The link between sausages and the Silk Road may seem superficial at best but both, in their own way, highlight the importance of trade, not least with the ongoing pandemic triggering protectionist trends. Sausages were an indirect casualty of the cross-border problems that followed the Brexit deal signed on Christmas Eve, writes Colin Stevens.
While the new agreement allows for tariff-free trading, Stonemanor, a British grocery store in Belgium that delivers up to 20,000 food products and other items from its Norfolk warehouse in the UK, discovered that it is something of a “minefield” to get through all the legislation and legal jargon.
The new post-Brexit rules say that bringing foods that contain meat or dairy into the EU, even for personal use, is forbidden. The export ban on British bangers has since resulted in worried customers seeking reassurance from Stonemanor about their future sausage supplies.
On a slightly different scale, the Belt and Road Initiative (BRI) is a gigantic development strategy proposed by the Chinese government which focuses on connectivity and cooperation between Eurasian countries.
What the humble sausage and the ambitious BRI project both share in common is the role trade plays in a global economy that depends on global supply chains.
Dutch MEP Liesje Schreinemacher, a member of the European parliament's Committee on International Trade, told this site: "On trade policy, high on the agenda for the EU in the coming years will be our trade relations with two of the largest global trading partners: the US and China.”
The Belt and Road Initiative (BRI) was unveiled in 2013 by China’s president Xi Jinping. Until 2016 it was known as OBOR – ‘One Belt One Road’. Most people have heard about it because of the large-scale infrastructure projects in more than 60 countries along both routes over land – forming the Silk Road Economic Belt – and over sea – forming the Maritime Silk Road. There actually exist two more routes: The Polar Silk Road and the Digital Silk Road.
There are different views about the BRI from European opinion and policy makers, but all agree that the BRI will have a great impact on the political and economic world order.
A source at the Belgian-Chinese Chamber of Commerce (BCECC) said that several experts anticipate that, thanks to these infrastructure projects, the trade costs for countries participating in the project will reduce significantly, resulting in a trade growth of more than 10%.
Through the BRI the Chinese government aims to accelerate economic integration of countries along the Silk Road and boost economic cooperation with Europe, the Middle East and the rest of Asia.
As a consequence, it is clear that this will also benefit sectors in which European companies are strong global niche players, such as for example logistics, energy and environment, machines and equipment, financial and professional services, healthcare and life sciences, but also tourism and E-commerce.
Currently there are already regular train connections between different Chinese logistic hubs and European cities, such as Antwerp and Liege locations in neighbouring countries, such as Tilburg (the Netherlands), Duisburg (Germany) and Lyon (France). These rail freight lines between China and Europe complete the range of multimodal freight connections available in Europe (air and sea), allowing companies to choose the most suitable logistics solution for their business.
An important part of the Belt and Road Initiative is also the digital Silk Road.
Today, digital trade and e-commerce are becoming an inseparable part of the global economy. For example, in December 2018 Alibaba announced that they will build their logistic hub for Europe in Liege airport.
This achievement cannot be overvalued: it has made Belgium the European headquarters for the Digital Silk Road, strengthening the good relations between China and Belgium even more and offering unique opportunities for e-commerce to many Belgian companies.
In an interview with this website, Anna Cavazzini, Chair of the European Parliament’s Committee on internal market and consumer protection and substitute member of the Committee on international trade, underlines the importance of rules for trade.
She said, "Trade deals are not only about trading more fridges or screws around the world: they function as economic constitutions superior to national or EU law, shaping economic exchanges in the long run with rules that our industries and governments will follow for decades to come. That is why we need to ensure that all our agreements, whether future or existing ones, are in line with the European Green Deal and our sustainability objectives."
On EU trade deals with other countries, she said: "When trade rules are ill-designed, trade agreements lock our societies into an unsustainable economic model. The EU-Mercosur deal is a glaring example of this, as it will boost Mercosur exports of meat and other agricultural products to the EU, leading to a significant increase in deforestation in the region, while we will export more cars, chemicals and machines. Enforceable commitments on fighting deforestation and climate change would be key.”
Addressing the EU/UK agreement, the MEP said: "The Paris Agreement has to set the framework for all trade. In this regard, the agreement on the future relations of the EU with the UK can become the blueprint for future trade deals. For the first time ever, environmental and social standards will be enforceable which until now the European Commission argued was not possible. The EU always has to make clear that access to the single market can never go along with standard dumping.
“Only by using the single market as an instrument to foster the transformation of our economy and by applying our standards to imports, can trade contribute to tackling the climate crisis."
She says that the ongoing EU-New Zealand negotiations provide a chance for more climate-friendly trade “as New Zealand is open to enforceable sustainability standards, a carbon border tax and even to address fossil fuel subsidies”.
“Yet according to reports, so far the EU has been rejecting all climate proposals made by NZ negotiators. It remains to be seen whether the EU will take up this trade policy opportunity to follow up on its Green Deal commitments."
