Brexit talks may have finished, but the EU’s negotiations with Britain about fish are only just beginning.
EU fisheries ministers will hold a video call on Monday to prepare for the first annual negotiation with the UK on fishing rights for the many different species that roam between British and EU waters.
The purpose of this new EU-UK negotiation is to set overall fishing limits for 2021 for each species to make sure they are not overfished. Each sides’ share — its quota — of those fishing rights is already set out in the Brexit trade deal.
Monday’s discussion will be a reminder that it is not just the UK fishing sector that is deeply unhappy about that deal: there is plenty of frustration and anger on the EU side as well.
Ireland already complained at a meeting of EU diplomats this month that it was being asked to bear a disproportionate share of the quota cuts that Brussels negotiated with Britain.
As part of the future-relationship deal, the EU agreed to reduce its quota shares for dozens of types of fish. Much of that has already taken effect in 2021, with the rest to phase in by January 2025.
The cuts — equivalent to around 25 per cent of the more than €630m worth of fish that EU boats used to catch in British waters each year — concern lucrative species that are mainstays of national fishing fleets. For Ireland, an especially tough blow is a one-quarter reduction in its quota share for western mackerel, the country’s largest stock.
Other nationals fleets are also despondent. Esben Sverdrup-Jensen, chief executive of the Danish Pelagic Producers Organisation, told the FT that the adjustments were a “massive blow”.
“A lot of Danish fishermen have had some serious conversations with their financial institutions over the past few weeks and no doubt there will be fishermen who will go out of business here and lose their vessels,” he said.
EU officials noted that the cuts were far less than those sought by the UK, which made taking back control of its fishing waters a core negotiating objective. Brussels also insists that the trade deal offers stability.
For one thing, the treaty is clear that further quota changes can only be made if both sides agree.
Access for EU boats to UK waters is also guaranteed until mid-2026 and the EU would have the right to take compensatory measures — including hitting British fish exports with tariffs — were the UK to decide at any point in the future to shut EU vessels out.
One way to mitigate the impact of the deal is money — Jan Jambon, the minister-president of Flanders, told the FT last week that the fishing sector would be a priority when it comes to spending his region’s share of the €5bn Brexit Adjustment Reserve that the EU is putting in place.
But the backlash raises pressure on EU negotiators, who need to hammer out numbers with the UK on the volume of fish their fleets can catch in 2021.
Such talks are a standard feature of relations between coastal states and are part of the more complicated fisheries landscape in which the EU finds itself. Brussels is used to negotiating each year on about a dozen shared fish stocks with Norway, the bloc’s main fishing neighbour up to now. In the talks with the UK, around 100 stocks will be in play.
Fish was a central issue in the trade negotiations. It will now be a test of how the EU and UK work together to apply the deal they reached.
Chart du Jour: Vaccine investment gap
The UK and US have each spent about seven times more upfront per capita on vaccine development, procurement and production than the EU, according to data gathered by Airfinity, a London-based life sciences analytics company.
The EU’s vaccine procurement strategy is under increasing scrutiny after the bloc’s comparatively slow rollout suffered a further blow when AstraZeneca warned of supply problems. (chart via FT)
The US and the EU are ramping up the pressure on Russia to free Alexei Navalny. Poland’s president has called for sanctions and EU foreign ministers will discuss the situation on Monday following mass protests across Russia over the weekend. (FT)
The EU’s steering committee on vaccines will hold talks with AstraZeneca on Monday after the company warned that it would have to scale back planned deliveries to EU countries. Italy’s prime minister Giuseppe Conte accused AstraZeneca of a “serious contractual violation” while Charles Michel, EU Council president, told Europe 1 radio on Sunday: “We intend to ensure that contracts signed by the pharmaceutical industry are respected . . . We can turn to all the legal options at our disposal.”
France appears to be heading towards a third national lockdown, with the Journal du Dimanche reporting that a decision is expected in the coming days. Emmanuel Macron may make the announcement on Wednesday. Belgium on Friday took the step of banning all non-essential travel in and out of its territory, a further sign of EU countries hardening restrictions. (Le Soir)
The European Commission is urging Germany to bolster its own reform ambitions as part of dialogue over the recovery fund, according to Handelsblatt.
