in and cooperation of panicked member states that are likewise scrambling for answers.
Addressing the public health crisis puts two forces at odds. On the one hand, the bloc is trying to solve a problem as a community. This makes sense on the economic level as the economies are closely integrated. On the health side, there is also a case for an integrated response given the threat is a communicable disease, how freely the populations move among one another, the close proximity of multiple countries and the desire to maintain what trade is possible. On the other hand, the member states demonstrate that they consider themselves to be facing exceptional circumstances likened to a state of war. Such a likening is not unheard of given the scale of economic and human consequences brought about by the pandemic. Given the EU was built with the intention of decreasing the risk of wartime behavior, its tools and approach are not compatible with countries in war mode where the me-or-them mentality prevails. The EU was never designed to lead a war nor fight public health battles. Member states most affected by the virus find themselves needing to do exactly this.
However ill-suited the bloc may be, it understands that the coronavirus outbreak warrants a collective response. To that end, the European Council approved Commission proposals to help guide the bloc through the public health crisis. Earlier this week, it recommended closing borders, limiting internal trade to the essentials and allowing citizens to return home. The proposals also called on the capacities of rescEU, a union-owned reserve that provides assistance in extraordinary situations. Thus, the Commission is now taking stock of medical equipment, collectively procuring supply and distribution of existing stock with the goal of equitable access and minimizing potential shortages.
The problem is that member states are responsible for reporting stocks and determining how many supplies their people need, and it’s unclear how each government makes those determinations. It’s also unclear how well Brussels can coordinate supply efforts.
 
(click to enlarge)
However, it is clear what the EU needs to combat the crisis: face masks, ventilators, health care professionals, hospital beds and so on. But already there are reports of shortages. Estimates of the disease's progression show no country has sufficient ventilators, face masks and hospital beds to meet potential peak demand. Health care professionals were already scarce prior to new demand levels. (This is to say nothing of high demand outside of Europe.)
Some countries are able to meet their own needs better than others, hence the discrepancies in which members do and do not support EU initiatives. Germany, for example, is better suited than most to manage the crisis on its own. It has the largest medical device market in Europe (ahead of the U.K., France and Italy) and the third-largest in the world (behind the United States and Japan). With Switzerland, Germany is home to the two leading ventilator producers in Europe. Italy, by contrast, boasts just one low-capacity ventilator manufacturer. France has some, but Spain has none. German company DACH Schutzbekleidung is also a leader in medical masks, particularly outside of China, though other countries such as Spain, the Netherlands and France also can produce masks.
Yet even Germany faces a potential shortage of hospital beds and health care workers. Many of these workers come from Poland and enter Germany on a rotating basis for multi-month shifts. The recent border restrictions have disrupted the cycle, making it difficult for more health care workers to enter back in.
Between the outbreak, medical shortages and lack of self-sufficiency in the public health and medical industries, many EU member states have started to turn toward their national governments for answers. In response, Berlin and Paris have imposed export restrictions on medical supplies. Given the advantages Germany has as a producer of these goods, it’s not a surprise that one of Berlin’s first moves was to restrict exports to ensure domestic needs were met first. Over the weekend, Berlin and the European Commission came to an agreement that allowed Germany to approve exports of protective equipment such as masks, goggles and gloves. Since then, it has issued licenses for the export of protective equipment to Italy, Switzerland and Austria.
What recourse, then, is there for member states? Most have begun inching toward the nationalization of key companies or operations so that the government can directly control resources during the crisis. Spain and Italy nationalized private hospitals and have legal standing to do more if they want with other companies. Germany has called on hospitals to postpone nonessential surgeries. France declared a state of “sanitary emergency” on March 18 allowing Paris to take more action in the economic sector to provide for the health system. The government is also supporting local factories as they shift production lines to produce high-demand products such as masks. Romania restarted and nationalized a company that had closed before the crisis and enlisted the help of the military to resume work to produce disinfectants. Other companies have been put to work by the state and switched to producing masks, other protective equipment and biocides (though, notably, not ventilators).
Thus there are two competing solutions to the coronavirus crisis. The EU is stepping up to grow beyond its current role to show members it’s a reliable manager. It had to, given that the source of the economic problems it needs to address requires addressing ways to stabilize a public health crisis. Meanwhile, states encourage the very kind of nationalist tendencies EU membership is supposed to dispel. Ultimately, the EU’s efforts to keep the bloc together will rest more on its ability to weather the economic impact than the public health battle.

DougMacG

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Re: GPF: The EU and the WuFlu
« Reply #303 on: March 27, 2020, 06:08:30 AM »
quote author=G M
"The EU is done."
------------------

Yes.  The EU was dysfunctional  before Brexit.  The economic growth rate in the best of times was near zero.  The EU without Britain is a greatly changed, greatly weakened group.  Greece, Italy, Spain were in really bad shape before Wuhan virus.  The open borders feature of the EU is now closed (probablly the only good news in this).  The weakening of their currency means they can't and won't buy American goods.  Without Britain, the 27 countries of the EU have but one nuclear 'power', France.  The greatest economic power in the EU, Germany, has been shutting down its electric power capacity, switching to 'solar without sunshine'.  Europe has the Muslim migration challenge, rising crime rates, stressed social spending systems, failing healthcare systems, demographic disaster, the failure of assimilation, the resumption of reliance on Russia, the debt crisis, already high tax rates and excessive burden of government spending.

Where does it go from here?  Down.  They will have a much harder time recovering economically than the US. 

From an American perspective, they will sadly become less and less relevant.  Less tourism, less strategic militarily, less important economically.

Then we have roughly half of America saying, let's be more like Europe.
----------------------
Case study, Italy:  https://nationalinterest.org/blog/buzz/coronavirus-could-create-massive-eu-debt-crisis-think-italy-137177
« Last Edit: March 27, 2020, 06:42:26 AM by DougMacG »

ccp

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Re: European matters
« Reply #304 on: March 27, 2020, 06:58:29 AM »
oh, but that merkel gal
is just great

Crafty_Dog

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G M

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Re: European matters
« Reply #306 on: March 27, 2020, 06:13:09 PM »
oh, but that merkel gal
is just great

Well, she is still in a strong second place for the worst German leader in history rating.

Crafty_Dog

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Re: European matters
« Reply #307 on: March 27, 2020, 06:32:51 PM »
Let's not forget the one who now heads to consortium with Russia doing the gas pipeline to cut Poland out of the loop , , ,

=====================


March 27, 2020   View On Website
Open as PDF



    The German Economy Is in Trouble
By: GPF Staff
 
(click to enlarge)
It’s no secret that the global economy has slowed down in March as major economies across the globe introduce measures to combat the coronavirus outbreak. Measuring the impact of these measures is challenging since data for this period has, for the most part, not be released yet. In Germany, however, the Ifo Institute’s business climate index, which measures sentiment among German managers in the areas of manufacturing, services, trade and construction, is a useful indicator.

