When coronavirus hit, Germany splashed out on Europe’s most generous package of emergency aid. Now, for the first time since the start of the pandemic, politicians are asking whether the country can actually afford such largesse.
The debate was stirred by last week’s consultations on the 2021 budget. Olaf Scholz, finance minister, shocked MPs by nearly doubling the amount of new borrowing to €180bn. That comes on top of the €218bn of debt Germany is taking on in 2020, the largest amount in its postwar history.
Mr Scholz is unrepentant. “One shudders to think what would have happened here if we hadn’t invested such big sums,” he said on Friday. “Timidity would cost us too dear.”
That view is backed by most of Germany’s leading economists, who insist the country should do whatever it takes to cushion the coronavirus-related slump. The government parties, Angela Merkel’s CDU/CSU and the Social Democrats, are also largely supportive — in public at least. But opposition MPs worry Mr Scholz is storing up trouble for the future.
The expansion in debt is “threatening to become a crisis of the next generation”, said Karsten Klein, an MP with the pro-business Free Democratic party.
For a country that once prided itself on its balanced budgets, the sums are indeed eye-watering. Yet it was clear from the start that the policy of schwarze Null or “black zero” would never survive the coronavirus crisis.
So when the pandemic arrived, Mr Scholz quickly wheeled out his “bazooka” — a €1.3tn programme of subsidies and grants to businesses, supplemented in June with a €130bn stimulus package. He also suspended the “debt brake”, a measure enshrined in the German constitution which limits the budget deficit to just 0.35 per cent of gross domestic product.
Some in the opposition say that Mr Scholz’s motivation in opening the spigots is to improve his chances in next year’s Bundestag election, where he is running as the Social Democrats’ candidate for chancellor.
“The constitution doesn’t say that in an emergency you can spend whatever you want,” said Otto Fricke, an FDP MP and member of the Bundestag’s budget committee. “When in doubt, taxpayers’ money should always be spent cautiously and providently.”
The government insists the surge in spending is a temporary aberration, and normal service will be resumed once the pandemic is over. Germany will, it says, start paying off the pandemic-era debts in 2023, and the debt brake will be restored in 2022.
For some in Ms Merkel’s CDU/CSU bloc, a return to the path of fiscal rectitude cannot come soon enough. “At the moment, politicians are saying: ‘If we’re taking on so much debt anyway, then that means I can squeeze my little project into the budget too’,” said one senior Christian Democrat MP. “That’s why we urgently need to return to budgetary discipline soon.”
But many think reinstating the debt brake in 2022 is unfeasible. Gesine Lötzsch, an MP for the hard-left Die Linke, said the idea is “absolutely absurd”. “No one really believes it [will happen],” she said.
Even in the CDU/CSU group, there is scepticism. “You would have to reduce borrowing from €180bn next year to €10bn in 2022 — the maximum allowed under the debt brake,” said one adviser. “That’s insane. There’s never been such a radical fiscal consolidation in this country.”
The CDU/CSU has ruled out hiking taxes to restore the public finances. That leaves spending cuts — an option the left strongly opposes. “We need binding political guarantees that . . . Germany doesn’t return to harsh austerity policies after the corona crisis,” said Sven-Christian Kindler, a Green MP. “After the bazooka we can’t have a wrecking ball.”
For that reason, many expect the debt brake will have to be modified or even abolished altogether — a move that requires a change to the German constitution. Such an outcome will be more likely if the Greens, who have been highly critical of such strict fiscal rules, enter government after next year’s election, as seems increasingly likely.
Mr Scholz has insisted that Germany’s public finances will survive the rise in spending during the pandemic. The country’s debt-to-GDP ratio will be just 71 per cent by the end of this year — admittedly much higher than the 60 per cent it reached in mid-2020, but “lower than it was after the [global financial] crisis, and the lowest [rate] among all the G7 states,” he said.
He also noted that much of the €218bn in new borrowing for 2020 had not yet been tapped, so that taken together, the total amount of debt for this year and next will be around €300bn.
That has not silenced the critics, who have drawn attention to what they see as serious design flaws in some of the biggest aid programmes. After the government imposed a partial shutdown in November, it said it would pay restaurants, bars and hotels 75 per cent of the revenues they made in November 2019. The scheme was rolled over when ministers extended the shutdown into December.
