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EU circles wagons against criticism of Covid vaccine rollout



Ireland’s EU envoy did not hold back this week in his excoriation of the European Commission over a botched rollout of vaccine export controls that risked impeding cross-border trade with Northern Ireland. 

Tom Hanney voiced his criticism to Björn Seibert, the top aide to European Commission president Ursula von der Leyen, in a meeting of ambassadors in Brussels. He lambasted the “very serious mistake” made on January 29 and reversed within hours, diplomats said.

But more revealing still was other member states’ muted reaction to the Irish broadside. Many countries, including France, Italy and the Netherlands, called instead for unity over the bloc’s vaccine strategy. 

It is a sign of how EU national and institutional leaders are circling the wagons against criticism, including by some prominent politicians in Germany, of the bloc’s slow vaccine rollout compared with the UK and US. 

Whatever the difficulties, it is in the shared interests of both the Brussels institutions and EU countries to try to shore up confidence in a project they have all backed — and which is crucial to showing the bloc can deliver tangible benefits to people’s lives. 

“In the short term, there are very few alternative strategies,” said Stefan Lehne, visiting scholar at the Carnegie Europe think-tank. “The only way [to deal with] this very serious problem for the EU and member states is if there is sufficient good news that vaccine production is being ramped up and deliveries are arriving. But if it all gets stuck, it will be very, very hard — particularly for the Germans.”

A health worker with a dose of the Oxford/AstraZeneca vaccine in Newcastle upon Tyne, England © Lee Smith/Reuters

The EU ambassadors’ gathering where Ireland clashed with von der Leyen’s key lieutenant reflected a growing recognition this week of the need for member states to combine in defence of their Covid-19 immunisation drive. 

They also rallied around the commission chief, who has staked her reputation on the vaccine procurement process overseen by the EU executive — but in which member states remain closely involved.

Von der Leyen has attempted to draw a line under the recent troubles, telling EU political party groups in private meetings this week that she took ultimate responsibility — as head of the commission — for the Irish border debacle. 

She has also acknowledged publicly that the EU underestimated production hitches in the early months of inoculations, and had failed to prepare the public for them.

This led to a row with AstraZeneca after it said it would deliver only 31m of the 100m or more doses expected by the EU in the first quarter of the year — a figure since increased slightly to 40m. 

This had all been a “bitter” lesson, von der Leyen told a group of European media organisations in an interview this week. She added: “I’m aware that a country might be a speedboat and the EU more a tanker.”

EU countries have given 3.3 doses per 100 residents on average, compared with 10.6 for the US and 16.5 in the UK, according to Financial Times data on Friday. The bloc, home to about 450m people, faces a rocky couple of months on supplies, with deliveries of only 88m doses of the trio of two-shot vaccines approved so far by regulators expected in February and March.

The fact that the EU is being outpaced by the UK — just a month after its exit from the single market — rankles with bloc leaders, as Angela Merkel, Germany’s chancellor, acknowledged this week. But for many in the EU, this has only underscored the need for member governments and institutions to avoid squabbling in public. 

Manfred Weber, top MEP in the commission president’s centre-right European People’s party, said there had been a communication problem over vaccines, but insisted the EU’s overall policy approach was correct. 

“We have strong and proper arguments for our way of doing things in the EU,” he told the FT. “There is obviously heavy criticism, but we should not act nervous — we should believe in what we have decided.” 

The sense that EU institutions and national governments must stand together or hang separately on vaccines also pervaded meetings between von der Leyen and MEPs during the week, attendees said. Criticism of the slow rollout mingled with repeated calls for the EU to stand together. 

In public, prominent figures have rejected critiques that the EU erred by signing deals for leading vaccines months later than the UK and investing less upfront in jab development and manufacturing capacity. 

Sandra Gallina, EU director-general for health policy, told MEPs this week that all member states were in the “top league” of Covid-19 immunisations in a world where some poor countries have seen few or no jabs.

The EU’s official determination to show unity has been further fuelled by UK government attempts to use the commission’s mishandled export restrictions to extract concessions over the wider post-Brexit border agreement. 

There is also unhappiness on the EU side over criticism of the new export controls — which the bloc has not used to stop any shipments — when countries including the US and UK have their own direct or indirect restrictions on movements of medicines. 

Above all, many in the EU see joint action, however flawed, as better than a vaccine war of all against all, particularly for the relatively small states that make up a majority of the bloc’s countries.

“We would not have arrived where we are today if we had not done it collectively,” said a senior member state diplomat. “There is no doubt in anyone’s mind that this was the right way to do it.”

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US suspends tariffs on UK exports in Airbus-Boeing trade dispute




The US will temporarily lift punitive tariffs on £550m worth of UK exports such as Scotch whisky and Stilton cheese, imposed as part of a row with the EU over subsidies to Boeing and Airbus, in an attempt to de-escalate one of the longest trade disputes in modern history.

