“I always wanted, in politics, to come home,” says Ursula von der Leyen, president of the European Commission. Home is not Lower Saxony, where her family comes from and where the gynaecologist-turned-politician launched her career. It is Brussels, where she was born and grew up, made friends and nurtured a passion for the European project. She might have imagined herself one day being a commissioner there, she tells me, but not the first woman president of the commission itself.
The 62-year-old’s appointment last year was accidental, recommended not by her native Germany but by Emmanuel Macron, the French president, who had known Von der Leyen during her stint as German defence minister. Angela Merkel, her friend and mentor, is said to have been taken aback by the suggestion, but the chancellor could not pass up the opportunity of placing a German, a woman and an ally at the helm of the commission. “Angela Merkel always told me, ‘I need you here [in Germany],’” Von der Leyen says on our videoconference call.
With her swept-back blonde hair, pearl necklace and frequent smile, Von der Leyen’s cool elegance comes across even on screen. Not one to display her feelings or ever share stories — too aloof, too perfect are common criticisms of her in German political circles — she lets out a hint of emotion when discussing her return to Brussels. “I only realised how strong this feeling of coming home was when I was here, all of a sudden, and I had all these languages around me. This diversity of the European Union, it’s so fascinating. And all these childhood memories.”
Her first year in the job was more turbulent than she could ever have anticipated. Brexit was still nagging, though no longer an existential threat to the EU. But barely three months into her five-year term, the EU project threatened to come unstuck, thanks to coronavirus. When Covid-19 became a health emergency in Europe in the early months of 2020, Von der Leyen was powerless, the commission paralysed. Rather than coming together, member states shut their borders and hoarded medical equipment. In Italy, the first European country ravaged by the pandemic, hospitals were swamped and doctors were forced to make unbearable choices over who should live and who die. The most pro-European Italians felt abandoned by their northern neighbours and questioned the merits of EU membership.
Von der Leyen had few levers to pull. The EU’s executive arm plays a supporting role to national governments on policies such as public health and internal security. New to the job, she had little experience of EU structures or of managing the conflicting demands of 27 member states. She tells me that during the first council meeting of the pandemic, leaders professed to all be in it together but, within days if not hours, they were looking decisively inwards. “One of the biggest achievements of the EU is the open single market and the Schengen principles for passport-free travel,” she says. “Border closures due to coronavirus cut these freedoms — and then nothing was functioning any more.”
Von der Leyen soldiered on. Eager to show some semblance of cohesion, she rallied international support for vaccines and set up a donor-pledging event to raise €7.5bn to improve testing, treatment and vaccine discovery efforts worldwide. Her most significant contribution, however, came two months later, through the co-ordination of a €750bn borrowing plan to bankroll the recovery in the countries hit worst economically.
Few doubt that Von der Leyen’s relationship with Merkel, with whom she is in regular touch, was instrumental to the breakthrough. Germany had long been opposed to the issuance of common debt. “Merkel made an extraordinary move. She knew what was needed to keep the union together,” Von der Leyen tells me. The July agreement was a defining achievement for the bloc. It gave the commission unprecedented fiscal muscle and was hailed in some European quarters as a Hamiltonian moment, a reference to the 1790 agreement between Alexander Hamilton and Thomas Jefferson federalising the debts of different states.
The recovery fund should ensure a more even comeback between prosperous northern states and struggling southern ones. For now, however, it is held up by another fissure in EU politics: the nationalist governments of Poland and Hungary want to water down legislation binding recipients of EU funds to adherence to the rule of law. If the safeguards are maintained, it will fall to Von der Leyen’s commission to enforce them.
Once the recovery fund is finalised, Von der Leyen will have a chance to advance her priority agenda: the European green new deal. This aims to achieve carbon neutrality by 2050 and establish the EU as the global leader on climate change. Some 37 per cent of the recovery funds will be invested to further green new deal objectives, including a clean hydrogen economy and energy efficiency in construction. Thirty per cent will be raised through green bonds. “We have a limited amount of time to really change for the better and to transform into a growth strategy that is no more fossil fuel-based but that is giving back to nature as much as we’re taking from it,” she says.