But a recent study by the German Economic Institute in Cologne (IW) concluded that the €30bn programme was far too generous. Many businesses were making more money than they did normally because it did not factor in the sharp drop in variable costs they were seeing while their doors were closed.
“To refund most of a business’s revenues is neither clever nor fiscally sustainable,” said Carsten Linnemann, a senior CDU MP, adding that only a company’s fixed costs and living expenses should be reimbursed. “We have to think long-term — future generations also need room for manoeuvre.”
Ministers have now indicated that the scheme will not be extended into 2021. “By January we have to draw up more pinpointed aid programmes,” Helge Braun, Ms Merkel’s chief of staff, told Handelsblatt. “The state can act — but not in a limitless way.”
The government is insisting on a swift return to the fiscally prudent policies of the past. But opposition MPs give those assurances little credence. “When you’ve ramped up borrowing in an emergency, it’s incredibly difficult for the state to bring it down again,” said the FDP’s Mr Fricke. “Unfortunately you can just get used to debt.”
Thousands protest against French Covid health pass rules
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Over 200,000 people marched in cities across France on Saturday in the biggest turnout of three consecutive weekends of protests, calling for an end to what they see as draconian rules forcing them to get vaccinated against their will.
They marched down the streets of Paris, Lyon, Marseille, and elsewhere, shouting “This is a health dictatorship!” and “No vaccination, no health pass!”, in protests that included a wide range of social and political movements.
Staunch Communists marched with supporters of the far-right Rassemblement National party and some from the gilets jaunes movement against a new law making Covid-19 vaccination compulsory for healthcare workers and requiring a health pass for anyone wanting to enter public places such as restaurants, bars and high-speed trains.
“This is an experimental vaccine, we do not know what all of the side effects will be for ourselves or our children,” said Catherine Largo, a 42-year-old dental assistant, who is legally obliged to get vaccinated before the autumn but says she will refuse to do so.
The vaccines used in France have been extensively tested around the world and approved by the European and French medical authorities.
“I won’t be able to find other work, because what else would I do?” she said, as she arrived at one of four protests taking place in Paris on Saturday afternoon. “We should have the choice, we should have the liberty to choose.”
Although the final version of the law was watered down last weekend, a vocal minority of French citizens remain up in arms about the rules which they believe infringe on their personal liberties. But despite the pockets of angry opponents, the policy has so far proved successful at boosting vaccination rates and has been met with approval from the wider public.
Over 60 per cent of people are in favour of the health pass to enter public places and 70 per cent support compulsory vaccination for caregivers, according to an Ipsos-Sopra Steria poll conducted this month.
Around 204,000 people marched on the streets of France on Saturday, up from 161,000 a week before and 114,000 the week before that, according to estimates from the interior ministry.
One protester missing this week was François Asselineau, president of the pro-Frexit Popular Republican Union party and an ardent campaigner against the health pass, who was unable to attend the march in Paris after he tested positive for Covid-19 on Friday.
The 2022 presidential candidate said he was suffering from “body aches, fever and a cough” in a video posted on his party’s website, but told his followers that he had obtained ivermectin and hydroxychloroquine as a treatment, both controversial drugs which scientists say have no proven benefit against Covid-19.
Macron announced the extended application of the health pass in the midst of a vaccination campaign that was losing momentum while the highly infectious Delta variant was spreading fast.
So far his decision to power ahead with the hardline vaccination strategy appears to have paid off. The number of first doses being administered per day has jumped back up to more than 350,000 after stagnating around 160,000 last month, according to data from the government compiled by Covidtracker.fr.
France has overtaken the US in the proportion of its population that is fully vaccinated — 52 per cent against 50 per cent in the US and 56 per cent in the UK, according to Our World in Data.
Only 7 per cent of people admitted to hospital with Covid-19 in France between May 31 and July 11 had been fully vaccinated, according to data released by the French government this week.
Turkey’s marine crisis: ‘death knells are ringing for Sea of Marmara’
For a decade, marine biologist Nur Eda Topcu has fought to preserve delicate corals off the Istanbul coastline, which environmentalists say are threatened by the dumping of industrial waste, fuel and sewage.