And according to this indicator, the future doesn’t look good. In the institute’s own words, the sentiment among business managers has turned “extraordinarily dire.” “The German economy is in shock,” the institute said. The two sectors contributing most to the declining business climate were trade and manufacturing. More worrying than the plunge in the business climate, however, is the plunge in expectations for the next six months. As mentioned in GPF’s 2020 forecast, Germany is vulnerable to an economic downturn because of its dependence on exports, which account for 47.4 percent of the country’s gross domestic product, according to the latest World Bank figures. This means every 2 percent drop in exports will translate into a nearly 1 percent decline in GDP.   



« Last Edit: March 27, 2020, 06:37:27 PM by Crafty_Dog »


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Stratfor: Coming soon, Europe is fuct
« Reply #311 on: March 30, 2020, 01:02:25 PM »
n Europe, COVID-19 Extends the Tenure of Fragile Governments
Adriano Bosoni
Adriano Bosoni
Senior Europe Analyst, Stratfor
7 MINS READ
Mar 30, 2020 | 17:21 GMT
An illustration of a microscope image of the new coronavirus and a surgical mask overlaying a 100 euro banknote.
A surgical mask and microscopic images of the new coronavirus overlay a 100 euro banknote. As it tears EU economies apart, the COVID-19 pandemic is also helping unite the bloc's formerly fragmented governments.

(Shutterstock/Kenan Stocks)
HIGHLIGHTS
As it tears EU economies apart, the pandemic is also bringing the bloc's fragmented political climate together. Though this renewed stability will only last as long as the health crisis....

The coronavirus outbreak is ravaging Europe’s economy by simultaneously bringing production, consumption, investment and trade to a near halt. But the pandemic is also helping freeze the Continent's political crises by forcing governments to unite against the escalating existential threat. Europe's political tumult, however, will return once the immediate contagion has abated. And several countries, in particular, will see a combination of financial and legislative fragility that will limit their ability to deal with the enduring economic repercussions. 

The Big Picture

European governments have reacted to the coronavirus crisis by pumping money into their economies. These efforts have, in part, been made possible by once-fragile governments putting aside their differences to introduce emergency measures. But when the coronavirus crisis is over, many governments will be made weak once again, hindering their capacity to quickly and effectively recover from the lingering economic impact.


COVID-19: Political Stability's Unexpected Ally

Several EU countries started the year with minority governments, caretaker administrations or unstable coalitions that the coronavirus crisis has since made much more resilient:

Italy

Before COVID-19 was detected in Italy, tensions between the country's coalition partners — the anti-establishment Five Star Movement and the center-left Democratic Party — were on the rise over issues such as the annual budget and reforms of the criminal justice system. Poor results in regional elections and the defection of several lawmakers to opposition parties had also further weakened the government. Prior to the outbreak, opinion polls had suggested the Euroskeptic League party could win if an early election was called, and would form a government with like-minded parties. A government led by the League would make investors nervous about Italy’s membership in the euro, adding political and economic uncertainty to Italy’s future.

The escalation of coronavirus cases and the drastic measures that followed, however, have since temporarily suspended Italy's political crisis. The March 29 referendum on a constitutional reform to reduce the number of lawmakers in the Italian Parliament has also been indefinitely postponed due to the COVID-19 crisis. Italy will probably not hold an early general election before the referendum takes place because of the complications related to electing members of parliament before the reduction in the number of lawmakers is enforced.


Germany

Germany's coalition government between the center-right Christian Democratic Union (CDU), the Christian Social Union and the center-left Social Democratic Party was also on the verge of collapse at the start of 2020. The partners have different views on fiscal policy, and were also trying to differentiate themselves in the eyes of voters after governing together for the majority of the past 20 years. Their poor performance in regional elections in late 2019 and early 2020 led to internal debates over whether to put an end to the coalition and hold an early general election.

But the arrival of COVID-19 has since put the coalition's crisis on pause. After months of virtual paralysis, the German government swiftly closed the country’s borders, announced tax benefits for companies and households, and offered government-backed loans to businesses. The outbreak also postponed the CDU’s plans to appoint a new leader. A party congress that was scheduled for April 25 has been suspended, and the new date has yet to be announced. The new CDU leader stands a decent chance of winning a general election and becoming the new chancellor after Angela Merkel's term ends in 2021. He or she will also have to decide whether to continue with Angela Merkel’s centrist approach, or to move to more right-wing positions to stop the party's continued hemorrhage of voters to the far-right Alternative for Germany party. But without a leader, the CDU will not be interested in exiting the government coalition and holding an early general election.

Belgium

In mid-March, the COVID-19 crisis convinced nine political parties in Belgium's parliament to put their ideological differences aside and formally support Prime Minister Sophie Wilmes’s caretaker government, which had been operating with limited powers since October. This formal support for Wilmes has granted her government full powers to pass emergency measures to cope with the outbreak. But while the coronavirus gave Belgium its first fully-fledged government since the inconclusive general election of May of 2019, the parties have only given their support to Wilmes for six months, after which she will have to ask for the confidence of parliament again in mid-September. If the worst part of the health crisis is over by then, the prime minister may struggle to win that vote and her government may in turn collapse, leading to renewed political turbulence in Belgium.

Romania

When the coronavirus crisis hit Romania, the country was struggling to find a new prime minister. Prime Minister Ludovic Orban of the center-right National Liberal Party was in power only in a caretaker role after losing a no-confidence motion in early February. Parliament was unable to appoint a successor, opening the door for a potential early general election. But after the COVID-19 outbreak took hold in early March, the Romanian parliament formally re-appointed Orban as prime minister, with support from some of the opposition lawmakers that voted to oust him just a month before. Shortly after his reappointment, Orban announced a stimulus package including cheap loans to companies and state support for workers who were suspended because of the pandemic.

A Fleeting Lifeline

Having stable governments in Europe is beneficial at a time when the Continent is feeling the immediate economic blow of the coronavirus outbreak. When governments do not have to deal with internal disputes and are united toward a common goal, they are in a better position to make decisions to mitigate the economic effects of crises, such as the current health emergency. But this new phase of political stability may not survive long after the danger has passed, as the sense of urgency that brought political adversaries together will be gone. And as a result, the governments that were fragile before the outbreak will see their disagreements resurface.

Political instability will return to many European countries at a time when their economies are still reeling from the aftermath of the COVID-19 crisis.

