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Brussels warns Poland and Hungary they cannot stop EU recovery fund

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The EU budget commissioner has warned Poland and Hungary that Brussels is ready to cut them out of the recovery fund and proceed with the project without them if they continue to block Europe’s upcoming budget. 

Johannes Hahn said that Warsaw and Budapest “cannot stop us from helping our citizens” as he confirmed that the commission’s lawyers had identified possible ways of circumventing the two capitals’ objections to the EU’s spending plans. 

His intervention, in a Financial Times interview, steps up the pressure on the two countries as they block the planned €750bn pandemic recovery fund as well as the EU’s seven-year budget. They both object to a new rule of law mechanism that they claim unfairly targets their nations — in a stand that has thrown the EU’s July spending deal into jeopardy. 

Mr Hahn said that Warsaw and Budapest would not succeed in blocking the recovery fund, and that if they continued to wield their vetoes it would “backfire” on their citizens by severely reducing flows of EU money to the two countries. 

Poland’s deputy prime minister, Jaroslaw Gowin, whose Agreement party belongs to the moderate wing of Poland’s ruling coalition, said on Thursday that he thought there was still scope for compromise.

“In the case of a veto, either from Poland or from Hungary, the so-called provisional budget will come into force,” he said after a meeting with officials in Brussels, according to Poland’s state news agency PAP. “Despite what some voices in the Polish public debate are saying, this would not be beneficial for Poland, or for each of the remaining 26 member states.”

“It seems to me that . . . a compromise is possible, even if not in the form of reopening the discussion on the form of this regulation [on the rule of law mechanism], then in the form of binding interpretative declarations.”

Mr Gowin added that an “interpretative declaration” could be prepared by the legal service of the commission, but would have to be confirmed by the European Council. He said it would need to make clear the rule of law mechanism would not be used to “put unjustified pressure on specific countries in questions other than the honest use of EU funds”.

The stand-off over the budget is set to dominate a Brussels leaders’ summit scheduled for Thursday and Friday next week. Mr Hahn said the commission’s focus was on striking an agreement with Warsaw and Budapest, but he added: “We are fully aware of our responsibilities; that is why we have already started on alternatives.” 

He was confident that if the EU resorted to the fallback route of excluding two member states, the recovery fund could still proceed roughly along the originally envisaged timeline. It would be a matter for discussion whether the EU reduced the size of the recovery fund to account for the absence of Poland and Hungary, or stuck to the originally agreed €750bn and distributed the proceeds only to 25 of the 27 member states, he added.

A commission official on Wednesday stressed this creative option to sidestep the veto-wielding countries would be based on EU law and governed by the commission rather than happening via an inter-governmental treaty between other capitals. 

“I think the message starts to arrive that both countries would lose significant money next year — and risk to lose even more” if they refused to compromise, Mr Hahn said on Thursday. Poland and Hungary both stand to be sizeable beneficiaries of the recovery fund if they participate, receiving grants amounting to 3 per cent of their gross domestic product, according to estimates from the European Central Bank. 

If they continue to block the EU’s upcoming seven-year multiannual financial framework, Brussels will be forced to move to a pared-back emergency budget for 2021 — the first time this has happened since 1988, further hitting the two countries’ EU receipts.

The emergency budget would result in the loss of billions of euros for policies such as climate change, migration and the Erasmus student exchange scheme. Brussels would not be able to pay out money for new cohesion project — with an impact on countries including Poland and Hungary. 

The emergency budget would result in the loss of billions of euros for policies such as climate change, migration and the Erasmus student exchange scheme. Brussels would not be able to pay out money for new cohesion projects — with an impact on countries including Poland and Hungary. 

Overall payments from the EU budget would fall between €25bn-€30bn next year without an agreement, according to commission estimates. 

“This heavily affects in particular those member states which are the biggest beneficiaries and recipients of cohesion money,” said Mr Hahn. He urged the two capitals to prioritise the interests of their citizens. “Otherwise it would be a lose-lose situation which is not in the interests of anybody.”

Mr Hahn added that a technical agreement had now been reached on the annual 2021 budget, but this will only come into force if the full seven-year multiannual financial framework is settled. Absent this, the EU will have to resort to an austerity budget. 