On EU-US trade relations, Schreinemacher said: “We have seen the temperature drop under the Trump administration. But I am hoping that with this Biden administration we will have our transatlantic ally and partner back and ready to cooperate and tackle today’s global challenges. Of course, our relationship will not magically be restored overnight, and we have to be realistic and see things for what they are. But we should waste no time to rebuild burned bridges and I hope the US will join us in our efforts to promote multilateralism, rules-based trade, provide security and the fight against climate change. I am hopeful that we will see a decline in trade conflicts, and I believe there is a need for cooperation on new topics such as regulating Big Tech companies or working on global AI standards."
Addressing concerns about trade rules, the European Parliament, on 20 January, adopted new rules allowing the EU to use countermeasures in trade disputes when arbitration is blocked.
The strengthening of the so-called enforcement regulation allows the EU to protect its trade interests against partners acting illegally. From now on, the EU can introduce countermeasures when it obtains a favourable ruling from a dispute settlement panel of the World Trade Organisation (WTO) or in bilateral and regional agreements, when the other party fails to cooperate on the adjudication of the dispute.
MEP Marie-Pierre Vedrenne (Renew, FR), Parliament’s rapporteur on the issue, said: “This regulation makes it clear that international trade is founded on rules that everybody needs to respect. No one is exempt from these rules.
“Europe continues to stand by the multilateral system and WTO rules. Yet the international dispute settlement mechanism is still blocked. The EU now has another credible, efficient and ambitious tool at its disposal to bolster its trade policies and ensure its strategic autonomy. We now expect the Commission to swiftly introduce a measure to counteract and deter coercive attempts by third countries.”
After exiting the bloc, the UK is now classed by the EU as a third country and the Brexit deal has triggered numerous trade-related problems.
For example, the British Meat Processors Association is receiving a growing number of calls from meat companies highlighting the plethora of problems they’ve been experiencing at the borders; problems which are now causing a serious and sustained loss of trade with the EU, the UK’s biggest export partner.
Alongside seafood, fresh meat is one of the most time critical perishable products. Every hour a lorry load of meat is delayed increases the chance of that order either being reduced in price, cancelled and returned or, in the most severe cases, thrown away and ending up in landfill.
Nick Allen, CEO of BMPA, describes a common problem: “One of our members reported on 11 January that he had 6 lorry loads of product [value around £300,000] all waiting for customs clearance into the Republic of Ireland. At the time, one of those loads was about to be returned to the processing company after waiting 5 days for clearance. Drivers have been reporting long delays as they wait for HMRC to process the customs documents.
“We are calling for the current customs and certification system to be modernised and digitized, as the existing paper-based system is a relic from the last century and simply not fit for purpose. It was never designed to cope with the kind of integrated, just-in-time supply chain we have built up over the last 40 years, and if not fixed quickly it will be the thing that starts to dismantle the European trade British companies have fought so hard to win”.
He said that for the first two weeks of January most companies deliberately cut the trade they do with the EU and Northern Ireland down to a very low level (on average 20% of normal volumes). This was so they could tentatively test out the new system. But even at these low volumes, there have been catastrophic delays for perishable products, he says.
Another problem is the lack of a functioning WTO Appellate Body, the multilateral authority to decide on trade disputes.
This is why it was imperative to update the EU’s Enforcement Regulation, says senior MEP Bernd Lange, trade committee chair.
The updated instrument allows the EU to suspend trade concessions or impose countermeasures at the end of dispute settlement proceedings even if partner countries try to exploit the situation at the WTO (and appeal cases into the void).
He said: “The new regulation will empower the EU to better defend its interests.”
EPP MEP Anna-Michelle Asimakopoulou cautions that ensuring Europe's strategic autonomy “in an increasingly unstable world must be an absolute priority.”
She adds that the new Enforcement Regulation “will allow the EU to defend itself when third countries, such as China or the United States, unilaterally adopt restrictions in access to their market and simultaneously block the WTO’s dispute settlement process”.
“The EU will be able to counter-attack by using customs duties and quantitative restrictions on the import or export of goods, and measures in the field of public procurement.”
Further comment comes from former Europe Minister in the UK, Denis MacShane, who told this website: “Trade is caught between, on the one hand, the ultra-free traders - who justified slavery in the past and sweatshop labour today as well as turning blind eye to torture and mass imprisonments in China which pre-dated Uighur issue - and the protectionists like Donald Trump and Brexit ideologues who reject trade with the UK's biggest trading partner in the name of national identity. The more trade and competition the better should be the general rule but the Davos hight priests of uncontrolled and socially unaccountable globalisation have ignored the cries for help of communities left behind.”
The former Labour MP added: “Trade cannot be disconnected from society and the challenge now is to connect trade maximisation with creating better, fairer and ecologically sensitive societies.”
