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Return of Kosovo’s anti-establishment Kurti poses questions for the west



For most of his adult life, Kosovo politician Albin Kurti has opposed the establishment. But after his Self-Determination Movement party won almost 50 per cent of the vote in a snap election on Sunday, the charismatic leader is set to become the establishment.

His convincing victory has been hailed as an “Obama hope moment” for one of Europe’s poorest countries — but it also raises questions for western engagement with the former Serbian province. 

Much of Kurti’s career has hinged on opposing the powers in control of Kosovo. His public life began as a student leader of a protest movement against apartheid-like policies of former Serb strongman Slobodan Milosevic in the 1990s, as Yugoslavia was being torn apart by war. When Kosovo was liberated in June 1999 after 78 days of Nato air strikes, Kurti was in a Yugoslav prison, where he was serving a 15-year terrorism sentence. He was released in December 2001.

In 2005, when postwar Kosovo was under UN administration, Kurti founded his Self-Determination Movement, which staged sometimes violent actions with the slogan “No Negotiations, Self-Determination!” Two years after Kosovo declared independence in 2008, the movement became a party and campaigned against the EU Rule of Law Mission, EULEX, which oversaw the country’s judicial system and continues to operate in a decreased capacity today.

For years, Kurti’s violence and his calls for union with Albania made many western policymakers, who wield tremendous influence in the country, apprehensive. But he has calmed and his ascension to premier in February last year, after winning almost 30 per cent of the vote on an anti-corruption platform, was cheered by many diplomats.

Kurti was ousted after less than 100 days in power in a no-confidence motion seen as engineered by Donald Trump’s boisterous aide Richard Grenell, who was hoping to rack up a quick foreign policy victory for the former president by reaching a landmark agreement between Kosovo and former master Serbia. The EU, which has mediated negotiations between the two countries since 2011, appointed its own envoy but talks have largely stalled.

Many were uneasy about US pressure for a deal, especially one that would include a contentious exchange of territory with Serbia. But many Kosovars have lost trust in the EU, which has kept its population of 1.8m out of the Schengen visa-free travel zone while extending the privilege to everyone else west of Belarus, including war-torn Ukraine. It is complicated for Brussels to create policy towards Kosovo as five EU member states do not recognise its independence. 

Kurti has made clear the EU-mediated dialogue with Serbia is not his chief priority. But he could surprise. Former president Hashim Thaci, who was the west’s chief interlocutor for more than a decade, has been compromised by allegations of corruption and war crimes, for which he now awaits trial in The Hague.

Kurti is the first leader in Kosovo in years with the popular legitimacy to deliver a deal. The question is whether the unbending anti-establishment force will be ready for compromise.

Chart du jour: the ‘Draghi effect’ on Italian bonds

Line chart of Percentage points showing Italy-Germany spread tightens on Draghi boost

Italian bonds were in high demand on Tuesday, with investors placing a record €110bn of orders on 10-year debt. Investors are betting on Mario Draghi delivering major financial reforms as prime minister. The former ECB is chief due to lay out his economic plans to Italian lawmakers on Wednesday. (chart via FT)

News around Europe

  • Ireland’s foreign minister Simon Coveney has said that “pragmatism and flexibility” are needed in implementing the Northern Ireland protocol. Talking to the FT, Coveney also hinted that Dublin would support “modest extension” to grace periods for British goods travelling across the Irish Sea.

  • As Joe Biden settles into the US presidency, Germany is urgently trying to sound out his administration’s view on the Russian-German Nord Stream 2 pipeline. Many hope that Antony Blinken, secretary of state, will lift sanctions on the pipeline and opt for “fence-mending”. (FT)

  • Poland’s tax on media advertising is the latest attack on Polish democracy akin to the storming of the US Capitol on January 6, according to Adam Michnik, former leader of Poland’s Solidarity. He argues that the tax is an attempt to halt the abilities of independent media to keep the state in check. The FT’s Ben Hall sees the threats to media freedom in Europe as a test of the EU’s commitment to independent journalism. (PS)

  • Turkey has been handed a reprieve from the EU’s tax haven blacklist thanks to divisions between member states. EU finance ministers on Tuesday parked a debate on placing Turkey on the list of non-co-operative tax jurisdictions following complaints that it should be included. Ankara is likely to be given a few more months to make good on promises of tax data exchange — or face being named and shamed.

  • The Dutch government’s Covid-19 curfew measures have been thrown into turmoil after judges in The Hague said the rules should be lifted immediately for violating personal freedoms. (NOS) The introduction of the country’s first curfew in the postwar era sparked violent riots last month. The government has said it will appeal the court judgment. In the meantime, Prime Minister Mark Rutte is urging people to stay at home after 9pm to control the spread of a variant of the virus first identified in the UK. (Dutch News)

Coming up today

European Commission president Ursula von der Leyen will be in the press room around noon to present Brussels’ plans for investing EU funds in combating coronavirus variants and helping vaccine producers ramp up production in the face of emerging mutant strains. The FT has the details.; @valeriein140

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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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