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Corruption is rotting the periphery of Europe

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The US and EU are both battling to protect democracy and the rule of law. The American struggle is more dramatic because the US president himself is leading the effort to subvert the political system. In Europe, by contrast, the threat comes largely from the fringes.

Hungary and Poland are in the spotlight as their governments resist efforts to link EU funding to respect for the rule of law. But focusing exclusively on the Hungarians and Poles underplays the scope of Europe’s problem. In several other EU countries, recent corruption scandals and rule of law controversies have raised serious questions about the health of their democratic systems. They include Bulgaria, Romania, Slovakia, Slovenia, Croatia, Malta and Cyprus. Collectively, the troubled democracies account for between one-quarter and one-third of the 27 governments seated around the EU conference table.

The Hungarian and Polish cases get the most attention partly because there is an ideological element to the dispute. Viktor Orban, Hungary’s leader, delights in giving lectures about “illiberal democracy”. The Poles and the Hungarians have also passed laws that undermine judicial independence.

Graft and corruption elsewhere in the EU tend to take place the old-fashioned way — under cover and without accompanying speeches attacking liberalism. These scandals attract less attention overseas. But they have provoked mass demonstrations and political instability in many of the countries concerned.

Since July, thousands have taken to the streets in Bulgaria to demonstrate against the government of Prime Minister Boyko Borisov. The crowds are inflamed by stories about politicians and officials buying apartments at way below market rates — as well as by a photo of Mr Borisov, next to an open drawer full of €500 notes and gold ingots. The prime minister says the images are fake. But even Bulgaria’s president, Rumen Radev, has accused him of running a “mafia government”.

In recent years mass protests have also shaken Romania, where anti-graft prosecutors have battled with government ministers. Liviu Dragnea, once the ringmaster of Romanian politics, was sent to prison in May 2019 for three and a half years on corruption charges. Ivo Sanader, Croatia’s longest-serving prime minister since independence, was sentenced on November 13 to eight years for corruption.

Elsewhere in the EU, corruption scandals have been mixed up with murder. Jan Kuciak, a journalist, and his fiancée, Martina Kusnirova, were murdered in Slovakia in 2018. Kuciak had been investigating links between the Italian mafia and officials close to Robert Fico, the prime minister — who was forced to resign after protests that followed Kuciak’s death.

In Malta, Daphne Caruana Galizia, a prominent investigative journalist, was murdered in 2017 after writing about alleged money laundering by powerful officials, as well as the business dealings of the prime minister’s wife. The investigations and public demonstrations that followed her death eventually led to the resignation of the prime minister, Joseph Muscat, and to the arrest of his chief of staff, Keith Schembri.

Mr Schembri is out on bail and has not been charged in a police inquiry into the sale of Maltese passports to non-EU nationals. The sale of passports by Cyprus has also become controversial — with the government accused of issuing passports to foreign criminals and the relatives of despots such as Syria’s Bashar al-Assad and Cambodia’s Hun Sen.

Some may argue that corruption and violence in small countries such as Malta or Cyprus are relatively insignificant in an EU of 440m people. But in France, former president Nicolas Sarkozy is on trial for corruption and influence-peddling. Transparency International’s corruption perception index suggests that Italy’s graft problem may be worse than that of Malta or Cyprus.

Corruption in any country, however small, affects the EU as a whole. Every country has a veto over some crucial policies, such as the EU budget. Each country also gets a turn at chairing the EU and shaping its agenda. A passport from any EU country confers the right to live and work anywhere in the EU27.

The EU’s powers to investigate corruption and enforce the law in its member states are limited. The recently established European Public Prosecutor’s Office can only take on cases involving abuse of EU funds or actions by its staff. Participation in the EPPO is voluntary. Hungary and Poland have opted out.

Eurosceptics will seize upon these flaws to argue that the EU itself is rotten. Mr Borisov has certainly received more protection from fellow EU politicians than he deserves. But if the EU were dissolved, corruption problems in countries such as Bulgaria would probably get worse.

When it acts, the EU is a force for good. After Laura Codruta Kovesi, an anti-corruption prosecutor in Romania, was sacked, the EU institutions supported her. Ms Kovesi was later appointed to head the EU’s public prosecutors’ office — demonstrating that the political culture of Brussels is still set by governments that take the rule of law seriously.