In a problem that echoes Stonemanor’s sausage situation, Dutch customs officials have been filmed confiscating sandwiches and other food from passengers on a ferry from Britain, blaming new post-Brexit trade rules. The British government in December gave the example of ham and cheese sandwiches as food that could not cross to the continent after Britain formally abandoned EU trade rules on 1 January.
Sam Lowe, of the Centre for European Reform, a think tank, says that the EU/UK Trade and Cooperation Agreement (TCA) removes tariffs and quotas (conditional on the exported products meeting the agreement’s rules of original criteria) but does little to facilitate trade in services, or negate the need for new bureaucracy and checks at the border.
“But this was expected – once the UK government prioritised regulatory autonomy, ending freedom of movement, and gaining a free hand on trade policy, its economic ambition was limited to a trade agreement with the EU similar to what the bloc has with Canada and Japan (at least for Great Britain; Northern Ireland has a deeper trade relationship with the bloc under the terms of the Withdrawal Agreement).”
Lowe said: “You could also imagine the UK seeking to revisit the question of border checks on products of animal origin, simply to reduce the burden placed on traders navigating the new internal trade border between Great Britain and Northern Ireland.”
Brexit aside, the EU has certainly been busy of late in securing trade deals. Most recently, last November, a new EU-US agreement to eliminate customs duties on certain European and American products was signed.
In the context of trade tensions between the EU and the US, this agreement sets a positive mark as the first tariff reduction agreement between the EU and the US in more than 20 years. Moreover, it falls within WTO rules and rules-based trade and MEP Liesje Schreinemacher said: "This mini-deal presents a positive step towards greater cooperation between the EU and US.”
In April 2019, the EU also signed a new Economic Partnership Agreement with Japan, a landmark moment for global trade and the largest free trade area in the world.
“The vast majority of the €1 billion of duties paid annually by EU companies exporting to Japan and vice-versa were instantly removed, helping trade between the two sides to increase by up to nearly €36 billion,” said BusinessEurope Director General Markus J. Beyrer.
The EU is currently trying to secure a similar trade deal with Australia and council president Charles Michel says the “timely conclusion of such an agreement would create growth opportunities, deepen economic integration and reinforce our shared support for rules-based trading arrangements.”
He stresses the EU’s “commitment to open and fair trade and underlines the need to support the multilateral rules-based trading system and render it fit for current challenges.”
Elsewhere, Luisa Santos, Director for International Relations for BUSINESSEUROPE, warns of rising trade tensions, saying, “We have a global economy that depends on global supply chains. Suppliers are scattered around the world and not just in one country or region. Countries need to import to be able to export. Increasing duties on imports is above all putting an extra cost on consumers, both citizens and companies.
“European companies have large investments in the U.S. and China. A trade war between the U.S. and China is also bad for our companies.
“On the other end we recognise, some of the complaints the U.S. has against China are valid and they merit to be discussed and addressed. Europe has already said that it is ready to work with the U.S. and other partners like Japan. But we need to work together and not against each other.”
That is one of the aims of the Belt and Road Initiative (BRI), an ambitious vision of a refashioned, inter-dependent and closely connected world.
Commenting on the digital Silk Road, Luigi Gambardella, president of the ChinaEU Business Association, said this (digital) has potential to be a "smart" player in BRI, making the initiative more efficient and environment friendly.
The digital links will also connect China, the world's largest e-commerce market, to other countries involved in the initiative, he notes.
In ancient times, countries competed for land but, today, the new 'land' is technology.”
The digital industry, including fifth generation mobile networks, are among the most promising areas for cooperation between Europe and China as part of the Belt and Road Initiative, the ChinaEU Business Association says.
Using the China-Europe rail network, a crucial part of the Belt and Road Initiative, online retailers have cut the time transporting auto supplies from Germany to Southwest China by half, compared to sea routes. It now takes just two weeks.
China now has express freight services to 28 European cities. Since March 2011, more than 3,500 trips have been made, and the figure is expected to rise to 5,000 this year.
By 2020, trade volume through cross-border e-commerce will account for 37.6 percent of China's total exports and imports, making it a significant part of China's foreign trade, research agency CI Consulting predicts.
Cross-border e-commerce cooperation has brought China and countries involved in the Belt and Road Initiative closer, and the benefits will extend not only to trade, but also to sectors such as the internet and e-commerce, according to a DT Caijing-Ali Research report.
Both physical and virtual cross border trade depends upon speedy processing of documentation and secure payments. Innovative methods of delivering end to end processing using digital technology have been developed and are becoming widely accepted and used by businesses trading across borders.
LGR Global is one such company providing end to end solutions along the Belt and Road using blockchain technology.