The move follows the UK’s unilateral decision to suspend tariffs against the US from January 1, which took both Brussels and Airbus by surprise. Brussels has disputed that the UK had the right to act unilaterally in a trade dispute between the EU and the US when it has left the bloc.

Liz Truss, UK international trade secretary, said she was delighted that US president Joe Biden had agreed to suspend tariffs on UK goods for four months. The move would help to improve transatlantic relations, she said.

The US trade representative’s office confirmed that it would temporarily suspend the tariffs, to allow time to negotiate on settling the aircraft dispute.

The Johnson government has come under heavy fire over the tariffs in particular from the Scotch whisky industry, whose exports to the US plunged 30 per cent last year.

“The easier it is for Americans to buy a bottle of Macallan, Talisker or Glenmorangie, the more money those producers will have to invest in their businesses, their staff and futures,” Truss said. “Trade equals jobs.”

The US-EU aircraft subsidies dispute is one of the longest-running cases in the World Trade Organization’s history, reflecting the importance of the industry to each side and the intense competition between Boeing and Airbus.

The battle dates back to 2004, the year after Airbus first overtook its US rival in terms of deliveries. Both sides have been found guilty of providing billions in illegal subsidies to their aircraft makers.

Brussels was last year given the green light by the WTO to impose tariffs of up to 25 per cent on $4bn worth of US products, after Washington announced duties on $7.5bn worth of European imports. 

Both Boeing and Airbus welcomed any move that could help to bring the two sides together. “We welcome USTR’s (US Trade Representative) decision to suspend tariffs for allowing negotiations to take place,” Airbus said in a statement. “Airbus supports all necessary actions to create a level-playing field and continues to support a negotiated settlement of this longstanding dispute to avoid lose-lose tariffs.”

Boeing said: “We commend this action by the US and UK governments creating an opportunity for serious negotiations to resolve the WTO aircraft dispute. A negotiated settlement will allow the industry to move forward with a genuinely global level playing field for aviation.”

However, Britain’s departure from the EU has raised questions about how effective any UK-US suspension can be. With no precedent to follow, trade lawyers have said it is unclear whether the UK still had a right to impose or suspend tariffs that were granted to the EU. 

Whitehall officials insisted the UK had the right to revoke retaliatory tariffs. One individual close to the process said: “This whole issue shows the benefit of being an independent trading nation . . . if we can get this done, it paves the way to a deeper trading relationship with the US and will help free trade deal negotiations.”

Despite this, there appear to be very few signs of progress in the trade talks between the US and UK. In January, White House press secretary Jen Psaki indicated that securing a deal would not be a priority for the Biden administration.

Last month, Biden’s nominated top trade adviser Katherine Tai told senators that she would “review the progress” of the talks that had taken place between the two sides over the previous two and a half years.

Both the EU and the US have long argued for a resolution to the dispute, but have remained far apart on the terms of any agreement on how to fund new aircraft development. 

After Biden’s election as US president, there was a feeling in Europe that a deal could be within reach. There has been growing speculation that talks were progressing.

However, in late December, the US further raised tariffs on European goods, specifically targeting French and German products.

The EU has said it is in intensive talks with the US in a bid to quickly secure a deal to remove punitive tariffs. 

“We have proposed that both sides agree to suspend tariffs for six months,” a European Commission spokesperson said. “This will help restore confidence and trust, and thus give us the space to come to a comprehensive and durable negotiated solution.”

A US administration official said that while he could not indicate whether there were plans to imminently remove the EU tariffs, the Biden team was continuing to review the dispute. “The goal is to resolve the dispute and create a level playing field,” the official said. 

Both Brussels and Washington are keenly aware that the rules need to be set before China becomes a significant competitor to Boeing and Airbus.

China is expected to be the fastest-growing market for commercial aircraft over the coming decades and Beijing has made it a strategic priority to break the global duopoly in an attempt to claim some of that market for Chinese industry. Later this year, China’s Comac is expected to have fully certified its first major commercial aircraft, the C919 single aisle.

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FC Barcelona and Real Madrid will be forced to pay back illegal state aid




FC Barcelona and Real Madrid will be forced to pay back millions of euros in illegal state aid after the EU’s highest court ruled Brussels was right to declare that beneficial tax arrangements they enjoyed for a quarter of a century were illegal.

The decision by the European Court of Justice upholds previous rulings by the European Commission and comes as Barcelona, the world’s highest-earning football club, is enduring one of the biggest crises in its history. 

This week police arrested the club’s former president, its current chief executive and its general counsel, in connection with a separate legal case ahead of a vote on Sunday to decide its next president. Barcelona, which recorded a loss of €100m last year, also has to contend with a debt pile of more than €1bn.

In 2016 Margrethe Vestager, the EU’s competition chief supremo, ordered four Spanish football clubs to pay back tens of millions of euros received since the 1990s in the form of sweetheart property deals, tax breaks and soft loans.