Even so, badly-governed states with corruption problems are well-represented around the EU table. European leaders pose together at summits for what is called the “family photo”. There are quite a few crooked uncles and dodgy cousins smiling for the camera.

gideon.rachman@ft.com

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Vaccine cocktails cause headaches for Italy’s government

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Buongiorno and welcome to Europe Express.

Italian cocktails such as the Aperol Spritz are being enjoyed in many European capitals these sunny days, but mixing Covid-19 shots is proving a recipe with potentially toxic effects for the government of Mario Draghi. We will explore why recent flip-flops on this latest vaccination trend are dominating the political debate in Italy.

Sticking with toxic politics, an en masse resignation at the Oslo city council has highlighted the difficulties even respectable Nordic oil producing countries face in working out how to meet their international climate obligations.

As for the EU’s stalled Banking Union, the ball did not move yesterday because of multiple differences between eurozone finance ministers gathered in Luxembourg. Eurogroup chief Paschal Donohoe, who has been trying to land a “work plan” setting out how to advance the complex initiative, said it would take more time to agree the plan between member states and that he would return to the matter later this year. Here is a full rundown of why the project remains blocked.

This article is an on-site version of our Europe Express newsletter. Sign up here to get the newsletter sent straight to your inbox every weekday morning

Toxic cocktail recipe

Mixing Covid-19 vaccines risks turning into a toxic cocktail recipe for Mario Draghi’s government, as an increasing number of Italians begin to shun immunisation, writes FT Milan correspondent Silvia Sciorilli Borrelli.

Italian authorities last week banned the Oxford/AstraZeneca vaccine for people younger than 60. At the same time, they sought to impose mRNA jabs, such as BioNTech/Pfizer and Moderna, as the second dose for almost 1m people who had already received a first dose of the vaccine.

Both moves were prompted by the death of an 18-year-old woman (who allegedly suffered from low blood platelets) from a rare form of blood clot two weeks after receiving her first AstraZeneca dose.

But this latest change in guidelines sparked panic among the public, with thousands of people cancelling their vaccination appointments. Adding to the public scare was Marco Cavaleri, a senior European Medicines Agency official, who was misquoted in Italian media as saying that the AstraZeneca jab should be banned altogether.

The EU regulator reiterated this week that the advantages of the AstraZeneca vaccine outweighed the risks for all age groups.

Nevertheless, the Italian government has come under fire for failing to restrict it for younger people earlier and for continuing to give the public mixed messages on a vaccine that has been discontinued in several European countries and was banned for certain age groups in others months ago.

The idea of an obligatory cocktail of vaccines was met with strong opposition in Italy, where several regional governments signalled that they would not follow Rome’s orders and vowed to offer citizens an option for their second dose.

Yesterday, after an increasing number of people refused the vaccine cocktail and with only 24 per cent of the population fully immunised, officials in Rome suggested Italy might follow the “Spanish model.” Under that policy, people can still opt to receive their second AstraZeneca dose regardless of their age after signing a liability waiver in case of adverse effects. 

France has also approved mixing the AstraZeneca and mRNA vaccines for people under the age of 55, but it is not mandatory and applies to a smaller proportion of the population than in Italy.

Franco Locatelli, head of the health council, insisted preliminary studies showed mixing vaccines boosted the immune system’s response.

However, preliminary findings of a study published in The Lancet last month showed the vaccine cocktail amplified common side effects and therefore “might have some short-term disadvantages”.

The absence of unambiguous data on the effects of mixing led Italian commentators to harshly criticise the government’s decision and its poor communication on the AstraZeneca jab’s limitations.

Several analysts and politicians also claimed that the media had been sympathetic to Draghi’s government and the Covid-19 commissioner he installed, whereas the former prime minister, Giuseppe Conte, would have been “torn to pieces” had the same situation materialised. 

Italy’s decision to set up vaccination “open days” — where people as young as 16 could show up without a booking to be immunised with any vaccine available — also came under fire domestically and abroad.

How would you feel about being inoculated with two doses of different Covid-19 vaccines? Take our poll here.

Chart du jour: Inflation extremes

Line chart of Annual inflation (%) showing Eurozone inflation mostly trends upwards

The European Central Bank’s governing council meets on a hillside in Frankfurt today, with inflation targets one of the big issues on their agenda. Figures released for May showed inflation was on the rise across most of Europe, with Luxembourg recording an increase of 4 per cent. At the opposite end, Greece, hampered by low tourism numbers, is still recording negative inflation.