Their CEO, Ali Amirliravi, told EU Reporter: “We couldn’t be more excited about the opportunities for cooperative business development that the BRI is ushering in, we are truly on the verge of a new paradigm in trade. The key for long-term sustainable growth will be implementation of platforms and technology stacks that are up to the task of digitizing, optimizing, and adding transparency to the processes and documentation pipelines that undergird international trade and trade finance - this is precisely the goal of the LGR Global solution.”
Apart from online trade, Jane Sun, CEO of Ctrip, China's largest online travel agency Ctrip, believes there is huge market for EU-China online tourism.
She said: “Ctrip will expand International cooperation with Italian partners and is ready to be the ‘Marco Polo’ of the new era, acting as a bridge of cultural exchange between Italy and China.”
Ctrip recently signed a strategic arrangement with ENIT- the Italian National Tourism Board.
She said: “Italy was the destination of the ancient Silk Road and it is an important member of the Belt and Road Initiative. Our cooperation will better unleash the potential of both tourism industries, create more jobs and bring more economic benefits.
“Tourism is the most simple and direct way to enhance people to people exchanges. It can build a bridge between China and the countries alongside the Belt and Road region as well as other countries in the world.”
Despite the pandemic, Thilo Brodtmann, director of the Mechanical Engineering Industry Association, says it is vital for trade to keep borders open.
"The calls for border closures, which are now increasingly arising again in some EU member states, must be buried as soon as possible. In the first wave of the pandemic, we had to learn painfully that closed borders impair central value chains and can lead to bottlenecks in important goods and services.”
Looking to the future, MEP Schreinemacher comments on EU-China relations and says the European Parliament will have to closely scrutinize the investment agreement with China before making any decision.
She added: “China is currently an important trading partner, but apart from its timing this agreement raises a lot of questions. I am particularly concerned with the enforceability of this agreement.
"I think the vote on this agreement will be one of the most important decisions on trade issues that the Parliament will be making in the upcoming year.”
Trillion euro GDP opportunity if Europe embraces digitalization, report reveals
A new report, Digitalization: An opportunity for Europe, shows how increased digitalization of Europe’s services and value chains over the next six years could boost the European Union’s GDP per capita by 7.2% – equivalent to a €1 trillion increase in overall GDP. The report, commissioned by Vodafone and conducted by Deloitte, looks at the five key measures – connectivity, human capital, use of internet services, integration of digital technology and digital public services – that are measured by the European Commission’s Digital Economy and Society Index (DESI), and reveals that even modest improvements can have a big impact.
Using data1 from all 27 EU countries and the United Kingdom across 2014-2019, the report reveals that a 10% increase in the overall DESI score for a member state is associated with a 0.65% higher GDP per capita,assuming other key factors remain constant, such as labour, capital, government consumption and investment in the economy. However, if the digital allocation from the EU recovery package, particularly the Recovery and Resilience Facility (RRF), was concentrated in areas that could see all member states reach a DESI score of 90 by 2027 (the end of the EU’s budget cycle), GDP across the EU could increase by as much 7.2%.
Countries with lower GDP per capita in 2019 stand to be the biggest beneficiaries: if Greece were to raise its score from 31 in 2019 to 90 by 2027, this would increase GDP per capita by 18.7% GDP and productivity in the long term by 17.9%. In fact, a number of significant member states, including Italy, Romania, Hungary, Portugal and the Czech Republic would all see GDP rises of over 10%.
Vodafone Group External Affairs Group Director Joakim Reiter said: “Digital technology has been a lifeline for many over the last year, and this report provides concrete demonstration of how further digitalisation really is essential to repair our economies and societies following the pandemic. But it puts a clear onus on policy-makers to now make sure that the funds allocated by the Next Generation EU recovery instrument are used wisely, so that we can unlock these significant benefits for all citizens.
“This crisis has pushed the boundaries of what all of us thought was possible. Now is the time to have the courage and set a clear, high bar for how we rebuild our societies and fully leverage digital to that effect. DESI - and the call for “90 by 27” - provides such a robust and ambitious framework to drive concrete benefits of digitisation and should form an integral part of measuring the success of the EU reconstruction facility, and Europe’s Digital Decade ambitions more broadly.”
Digitalisation can enable economic and societal resilience not only when it comes to connectivity and new technologies, but also by driving the digital skills of citizens and the performance of public services. Previous studies have already established broadly positive links between digitalisation and economic indicators.
This new report goes one step further, and builds on an earlier Vodafone report, also produced by Deloitte, that also looks at the wider benefits of digitalization, which include:
- Economic: An increase in GDP per capita between 0.6% and 18.7%, depending on the country; with the EU seeing an overall increase in GDP per capita of 7.2% by 2027;
- Environmental: the more we use digital technologies, the greater the environmental benefits, from the reduction in paper use to more efficient cities and less use of fossil fuels – for example, using Vodafone’s Internet of Things (IoT) technology in vehicles can cut fuel consumption by 30%, saving an estimated 4.8million tonnes of CO2e last year;
- Quality of life: innovations in eHealth can improve our personal wellbeing and smart city technologies support our health with lower emissions and mortality – rolling out eHealth solutions across the EU could prevent as many as 165,000 deaths a year, and;
- Inclusivity: the digital ecosystem opens up opportunities to more members of society. As we invest in digital skills and tools, we can share the benefits of digitalization more equitably – for example, for every 1,000 new broadband users in rural areas, 80 new jobs are created.