In addition, there will be a lag between the drop in contagion cases and the recovery of the economy. The eventual relaxation of quarantine measures will allow the services and industrial sectors to resume their activities as people are allowed to leave their homes and production and consumption gain traction again. The problem is that many businesses will not survive the crisis, and some of the workers that were suspended during the peak of contagion will not get their jobs back. Europe’s largest economies — including Germany, France and Italy — were already cooling down before the COVID-19 outbreak, meaning that the Continent's post-virus recovery will likely be slow and uneven.

To make things more complicated, slow economic growth, higher unemployment and fragile governments will coincide with the financial problems created by the policy reaction to the outbreak. Countries such as Italy, France, Germany and Spain have announced large packages of stimulus measures (including cheap loans for companies, assistance for self-employed workers and delays in tax payments) that will partially be financed by taking on additional debt. In a context of low growth, this decision will deepen their deficits and widen their debt-to-GDP ratios, which could make financial markets once more worry about whether this is sustainable.

Political instability will thus return to many European countries at a time when their economies are still reeling from the aftermath of the COVID-19 crisis. This will reduce the room for many governments to introduce structural reforms to deal with the growth problems that predated the pandemic. Meanwhile, the prospect of early general elections in large countries such as Italy and Germany will also result in households and investors postponing some of their spending and investment decisions amid the reemerging political uncertainty. This means that Europe will feel the consequences of the coronavirus outbreak long after the outbreak is put under control.

Crafty_Dog

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GPF: European Crash coming
« Reply #312 on: March 31, 2020, 10:33:56 AM »
By: GPF Staff
Anticipating an economic crash. According to a European Commission report, the economic crash resulting from the coronavirus pandemic could cause a recession deeper than the one that followed the 2008 financial crisis, which saw a 4.3 percent drop in the European Union’s gross domestic product. The report did not, however, specify by how much the economy would contract this time around. So far, European countries have introduced stimulus packages worth on average 2 percent of GDP and provided liquidity of around 13 percent – but the European Central Bank has already warned that 2 percent will not be nearly enough. Italian business lobby Confindustria has said it expects Italy’s GDP to shrink this year by 6 percent, it’s biggest fall since 1946. And though the EU is considering issuing so-called “coronabonds,” the head of the eurozone’s bailout fund warned that it could take up to three years to set them up.

DougMacG

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European matters, WRM: CV re-opens old divisions, EU pays or dies?
« Reply #313 on: April 09, 2020, 12:19:08 PM »
South Europe hit hardest.  North Europe richer, can afford this, S. Europe poorer, can't.  N. Europe now missing UK. 

From the article:
"Portugal’s Prime Minister António Costa agrees: “Either the EU does what needs to be done or it will end.” Inaction, warned French President Emmanuel Macron, could be the death of the EU."
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https://www.wsj.com/articles/coronavirus-reopens-europes-old-division-11586386729?mod=opinion_featst_pos2

Coronavirus Reopens Europe’s Old Division
The economics of the pandemic pit the South against the North on the question of ‘corona bonds.’

By Walter Russell Mead
April 8, 2020

European Union flags fly outside the European Central Bank’s headquarters in Frankfurt, Feb. 13, 2015.
PHOTO: MARTIN LEISSL/BLOOMBERG NEWS
Usually it’s right-wing U.K. and U.S. euroskeptics who prophesy doom for the European Union, but in the past couple of weeks voices of gloom have come from the heart of the EU establishment.

Former European Commission President Jacques Delors spoke of a “mortal danger” to the bloc. Former Italian Prime Minister Enrico Letta warned of the “deadly risk” Europe faces. Spain’s Prime Minister Pedro Sánchez called this Europe’s “worst crisis since the Second World War.” Portugal’s Prime Minister António Costa agrees: “Either the EU does what needs to be done or it will end.” Inaction, warned French President Emmanuel Macron, could be the death of the EU.

The coronavirus has reopened old wounds and torn Europe in two along the old creditor-debtor line—a mostly Latin Southern Europe vs. a largely Nordic and Germanic North. The massive economic and social shock of the pandemic has hit every European country, but the Germans and their neighbors can manage, mostly, on their own resources. Southern states, many already burdened with high levels of debt and some having yet to recover from the 2007-09 recession, need help.

That much isn’t controversial. Even the tightfisted Dutch agree that the coronavirus is a once-in-a-century crisis that demands a pan-European response. The Northerners recognize that the bailouts following the 2007-09 recession didn’t work as well as hoped, and they understand, or claim to understand, the resentment that is so common in the South. They say they’re willing to approach this crisis in a generous spirit of European solidarity.

They have already agreed to lift the much-criticized deficit caps on member states. The European Central Bank is providing unlimited support for member states’ bonds, and the European Investment Fund is also ready to help. Beyond that, the European Stability Mechanism has about €400 billion ($435 billion) ready to be deployed. Another €100 billion fund will support crisis-hit businesses and workers. The Northerners are also signaling that in light of this unprecedented challenge, they are ready to live with a somewhat larger EU budget to help with the recovery.

But this isn’t enough for the South. Italy and Greece remember the humiliating conditions attached to the bailouts following the 2008 crash. The ensuing decade of austerity and slow growth generated a deep, bitter anger toward what the South saw as a stingy North. Public opinion in Italy, once among the most pro-European countries in the union, swung sharply against the EU. A March poll showed that 88% of Italians thought Europe was being unhelpful in Italy’s fight with the coronavirus, and 67% of those polled said that Italy’s membership in the EU was a “disadvantage.”

Against this background, Prime Minister Giuseppe Conte has taken a hard line against further conditional loans, demanding that the EU issue joint bonds in the crisis. Italy and other struggling countries could use the funds from these bond sales for relief and economic recovery, with taxpayers in Northern countries equally responsible for repaying the debt. Eight other EU member countries, including France and Spain, have joined in his demand.

To many Southerners, the need for “corona bonds” is obvious. Wealthy Northern countries have the resources to cope with the emergency. Germany, whose ratio of debt to gross domestic product is about 60%, can afford to subsidize small business, bolster its banks, and pay generous benefits to the unemployed—even as it provides health care to an unprecedented number of ailing citizens. Italy, with a debt totaling about 135% of GDP before the crisis, doesn’t have the fiscal firepower to cover these costs. Rome has had enough of bailouts and loans; it is insulting to be given strict conditions and required to accept oversight simply to take steps toward overcoming a national calamity.

Debt mutualization is a step too far for many in the North. At the time the euro was adopted, Northern voters were promised that the eurozone wouldn’t become a “transfer union” in which richer states would be compelled to support the governments of poorer (and, some say, less well-managed) states in the South. Introducing common EU bonds might weaken the power of euroskepticism and populism in the South—but it would increase such feelings in the North. Is the EU really better off if Italy is pro-Europe again, but Germany and the Netherlands turn euroskeptic?

