Emerging Markets

Polish parliament backs PM’s hardline stance on EU budget

Published

3 months ago

November 19, 2020

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Poland’s parliament has issued a resolution backing the government’s stance in negotiations over the EU’s €1.8tn budget and recovery package, ahead of a summit in which the bloc’s leaders are due to discuss ways out of the impasse.

Two weeks ago, European officials struck a deal to link access to EU funds to respect for the bloc’s principles, including the independence of the judiciary, in a move proponents say would give the EU a powerful tool to push back against the authoritarian drift in some member states.

However, Poland and Hungary, which are both subject to EU disciplinary procedures over the rule of law, indicated on Monday that they would veto the bloc’s budget over the mechanism, leaving officials scrambling to find ways to revive the package, which is designed to help the bloc’s battered economies weather the impact of the coronavirus pandemic.

EU leaders were set to discuss ways forward during a virtual summit on Thursday evening. But shortly before the meeting, Poland’s parliament resolved not to accept “any solution which does not guarantee EU member states respect for their rights which are enshrined in the [EU’s] treaties”.

The resolution also reiterated the Polish ruling camp’s criticism that the rule-of-law mechanism, which would allow funding to be withheld if this was supported by a majority of member states, would pave the way for politically motivated attacks on Warsaw.

“All propositions containing provisions that are vague, imprecise and prone to biased interpretation must be decisively rejected — otherwise there is a threat that payments from the EU budget could be completely blocked by an arbitrary decision of the European Commission,” the resolution stated.

“From numerous statements from politicians from many European countries, there is no doubt that Poland is meant to be the target of such actions.”

Manfred Weber, head of the right-of-centre European People’s party grouping in the European Parliament, insisted on Thursday that the proposals would create more legal certainty, not less, and “no politicisation of the process”.

However, in an impassioned speech on Wednesday night, Poland’s prime minister Mateusz Morawiecki accused the EU of using the rule of law as a “propaganda stick” against his country, comparing the bloc’s actions to Poland’s former communist dictatorship.

He also warned that the EU risked behaving like an “oligarchy” and claimed that politically motivated use of the proposed rule-of-law mechanism against Poland would lead to the collapse of the bloc.

“We demand that the EU is not a union of double standards, but a union of equals, and not a union of more and less equal,” he said, listing a number of grievances with the bloc, ranging from the treatment of Polish “posted workers” to the fact that many young Poles — the “flower of the nation” — had gone abroad for work.

“Europe is great, when it is a Europe of fatherlands, when Europe is able to work together, when it can nurture transatlantic relations, when it can in a real way build economic cohesion: a Europe of fatherlands, a Europe of nations, a Europe as was envisioned by its Christian founding fathers.”

Failure to settle the disagreement and enact the EU’s upcoming seven-year budget within the coming weeks would have damaging consequences for EU member states — including Poland and Hungary themselves.

Without an agreement by early December, the bloc would have to fall back on am emergency spending programme for 2021. This so-called “provisional twelfths” annual budget would extend the bloc’s 2020 spending ceilings but only allow money to flow to some ringfenced areas. Cohesion payments would continue for existing projects, but new ones would not be started, hitting poorer EU member states in particular.

The squeeze would be exacerbated by delays to the EU’s €750bn recovery fund, which includes Poland and Hungary among its key beneficiaries.

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Emerging Markets

NYSE to suspend trading of China’s Cnooc next month

Published

15 hours ago

February 26, 2021

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The New York Stock Exchange is to start delisting proceedings against China National Offshore Oil Corporation to comply with an executive order from Donald Trump that bans Americans from investing in companies with ties to the Chinese military.

The NYSE on Friday said it would suspend trading in Cnooc’s American depository shares on March 9, after determining that the company was “no longer suitable for listing” following the order that the former US president signed in November.

The order banned investing in several dozen Chinese groups that were last year put on a Pentagon blacklist of companies that are accused of working with the People’s Liberation Army and threatening US security. Trump set a January 28 deadline for the ban to take effect, but President Joe Biden pushed the deadline back to May 27.