Von der Leyen has been determined to lead on climate change, convinced that politicians must keep up with the concerns of society if they are to remain relevant: “If you look at the time left before tipping point, not many parties have understood that this green ambition is right. It’s at the right time, and you’d better find the right answers.”
The quest for relevance also defined her early political career in Germany’s conservative Christian Democratic Union party, which she helped steer towards more family- and women-friendly policies.
Von der Leyen was born in 1958 into the German political establishment and CDU aristocracy — her father, Ernst Albrecht, was a senior European official at one time and later became prime minister of Lower Saxony. She initially studied economics but switched to medicine in 1980 (she has a masters degree in public health and a doctorate in medicine). She inherited from her father a positive view of politics, she says, and decided to follow in his footsteps and to use her health training to effect policy change.
She entered national politics as minister for family, seniors, women and youth in Merkel’s first cabinet in 2005. By that time, she’d had seven children with husband Heiko von der Leyen, a professor of medicine. I ask how they coped with a large family.
“First of all, the most exhausting — if I may say so because they’re all wonderful, all seven of them — was having my first child. We went from total freedom to all of a sudden, 24 hours, seven days a week and 52 weeks a year responsibility and being on call,” she says. “I think the second one taught me you only have two arms and two legs . . . and then the third, well they say the third child is for the mother and I can underline that, for whatever reason, these babies are always relaxed, I guess because the whole household is somewhere on the floor.”
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She was exhausted and was often made to feel inadequate for wanting to be both a mother and a practising doctor. When, in 1992, her husband was offered a grant to teach at Stanford University, she grabbed the opportunity. Living in California liberated her as a mother and a professional, and shaped her views about women and work.
“It was the mid-1990s and [Americans] had an attitude that I had never encountered before,” she recalls. “In Germany, when I had my first child, they were disappointed at the hospital, they said, ‘Your career’s over.’ In California, they wanted to have the best in the world and they made sure that their faculty and staff feel good, that they have time for research and time for their family . . . Suddenly, I started to discover what a difference it makes if you have a positive backing of society and not a negative one.”
She became pregnant again, this time with twins. After four years, the couple returned to Germany. “When we moved back I was determined, and I managed to never have anybody make me have a bad conscience about doing what we do. And then, well, I had the sixth and the seventh child, and I was asked to be minister.”
Her husband took over caring for the children and she set out to “walk the talk” as minister for families, and later as minister for labour. She introduced family-friendly policies, including raising the number of nursery places and introducing allowances for fathers on paternity leave, and making it easier for women to juggle family and work.
The challenge to traditional family structures was unpopular within her party — but not across the country. “The young generation in Germany was more ready for the change and I had a lot of public backing,” says Von der Leyen. “A party has to move on and learn. It’s a bit like the green topic. There, too, my party came late, but it came.”
The CDU never quite warmed to Von der Leyen. She is often criticised for a failure to socialise or to campaign for MPs in elections. A non-drinker who relies on a long-serving group of advisers who she has taken with her to the commission, her priority was to travel back to her family in Lower Saxony on weekends.
Even in Brussels, Von der Leyen attracts mixed reviews, winning plaudits for thinking outside the box but also complaints that her working style is over-centralised and not sufficiently consultative. “She has not, over the years, really become a politician, unlike Merkel,” says a German politician. “She hasn’t immersed herself in the party or reached out to people.”
Von der Leyen’s popularity took another dip when she became the first woman to lead the defence ministry in 2013. Her time there was marred by scandals, including a parliamentary inquiry into the awarding of billion-euro consulting contracts. That put an end to any speculation that Merkel was grooming her for succession. The defence portfolio is not Von der Leyen’s favourite topic of conversation.
She tells me that modernising Germany’s armed forces is a “very difficult process” but without it she would not be in Brussels today. “Two months after I became defence minister, Russia annexed Crimea and started the hybrid war in eastern Ukraine. Three months later, Daesh (Isis) started in Syria and Iraq. Afghanistan was still going on. Then we had the crisis in the Sahel,” she says. As the crises accumulated, so did her experience in world affairs.