A 14-hour marathon teleconference among EU finance ministers failed to reach a consensus Tuesday night over what conditions should be placed on emergency loans. The even more divisive issue of corona bonds was postponed to the future. Despite the dire warnings and the bruised feelings on both sides, the standoff is unlikely to end the EU. Realistically, Italy and other Southern countries have nowhere else to go. Hundreds of billions of euros will be needed to cover the cost of the epidemic and the economic closures and to launch the recoveries ahead. The U.S., Russia, China and international financial institutions aren’t going to bid against the EU for the privilege of bailing the Southerners out. It’s Brussels or bust.


Crafty_Dog

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Stratfor: Southern Euro's ChiCom Virus problems just beginning
« Reply #315 on: April 13, 2020, 04:45:29 AM »
Stratfor Worldview
Southern Europe’s COVID-19 Crisis Is Just Beginning
7 MINS READ
Apr 13, 2020 | 10:00 GMT

HIGHLIGHTS

For many governments in Southern Europe, containing the COVID-19 contagion in the coming weeks may prove to be the easy part. After the immediate health crisis subsides in the region, much bigger economic and political troubles will quickly follow in the second half of the year. Countries including France, Italy,...

For many governments in Southern Europe, containing the COVID-19 contagion in the coming weeks may prove to be the easy part. After the immediate health crisis subsides in the region, much bigger economic and political troubles will quickly follow in the second half of the year. Countries including France, Italy, Spain, Greece and Portugal will experience deep recessions and severe fiscal problems, which in some cases will be made worse by the return of political instability and the strengthening of nationalist opposition parties.

The Big Picture

Countries in Southern Europe are currently focusing their efforts on containing COVID-19 contagion and mitigating the negative economic effects of quarantine measures. But this will come at the expense of worsening deficits and higher debt levels that, over time, could make investors nervous about the sustainability of debt in Southern Europe and trigger new financial crises across the Continent.

Deep Recessions

Most, if not all, countries in Southern Europe will be in a recession this year because of the quarantine measures implemented to contain COVID-19. Many economies in the region were already slowing down before the pandemic. In the fourth quarter of 2019, France’s economy contracted by 0.1 percent, Italy’s by 0.3 percent and Greece’s by 0.7 percent. Countries such as Spain (+0.5 percent) and Portugal (+0.7 percent) saw some growth, but it was weak.

The data for the first quarter of 2020 will be negative, but the data for the second quarter will be worse. Southern European countries introduced their toughest quarantine measures in March, which means that normal economic activity in January and February will somewhat mitigate the impact of the COVID-19 in the first quarter. But with the quarantine measures in full force in April, and a progressive lifting of the measures potentially starting in May, the second quarter will probably show deeper GDP contractions in Southern Europe.


It is impossible to know the exact duration and depth of the recessions since they will depend on the evolution of contagions and the progressive lifting of the lockdowns. But because many companies have gone out of business during the quarantine, and hundreds of thousands of workers have lost their jobs, production, consumption and investment will probably remain weak in the third and potentially even the fourth quarter of 2020.

Higher Unemployment
 
Unemployment rates fell steadily in Southern Europe since the peak of the financial crisis in the early 2010s. In early 2020, unemployment was below 10 percent in Portugal, France and Italy, and around 14 percent in Spain and 16 percent in Greece. But these rates will increase significantly in the coming months because many of the workers who lost their jobs or were suspended during the quarantine will not find immediate employment once the outbreak is over.

The quarantine measures are destroying millions of jobs in Europe. In Spain, almost 900,000 jobs (in a labor force of roughly 23 million) were lost between layoffs and suspensions in the second half of March alone. In France, nearly four million workers (in a labor force of around 30 million) were on state-subsidized furloughs at the beginning of April. In Portugal, by late March, companies had asked for state permission to dismiss more than 500,000 workers (in a labor force of less than 6 million). Unemployment benefits and state subsidies are not a full substitute for salary, which reduces the affected workers’ ability to consume and further weakens the economy.

Higher Deficit and Debt Levels

In recent weeks, national governments have pumped massive amounts of money into the economy in the shape of state-backed loans for companies, delays in tax payments for households, and assistance for workers who lost their jobs. A big part of these measures will be funded by taking on additional debt. So far, Southern European governments have been able to take on new debt at low-interest rates, partially because of the intervention of the European Central Bank in debt markets. But when the COVID-19 contagion is over, these countries will find themselves with higher debt levels amid deep recessions.

Italian business lobby Confindustria recently calculated that the country's debt could reach 147.2 percent of GDP in 2020 from 134.8 percent in 2019. Goldman Sachs, meanwhile, said that Italy's debt could reach as much as 160 percent of GDP this year. According to the Swiss financial services firm Credit Suisse, Spain’s sovereign debt will reach 105.3 percent of GDP in 2020 from 94.4 percent in 2019. And the Italian bank Unicredit said Portugal’s debt could reach 145.7 percent from 117.6 percent a year ago.


The main question that markets will try to answer after the COVID-19 pandemic is over is whether these levels of debt are sustainable. One of the places where they will look for answers is fiscal deficits, and the situation will not be reassuring. Before the current health crisis, some countries in Southern Europe were struggling to take their deficits below the EU-mandated threshold of 3 percent of GDP. But the broad trajectory was still toward compliance with the bloc’s requests. However, the massive stimulus packages in Southern Europe will lead to deficits that, depending on the calculation, could be between 5 and 10 percent of GDP in 2020 (some analysts suggest they could be even higher).

Credit rating agencies could react to these debt and deficit levels by downgrading the countries in trouble. This would make it more expensive for governments to borrow and, in countries such as Italy, would bring debt dangerously close to “junk” status, which means that many investors would not be able to purchase Italian debt because of their internal rules against the purchase of risky assets. A degradation in the quality of bonds would also have a negative impact on the assets portfolio of the banks that hold them — a problem that is particularly acute in Italy, where banks hold billions of euros in debt from the national government.

A heavier debt burden, combined with higher borrowing costs, would also constraint the Southern European government’s room to spend domestically because a significant part of public revenue would have to be used to service the debt. Over time, national governments may have to introduce spending cuts and tax hikes to increase state revenue and reduce their deficit, limiting their ability to emerge from the recession.

Southern European Countries will experience deep recessions long after the COVID-19 pandemic subsides, which could give rise to another wave destabilizing nationalist movements.

The economic crisis will also create problems for banks holding private debt. In recent years, banks in Southern Europe have been reducing their exposure to non-performing loans at a fast pace. But the risk of households and companies defaulting on their loans will increase hand-in-hand with the rise in unemployment and the contraction of economic activity. The four EU member states with the highest ratio of non-performing loans are all southern: Greece, Cyprus, Portugal and Italy. These are the places to look at for banks potentially failing because of the economic downturn.