Sam Blackie, partner and head of EMEA Economic Advisory, Deloitte, said: “The adoption of new technologies and digital platforms across the EU will create a strong foundation for economic growth, creating new opportunities for products and services and boosting productivity and efficiencies. Economies with low-levels of digital adoption stand to benefit considerably from digitisation, which will encourage further collaboration and innovation across Europe.”
In addition to commissioning this report, Vodafone has a number of initiatives, at both EU and member state levels, that will support the drive towards digitalization and the push for 90 for 27. Visit www.vodafone.com/EuropeConnected for more details.
Select Member States GDP and productivity increase if they reached 90 on the DESI by 2027:
|2019 DESI score||63.6||58||53.6||51.2||47.3||47||42.3||41.6||36.5||35.1|
|% increase in GDP if country gets to 90 on DESI||0.59||0.98||4.38||7.81||10.06||10.16||11.43||11.65||16.48||18.70|
|% increase in productivity if country gets to 90 on DESI||4.70||6.30||7.70||8.60||10.30||10.50||12.90||13.30||16.70||17.90|
The report utilises data from 27 EU countries and the United Kingdom across 2014-2019 to develop econometric analyses of the economic impacts of digitalisation, as measured by the DESI, on GDP per capita and on long-term productivity. This builds on approaches used in previous literature to study the impact of technology and digital infrastructure on economic indicators. For more information on the methodology, please see the technical annex of the report here.
About the DESI
The Digital Economy and Society Index (DESI) was created by the EU to monitor Europe's overall digital performance and track the progress of EU countries with respect to their digital competitiveness. It measures five important aspects of digitalization: connectivity, human capital (digital skills), use of internet services, integration of digital technology (focusing on businesses) and digital public services. EU and country scores are out of 100. DESI reports on digitalisation progress across the EU are published annually.
Vodafone is a leading telecommunications company in Europe and Africa. Our purpose is to “connect for a better future” and our expertise and scale gives us a unique opportunity to drive positive change for society. Our networks keep family, friends, businesses and governments connected and – as COVID-19 has clearly demonstrated – we play a vital role in keeping economies running and the functioning of critical sectors like education and healthcare.
Vodafone is the largest mobile and fixed network operator in Europe and a leading global IoT connectivity provider. Our M-Pesa technology platform in Africa enables over 45m people to benefit from access to mobile payments and financial services. We operate mobile and fixed networks in 21 countries and partner with mobile networks in 48 more. As of 31 December 2020, we had over 300m mobile customers, more than 27m fixed broadband customers, over 22m TV customers and we connected more than 118m IoT devices.
We support diversity and inclusion through our maternity and parental leave policies, empowering women through connectivity and improving access to education and digital skills for women, girls, and society at large. We are respectful of all individuals, irrespective of race, ethnicity, disability, age, sexual orientation, gender identity, belief, culture or religion.
Vodafone is also taking significant steps to reduce our impact on our planet by reducing our greenhouse gas emissions by 50% by 2025 and becoming net zero by 2040, purchasing 100% of our electricity from renewable sources by 2025, and reusing, reselling or recycling 100% of our redundant network equipment.
In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.
Please click here for a detailed description of the legal structure of DTTL and its member firms.
1 Data sources include the World Bank, Eurostat, and the European Commission.
Has Europe finally lost patience with its imported oligarchs?
EU Foreign Policy Chief Josep Borrell’s disastrous trip to Russia in early February has cast a long shadow over the continent. It’s not the first time that a top European diplomat has failed to stand up to the Kremlin, but the humiliating scenes from Moscow—from Borrell’s conspicuous silence while Russian Foreign Minister Sergey Lavrov called the EU an “unreliable partner” to Borrell finding out via Twitter that Russia had expelled three European diplomats for attending demonstrations supporting opposition leader Alexei Navalny—seem to have struck a particular nerve among European policymakers.
Not only are calls multiplying for Borrell’s resignation, but the diplomatic dustup seems to have whetted European politicians’ appetite for new sanctions on Putin’s inner circle. Navalny himself laid out the blueprint for fresh sanctions before he was jailed, composing a target list of oligarchs. A number of the names under consideration, such as Chelsea FC owner Roman Abramovich, have long skirted Western scrutiny despite serious allegations against them and tight ties to Putin. Indeed, European policymakers have shown a remarkable tolerance for the business dons who’ve flocked to their shores—even as they have utterly failed to integrate into European societies, scorning Western court rulings and remaining in lockstep with the cronyist networks that prop up Putin’s regime. In the wake of the Navalny saga and Borrell’s catastrophic journey to Moscow, have Western lawmakers finally run out of patience?