Norway’s Greens vs Big Oil

A fierce and sometimes surreal controversy has felled Oslo’s entire government, giving a taste of some of the debates that are likely to resurface in national elections in September, writes Richard Milne, FT Nordic and Baltic bureau chief.

The entire centre-left Oslo city council resigned in protest on Wednesday after a vote of no confidence in Green politician Lan Marie Berg, because of her failure to disclose a huge cost overrun in a new water pipeline for Norway’s capital.

Berg is one of the most polarising politicians in Norway, as her outspoken attacks on petrol cars and more have drawn a torrent of criticism, some of it heavily misogynistic and racist.

She is running for Norway’s national parliament in elections on September 13 that the centre-left opposition — of which her Green party is part — are on track to win.

But the controversy surrounding her underscored the difficulties that Norway, western Europe’s biggest petroleum producer, is experiencing in working out how to meet its climate obligations.

The International Energy Agency warned last month that there should be no new oil and gas exploration to reach the Paris agreement goal of limiting global warming to 1.5C more than pre-industrial levels. But Norway’s main centre-left Labour party and ruling centre-right Conservatives have shown no desire to call time on the country’s oil industry.

The Greens have said they would not support any government that continues with oil exploration, but it is far from clear whether the party will gain enough votes to enter parliament. Many Norwegian voters appear put off by their tough rhetoric, with the Centre party — rivalling Labour as the biggest centre-left group — defending diesel cars popular with their mostly rural supporters.

The surreal aspect of the events in Oslo is that the same centre-left government is likely to be reborn without Berg, who wants to focus on her parliamentary run. That led the Centre party to accuse her of self-indulgence for not simply resigning and sparing the capital the spectacle of high political drama in the midst of a pandemic. It also demonstrated the divisions within Norway’s centre-left and the difficulties they could have in forming a coherent national government should they win in September.

What to watch this weekend

  1. Brexit commissioner Maros Sefcovic gives a speech today at the College of Europe on the EU’s post-Brexit relations with the UK

  2. The Conference on the Future of Europe holds its first plenary session tomorrow in Strasbourg

Smart reads

  • WFH future: Remote working is here to stay, with a majority of European office workers preferring it to the old way of going in to the office. A policy paper by Bruegel suggests the EU should set up a regulatory framework for hybrid working.

  • Gig workers: Self-employed, in fierce competition for orders, without social protection and subject to algorithmic bias — this is the experience of most delivery service workers in Europe. The Centre for European Policy Studies has published a report about the situation of digital platforms workers in all 27 EU countries over the past five years.

  • Flying green: FT travel editor Tom Robbins writes about his experience onboard the world’s fully electric two-seat plane, which was recently certified for commercial use in the EU market.

  • Axe the G7: A week after the G7 summit in Cornwall, economist Jeffrey Sachs argues that the format is outdated and consistently fails to deliver results — and should therefore be consigned to the history books. (PS)

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Today’s Europe Express team: silvia.borrelli@ft.com, richard.milne@ft.com, david.hindley@ft.com, valentina.pop@ft.com. Follow us on Twitter: @silvia_sb_, @rmilneNordic, @valentinapop.





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The links with Tai that Brussels hopes will bind

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This article is an on-site version of our Trade Secrets newsletter. Sign up here to get the newsletter sent straight to your inbox every Monday to Thursday

Hello from Brussels, where the barbed-wire barricades have been cleared away, the buses are back running on their usual routes rather than being diverted around the centre and in general the city has the typical morning-after feeling that follows a visit from the US president. Today’s main piece looks at what Joe Biden’s trip to Brussels actually meant for trade, while Charted waters delves into the nature of the trading relationship between the two jurisdictions.

We want to hear from you. Send any thoughts to trade.secrets@ft.com or email me at alan.beattie@ft.com

Warm words now, but a cold reality awaits

And so the US presidential procession leaves behind, certainly in Brussels trade circles, a profound sense of relief that they are dealing with the personable and constructive Joe Biden and Katherine Tai rather than the abrasive and frequently toxic Donald Trump and Robert Lighthizer.

The big victory was the Airbus-Boeing deal after a mere 17 years of World Trade Organization litigation, not just in itself but for what it said about the possibilities of constructive engagement. Tai, the US trade representative, told a media roundtable in Brussels on Tuesday: “This was a test of our relationship and our ability to build confidence and trust.” However, as Trade Secrets wrote yesterday, it’s not a given that an ad hoc make-it-up-as-you-go-along approach will work between two economies and their aircraft manufacturers, which still have serious problems with each other’s subsidy models.

