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ECB prepares for the next stage of coronavirus support

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Viable vaccines have injected optimism into financial markets, shifting discussions among many economists from how to cope with a crisis to how to support the recovery. The European Central Bank’s decision to beef up its stimulus policies on Thursday provided a reminder that, while the worst possible economic outcomes may have become less likely, it will be a long road back to even the “new normal”.

Increasing monetary stimulus at this point is sensible. A second wave of coronavirus infections in the eurozone, already among the world’s worst-affected regions, has hit growth and employment. The reinstatement of lockdowns risks a double-dip recession in the currency bloc.

This is why the central bank announced a €500bn increase in the size of its main quantitative easing programme as well as extending the duration of its main crisis-fighting tools by nine months. It also announced a further three targeted long-term refinancing operations, as it calls its subsidies designed to encourage further bank lending. The central bank’s objective is to “preserve favourable financing conditions for all sectors”, said president Christine Lagarde in Thursday’s press conference.

The central bank sensibly laid the groundwork for more long-term support to the economy, too. The eventual rollout of vaccines will provide the most effective economic relief measures but until that point the currency bloc will continue to need monetary support; the ECB’s forecasts for growth in 2020 were increased, but those for 2021 were revised down.

Ms Lagarde justified the nine-month extension to the stimulus programmes by the expectation that “we will have reached sufficient herd immunity to hope that by the end of 2021 the economy will function under more normal circumstances”. Analysts, however, interpreted the additional stimulus as a commitment to more long-term support and an admission that extraordinary policy could be needed for years. The ECB forecasts that inflation in 2023 will still be below its 2 per cent target.

The ECB cannot shoulder the entire burden of supporting the eurozone recovery. Market moves have already lessened the effectiveness of existing schemes: the euro is trading at its highest level against the dollar for more than two years — a development the central bank said it was “very carefully” monitoring.

This appreciation makes the bloc’s exports less competitive and imports deflationary pressure. The latest figures show that prices are already falling in the eurozone: in November they were 0.3 per cent lower compared with the previous year. This was the fourth consecutive month of prices falling in the currency bloc.

Increasing asset purchases through its quantitative easing programme will have only a small impact on the real economy, given how low borrowing rates already are: Spain issued a 10-year bond with a negative interest rate for the first time ahead of the ECB’s policy announcement. This may be why the ECB has become far bolder in its use of targeted long-term refinancing operations that pay banks if they lend more to the real economy.

Ultimately fiscal policy and a compromise on the €1.82tn EU-wide pandemic recovery fund will be more helpful for supporting the eventual recovery than any further marginal changes to already low interest rates. Either way the politicians in Brussels, however, can be reassured that the ECB will continue to do its part.



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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Britain’s wrong-headed approach to refugees

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UK immigration updates

Thanks to the bravery of volunteers who run towards storms at sea to rescue ships’ crews, few British institutions command as much respect as the Royal National Lifeboat Institution. The charity, however, has recently had to negotiate a different kind of storm, over its efforts to help refugees who get into difficulties crossing the Channel from France. Nigel Farage, the former Brexit party leader, accused it of running a taxi service for illegal trafficking gangs. Last week, the RNLI said it had received hundreds of thousands of pounds of extra donations in response.

The RNLI has become embroiled in a now familiar story when the summer months allow more small boats to make the Channel crossing. Compared with the flows to other countries such as Spain, Italy and Greece, only a handful of migrants attempt the journey. That makes the UK’s inability to control the border in an effective and humane way — and shabby treatment of those who do make it across — no less of a scandal.

Britain’s strategy for stemming the flow has relied mostly on paying the French authorities to limit the number of boats crossing and return any that leave to France, while deterring would-be migrants through the unwelcoming environment that awaits them. Just as EU countries are dependent on their neighbours for keeping entrants down — whether Morocco for Spain or Belarus for Lithuania — the UK needs French co-operation to control the mutual border. Diplomatic spats, whether over Brexit or extra Covid quarantine restrictions on arrivals from France, have made that harder.