Another Nationalist Wave?

The COVID-19 crisis brought temporary political stability to several countries in Europe. Politicians across the Continent have put their ideological differences aside to back emergency measures, increasing the popularity of many governments. But when the worst part of the health crisis is over, pre-existing political disputes will return. And governments that were either fragile (such as Italy’s) or unpopular (such as France’s) will see their old problems come back. Once the emergency passes, the blame game will begin as opposition parties focus their criticism on the things that the governments should have done differently. Nationalist and Euroskeptic parties in the south will attack countries in the north for their lack of solidarity, and will criticize the European Union for its slow reaction to the crisis.

The austerity measures could further complicate the political situation. During the financial crisis of the early 2010s, most of the governments that implemented unpopular spending cuts were punished by voters in the next election. The crisis also contributed to the emergence of anti-establishment parties, some of which had anti-immigration and anti-EU positions. So far, nationalist parties such as Italy’s League and France’s National Rally have struggled to take advantage of the coronavirus pandemic. But these kinds of parties thrive in times of recession, which means that the door will be open for existing or new parties to emerge as a result of the new economic crisis that is just now beginning Europe.


DougMacG

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European Matters, Covid recovery plan, "The Frugal Four"
« Reply #317 on: June 19, 2020, 04:10:03 PM »
Previously in this thread, Brexit [will] result in a shift of the balance of power in the EU (greater Germany) from the richer northern countries to the southern poorer countries.

https://www.dw.com/en/frugal-four-nations-counter-franco-german-eu-initiative/a-53545304

Austria, Denmark, the Netherlands, and Sweden put forward a counter-proposal to France and Germany's recently submitted €500 billion ($545 billion) coronavirus economic recovery plan, a source reported on Saturday.

Many saw  Chancellor Angela Merkel and French President Emmanuel Macron's initiative as an important step towards stronger European Union (EU) financial relations. However, the four fiscally conservative states – already reputed in the bloc as the "frugal four" – are seeking a unique emergency fund to re-strengthen the EU's economy.

Crafty_Dog

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Re: European matters
« Reply #318 on: July 21, 2020, 01:58:30 PM »
After Brexit, the Deluge
Boris Johnson faces many tests. If he can pass them, Britain may emerge stronger.

By Walter Russell Mead
July 20, 2020 6:29 pm ET


Few world leaders face as many staggering tests as Boris Johnson. Withdrawing from a trading bloc that accounts for 43% of British exports was already going to be the biggest challenge in U.K. foreign and economic policy for a generation. Then came Covid, and as if that weren’t enough, China imposed harsh new security laws in the former British territory of Hong Kong. The U.K. has offered British residence to qualified Hong Kong residents, suspended its extradition agreement with the city, and—in an unrelated decision that also enraged Beijing—announced plans to exclude Huawei from the U.K. telecommunications market. As China threatens retaliation, Britain will have to reform its relationship with its many European trading partners and weather the pandemic-induced recession sweeping the world.

Meanwhile, London’s resurgence as a global financial center—the biggest success for the U.K. economy since World War II—is under threat. The mix of financial deregulation and globalization since the 1980s has brought extraordinary benefits to British finance and service firms. But now many countries are turning toward reregulation and deglobalization. Financial centers like London may have to reinvent themselves to thrive. Worse, U.K. markets and investors will likely face harsher treatment from EU authorities in a post-Brexit world.

Relations with Moscow, already icy following the 2018 poisoning of a Russian defector on British soil, are also worsening. Last month, the U.K. angered both Donald Trump and Vladimir Putin by announcing its opposition to Russia’s re-entry into the Group of Seven. This Tuesday, British investigators are expected to announce evidence of Kremlin meddling in the Brexit referendum, the referendum on Scottish independence, and last December’s general election.

Speaking of Scexit, strong pro-secession sentiment in Scotland could boil over in next year’s scheduled Scottish elections. Recent polling shows a majority of Scottish voters favor independence, and the Scottish National Party is projected to win by a landslide.

As the EU turns inward, relations between the U.K. and its member countries are unlikely to improve. Europe’s political energy and financial resources will be directed toward addressing the economic tensions between North and South and the political tensions between the West and populist-ruled countries like Hungary and Poland. Unfortunately, a navel-gazing Europe has less energy for the kind of flexible and creative diplomacy that could build a strong new U.K.-EU relationship.

None of this is good for Britain, and it will certainly make Mr. Johnson’s tenure in Downing Street memorable, but it’s not the end of the world. U.K. exports to the EU and to China will suffer. They won’t disappear. Brexit and antiglobalism abroad will challenge London, but it has overcome challenges before. With the Battle of Brexit and the Corbynite era of the Labour Party both receding into the past, British politics may be settling down. And an infusion of entrepreneurial, talented and grateful Hong Kong people will likely boost U.K. prospects over the long run.

Although the North Atlantic Treaty Organization will remain the core of Britain’s security policy and relations with Europe will figure prominently in its diplomacy, Britain is looking elsewhere for its future. Fifty-two years after Harold Wilson announced that the U.K. was retreating from “East of Suez,” Mr. Johnson’s Britain is returning to the Indo-Pacific. The Five Eyes, Asian countries concerned about China’s rise, and longtime U.S. and U.K. allies in the Persian Gulf are the basis for a new grouping in world affairs in which Britain hopes to find a place. With a combined 29% of the world’s population and 46% of its gross domestic product, this bloc offers rich prospects for new British markets and partnerships.

The Gulf Arab states remain vital for the U.K. Close ties between British and Arab elites persist and will be critical to London’s future as a world banking center. We can also expect an intense U.K. effort to build ties with India, a natural alternative to China as both a market and a manufacturing platform.

The key to Britain’s new foreign policy will be Washington. Britain badly needs an ambitious new trade agreement with the U.S. and will hope to work with other members of the emerging Indo-Pacific entente to persuade America to make a rules-based trading system an integral part of its Asia policy.

For Washington, the U.K. remains a vital ally and Britain’s return to the Indo-Pacific is good news. British and American interests in the region are broadly aligned, and the development of a stable and prosperous region in the face of Chinese hostility will benefit from Britain’s presence. Secretary of State Mike Pompeo’s message to the U.K. today should be one of support and reassurance. It is very much in America’s interest for Britain to be great.

Crafty_Dog

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GPFL George Friedman on Brexit
« Reply #319 on: September 08, 2020, 10:32:38 AM »
   
    Eternal Brexit
By: George Friedman

In 2016, the British government called for a referendum on whether the United Kingdom should remain a member of the European Union. The British people voted to leave. Since then, there has been a struggle in Britain to reverse the decision and a struggle between Britain and the EU on the terms of the departure. It’s now 2020, and the process still isn’t finished. Given that the EU is based merely on a treaty – not a federation – sovereignty is a matter for individual states, not the “government” in Brussels. Treaties are arrangements between nations, not a merger of nations, and therefore are reversible.