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Brazil virus variant found to evade natural immunity

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The P.1 Covid-19 variant that originated in Brazil and has spread to more than 25 countries is around twice as transmissible as some other strains and is more likely to evade the natural immunity people usually develop from prior infection, according to a new international study.

The research, conducted by a UK-Brazilian team of researchers from institutions including Oxford university, Imperial College London, the University of São Paulo, found that the P.1 variant was between 1.4 and 2.2 times more transmissible than other variants circulating in Brazil. 

It was also “able to evade 25-61 per cent of protective immunity elicited by previous infection” with any earlier variant, the researchers found, in a sign that current vaccines could also be less effective against it.

International concern about the P.1 variant has escalated recently, with more than 25 countries detecting the variant, including Belgium, Sweden and the UK, which has identified six cases.

The scientists are expected to release a paper describing the research on Tuesday. Dr Nuno Faria, the lead author, did not immediately respond to a request for comment. The study has not yet been peer reviewed.

The researchers have dated the emergence of the P.1 variant to November 6, 2020, around one month before cases began to surge for a second time in the Brazilian city of Manaus. They found that the proportion of cases classified as P.1 in Manaus increased from zero to 87 per cent in the space of 7 weeks. 

The paper concluded: “Our results further show that natural immunity waning alone is unlikely to explain the observed dynamics in Manaus, with support for P.1 possessing altered epidemiological characteristics.”

“Studies to evaluate real-world vaccine efficacy in response to P.1 are urgently needed,” it added.

The researchers also found that infections were 10 to 80 per cent more likely to result in death in Manaus after the emergence of P.1. However, the authors cautioned that it was not possible to determine whether this meant the variant was more lethal or whether it was a result of increased strain on the city’s healthcare system, or a combination of both. 

The P.1 variant has over 17 mutations, which alter its genetic sequence from the virus originally identified in Wuhan, including 3 key changes to the spike protein that it uses to enter human cells.

Researchers in Brazil have been using genetic sequencing technology developed by Oxford Nanopore in the UK to identify and track the variant. The technology was first used in Brazil during the Zika outbreak in 2015.

Dr Leila Luheshi, director of applied and clinical markets at Oxford Nanopore, told the Financial Times that while the B.1.1.7 variant in the UK has similar properties of high transmissibility to P.1 — it is thought to be around 1.5 times as transmissible as variants that preceded it — there was no evidence to date that it evaded past natural immunity in the same way. Studies so far have also shown that current vaccines retain their efficacy against B.1.1.7.

Luheshi said that the concern with P.1 is that “because it has these mutations around the spike . . . the hypothesis is that the vaccine will be less effective.” But she added that there is not yet definitive evidence to support this theory. 



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Coronavirus latest: Production glitches to delay Johnson & Johnson vaccine distribution

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Coronavirus latest: Production glitches to delay Johnson & Johnson vaccine distribution



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Norsk Hydro blamed for birth defects in Amazon forest pollution case

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Maria do Socorro explains in graphic detail the spate of ailments affecting newborns in her remote community in the Amazon: her grandson died after being born with his intestines outside his body, while others were missing organs or had undeveloped bones.

For the 56-year-old community leader, there is little doubt about the cause of these illnesses. She said the rainforest town had for years suffered from toxic waste pollution from the local operations of Norwegian aluminium producer Norsk Hydro.

Long a simmering environmental scandal in Brazil, the allegations were brought on to the international stage this month when Socorro’s community sued the Norwegian giant in a Dutch court, seeking damages for claims that “the incorrect disposal of toxic waste” from operations in the area had caused a variety of health ailments, polluted the rainforest and destroyed economic opportunities.

“We cannot have future generations because the children are born and then die. Whole families are contaminated,” said Socorro from the Barcarena township in the northern state of Pará.

The case — filed just days before the UK’s top court ruled that Royal Dutch Shell could face legal action in London brought by thousands of Nigerian villagers over alleged pollution — is the latest international trial pitting large, resource-hungry companies against impoverished rural communities.

It also comes amid mounting pressure on companies to abide by strict environmental standards, a push being spearheaded visibly by Scandinavian investors.