The UK approach manages to be simultaneously ineffective and cruel. Yvette Cooper, chair of the home affairs select committee, wrote last week to home secretary Priti Patel to complain of unacceptable conditions in the holding facility for migrants who make it to the Kent coast. A recent unannounced visit by MPs found most of those remaining in the overcrowded facility sitting on a thin mattress on the floor, with women and children in the same room as adult men.

Earlier this year, the High Court ruled that “squalid” conditions in the Napier Barracks, a temporary centre set up last year to house asylum seekers during the pandemic, were so bad as to be unlawful. While arrivals have declined since the peak seven years ago, cutbacks have led to a backlog in processing claims, leaving more in a legal limbo.

Since the start of the pandemic Britain has shut down other paths into the country, ending a resettlement scheme. This has ceded the ground to people traffickers. The “push factors” of the risk of violence and torture at home and “pull factors” of higher living standards mean many are still willing to resort to risky and illegal methods to try to reach the UK. Creating a harsh environment for those who make it has done little to dispel the widespread belief among migrants that Britain is a better destination than other European countries, and stem the flow.

That will not stop the government trying. Barristers have warned that a clause in draft border legislation could potentially make it a crime to help asylum seekers arrive in the UK, with a maximum penalty of life imprisonment; at present it is illegal to do so to earn a profit. The Home Office says the clause is aimed at criminal traffickers. But along with a suggestion to set up offshore processing centres, the provision has rightly earned criticism from human rights groups. If the government is unwilling to create safe and legal routes, its only option is to prevent people from coming in the first place. That, ultimately, will mean relying on France.



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Olympic organisers investigate after Belarusian runner seeks refuge

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Tokyo Olympics updates

A Belarusian runner due to compete at the Tokyo Olympics was taken to the airport against her wishes after making complaints about her coaches, according to media reports on Sunday night.

The International Olympic Committee, the Games organisers, said it had asked for clarification from the Belarus team about the status and whereabouts of Krystina Tsimanouskaya, who is due to compete in the women’s 200m sprint on Monday.

Belarus’ dictatorial leader Alexander Lukashenko and his regime are widely seen as international pariahs after he fraudulently claimed victory in last year’s presidential election and then embarked on a brutal campaign to suppress protesters and supporters of his rival, which has seen thousands beaten and jailed. 

Images and video circulated on social media sites by Belarusian opposition activists appear to show Tsimanouskaya at Tokyo’s Haneda airport, where she refused to board a plane and instead sought refuge with Japanese police.

Krystsina Tsimanouskaya took part in the heats for the women’s 100 metres on Friday but narrowly missed qualifying for the semi-finals © Aleksandra Szmigiel/Reuters

The IOC said it “has seen the reports in the media, is looking into it and has asked the [Belarus] national Olympic committee for clarification”.

Japanese police did not immediately respond to requests for comment.

The Belarusian Olympic Committee did not immediately respond to requests for comment, but a statement attributed to the body suggests she had been removed from competition by coaches on the advice of doctors advice about her “emotional, psychological state”.

Late on Sunday, Tsimanouskaya shared a screenshot of that statement on Instagram with the message: “This is a lie.”

“I am asking the International Olympic Committee for help, they are putting pressure on me and they are trying to take me out of the country without my consent,” Tsimanouskaya said in a video message reportedly recorded on Sunday evening from the airport and posted on social media.

A person close to Olympic officials said there remained “confusion” around the incident, adding they had been told that Tsimanouskaya had boarded a coach to the airport and had gone through the departures area to board a plane to Istanbul, where she then sought Japanese police to ask for asylum.

Belarusian opposition leader Sviatlana Tsikhanouskaya tweeted that she was grateful to the IOC for its quick reaction. “She has a right to international protection and to continue participation in the Olympics. It is also crucial to investigate Belarus’ NOC violations of athletes’ rights,” she said.

Tsimanouskaya on Friday appeared to criticise her coaches and team management in an Instagram post that said she had been “ignored” and that “people in higher ranks should respect us as athletes”.

The 24-year-old had taken part in the heats for the women’s 100 metres on Friday but narrowly missed on qualifying for the semi finals of the event. She is listed on official Olympics sites as due to compete in the first round of the 200 metres at the Olympic stadium on Monday morning.





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