New targets after Navalny affair
Russia’s relations with both the EU and the UK have come under increasing strain since Alexei Navalny was poisoned last August with the Soviet nerve agent Novichok, and have plunged to new lows in the wake of his arrest in January. Even before Borrell’s ill-fated trip, there was growing momentum for imposing fresh restrictions on Russia. The European Parliament voted 581-50 in late January to “significantly strengthen the EU’s restrictive measures vis-à-vis Russia”, while opposition MPs have challenged the UK government to draw up fresh sanctions. The pressure to take a tough line has reached a fever pitch after Borrell’s humiliation in Moscow, with even the Russian ambassador in London admitting that the Kremlin is expecting new sanctions from the EU and the UK.
Britain and the European Union already rolled out some sanctions last October, targeting six Russian officials and a state-run scientific research centre believed to have been involved in deploying the banned chemical weapon against Navalny. Now, however, Navalny and his allies are not only calling for a second wave of consequences but are advocating for a strategic shift regarding which pressure points the sanctions are aimed at.
Navalny believes that the oligarchs and ‘stoligarchs’ (state sponsored oligarchs like Arkady Rotenberg, who recently claimed that the opulent “Putin Palace” Navalny profiled in an exposé was actually his) whose funds freely move throughout Europe should be the target of fresh sanctions, rather than the mid-ranking intelligence officials who have historically shouldered the consequences. “The main question we should ask ourselves is why these people are poisoning, killing and fabricating elections,” Navalny told an EU hearing in November, “And the answer is very very simple: money. So the European Union should target the money and Russian oligarchs.”
A swipe at Putin’s regime, but also long-awaited retribution
The opposition leader’s allies, who have picked up the fight for fresh sanctions after Navalny was handed a two year and eight month jail sentence, have argued that personal sanctions against high-profile oligarchs with assets in the West could lead to “intra-elite conflicts” which would destabilise the network of wealthy allies that enables and legitimates Putin’s criminal behaviour.
Taking a tougher line on oligarchs with a chequered past, however, would have benefits above and beyond putting direct pressure on Putin’s administration. Just as Borrell stood by silently as Sergei Lavrov lambasted the European bloc he was supposed to represent, the West has sent a troubling message by rolling out the red carpet for oligarchs who have repeatedly tried to sidestep the European rule of law.
Just take the case of tycoon Farkhad Akhmedov. A close friend of Abramovich’s, Akhmedov was ordered by the British High Court to hand over 41.5% of his fortune—adding up to £453 million—to his ex-wife Tatiana, who has lived in the UK since 1994. The gas billionaire has not only refused to cough up the divorce payment, but has embarked on a no-holds-barred attack against the British legal system and has concocted what British judges described as elaborate schemes in order to evade the UK court decision.
Akhmedov promptly declared that the London High Court decision was “worth as much as toilet paper” and suggested that the divorce judgment was part of a British conspiracy against Putin and Russia writ large—but he didn’t limit himself to inflammatory rhetoric questioning the integrity of the British judicial system. The controversial billionaire apparently enlisted his son, 27-year-old London trader Temur, to help him move and hide assets out of reach. Ahead of a court date to answer questions about the “gifts” his father showered him with, including a £29 million Hyde Park flat and £35 million to play the stock market, Temur fled the UK for Russia. His father, meanwhile, turned to a Dubai sharia law court—which did not recognise the Western legal principle of shared assets between spouses—in order to keep his £330 million superyacht safe from the UK High Court’s worldwide freezing order on his assets.
The extraordinary lengths to which Akhmedov apparently went to thwart the British justice system are sadly par for the course for the oligarchs who installed themselves in European capitals without adopting European values or leaving behind the complex cronyism on which they, and Putin’s regime, depend.
European policymakers have been slow to address this new breed of robber barons. Properly targeted, the next round of sanctions could kill two birds with one stone, ratcheting up pressure on Putin’s inner circle while also sending a message to tycoons who have long enjoyed their assets in the West with impunity.
European Commission and ECB to launch a digital euro project
Are you ready to use a ‘digital wallet’? For the uninitiated, this refers to a virtual currency that is meant to be a complement to the cash in peoples’ wallets. Eurozone central bankers are leaning towards a rollout of the so-called digital euro later this year. The digital euro will be an electronic form of central-bank money, meant to be accessible to all. The new payment instrument is just one part of a revolution currently taking place in the sometimes shadowy world of crypto currencies.
These range from crypto and stable coins to crypto tokens.
European Union finance ministers hope to steal a march on the rest of the world with the unofficial launch, possibly as early as the spring, of a digital euro.