It was also a time when the international liberal order in which postwar Germany has thrived was shaken to the core with the 2016 election of Donald Trump in the US and Britain’s vote to leave the EU. Brexit was particularly painful for Von der Leyen, who is fond of Britain and had studied at the London School of Economics. “I love British humour — it’s phenomenal,” she enthuses.
But having once described Brexit as a “burst bubble of hollow promises by populists”, she says the EU has now adapted to the loss. However tough she’s been in negotiations, she says she is looking forward, not back. “At the end of 2020, it’s not the end of something but the beginning of a new relationship, and we will always work hard for a good relationship, whether Britain leaves with or without a deal.”
The EU can also now look forward to the resurrection of the transatlantic alliance following the election of Joe Biden. The abandonment of traditional allies under Trump had alarmed Europe and sped up the bloc’s pursuit of so-called strategic autonomy. Von der Leyen says Europe must still forge ahead with greater self-reliance. While she is relieved to have a friendly president back at the White House, the message she is eager to convey is that Europe now has a new-found confidence.
“We’re not going to pick up where we left off in 2016. The world has changed. The US has changed, but we have too,” she says. “The last four years have taught us an important lesson — that we have to define our position as Europeans.”
Roula Khalaf is editor of the Financial Times
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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.
France delays EDF reforms after failure to agree terms with Brussels
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France has been forced to delay the restructuring of state-owned utility EDF after it failed to agree the terms with the EU, a setback to a major economic reform promised by President Emmanuel Macron.
“Significant progress has been made in our discussions with the European Commission, but to date we have not reached an overall agreement,” said a government official. “Therefore it is not possible to submit a draft law to parliament if the principle points of the reform have not been agreed to in advance.”
Jean-Bernard Lévy, EDF chief executive, on Thursday declined to provide a specific timetable for when the reform could be completed, but analysts said it would likely prove difficult at least until after the French presidential elections next April.
“I regret that this reform that is indispensable to EDF cannot happen now,” said Levy. “Our short term [prospects] are guaranteed, but our medium and long term are not if we want to play in the big leagues, which is what is expected of EDF.”
Dubbed Project Hercules, the planned overhaul of EDF was meant to give it the financial firepower to invest in both nuclear and renewable energy in the coming decades.
An important element would be changing the mechanism and regulated prices at which EDF sells nuclear power, which provides 70 per cent of France’s electricity. France wanted to push through higher regulated prices for nuclear power, so EDF could pay down heavy debts and absorb the high costs of maintaining its nuclear reactors.
But Brussels would have to approve such a change because of its remit to ensure free competition in the energy sector and to prevent member states from unfairly bailing out companies.
The plan would effectively split up EDF by creating a government-owned mother company, EDF Bleu, containing the nuclear assets as well as a hydroelectric subsidiary. Another subsidiary, EDF Vert, would house renewable assets, the networks and services businesses, and would be publicly listed with about a third sold to raise funds to boost EDF’s green energy investments.
Macron has argued that the changes are vital for EDF to flourish and keep up with rivals. Given that France owns almost 84 per cent of the group, the government had also hoped the reforms would lighten the state’s financial burden.
But the overhaul has been caught in wrangling with the commission. Le Monde reported that the key sticking point was how the relationship between the newly created entities would work and whether cash could freely flow between them as if the company were still fully integrated.
The French finance ministry, which has piloted the talks, and the Elysée Palace declined to comment further on the details.
EDF’s powerful labour unions had opposed the plan as a prelude to the group being broken up or privatised, and have also raised concerns that it would pave the way for nuclear energy to be marginalised.
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“We celebrate the knockout punch delivered to Hercules,” the far-left CGT union said. “The only aim of these manoeuvres is to pull off juicy financial transactions at the expense of consumers and EDF employees.”
EDF shares fell as much as 4 per cent on Thursday as the reform’s failure overshadowed strong second-quarter financial results that showed the utility rebounding as economic activity picked up despite the Covid-19 pandemic.
