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EU recovery deal to ‘alter permanently’ bloc’s crisis-fighting approach

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The landmark recovery plan agreed by EU leaders this week has the potential to permanently change the way the bloc handles major crises.

At a two-day summit that ended on Friday in Brussels, leaders unlocked a €1.8tn budgetary package built in part on unprecedented levels of European Commission debt issuance. The core innovation is the €750bn pandemic recovery fund, which was first sketched out in July and will allow transfers to pandemic-stricken member states starting next year. The compromise also paved the way for a separate agreement on ambitious new climate change objectives and settled the EU’s next seven-year budget.

Angela Merkel, who holds the EU’s rotating presidency and brokered the deal that overcame a blockade by Poland and Hungary, was relieved. “It is a huge weight off my mind,” the German chancellor told reporters.

French president Emmanuel Macron also expressed satisfaction: “This summit was a test for Europe and we have passed that test.”

The recovery fund, which needs to be ratified by national parliaments, is explicitly designed to be a temporary feature of the EU’s crisis recovery toolkit. As such, it does not offer a lasting response to those who worry about the absence of fiscal firepower at a supranational level to withstand future economic crises.

But analysts see the accord as a fundamental shift. “Even if the debt instrument is not permanent, it will permanently alter the way we think about the instruments that Europe has at its disposal in a crisis,” said Lucas Guttenberg of the Jacques Delors Institut in Berlin. “It shows what is possible.” 

French president Emmanuel Macron outside the European Council building during the EU summit
French president Emmanuel Macron outside the European Council building during the EU summit © POOL/AFP via Getty Images

The centrepiece of the recovery fund — €390bn of grants handed out by Brussels to member states — will deliver a net benefit worth more than 10 per cent of pre-crisis economic output in Croatia and Bulgaria, according to the European Central Bank. Greece stands to receive a 9 per cent net benefit, while Portugal will get 5.4 per cent and Spain 3.4 per cent. 

Guntram Wolff, of the Bruegel think-tank, said the flow of funding would provide significant “fiscal space” to weaker economies to support the recovery in coming years. “The transfer element from stronger to weaker countries is important,” he said.

As observed in the history of the EU, a major crisis — the devastating economic fallout of the Covid-19 pandemic — has helped build consensus and overcome deep divisions among member states. Before the summer, the so-called frugal countries — the Netherlands, Denmark, Sweden and Austria — were opposed to the idea of the commission raising debt to fund grants to member states. More recently, the EU grappled with an eleventh-hour threat to the entire budget package because Warsaw and Budapest objected to plans to curb payouts to countries that breach the rule of law.

Bar chart of net impact of EU recovery fund spending (% of 2019 GDP, selected countries) showing which countries benefit most from the fund?

In both cases, solutions were found. Poland and Hungary were won over on Thursday with a non-binding declaration designed to assure them they would not be unfairly singled out under the new rules. The declaration also stipulates that member states can challenge its legality at the European Court of Justice before it is used.

Diplomats insisted the substance of the rule-of-law legislation remained unchanged. Nevertheless, they acknowledged that the complex political wrangling involved in securing both the recovery fund and climate deals exposed rifts in the union.

The stand-off on the rule of law in countries that have drifted, or risk drifting, into authoritarianism also highlights an enduring resistance to Brussels’ oversight — an issue that will probably hang over the recovery fund spending in coming years. This debate would be “coming back”, one diplomat warned. 

Similarly, while the summit settled on climate targets for a 55 per cent reduction in emissions by 2030, disagreements remain between member states on how to reach those goals. The range of views was highlighted by the varied environmental priorities the 27-member EU has vowed to address — from spruce bark beetles ravaging trees in the Czech Republic to Maltese concerns about the needs of island states.

The difficulty handling the Hungarian and Polish objections to the rule of law mechanism underscores the need to develop permanent crisis-fighting tools that cannot be so easily held up by a small number of veto-wielding member states, according to Mr Guttenberg.

“We cannot build instruments that are new in each crisis,” he said, because that implied having to secure the agreement of all 27 countries — or all 19 in the case of eurozone initiatives. The summit deal, he said, was a huge step. But “it’s just not the end of the road”.