Since we are about to see a new and presumably final round of negotiations on the divorce, with the EU now calling for a rapid resolution, even as the Irish question is now the blocker, the real issue is how this matter has dragged on so long. To anyone who has been divorced or seen one, it makes sense: Divorces are almost always filled with rage, recrimination, desires to inflict pain and sometimes the desire that the old affection be resurrected. The children are made pawns. Friends must choose sides.

The difference, of course, is that Britain’s relationship to the EU is simply a matter of national interest and not the result of a love affair. Britain and the EU lived together when they had to, but they never married. And so the lawyers continue to meet as each side creates more barriers to an amiable disengagement.

The first barrier to the separation was within Britain. The technocratic classes and the financial community took it for granted that Brexit would be rejected by the voters. When it wasn’t, they had two choices: face the fact that they had misunderstood their country, or label the vote flawed and the result of ignorance on the part of those who voted for withdrawal. Naturally they chose the latter, a decision that is primarily responsible for Brexit’s delay. If the ignorant voted for Brexit, all they needed was a little education in the error of their ways, or so the thinking went. The best strategy, then, was to delay Brexit and persuade the country that Brexit would be catastrophic so that the government could reverse the vote.

The problem was that the technocracy and the financial community were confusing their interests with those of the country as a whole. Free trade had benefitted many, but it had also left the industrial classes struggling as low-wage countries had access to the British market. The result was a near depression in the industrial heartland of Britain. As in other countries, those who benefitted from free trade were either indifferent or mostly ignorant of the price others were paying. They never imagined they would lose the referendum, but then they didn’t know how many unemployed industrial workers there were.

A second barrier concerned national sovereignty, particularly on immigration. The enlightened elite felt a moral obligation to help immigrants. They were in lockstep with the elite of the European continent on this. Of course, the immigrants would not be living with the elites in their neighborhoods. Immigrants live in low-cost housing, the same kind that the industrial class has lived in since its decline. The idea that immigration could not be blocked under EU rules meant not only a loss of national sovereignty but a burden to be uniquely carried by those who have lost the most.

The irony was that, historically, the political factions that championed the interests of the industrial working class and were hostile to the financial elite found themselves with the opposite stance: The industrial working class was now perceived as reactionary and racist, while the financial and technocratic elite was seen as enlightened. If opposition to Brexit was enlightened, then the vote could be reversed once the rest of the country understood as much. Hence the strategy to reverse the vote and reaffirm British commitment to the EU. This continued until the election of Boris Johnson settled the question.

The EU, meanwhile, did what it could to make Brexit unpalatable with a two-pronged approach. The first was to make it appear that Brexit would be financially catastrophic for Britain and relatively inconsequential to the EU. The second prong was to make the negotiations as difficult as possible, setting terms as onerous as possible and difficult for Britain to accept. The irony was that if Brexit was of so little concern to the EU as it portrayed, then the seemingly inflexible stance it took made no sense. In truth, losing free access to the second-largest economy in Europe was enormously important, and bargaining positions notwithstanding, some accommodation was essential.

The driving force in this strategy was an implicit alliance between anti-Brexit Britons and the EU. Both badly wanted to keep Britain in the EU, and the actions of each were meant to help the other. A rigid negotiating position by Brussels made a manageable Brexit seem impossible, and might strengthen the hand of anti-Brexit British. At the same time, the constant maneuvers to reverse Brexit strengthened Brussels’ hand since they were dealing with what might be a declining faction in Britain. Together, these two factions might break the back of Brexit.

The strategy failed, of course, because neither faction could recognize or concern itself with the price the British industrial class was paying. Both expected this class to weaken, but in fact, the faction remained intact and even attracted others. The lower class movements, labeled right wing by the elite, became more powerful and more extreme. The British problem became the European problem, same as it ever was.

We are now entering what seems to be the final phase. Brussels appears to be bitter at how long the process has taken, and the chief EU negotiator, who had been threatening and unrelenting in his negotiating strategy, appears to have been removed from his position. In other words, the EU is no longer the issue. Once Britain had decided to leave, there was nothing the EU could do except delay. The issue now is the historical British issue: Ireland. Ireland is in the EU and will stay. It wants free trade with Northern Ireland. Northern Ireland is part of the U.K. and therefore will leave the EU. The EU cannot permit free trade between an EU member and a part of Britain since that will turn into free trade with England, which is not nearly as much a problem for Ireland or Britain as it is for the EU. The EU is balking, and Britain is leaving. That may reignite the political conflict in Northern Ireland.

Marriages are wonderful things. Divorces are agonizing things for all involved. This is particularly relevant when the couple has merged as completely as a good marriage requires. The lesson for nations is that all alliances end in divorce. And the more focused and limited, the less agonizing the inevitable is. In a marriage, all are one, or should be. In a political arrangement that is never the case. It’s nothing more than nations pursuing their national interest. Until death do us part does not apply to nation-states.   




DougMacG

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European matters, Debt Spiral
« Reply #320 on: October 05, 2020, 07:45:27 AM »
 “The eurozone is sliding further into a debt-deflation trap, risking a protracted economic depression in the southern countries and a slow-motion insolvency crisis. Large areas of the eurozone are at risk of debt deflation, a term used by Irving Fisher in the 1930s for when falling price levels cause real debt burdens to deteriorate in a vicious circle. It is extremely hard to break out of such a self-feeding process. It ends in mass default. The OECD’s worst case scenario sketches debt-to-GDP ratios next year reaching 229 percent in Greece, 192 percent in Italy, 158 percent in Portugal, 152 percent in France, and 150 percent in Spain. “We’re seeing a storm building up that may come to a head over the next six months,” said Ashoka Mody, the International Monetary Fund’s former deputy director in Europe.  ‘Debts have to be repaid and a lot of new debt has been guaranteed by governments that can’t pay.’”

https://www.telegraph.co.uk/business/2020/10/02/deepening-deflation-pushes-southern-europe-closer-debt-spiral/

Crafty_Dog

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Re: European matters
« Reply #321 on: October 05, 2020, 10:39:43 AM »
What will President Harris Biden do about this?

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Stratfor: Spain and the Catalonian push for independence
« Reply #323 on: December 21, 2020, 12:47:13 PM »


In Spain, the Next Phase of Catalonia's Independence Push
7 MINS READ
Dec 21, 2020 | 15:40 GMT
Demonstrators hold a Catalonian flag ahead of a political meeting in Perpignan, France, on Feb. 29, 2020.
Demonstrators hold a Catalonian flag ahead of a political meeting in Perpignan, France, on Feb. 29, 2020.