Coming up today
EU foreign ministers will discuss the detention of Alexei Navalny by Russian authorities as well as relations with the US. Other items on ministers’ agenda include co-operation with the UK and the EU’s strategy for sharing Covid-19 vaccines with other countries. Japan’s minister Toshimitsu Motegi will join the meeting by video for a discussion on Asia-Pacific matters.
Fisheries ministers will hold a video call on upcoming negotiations on fish stocks shared with the UK. Farm ministers will discuss reform of the Common Agricultural Policy.
Putin and Lukashenko’s ski fun shows cold shoulder to EU
As news of new EU sanctions against Russia began to leak out of a meeting of bloc foreign ministers on Monday afternoon, Vladimir Putin and his Belarusian counterpart Alexander Lukashenko were discussing a different challenge to the Russian president.
“You can try to compete with Vladimir Vladimirovich,” Lukashenko, in ski gear, said to his son, Nikolai. “But you probably won’t catch up,” he added, with a smile to Putin as the Russian leader pushed off down the slope.
Putin and Lukashenko are the men behind Europe’s two repressive crackdowns over the past six months, who have both jailed or exiled their most prominent opponents and seen their security forces violently assault and detain thousands of peaceful protesters.
But in a summit in the snow-covered mountains of Sochi, on Russia’s southern coast, they revelled in their twosome of leaders shunned and sanctioned by Brussels, in a calibrated message to the EU that the cold-shoulder was mutual.
For foreign policy experts there were few details to digest, despite the complex negotiations going on behind the scenes as the two post-Soviet states seek to recalibrate their future relationship.
Putin is keen to deepen integration on Moscow’s terms. Lukashenko is desperate for Russian investment and trade co-operation but is loath to relinquish sovereignty. Yet in place of diplomatic negotiations and policy pronouncements, photographs and video footage of the two leaders enjoying each other’s company were in full display.
At the outset, Putin, in jeans and an open-collar shirt and blazer, greeted his guest with a handshake and a hug. “Even our appearance, clothes and so on, suggest that these are serious negotiations in ordinary clothes,” Lukashenko quipped. “It suggests that we are close people.”
Pleasantries exchanged, it was time for the salopettes and ski boots, and a shared chairlift to the summit. Putin, pushing off confidently, set off down the gentle slope, Lukashenko in his wake.
After a short ride on snowmobiles back to their chalets, discussions continued over more than six hours — and what appeared to be three different sized wine glasses.
“The optics for the international audience is that they have been able to maintain their positions and nothing can be done against them,” said Maryia Rohava, a research fellow at Oslo university specialising in post-Soviet relations.
“Now we’re talking not just about sanctions against Belarus but also against Russia,” she added. “And it seems like they look at that like, ‘Well, we don’t care . . . We’re just enjoying our winter break like autocrats do.’”
To be sure, the fun on the slopes was not wholly without power games. Putin was clear to underscore he was the senior partner, from wrongfooting his guest at the top of the ski lift to releasing photographs of their meeting showing Lukashenko scribbling notes as his host spoke.
But the mood music was in sharp contrast to Lukashenko’s last visit to Russia in September. Then, with protests raging and the Belarusian leader’s position looking shaky, Putin reprimanded his guest for mishandling the unrest and risking the toppling of an ageing post-Soviet regime that could weaken his own.
Then, in a businesslike and cold atmosphere, Lukashenko pleaded with Putin that “a friend is in trouble” and was granted a $1.5bn loan from Moscow — but not before his host remarked that Belarusian people should be given a chance to “sort this situation out”.
The absence of such language on Monday also sent a subtle signal to other illiberal regimes, particularly those on the outer rim of Europe who, like Belarus in the past, find themselves lured towards Brussels by economic opportunities but repelled by the reforms and democratic standards demanded in exchange.
The message to the likes of Georgia, Moldova, Armenia and Turkey is that Putin, whose relations with the EU are at rock bottom, is always ready to talk.
Mitsubishi Motors set to reverse move to withdraw from Europe
Mitsubishi will formally consider the move at a board meeting on Thursday, according to three people with direct knowledge of the matter, following months of fractious discussions with its alliance partners.
A framework agreement between the three carmakers was reached on Monday during an alliance meeting, two of the people said. They added that the deal may still fall apart.
The decision to have Renault produce Mitsubishi cars at its French factories in a manufacturing deal, if finalised, would force the Japanese company to justify the U-turn — and face down accusations it yielded to a Renault campaign to protect French jobs.