This, in part, aims to counter the Diem project, a single dollar-backed digital coin. Diem, which means “day” in Latin, is backed by social media giant Facebook and 26 other companies who plan to launch the payments service this year.
EU political figures have urged speedy action to match China and other central banks who are also considering virtual versions of their money.
The digital euro is a complex project that would facilitate payments but could also shake the foundations of the financial system. It would also take on the U.S. dollar’s global influence in the sector.
A digital euro aims to be a supplement to, not a substitute for, physical cash and does not imply that banknotes and coins will disappear.
It aims to take account of digitalisation, rapid changes in the payments landscape and the emergence of crypto-assets.
Debate about a digital euro, though, has put the focus firmly on the issues around cryptocurrencies.
Facebook was one of the first out of the blocks with its announcement last summer of the project to launch its own digital currency (initially named Libra but since renamed Diem)
Some central banks, including Sweden and China, are now working on digital versions of their own currencies.
The commission and ECB hope to launch a digital euro project towards the middle of 2021.
“Such a project would answer key design and technical questions and provide the ECB with the necessary tools to stand ready to issue a digital euro if such a decision is taken,” the two institutions say in a joint statement.
A Commission spokesman said a range of “policy, legal and technical questions” were still be addressed.
The ECB launched a public consultation on the introduction of a digital euro as a central bank digital currency in November 2020. This is designed to be a chance for people to express their priorities, preferences and concerns about the issuance of a digital euro as a central bank digital currency and means of payment in the euro area.
Fabio Panetta, a member of the ECB’s Executive Board, recently wrote to MEP Irene Tinagli, chair of the Committee on Economic and Monetary Affairs (ECON) in the European Parliament, about the matter.
This coincided with Panetta’s recent hearing before the committee following the publication of the Euro system report on a digital euro. The public consultation closed on 12 January 2021 and generated a particularly impressive response.
Panetta says the response reflects the growing interest in an issue that, until recently, has been on the periphery.
He said: “I am pleased to say that 8,221 citizens, firms and industry associations responded to the online questionnaire, a record for ECB public consultations.
“The high number of responses to our survey shows that Europe's citizens, firms and academics are keenly interested in shaping the vision of a digital euro. The opinions of all stakeholders are of utmost importance to us as we assess the need, feasibility and risks and benefits of a digital euro.”
The Italian says a digital euro would “combine the efficiency” of a digital payment instrument with the “safety” of central bank money.
“The protection of privacy would be a key priority, so that the digital euro can help maintain trust in payments in the digital age.”
He said: “We will now analyse in detail the large number of responses.”
An initial analysis of raw data shows that privacy of payments ranks highest among the requested features of a potential digital euro (41% of replies) followed by security (17%) and pan-European reach (10%).
The ECB board member cautioned: “The public consultation was designed to be open to everyone without restrictions. At the same time, given its nature and the fact that respondents answered the questionnaire of their own free will and were not selected on the basis of any particular criteria, data gathered through the consultation were never intended to be representative of the views of the EU's population as a whole and should not be interpreted as such."
The ECB, said the official, will continue to analyse the responses and publish a “comprehensive” analysis of the consultation in the spring which “will play an important role” in helping the ECB Governing Council decide whether or not to launch a digital euro project.
He said: “I very much look forward to reporting the details of the analysis on this important topic in the spring.”
So, what are the perceived benefits of a digital euro?
Well, one potential advantage is that savers, for example, could see more benefit in holding digital euros than depositing their cash in accounts, which can come with fees and offer little return at current rates.
A digital euro could, additionally, facilitate payments across Europe and offer the opportunity to every euro area citizen to have a deposit account in the perceived safe hands of the ECB.
But several outstanding issues remain to be settled, including the technology that would power the digital euro.
Another issue is the level of privacy, one of the top concerns raised in the ECB’s public consultation.
The recently published Euro system report on a digital euro stated that "a digital euro could support the digitalisation of the EU’s economy and its strategic autonomy", especially when it comes to correspondent banking for international business.
It also describes two approaches to how a digital euro might work: one that requires intermediaries to process the payment and one that doesn’t.
The ECB explained: “If we design a digital euro that has no need for the central bank or an intermediary to be involved in the processing of every single payment, this means that using a digital euro would feel closer to cash payments, but in digital form – you would be able to use the digital euro even when not connected to the internet, and your privacy and personal data would be better protected.”
It says the other approach is to design a digital euro with intermediaries recording the transaction. This would work online and allow broader potential for additional services to be provided to citizens and businesses, creating innovation opportunities and possible synergies with existing services.
Senior Member of the European Parliament Stéphanie Yon-Courtin, Vice-Chair of the influential ECON committee, spoke to this site about the digital euro, saying: "As for every project related to the digitalisation of our economy, the digital euro should be built with innovation, consumer protection, and financial stability in mind.”
The French RE member added: “I trust the ECB's expertise in striking this delicate balance."