(LLUIS GENE/AFP via Getty Images)

HIGHLIGHTS

Pro-independence forces in Spain’s Catalonia region will likely remain in power after February regional elections, but they are unlikely to achieve their secessionist goals in the near-to-medium term. Nonetheless, Catalonia’s persistent push for independence will risk eventually undermining its own political and economic stability, as well as that of Spain’s. It could also stoke a nationalist backlash in other parts of the country. Catalonia will hold an early regional election on Feb. 14, though the vote could be postponed depending on the evolution of Spain’s COVID-19 epidemic. Opinion polls suggest that secessionist forces, which include the Republican Left of Catalonia (ERC) and Together for Catalonia (JxCat) will win enough seats in the Catalan parliament to form a government. Both parties were involved in the illegal referendum and the 2017 unilateral declaration of independence, and some of their leaders are in jail while others have fled the country to avoid arrest. ...

Pro-independence forces in Spain’s Catalonia region will likely remain in power after February regional elections, but they are unlikely to achieve their secessionist goals in the near-to-medium term. Nonetheless, Catalonia’s persistent push for independence will risk eventually undermining its own political and economic stability, as well as that of Spain’s. It could also stoke a nationalist backlash in other parts of the country. Catalonia will hold an early regional election on Feb. 14, though the vote could be postponed depending on the evolution of Spain’s COVID-19 epidemic. Opinion polls suggest that secessionist forces, which include the Republican Left of Catalonia (ERC) and Together for Catalonia (JxCat) will win enough seats in the Catalan parliament to form a government. Both parties were involved in the illegal referendum and the 2017 unilateral declaration of independence, and some of their leaders are in jail while others have fled the country to avoid arrest.

In early December, the Barcelona-based El Periodico newspaper released a GESOP poll in which 22 percent of respondents said they planned to vote for the ERC. JxCat came in second at 19.4 percent, followed by the two unionist parties — the Socialist Party of Catalonia (PSC) and Ciutadans (Cs) — with 18.9 percent and 10.6 percent, respectively.

Some polls suggest pro-independence parties in Catalonia may, for the first time, receive more than 50 percent of the popular vote in the next election. If this happens, the secessionist parties — who already have a majority of seats in the Catalan parliament — will use it to legitimize their demands for a legally binding independence referendum. But a larger popular mandate in Catalonia is unlikely to change Madrid’s opposition to such a vote. 

Instead of making unilateral moves toward succession, the next Catalan government will likely focus on selectively challenging the authority of the Spanish central government, as it seeks to continue cooperating with Madrid in areas where it proves beneficial. The desire to secure extra national funding for the region, along with extra help in managing the spread of COVID-19, will compel Catalonia’s pro-independence parties to maintain a working relationship with Madrid. These parties will also want to avoid a repetition of the events of 2017, which resulted in the Spanish central government dismissing the Catalan regional government and taking direct control of the region. These tactical reasons to cooperate with Madrid — along with internal divisions within the pro-independence camp — will, in turn, reduce the probability of unilateral action to secede from Spain.

The COVID-19 pandemic has temporarily made Catalan independence a secondary issue for many voters. Similarly, the regional government’s immediate priority is to address the health and economic repercussions of the pandemic.

In recent months, the ERC and, to a lesser extent, JxCat have cooperated with the Spanish central government on certain issues. In early December, both parties voted in favor of the 2021 budget proposed by Spanish Prime Minister Pedro Sanchez’s government, which included roughly 2.3 billion euros in investment and fiscal transfers for Catalonia.

On Nov. 10, the Spanish parliament reformed a national law requiring that Spanish be the main language taught in schools throughout the country. This was a longstanding demand of Catalan and Basque nationalists that was made possible by the region’s cooperation with the central government.

ERC and JxCat are also interested in cooperating with the Spanish government to ensure the early release of the pro-independence leaders who are in prison. Madrid is currently considering pardoning the jailed leaders and modifying the country’s sedition laws that were used to detain them.

Small secessionist parties, like the left-wing Popular Unity Candidacy (CUP) are likely to continue demanding unilateral action and defend a confrontational strategy vis-a-vis Madrid, but their impact on actual policy will be modest.

Conservative parties in Spain will accuse the central government of being too lenient with Catalonia, which will likely exacerbate the country’s political polarization by opening the door to protests and the potential radicalization of some Spanish voters. Center-right Spanish political parties, including the Popular Party (PP) and Ciudadanos (Cs), will escalate their criticism of Sanchez’s government, accusing it of putting the country’s territorial unity at risk. In particular, Spain’s far-right Vox party will likely organize anti-government protests, trying to capitalize on growing nationalist sentiments across the country. Spain’s growing political polarization could pave the way for a center-right central government following the country’s next general election, which is scheduled for late 2023 but could happen sooner if the current minority government collapses before then. A more right-wing Spanish government would worsen Madrid’s relationship with Catalonia, increasing the probability of renewed unilateral action in the region.

As of late November, Spain’s Socialist Party was polling at roughly 28.8 percent, followed by PP at 18 percent. Recent polls also put Vox’s popularity at around 17 percent, an improvement from the 15.1 percent of the vote it received in the general election of November of 2019.

In late November, a group of 73 retired army officials sent a letter to Spanish King Felipe VI warning that the Spanish central government’s cooperation with secessionist parties was putting the country’s territorial integrity at risk. While this position does not necessarily represent the views of the active army officials, it coincides with the position of some nationalist political parties like Vox.

Spain’s central government only controls 155 of the 350 seats in the Congress of Deputies. While Sanchez managed to obtain 188 votes in favor of his budget, this majority could evaporate if nationalist parties in Catalonia and the Basque country stop cooperating with the central government.

Questions about Spain’s territorial integrity will continue to generate political and economic risk in the country, exacerbating the financial fallout from the COVID-19 crisis. The ongoing pandemic poses the most immediate threat to the Spanish economy, with domestic consumption and investment likely to remain depressed for at least several more months. In the longer term, the Spanish central government will also have to deal with worsening fiscal deficit and rising debt levels, which could raise questions in financial markets about the sustainability of Madrid’s fiscal policies. The risk of households and companies defaulting on their bank loans will remain high during 2021, as will the risk of companies going bankrupt — especially those that are small- and medium-sized). In a longer-term, the question of Spain’s territorial integrity will be of concern for both domestic and foreign actors in the country’s economy, influencing their investment and spending decisions. 

The European Commission expects the Spanish economy to contract by 12.4 percent in 2020, followed by a 5.4 percent expansion in 2021. This means that Spain’s overall economic growth is expected to remain below pre-pandemic levels throughout the next year.