The coalition between the three car groups is held together by Renault’s 43 per cent stake in Nissan, which owns 34 per cent of Mitsubishi, the smallest of the companies.
The French government’s 15 per cent stake in Renault has fed longstanding fears at the two Japanese carmakers that alliance strategy would be heavily influenced by French industrial politics.
In July Mitsubishi announced plans to in effect pull out of its lossmaking operations in Europe by cancelling model launches and running down its current line-up. This would lead to the end of all car sales in European markets as early as this year.
Following the announcement, some dealerships have already sold operations in preparation for Mitsubishi’s exit, while others are preparing to become repair garages for the brand instead.
An agreement to build Mitsubishi cars in France would be held up internally as a sign the Renault-Nissan-Mitsubishi Alliance was working under new management teams installed after the arrest and ousting of former boss Carlos Ghosn in 2018.
But people within both Mitsubishi and Nissan have expressed concern about such a deal that would mean Renault building Mitsubishi cars — increasing work for its French plants and providing a political boost in the country, where it is cutting jobs.
Executives were particularly worried about a potential repetition of Renault’s 2001 decision to move the Nissan Micra from the Japanese group’s Sunderland plant to its own underperforming Flins factory outside Paris. This was seen as a political move by the French group to shore up union support.
Mitsubishi said there was no change in its policy to halt development of new models in Europe.
Nissan and Renault said they would not comment “on speculation”. Renault added the alliance always “aims to enhance competitiveness and enable more effective resource-sharing for the benefit of all three companies” and that there “are always ongoing discussions between the three companies”.
Last month, Renault chief executive Luca de Meo suggested in an interview with the Financial Times that a deal could be done, saying: “We have space in our plants; we have platforms.”
De Meo also suggested that Renault could end up building more cars for Nissan in its French plants, something that was resisted by Nissan, according to people familiar with the discussions. That led to pressure being applied to Mitsubishi by both sides of the alliance, the people said.
Before last year announcing its withdrawal, Mitsubishi sold just 120,000 cars in Europe in 2019, giving it less than 1 per cent market share.
The tentative agreement reached on Monday is the first big deal between de Meo, who joined Renault as CEO last summer, and the heads of Nissan and Mitsubishi, and a test of the relationship between the three sides.
Nissan and Renault are focusing on turning round their own businesses as well as repairing the alliance, which came near collapse in the wake of the turmoil that followed Ghosn’s ouster.
De Meo announced a scheme to save €3bn by cutting factory capacity as part of a company overhaul last month, while Nissan aims to save ¥300bn ($2.85bn) through its own turnround plan.
What Mario Draghi’s appointment as Italian PM means for fintech
Mario Draghi’s surprise appointment to lead a national unity government in Italy was welcomed by financial markets and political experts alike last week. The former European Central Bank chief has promised an ambitious programme of reforms, and fintech is expected to be a key part of the plans.
In his first address to parliament on Wednesday, Draghi pledged to invest a large share of the money Italy receives from the EU Recovery Fund in digital infrastructure and technological upgrades. Vittorio Colao, the former chief executive of Vodafone, has been appointed minister for innovation and digital transition.
Last year, Italy was one of the worst performers in the EU’s Digital Economy and Society Index, which tracks the digital competitiveness of member states — with only Romania, Greece and Bulgaria further behind.
Colao has yet to unveil the details of his plans, but he is expected to focus on extending high speed internet access across the country and passing legislation to encourage the use of digital payment methods. He outlined similar priorities last year in a 53-page recovery and resilience plan that was ultimately ignored by the previous government.
“Draghi’s focus on innovation . . . is undoubtedly good news for the fintech sector and the appointment of minister Colao is a clear message of a strong push on the [tech and innovation] agenda,” said Corrado Passera, chief executive of digital bank Illimity and a minister in Italy’s last technocratic government.
Digital payments have long been seen as a way to combat tax evasion in Italy, where an estimated €130bn, or 8 per cent of GDP, escapes tax authorities each year.
Successive governments have encouraged the shift from cash to cards, and payments companies have been among the country’s most successful within Italy’s fintech sector, with companies like Nexi becoming continental players.
Less than 40 per cent of all payments in Italy were digital before the coronavirus pandemic, but experts believe that the combined impact of Covid, plus the arrival of the EU funds, will drive further change.