The NYSE move comes as Biden evaluates a number of assertive actions that Trump took against China during his last year in office. The commerce department last year put Cnooc on a separate blacklist — called the “entity list” — that makes it hard for US companies to sell products and technology to the Chinese oil group.

The Biden administration has not made clear whether it intends to keep Trump’s executive order in place. But the new president and his officials have so far adopted a tough stance towards China over everything from its economic “coercion” to concerns about its clampdown on the pro-democracy movement in Hong Kong to the repression of more than 1m Uighur Muslims in the northwestern Chinese province of Xinjiang.

Earlier this month, Biden used his first conversation with Chinese president Xi Jinping since assuming office to raise concerns about Hong Kong and Xinjiang, and aggressive Chinese actions towards Taiwan. Antony Blinken, secretary of state, also described the detention of Uighurs in labour camps as “genocide”.

Jen Psaki, White House press secretary, has said the administration was conducting a number of “complex reviews” of the China actions that Trump took. The former president put dozens of other Chinese companies on the Pentagon and commerce department blacklists, including Huawei, the Chinese telecoms equipment group.

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Emerging Markets

Bond sell-off roils markets, ex-Petrobras chief hits back, Ghana’s first Covax vaccines

Published

1 day ago

February 26, 2021

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The yield on the benchmark 10-year Treasury exceeded 1.5 per cent for the first time in a year and the outgoing head of Petrobras warns Brazil’s President Jair Bolsonaro against state controlled fuel prices. Plus, the FT’s Africa editor, David Pilling, discusses the Covax vaccine rollout in low-income countries.

Wall Street stocks sell off as government bond rout accelerates

https://www.ft.com/content/ea46ee81-89a2-4f23-aeff-2a099c02432c

Ousted Petrobras chief hits back at Bolsonaro

https://www.ft.com/content/1cd6c9fb-3201-4815-9f4f-61a4f0881856?

Africa will pay more for Russian Covid vaccine than ‘western’ jabs

https://www.ft.com/content/ffe40c7d-c418-4a93-a202-5ee996434de7

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Emerging Markets

Petrobras/Bolsonaro: bossa boots | Financial Times

Published

2 days ago

February 25, 2021

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“Brazil is not for beginners.” Composer Tom Jobim’s remark about his homeland stands as a warning to gung-ho foreign investors. Shares in Petrobras have fallen almost a fifth since President Jair Bolsonaro said he would replace the widely respected chief executive of the oil giant.

Firebrand Bolsonaro campaigned on a free-market platform. Now he is reverting to the interventionism of leftist predecessors. It is the latest reminder that a country with huge potential has big political and social problems.

Bolsonaro reacted to fuel protests by pushing for a retired army general to supplant chief executive Roberto Castello Branco, who had refused to lower prices. This is politically advantageous but economically short-sighted.

Fourth-quarter ebitda beat expectations at R$60bn (US$11bn), announced late on Wednesday, a 47 per cent increase on the previous quarter. This partly reflected the reversal of a R$13bn charge for healthcare costs. Investors now have to factor the cost of possible fuel subsidies into forecasts. The last time Petrobras was leaned on, it set the company back about R$60bn (US$24bn at the time). That equates to 40 per cent of forecast ebitda for 2021.

At just over 8 times forward earnings, shares trade at a sharp discount to global peers. Forcing Petrobras to cut fuel prices will make sales of underperforming assets harder to pull off and debt reduction less certain. Bidders may fear the obligation to cap prices will apply to them too.

A booming local stock market, rock bottom interest rates and low levels of foreign debt are giving Bolsonaro scope to spend his way out of the Covid-19 crisis. But the economy remains precarious. Public debt stands at 90 per cent of gross domestic product. The real — at R$5.40 per US dollar — remains near record lows. Brazil’s credit is rated junk by big agencies.

Rising developed market yields will make financings costlier for developing nations such as Brazil. So will high-handed treatment of minority investors. It sends a dire signal when a government with an economic stake of just over a third uses its voting majority to deliver a boardroom coup.

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