Now she fears a new threat may hasten the end of the Sea of Marmara’s coral reefs. A gelatinous substance colloquially known as sea snot has in recent months choked aquatic life, blighted fishing and repelled swimmers.
Long brown streaks of the marine mucilage were still visible across the Marmara in late July, while the gooey foam sank below the surface settling on the rare corals. Scientists warn that the sea, whose mix of Mediterranean and Black Sea currents foster coral usually found at far deeper depths, itself is at risk.
“The death knells are ringing for the Marmara,” said Topcu after surfacing from a recent dive to clean the slime that coated normally fuchsia-hued corals off an Istanbul archipelago. “We can’t stop the mucilage. It’s smothering the gorgonians [and] infecting them with harmful bacteria.” She fears most of Marmara’s soft, red Paramuricea clavata, listed as a vulnerable species of coral, will perish this year.
Factories have nearly doubled the deluge of wastewater they discharge into Turkey’s seas in recent years, according to official statistics. The 50,000 tankers that sail through the Marmara each year illegally dump waste and fuel, according to one municipal monitor. Almost two-thirds of the nation’s industry, including an oil refinery, carmakers, chemical plants and power stations, is concentrated in the region.
Most wastewater from Istanbul, Turkey’s largest city, is only treated to remove solids, then pumped to the bottom of the sea. “We use it as our cesspool,” said Levent Artuz, a hydrobiologist at the Marmara Environmental Monitoring Project and author of a new book A Recent History of the Polluting of the Sea of Marmara.
The situation was not helped by the fact that sea temperatures had climbed by an average two degrees Celsius in the Marmara since the start of this century as pollution trapped heat, he said. A state project that diverted the Ergene River, one of Europe’s most toxic waterways, to the Marmara last year was “the tipping point”.
“The essential problem isn’t mucilage. That’s just a link in the chain of decades of degradation,” Artuz said. “We have zero chance of recovering the Sea of Marmara as it was. What we have to do now is figure out how to prevent the Marmara from harming us.”
In recent years, marine life has died in mass mortality events, and there have been infestations of jellyfish and algal blooms such as red tides and mucilage.
But scientists and fishermen say the current flare-up is unprecedented. Phytoplankton is flourishing because of nutrient-rich sewage and fertiliser from agricultural runoff while overfishing has wiped out populations of small fish and crustaceans that would consume the algae.
Gone are the mackerel, tuna, swordfish and other seafood that Istanbul was known for. This year’s haul was down 90 per cent from 2020 as mucilage clogged and dragged off nets, said Erdogan Kartal, the head of Istanbul’s fishing co-operative. “Even if we could supply fish markets, customers aren’t buying out of disgust.”
Recep Tayyip Erdogan, Turkey’s president, has vowed to crack down on polluters and “save our seas from this scourge of mucilage”. Thousands of cubic metres of the sea snot had been vacuumed up, the country’s environment minister said. In early July, he pronounced the Marmara “cleaner and bluer” than before.
Turkey is the only G20 country that has not ratified the Paris accords on climate change, and grassroots movements to protect the environment are often viewed as provocateurs by the government.
Authorities have refused to register a new Green party eager to fight climate change. Scientists also say that a planned shipping canal from the Black Sea to the Marmara could deplete oxygen in the Marmara and promote hydrogen sulphur gas that would envelop Istanbul with the stench of rotten eggs. Erdogan’s transportation minister argues that the cleaner water coming through from the Black Sea would improve the quality of the Marmara.
Along the way, there have been successes for Topcu and members of Istanbul’s Marine Life Conservation Society (MLCS). They secured protected status for the tiny outcrop of Neandros this April, stopping boats from dropping anchors or trawling for fish near its corals. They spent two summers transplanting fan-like yellow sea whips to Neandros after a nearby colony of the golden Eunicella cavolini was buried in debris from a government construction project.
“We carried them like a heart or kidney for transplant, keeping them in cold water and in the dark to prevent shock,” said Serco Eskiyan of the MLCS. It took more than 100 dives to harvest and replant 300 corals 30 metres down.