One of the allegations in the lawsuit is that the pollution has caused birth defects © Alessandro Falco/Bloomberg

“If business can be global, why can’t justice? These companies have businesses everywhere, but then when they do something wrong they want to smother the possibility of people getting compensation,” said Pedro Martins, partner at law firm PGMBM, which is representing 40,000 alleged victims bringing the suit against Norsk Hydro.

“International corporations have different standards for how they do business in the northern and southern hemispheres as if life in the southern hemisphere does not have the same value.”

Through local entities, Norsk Hydro runs three facilities — a bauxite mine, a refinery and a smelter — in Pará, a vast Amazonian state that is a flashpoint for illegal deforestation, gold mining and land-grabbing.

The company said it would respond to the request before the court in the Netherlands, where its subsidiaries controlling the local entities at issue are headquartered. It denied that in 2018 pollutants from its facilities spilled over during heavy rains and polluted nearby rivers and earth. The company declined to comment further.

A source close to the company said, however, that it did “not see the [health] effects that have been claimed. The actual impact is hard to see and there aren’t any studies showing that.”

Map of Brazil

A combination of poor sanitary conditions and the tropical climate could be behind many of the health issues, he added: “There are a lot of feelings and not so many things relating to actual facts.”

Locals say bauxite, lead and aluminium pollution have turned the region’s rivers red. A study from the Evandro Chagas Institute, a Brazilian public health body, found in 2018 that the region’s waters were so polluted with industrial waste from the Norsk Hydro facilities that they “cannot be used for recreation, fishing, or human consumption”.

Like many Amazonian communities, much of the Barcarena township depends heavily on fishing and farming for survival, work that they now say is impossible.

“I invite these Norwegians to come and bathe in our waters. I challenge them. They have good water there in Norway. Our wealth just goes there,” said Socorro, who heads Cainquiama, a group representing mainly indigenous people and quilombolas — the descendants of runaway slaves.

Nearly all of the claimants in the suit have complained about chronic pain, hair loss and skin conditions. The suit also contains claims in relation to birth defects, such as those that have affected Socorro’s grandson, who was born with gastroschisis — a hole in the abdominal wall.

A pipe belonging to alumina refinery Alnorte, which is owned by Norsk Hydro, in Barcarena © Ricardo Moraes/Reuters

“Studies around the world have shown the effects [of toxic metals] on pregnant women, foetuses and children at birth,” said Marcelo de Oliveira Lima, a public health researcher at the Chagas institute. “But our studies so far did not go deep enough to show the [connection]. Other studies are still being done.”

The case is a sensitive one for Norwegian investors and the government, which owns a 34 per cent stake in Norsk Hydro. Oslo has long attempted to hold Brasília to account for the environmental destruction of the Amazon, even publishing its own data on deforestation in the world’s largest rainforest.

“There seem to be quite some dispute about the facts in this case and in particular about the actual harm of the spill to local environment and whether the company is somehow to blame by neglecting important safety measures,” said Jeanett Bergan, head of responsible investments at the KLP pension fund, Norway’s largest pension provider.

“We know Norsk Hydro as a responsible corporate actor when doing businesses abroad. I do not think [this case] will damage the credibility of Norwegian actors.”

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here 

Martins, the lawyer leading the group action, said they brought the case in the Netherlands because of the inertia of the Brazilian court system. He believes the case can reach a verdict in 18 or 24 months.

Brazil is no stranger to environmental disasters. This month, miner Vale agreed to a $7bn settlement with authorities over a dam breach in 2019 in the Brumadinho township that killed hundreds of people and polluted vast tracts of lands with industrial sludge.

BHP was sued in a British court over a dam failure in Brazil’s Mariana township in 2015 that left 19 dead. The case was thrown out because parallel proceedings were taking place in Brazil.

“The Hydro case draws attention for having caused significant environmental damage,” said Luiz Eduardo Rielli, director of sustainability consultancy Novi. “After three years, what I care most about is: What lessons have been learned? How can we ensure that new damages do not occur?”

Additional reporting by Richard Milne in Oslo and Carolina Pulice in São Paulo



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