FC Barcelona subsequently contested the decision before the General Court, the EU’s second-highest tribunal, which annulled the commission’s judgment. However, after a final appeal from Brussels the ECJ ruled in favour of the EU.

In its decision on Thursday — which is final — the ECJ deemed the tax scheme “liable to favour clubs operating as non-profit entities over clubs operating in the form of public limited sports companies”, holding that it could therefore qualify as illegal state aid under EU rules.

The General Court had previously annulled Brussels’ decision over what it said was lack of sufficient evidence that the tax arrangements offered to the four football clubs, which also include CA Osasuna and Athletic Bilbao, were illegal.

But the commission had questioned the court’s “heavy burden of proof” on regulators in its appeal, arguing that a lower tax rate was obviously more favourable than a higher one.

The ECJ argued that the difficulty in assessing the extent of state aid — because of the complexity of tax deductions — did not preclude the commission from banning government practices that it considered gave sports clubs unfair advantages. 

It said: “The impossibility of determining, at the time of the adoption of an aid scheme, the exact amount, per tax year, of the advantage actually conferred on each of its beneficiaries, cannot prevent the commission from finding that scheme was capable, from that moment, of conferring an advantage on those beneficiaries.”

The Spanish government said on Thursday it had “absolute respect” for the court’s decision. FC Barcelona and Real Madrid did not immediately respond to requests for comment.

The judgment will be seen as a big win for regulators in Brussels who have for years been trying to stop highly successful commercial clubs from freeriding on the back of taxpayers.

The European Commission said on Thursday it noted “the judgment by the Court of Justice to follow the Commission’s arguments”.

Thursday’s ruling is the second time Brussels has won an appeal of its state aid decisions in recent weeks. Last month judges at the General Court rejected a legal challenge by budget airline Ryanair to state aid given to rivals on discriminatory grounds.

At present Barcelona is dealing with the fallout of what the Spanish media dubs Barçagate — allegations, denied by the club, that it corruptly hired outside groups to defame former president Josep Maria Bartomeu’s adversaries on Facebook.

Bartomeu was temporarily detained by the Catalan police earlier this week. He, the club, and other individuals in the case, which is being investigated by a Barcelona court, have all denied any wrongdoing.

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Italy raises €8.5bn in Europe’s biggest-ever green bond debut




Investors flocked to Italy’s inaugural environment-focused government bond offering on Wednesday, allowing the country to raise more than €8bn.

The banks running the issuance chalked up around €80bn in orders for €8.5bn of debt. It was the biggest debut sovereign green bond from a European issuer to date, according to Intesa Sanpaolo, which worked on the deal.

Other recent Italian bond sales have also attracted strong demand, after former European Central Bank president Mario Draghi became prime minister last month.

Demand for the debt highlights the popularity of green bonds, which provide funding for environmental projects and require borrowers to report to investors on how the funds are used. 

Tanguy Claquin, head of sustainable banking at Crédit Agricole, which was a co-manager on the transaction, said the sale was met with “very strong support” from investors, particularly those that are required to consider environmental factors in their portfolios.

The bond, which matures in 2045, was issued with a yield of 1.547 per cent. The underwriters were able to reduce the premium against a normal Italian government bond maturing in 2041 to 0.12 percentage points, a slimmer premium than the 0.15 points initially mooted.

Italy follows several European countries, including Poland, Ireland, Sweden and the Netherlands, into the green debt market. France has issued 11 green bonds since 2017, totalling $30.6bn according to Moody’s Investors Service. Germany joined the market last year with two green Bunds. In its budget on Wednesday, the UK announced plans to sell at least £15bn of green bonds in two offerings this year. 

Italy is the first riskier southern-European government to tap the green market. The spreads on Italian debt relative to the eurozone benchmark German bonds fell to a six-year low of less than 0.9 percentage points in early February in a sign of investors confidence in Draghi’s leadership of the EU’s third-largest economy. The spread widened during last week’s volatile bond market trading but remains low by recent standards.

Spain plans to follow Italy with a green bond offering in the second half of 2021. Analysts expect an initial €5-10bn sale at a 20-year maturity. Johann Plé, senior portfolio manager at AXA Investment Managers said the demand for Italy’s sale “should reinforce the willingness of Spain and others to follow suit.”

Plé said the price investors paid for the Italian green bond “remained fair” and that this “highlights that strong demand does not necessarily mean investors have to pay a larger premium”.

Green bonds often command higher prices, and therefore lower yields, than their conventional equivalents from the same issuer. The German green Bund currently trades with a “greenium” around 0.04 to 0.05 percentage points, roughly double the gap when it was initially issued, according to UniCredit analysis, while French government green debt is roughly 0.01 percentage points lower in yield than conventional bonds.

Italy’s pitch on the environmental impact and reporting of its green projects drew positive reactions from some investors. Saida Eggerstedt, head of sustainable credit at Schroders, which invested in the bond, said the details provided on projects including low-carbon transport, power generation, and biodiversity were “really impressive”.

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