Barclays analysts wrote in a note that investors were being too pessimistic on the outlook for the reform even if its timing was hard to predict.
“We continue to believe that ultimately there will be an agreement between the EU and France on EDF’s reorganisation.”
Additional reporting by David Keohane
EU economy chief urges end to ‘muddling through’ with budget rules
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Brussels cannot afford to carry on fudging the application of its own fiscal rules to blunt their negative impact, the EU’s economics chief said as he called for a far-reaching legislative overhaul to help drive stronger public investment and growth.
Paolo Gentiloni said he wanted “renewed and reviewed” EU budget rules that would provide an incentive to public investment in the green and digital transitions, while fostering stability and durable economic growth.
“It is clear we cannot simply go back to normal,” Gentiloni said in an interview with the Financial Times. “You need common rules that are connected to the economic challenges we have. Otherwise, the risk is that the European Commission will spend the next decade finding creative ways to bypass its own rules, which I think is not the best solution we can have.”
The commission is due to restart this autumn a consultation on how to amend the rules surrounding the Stability and Growth Pact (SGP). The budget framework is currently suspended because of the Covid-19 crisis, but the rules are likely to be reimposed in 2023, and there will be a fierce debate ahead of that over how they should be reformed.
Janet Yellen, US Treasury secretary, this month added her voice to those arguing that the SGP restricts governments’ latitude to battle downturns as she called for the EU to reinforce its stimulus efforts. But fiscally conservative northern European member states will chafe against efforts to substantially loosen the rules, reigniting a north-south divide over economic policy.
Gentiloni said he did not see it as the commission’s role to question the EU treaty, which contains the basic goals of keeping public debt at 60 per cent of gross domestic product and deficits to 3 per cent. But he said he wanted the commission to propose reforms to legislation as it seeks to reflect post-pandemic realities, including the surge in average eurozone public debt burdens to 100 per cent of GDP.
He questioned whether the bloc should return to a “‘low for long situation’ — low inflation, low growth, low interest rates? Or should we try to use this crisis . . . to try to have stronger and more sustainable growth?”
He supported several changes, including adjusting the rules governing the mandated path for bringing down public debt ratios, which under the current framework would entail deep and punishing reductions following the debt blowouts over the past year.
The changes would entail a shift to more “simple and observable” criteria to manage fiscal policies, he said, referring to a suggestion from the European Fiscal Board, a commission advisory body, for a budget policy set according to an “expenditure rule” setting a ceiling on the growth rate of nominal public spending.
In addition, the rules would need to be changed to provide an incentive to public investment. This would help avoid repeating the aftermath of the financial crisis, when net investment drifted rapidly lower, stymying growth.
One idea is a “golden rule” excluding some specific growth-enhancing expenditure from the ceiling on spending growth, but Gentiloni stressed he was not wedded to that specific concept. “There are a lot of possible solutions, proposals, if we recognise the need to encourage, to strengthen, public investment in certain sectors.”
To “muddle through” with the budget rules might have previously seemed reasonable, Gentiloni said, but he argued that given the circumstances, legislative changes would be needed. “This is the only way to have real common rules, and not just common rules that are there to be bypassed,” he said.
Gentiloni reiterated the upbeat short-term economic outlook he offered this month when the commission published forecasts predicting the strongest growth in decades, with an expansion of 4.8 per cent this year and 4.5 per cent next.
While the spread of the Delta coronavirus variant presented a “downside risk” to growth, he stressed that the current situation was far more propitious given the rapid rate of Covid vaccinations. The EU, he pointed out, had caught up with the adult vaccination rate of the US.
“We know very well we’re not out of the woods. At the same time we should be very clear we’re in a different situation from the one last summer and the difference is caused by vaccines and vaccination,” Gentiloni said.
Indicators of individual mobility, and the stringency of lockdown measures, continued to point to a recovery “with speed”.
“I think the recovery will proceed. All in all our brighter forecast is still supported by what we see on the ground,” he said.
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