The pandemic caused some strain for Italian banks and insurers whose relationships with customers are still often based on branches, according to a recent report by PwC. Sudden lockdowns and prolonged working from home “forced experimentation of new ways of collaborating remotely through digital solutions”, encouraging traditional institutions to try more partnerships and strengthen collaboration with younger tech-focused companies.
However, the sector has continued to face challenges despite regulatory support and favourable legislation in the past.
Illimity, which specialises in small business loans and distressed debt, grew its assets to €4bn by the end of 2020, its first full year of operations. It posted a return on equity of 5.5 per cent despite the impact of the pandemic and said it expects to increase it further this year.
Such rapid growth, however, is not the norm. Out of the 278 Italian fintech companies analysed by PwC, only 37 had an annual turnover above €1m, and 70 per cent employ 10 people or less.
The consultancy says low levels of investment and a focus on more mature companies, as opposed to start-ups, have been key challenges. In 2018, for example, a single deal — a €100m investment in insurance company Prima Assicurazioni — accounted for a third of all the money invested in Italian fintech start-ups. The rest trickled down to 34 other companies.
The lack of investments in the Italian ecosystem has encouraged several larger fintechs like Moneyfarm, Soldo and OvalMoney to move their headquarters abroad.
Still, Illimity’s Passera remains optimistic, highlighting progress on initiatives like open banking, which forces institutions to share customer data, enabling new competitors or collaboration with third-party developers to build new services. “Digitalisation is changing the entire banking sector, innovation will play a significant role in its future . . . increasingly, [fintech] banks will act as disrupters for the sector and will emerge as new winners,” said Passera, who previously ran Italy’s largest bank Intesa Sanpaolo.
“Without inferiority complexes toward other countries, [while] trying to follow their best practices, there’s a great potential in Italy.”
Quick fire Q&A
What’s your name? SeedFi
When were you founded? March 2019
Where are you based? San Francisco and New York
Who are your founders? Chief executive Jim McGinley, chief operating officer Eric Burton, chief technology officer Rodrigo Menezes, head of marketing Greg Berman and head of product Bernardo Menezes.
What do you sell, and who do you sell it to? SeedFi is a financial health start-up helping underserved Americans build credit, save money, access funds and plan for the future.
How did you get started? The founding team wanted to help underserved communities after spending years working together at mission-driven start-ups and big banks.
How much money have you raised so far? $69m ($19m equity and $50m debt)
What’s your most recent valuation? N/A
Who are your major shareholders? Founders, Andreessen Horowitz, Flourish Ventures, Core Innovation Capital, and Quiet Capital
There are lots of fintechs out there — what makes you so special? We’re helping struggling consumers escape cycles of debt and build long-term financial health, which is more important in today’s economy than ever.
Mark Carney joins Stripe: Speaking of high-profile former central bankers, Mark Carney, former Bank of England governor, has added to his growing list of post-BoE jobs by joining the board of payments group Stripe. Carney is already head of impact investing at Brookfield Asset Management, and he has been active in pushing finance firms to do more to fight climate change. Carney said he wanted Stripe’s payments infrastructure to help encourage “strong and inclusive economic growth”.
More bad news for Ant Group: Anyone hoping Jack Ma’s Ant Group would be able to put its recent travails behind it after reaching a restructuring deal with Chinese authorities last month are likely to have been disappointed this week. At the weekend, regulators confirmed new rules governing how platforms like Ant fund their loans, which analysts say could hit Ant’s valuation. Pressure on the company has boosted rivals who charge much higher interest rates, raising fears that a drive that was officially intended to reduce credit risk in the economy could actually spur more defaults. An investigation by the Wall Street Journal sheds some light on why authorities may be willing to put up with such an outcome.
Transferwho? TransferWise has become one of the best-known names in fintech over the past decade, but co-founder Kristo Käärmann says the name doesn’t suit it any more. As of Monday, it will just be “Wise”. The change reflects the company’s efforts to expand beyond its roots as a simple money transfer service into a broader platform for internationally-minded consumers and, especially, businesses.
Wirecard fallout: The Wirecard saga continues to produce new ways to shock even the most jaded of financial journalists. This week it emerged that a senior investment banker at UniCredit continued to moonlight for now-disgraced Wirecard CEO Markus Braun until just before the payments company collapsed. Jana Hecker, who had worked with Wirecard in a previous role at Deutsche Bank, ran up around €800,000 of invoices with Braun, who is currently in police custody after being accused of being the linchpin of a criminal racket that conducted “fraud in the billions”.
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