Additional reporting by Guy Chazan in Berlin and Victor Mallet in Paris



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Global house prices: Raising the roof

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Global house prices: Raising the roof



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Missing Belarus activist found hanged in Kyiv park

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Belarus updates

A Belarusian opposition activist has been found hanged from a tree in a park near his home in Ukraine, a day after he was reported missing. Local police said his death could have been made to look like suicide.

Vitaly Shishov, who led the Kyiv-based organisation Belarusian House, which helps Belarusians fleeing persecution find their feet in Ukraine, had been reported missing by his partner on Monday after not returning from a run.

Shishov’s death follows weeks of increased pressure in Belarus by authorities against civil society activists and independent media as part of what the country’s authoritarian president Alexander Lukashenko has called a “mopping-up operation” of “bandits and foreign agents”.

Many Belarusians have fled the country since Lukashenko launched a brutal crackdown last summer after nationwide protests erupted following his disputed victory in presidential elections. About 35,000 people have been arrested in Belarus and more than 150,000 are thought to have crossed into neighbouring Ukraine.

Franak Viacorka, an aide to Belarusian opposition leader Sviatlana Tsikhanouskaya who met UK prime minister Boris Johnson on Tuesday in London, said Shishov’s death was “absolutely shocking and unexpected to all of us”.

“He [Shishov] and his friends helped people who were moving to Ukraine,” Viacorka told the Financial Times. “They were very helpful, especially for those who have just arrived and didn’t know what to do.”

Viacorka said many activists living in Ukraine, such as Shishov who fled Belarus in 2020, had “complained about possibly being followed, and receiving threats”.

Kyiv park where Vitaly Shyshov’s body was found
The Kyiv park where Vitaly Shishov’s body was found after he failed to return home following a run © Gleb Garanich/Reuters

Downing Street said that after meeting Tsikhanouskaya, Johnson condemned the Lukashenko regime’s severe human rights violations. “The UK stands in solidarity of the people of Belarus and will continue to take action to support them,” a spokesperson said.

Ukrainian police have now launched a criminal case for the suspected murder of Shishov, including the possibility of “murder disguised as suicide”.

Yuriy Shchutsko, an acquaintance and fellow Belarus refugee who found Shishov’s body, ruled out suicide, pointing out that Shishov’s nose was broken.

“I suspect this was the action of the [Belarus] KGB . . . we knew they were hunting for us,” he told Ukrainian television.

Ihor Klymenko, head of the National Police of Ukraine, subsequently said Shishov’s body had what appeared to be “torn tissue” on his nose and other wounds, but stressed it would be up to medical examiners to determine if these were caused by beatings or the result of suicide.

There was no immediate comment from Lukashenko or his administration.

Belarusian House said: “There is no doubt that this is an operation planned by the Chekists [the Belarusian KGB] to eliminate someone truly dangerous for the regime.

“Vitalik was under surveillance,” it added. “We were repeatedly warned by both local sources and our people in the Republic of Belarus about all kinds of provocations up to kidnapping and liquidation.”

Adding to the swirl of attention on Belarus this week, Tokyo Olympics sprinter Krystsina Tsimanouskaya on Monday took refuge in Poland’s embassy after alleging she had been taken to the airport against her will, having criticised her Belarusian coaches.

The athlete has said she feared punishment if she went back to Belarus but has so far declined to link her problems to the country’s divisions.

Shishov’s death comes five years after Pavel Sheremet, a prominent Belarus-born opposition figure and journalist, was killed in an improvised bomb explosion in downtown Kyiv while driving to work at a local radio station. Lukashenko has ruled Belarus since 1994.

Ukrainian authorities at first suggested Belarusian or Russian security services could have been involved in the hit, as Sheremet was close to opposition movements in Russia as well.

Instead, officials charged three Ukrainian volunteers who supported war efforts against Russia-backed separatists in eastern Ukraine — although they steadfastly denied involvement and authorities were unable to provide a motive in what has been widely described as a flimsy case.

Additional reporting by Jasmine Cameron-Chileshe in London



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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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