In fact, if you had to sum up the entire encounter, it was that while leaders and officials luxuriate publicly in a rhetorical hot tub of co-operation and mutual appreciation, they still need to pass through a cold shower of political and legal reality on the way to the changing rooms.

Having China as a rival in common is certainly a useful bonding experience and framing device. The Airbus-Boeing deal was portrayed as a joint response to the rise of aircraft manufacturers in non-market economies. Similarly, the US pledge to fix the “Section 232” national security tariffs on EU steel and aluminium that the Biden administration inherited from Trump was put in the context of global overcapacity driven by Chinese (and others’) steel production.

Still, when it comes to a choice between irritating an ally such as the EU (and possibly breaking international law) and disappointing a politically powerful domestic constituency such as the steel industry, which likes the tariffs, the Biden administration has so far chosen the former

Plans to remove existing transatlantic irritants remain either fragile or aspirational. The Airbus-Boeing subsidies have been suspended but not abolished. Tai said on Tuesday: “We have pivoted to co-operation and collaboration, but it is going to be helpful to have the ability to bring these tariffs back to keep each other honest.” In other words: trust but verify, agree a ceasefire but do not disarm.

On the Section 232s, which are supposed to be fixed by the beginning of December, Tai said: “There are hard questions that we have to face and deep feelings that we’re going to have to address . . . we’re going to push ourselves and our partners in the EU for an outcome that is going to be good for our relationship, for our industries, for our economies, for our workers”. If you believe the zero-sum logic of protectionism, there may be some difficulty in addressing all those goals at once.

There are mysterious nose-tapping “wait and see” noises from both sides about how they might punch enough of a hole in the 232 tariff wall to let some European steel and aluminium into the US without alienating blue-collar workers enough to hand the Midwest to the Republicans. But it’s going to be technically and politically difficult to get that done in less than six months.

As for the WTO itself, certainly the Biden administration pleased the EU and others by moving quickly in its early weeks to unblock the appointment of Ngozi Okonjo-Iweala as director-general. But that wasn’t politically costly: only isolationist headbangers in US politics and business really want to destroy the institution. Asked on Tuesday about the prospects for reviving the WTO’s at-present paralysed appellate body, long disliked by the US steel industry for ruling American antidumping duties illegal, Tai said: “I’m definitely not answering that.”

The goodwill certainly sounds like it’s there. Every utterance on both sides was suffused with the rhetoric of co-operation. Tai even went out of her way to praise the EU for its submission to the WTO on the vaccine IP issue which, unlike the US stance, does not call for a patent waiver.

On that subject, incidentally, while declining to rule out the US itself submitting a negotiating text, she said: “I think that we have a unique ability in the WTO on this issue to be a facilitator, to have credibility with the different sides”. This strengthens our view that the US is far happier to get the good PR from supporting a waiver in principle than to stick its neck out by taking a position in the talks.

Whatever the vibe, the Biden administration is overwhelmingly focused on its domestic economy and maintaining political support, and the EU doesn’t have any votes in the next year’s US midterm elections. We’ll watch the outcomes with interest but without great confidence that everything will get fixed in short order.

Charted waters

We’ve written about the diplomatic relationship, but what about trade between the EU and US itself? As the chart below shows, the two have a tight — and increasingly important — relationship. The EU’s surplus has grown slightly of late, though by a smaller factor than the growth in total values of traded goods.

Column chart showing the EU maintains a healthy trade surplus with the US

In terms of industries, here’s a breakdown of the most valued ones for the EU. The importance of machinery and transport equipment goes some way to explaining why Trump’s threat of tariffs on the car industry did so much to rile lawmakers here. Claire Jones

Bar chart of EU trade balance with the US, by product group (€bn) showing the EU surplus by sector

Trade links

A round-up of stories from the Financial Times this morning. As jurisdictions get tougher on due diligence, lawyers are helping companies clean up their supply chains. We also have an opinion article, which pushes for a global consensus on how to stress test supply chains. This follows calls from the US — wise in our view — to set up a global forum for supply chain resilience. New Zealand wants to agree trade deals with the EU and UK this year in an attempt to become less reliant on China.

Many countries have imposed sanctions on Myanmar following the military coup earlier this year. Not so Moscow. Nikkei ($) reports that Russia’s rolling out of the welcome mat for Myanmar’s air force commander was a cue to the junta that its arms will flow to the south-east Asian nation.