But Eskiyan, who has dived the waters off the islands since the 1970s and knows the area “like the rooms in my house”, was unable to locate the transplants in July, blinded by the sea snot that reduced visibility to a metre or two. “It looks like a different planet,” said Topcu.
A generation ago, the Marmara’s rich fauna included seahorses, poisonous scorpionfish and great white sharks, now all gone, though Eskiyan still occasionally confronts a rare angular roughshark when he hunts for “ghost nets” abandoned by industrial fishing boats that choke the corals. The MLCS has collected 32,000 square metres of the meshing since 2015.
“I have faith in the sea’s ability to renew itself from the damage people do. But now I question how much longer it can fight back,” Topcu said.
Ransomware attacks rise despite US call for clampdown on cybercriminals
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In mid-June, US president Joe Biden held talks with his Russian counterpart Vladimir Putin to discuss a recent scourge of cyber attacks against the US, including by Russian-based criminal ransomware hackers.
Biden has said he told Putin in no uncertain terms that “certain critical infrastructure should be off limits to cyber attack — period”. Nevertheless, data show that ransomware attacks continue apace, including in sectors such as healthcare and education. It is unclear whether Biden will take further action in light of this.
Ransomware, which usually involves hackers seizing an organisation’s data or computer systems and only releasing access if a ransom is paid, has long plagued businesses large and small. The first known ransomware virus, PC Cyborg, was recorded in 1989, with victims infected via floppy disk and told to send a $189 cheque to an address in Panama.
Today, these financially motivated hacks are far more sophisticated — and are proliferating fast. Attacks have quadrupled during the pandemic, SonicWall data show, partly because the shift to remote working has left staff more vulnerable than if they were connecting to more secure corporate networks.
Additionally, hackers have swapped demanding cheques for requesting hard-to-track cryptocurrencies, meaning that as the price of bitcoin has risen during the past year, the business of ransomware has become all the more lucrative. It is also easier to launch attacks with little to no technical knowhow, given the growing market for “ransomware-as-a-service”, where hackers maintain their ransomware code but rent it out to others and take a cut of any extortion payouts.
While known attacks have reached unprecedented levels, the story of what we do not know — given that there are few rules around disclosure — may be far worse. Earlier this week, Bryan Vorndran, assistant director of the FBI Cyber Division and other cyber agency officials called for mandatory reporting rules around attacks, so that accurate data can be gathered and analysed by the US government.
Small businesses with little spare resources have tended to be the hardest hit by ransomware attackers. But the matter was thrust into the spotlight earlier this year after several audacious attacks on critical infrastructure such as the Colonial Pipeline, which led to fuel shortages for several days on the US east coast, the Irish health system and Brazilian meat supplier JBS. All of these attacks were believed to originate from Russia-based ransomware hackers, although the US government has accused Chinese state-backed groups of also orchestrating attacks.
The number of ransomware gangs stretches into the dozens and continues to proliferate as the economics remain so profitable. Vorndran said the FBI tracked 100 gangs, using an algorithm to rank them and the effect that each has on the economy. The largest one rakes in an estimated $200m a year in revenues, he said.
To help victims fight the gangs, a cottage industry for “ransomware negotiators” has emerged. These middlemen are tasked by victims with haggling down the ransom payments. As go-betweens, they also collect data on attacks, learning the playbooks of various groups in order to best know how to speak to them.
According to data from Coveware, the average ransom payment has fallen in the second quarter to $136,576, from more than $200,000 in the first quarter, amid an emergence of smaller ransomware groups. But in the majority of attacks — about 80 per cent — hackers are using the newer tactic of threatening to leak data as extra leverage in extorting victims. About half of these “leak threat” victims paid out in the second quarter, Coveware said.
Unfortunately, the negotiators’ services continue to be in high demand. According to data on reported attacks collated by Recorded Future, in the US there have been 10 attacks on healthcare, nine on schools and 10 on public state and local government groups during June and July this year. Despite Biden urging Putin last month to crack down on the criminal groups and warning against attacks on 16 critical entities, attacks on many of these key sectors have continued.
“The volume of targeted attacks on government organisations and enterprises that impact civilians, countries and the global economy will not end without a change in approach,” said Bill Conner, the chief executive of SonicWall.
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