Spain’s unemployment rate also reached 16.2 percent in the third quarter of 2020, up from 13.9 percent in the same quarter of 2019. Catalonia’s unemployment rate, meanwhile, reached 13.2 percent in the third quarter of 2020, up from 10.8 percent in the same quarter of 2019.
Spain’s sovereign debt is expected to reach around 120 percent of GDP in 2020, from 95 percent of GDP in 2019.

Uncertainty about Catalonia’s future appears to have also contributed to a decrease in foreign direct investment (FDI) in the region, which decreased by roughly 5 billion euros between 2016 and 2019, according to Catalonia’s Statistics Institute. During that same period, FDI in the community of Madrid increased by nearly 3 billion euros.

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Brexit Deal
« Reply #324 on: December 24, 2020, 12:17:53 PM »
The EU and U.K. Reach a Trade Deal, Ending Brexit. What Now?
Adriano Bosoni
Adriano Bosoni
Senior Europe Analyst, Stratfor
6 MINS READ
Dec 24, 2020 | 16:58 GMT

HIGHLIGHTS

Five years of economic uncertainty for households and companies that began with the Brexit referendum of 2016 have come to an end. The European Union and the United Kingdom have reached a free trade agreement that covers most goods, but only a limited number of services. This means that manufacturers in the European Union and the United Kingdom will be able to continue trading with each other from Jan. 1, 2021, without any quotas or tariffs, and the heavily disruptive scenario of trade under World Trade Organization tariffs has been avoided. On the contrary, the services sector (which represents around 80% of the British economy) will have limited access to the EU single market. ...

Five years of economic uncertainty for households and companies that began with the Brexit referendum of 2016 have come to an end. The European Union and the United Kingdom have reached a free trade agreement that covers most goods, but only a limited number of services. This means that manufacturers in the European Union and the United Kingdom will be able to continue trading with each other from Jan. 1, 2021, without any quotas or tariffs, and the heavily disruptive scenario of trade under World Trade Organization tariffs has been avoided. On the contrary, the services sector (which represents around 80% of the British economy) will have limited access to the EU single market. On Dec. 24, Brussels and London announced a free trade agreement after nine months of negotiations. The announcement came only a week before the scheduled British exit from the single market on Dec. 31. In addition to trade, the deal covers cooperation on areas including nuclear energy, energy interconnections, aviation, fishing, police and judicial affairs.

The deal includes the elimination of tariffs and quotas for EU and British goods. Customs controls, however, will be applied to ensure goods comply with the agreement. This will result in additional bureaucracy that did not exist when the United Kingdom was a part of the single market.

Starting Jan. 1, companies in the British financial services sector will lose their authorization to sell their products in the single market. The European Union grants so-called "passporting" and "equivalence" rights to third countries with similar regulatory environments, but no deal has been reached yet. This is a crucial issue for the United Kingdom, as financial services represent around 7% of the British economy. London is likely to try to reach an agreement with Brussels on this issue in 2021.

The agreement does not automatically recognize one another's professional qualifications. This means that lawyers, accountants, architects and other professionals in the European Union and the United Kingdom will not be able to automatically sell their services in each other's markets and may need to open offices in the European Union and the United Kingdom, respectively, to do so. This is another area of possible negotiation in 2021.

The deal does not include a so-called "mutual recognition of conformity assessment," which means that EU and British companies will have to certify their products in each other's markets, which will create extra costs.

The free movement of people between the European Union and the United Kingdom will end, which means that people will need visas to work in each other's territories.

The deal will now be put to a vote at the European Council, which represents the EU governments, and the British Parliament. The vote at the European Parliament will take place in January, which means that the trade deal will enter force only provisionally Jan. 1, pending full confirmation from EU lawmakers. The European Commission has been in permanent contact with EU governments during the negotiations, which means that the European Council will likely ratify the deal. In the United Kingdom, Prime Minister Boris Johnson's Conservative Party controls a comfortable majority of seats in Parliament, and some members of the opposition Labour Party may also vote for the deal. While some euroskeptic Conservative members of parliament may vote against the deal, the rebellion should not be strong enough to torpedo the deal. The provisional implementation of the deal will create some uncertainty about its future, but the European Parliament will probably ratify it considering the significant political capital that the European Commission has invested.

Nigel Farage, who leads the Brexit Party, and some hard-line Conservative members of parliament have already criticized the deal. But most Conservative members of parliament have said they will support it, which means it will probably be ratified.

The French government has been particularly loud in its claims that it would not support a "bad" trade agreement. But Paris is unlikely to veto the agreement after so many months of negotiation.

The European Parliament will not have the power to modify the terms of the deal in January; the vote will be on a "take it or leave it" basis.

In the short term, the United Kingdom's reduced access to the EU market is likely to negatively impact the British economy. In the long run, this trade deal gives London some degree of autonomy to develop its own regulations and standards and opens the door for it to negotiate free trade agreements with other countries. For the European Union, the deal preserves access to the British market for a sector where it has a trade surplus (goods) while reducing its exposure to a sector where it has a trade deficit (services). The deal also achieved the EU goal of keeping the Irish border open and preserving the integrity of the single market from external competition because it includes provisions to sanction the United Kingdom in the case of unfair competition.

The current British trade strategy started in 2019, when London chose to exit the EU single market and customs union and negotiate a basic free trade agreement with the European Union.

In a press statement on Dec. 24, the British government said that the deal guarantees "we are not bound by EU rules, there is no role for the European Court of Justice and all of our key red lines about returning sovereignty have been achieved."

The British government has expressed interest in signing multiple free trade agreements around the world with countries such as the United States and the members of the British Commonwealth; many of these countries were waiting for the EU-U.K. negotiations to end before proceeding with their own talks.
In recent years, firms in the British financial services sector have moved some of their staff and operations to the single market in order to continue to be able to sell their products in the European Union.

This agreement puts an end to the period of political and economic turbulence that began with the Brexit referendum of June 2016. The European Union and the United Kingdom will continue to negotiate aspects of the bilateral relationship that remain unaddressed as well as the bilateral disputes that may emerge during its implementation. But with a free trade agreement in place, Brexit will finally become a secondary issue in European politics. Since 2016, business groups, unions, farmers, consumers' associations and other groups have demanded clarity from the European Union and the United Kingdom about their future relationship. Brexit has also been a dominant factor of British politics and, to a much lesser extent, EU politics.

One of the more important long-term political consequences of Brexit for the United Kingdom will be the issue of Scottish independence. A majority of Scottish voters supported the "remain" side during the Brexit referendum, and the governing Scottish National Party wants another independence referendum in the country, something London opposes.

For the European Union, a key political goal was to send the message to domestic voters that exiting the bloc is not easy or painless. Nationalist and euroskeptic political parties in the bloc will now face the challenge of adapting their rhetoric to a post-Brexit Europe.