Bloomberg ($) has a piece on European car sales failing to recover to pre-pandemic levels. We think this may have something to do with chip-induced supply shortages. In the meantime, the price of used cars has surged. Alan Beattie and Claire Jones

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Biden warns Putin of ‘devastating’ fallout if activist Navalny dies in jail

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Joe Biden warned Vladimir Putin that there would be “devastating” consequences for Russia if opposition activist Alexei Navalny were to die in prison after “open” and “frank” talks aimed at stabilising relations between the two countries.

In their first face-to-face meeting as leaders, the presidents agreed to begin bilateral talks on preventing cyber attacks, restart talks on arms control, restore their ambassadors to their respective embassies and explore a potential exchange of citizens held in each other’s prisons, Putin said.

Billed as a meeting riddled with difficult topics and mutual grievances, Putin told reporters following talks that lasted three and a half hours that there was “no hostility” and the conversation was “efficient . . . and constructive”.

“This was a productive meeting,” Putin said. “It was fruitful. It was to the point, and it took place in an atmosphere that was enabling . . . it gave us glimpses of confidence and hope.” 

Putin praised Biden’s moral qualities and described his approach as pragmatic and well balanced, but said it was “hard to say” whether relations would improve as a result.

Biden told reporters he had handed Putin a list of “certain critical infrastructure [that] should be off limits” from cyber attacks, which comprised 16 entities including the energy sector and water systems.

“I said: ‘How would you feel if ransomware took down the pipelines that run from your oilfields?’” Biden said.

But he echoed Putin’s comments about the tone of the meeting, which he said was “good, positive . . . There wasn’t any strident action taken.”

He added that he raised the issue of Navalny’s detention with Putin and what would happen if the activist died in prison. “I made it clear to him the consequences of that would be devastating for Russia.”

Navalny was arrested and sentenced to prison recently after returning to Russia. “Human rights is always going to be on the table,” Biden said.

Putin had answered questions about Navalny by saying that he had broken Russian law and knew he would be jailed if he returned to Russia, and claimed that his political activity was seeking to weaken Russia.

The meeting started at about 1.30pm local time with a handshake between the two leaders at the 18th-century Villa La Grange by Lake Geneva, and ended just after 5pm, more than an hour earlier than aides had predicted.

US secretary of state Antony Blinken, US president Joe Biden, Russian President Vladimir Putin and Russian foreign minister Sergei Lavrov
From left: US secretary of state Antony Blinken, Biden, Putin and Russian foreign minister Sergei Lavrov at Villa La Grange © Brendan Smialowski/AFP/Getty

Cyber warfare was one of the biggest irritants before the summit, following a major hack of US government agencies last year by Russia-based groups, and alleged disinformation campaigns in the US by Moscow-backed organisations.

Biden had described Putin as a “worthy adversary” ahead of the meeting and said he was going to clarify to the Russian leader “what the red lines are”. Russia was seeking to drive a wedge in transatlantic solidarity and the US was experiencing an increase in malicious cyber activity, Biden added. He promised to respond in kind if necessary.

“We believe cyber space is extraordinarily important in general and in particular for the US, and to the same extent for Russia,” Putin told reporters.

The agreed bilateral government talks on cyber security will be a first for the US and Russia, and have previously been resisted by Washington.

Biden and Putin also grappled with a long list of accusations, complaints and charges against one another, including alleged Russian meddling in US elections, US sanctions against Moscow and the Kremlin’s misgivings over Nato military expansion in eastern Europe.

Other difficulties in the relationship are torn-up arms control agreements and war in Ukraine.

Biden travelled to the Swiss city after a week in Europe meeting G7, EU and Nato allies. The response to threats posed by Russia was continually raised in talks with western leaders. The EU warned in a foreign policy paper on Wednesday of a “negative spiral” in EU-Russia relations.

The US president said world leaders had thanked him for holding the summit, which some analysts have criticised as handing Putin a diplomatic victory.

Biden said at the outset of the meeting: “As I said outside, it is always better to meet face-to-face to try to determine where we have mutual interest; co-operate, and where we don’t, establish predictable and rational” relations. He added: “Two great powers.”

Putin said that his ambassador would return to Washington, and the US ambassador would return to Moscow following the talks.

The respective diplomats left their posts earlier in the year after a chain of events prompted by Biden agreeing with an interviewer that Putin was a “killer”.



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