In the meantime, the Commission and ECB will continue their cooperation on a digital euro and pursuing their efforts towards “ensuring a strong and vibrant European digital finance sector and a well-integrated payments sector to respond to new payment needs in Europe.”
ECB president Christine Lagarde said: “We are still in the review and consideration stage, but we’ve just completed a public consultation so that consumers and Europeans can actually express their preference and tell us whether they would be happy to use a digital euro just in the way they use a euro coin or a euro banknote, knowing that it is central bank money that is available and that they can rely upon.”
The French born official added: “We have received a mine of information which we are currently processing. It is only in Spring, probably in April, that we will determine whether or not to go ahead with the work that will need to be done.
“My hunch, but this is a decision that will be taken collectively, is that we might well go in that direction,”
Lagarde cautioned, though that she sees at least a five-year timeline as a “feasible timeline” for a digital euro.
“This is a complicated issue that has to be resolved without disrupting the current financial scene nor jeopardising monetary policy decisions.”
Further comment comes from Commission Executive Vice President Valdis Dombrovskis who said: “I think we need a digital euro. I can really say that this debate is ongoing and progress is being made in this direction.
“The ECB and European Commission will jointly review a broad range of policy, legal and technical questions and there are some design questions which we would need to answer. But we can see how digital euros can be used in international payments.”
Leo Van Hove, a professor of monetary economics at the Solvay Business School at Vrije University Brussels (VUB), is another who has given a guarded welcome to a digital euro. He said the main attraction of the digital euro, if and when it happens, lies in its risk-free nature.
As emphasized by Lagarde, a core role of the ECB is to secure trust in money. Unlike commercial banks, a central bank cannot go bust, as it can create money out of thin air.
He says that if the digital euro is to become an effective new monetary policy instrument then the “holding limits” cannot be too tight.
“If the ECB really only wants to be a 'payment service provider of last resort' and, in this way, maintain the intermediation function of banks, Euro system officials clearly face a difficult – and strange – balancing act.”
In order to tackle such policy, legal, and technical challenges, the ECB and the European Commission set up on 19 January a joint working group to facilitate the preparatory work.
Last October, the ECB also presented its study on the issue to the ECON committee.
German MEO Markus Ferber, who is the EPP Coordinator in the European Parliament’s Economic and Monetary Affairs Committee explained: “I rather have a digital Lagarde-Euro than a Zuckerberg-Libra. In sensitive areas such as payments, we need to keep central banks in charge and not private consortia, as is the case with Facebook’s Libra.”
Ferber noted: “The ECB’s presentation last autumn also made clear that there are still numerous challenges to be overcome before a digital euro goes live - with safety, financial stability and data protection, the list is long.”
Ferber told this website: “The ECB has to make a very strong case about the actual added value of a central-bank sponsored digital currency. Digital central bank money is not an end in itself. One thing must be very clear though: a digital Euro can only complement cash as a means of payment and must not replace it.”
While we're all used to the idea of digital currency - spending and receiving money that isn’t physically in front of us – cryptocurrencies - digital, decentralized currencies that uses cryptography for security - still remain something of a mystery to most.
Aside from a digital euro, there are crypto coins such as bitcoin which continues to trade close to its all-time high reached in January. Its price is now over US $57,000, up about 77% over the past month and 305% over the past year.
First launched in 2009 as a digital currency, Bitcoin was for a while used as digital money on the fringes of the economy.
Bitcoin is still used and is very actively traded on cryptocurrency exchanges, which allow users to swap ‘ordinary’ money like euros for bitcoins.
Bitcoin is the original cryptocurrency and accounts for over half of the $285 billion global coin trading market. But that dominance is under threat, with a host of alternative digital coins emerging as developers race to build cryptocurrencies able to enter mainstream commerce and finance.
There are also crypto tokens such as LGR Global’s Silk Road Coin (SRC). This is an innovative blockchain-powered technology solution, called a utility token, which is used to access a suite of next-gen trade finance and money-movement services within LGR’s secured digital business enviroment.
LGR Global’s founder and CEO, Ali Amirliravi explained to EU Reporter the business case for using a utility token such as the SRC rather than Bitcoin for international cross border trade:
“The value fluctuations that we are seeing in the market right now makes Bitcoin very interesting for investors and speculators, however for business clients looking to quickly and reliably transfer value cross-border, these fluctuations can cause complications and accounting headaches. What the trade finance industry is really looking for is a way to leverage the benefits of digital assets (i.e. speed, transparency, cost), while hedging against uncertainty and value fluctuations. LGR’s secure business environment harnesses the power of the SRC blockchain utility token and combines it with a single fiat currency pair (EUR-CNY) in order to offer our clients the best of both worlds”
Additionally, there are stable coins such as America’s USDTether. Unlike many digital currencies, which tend to fluctuate wildly against the dollar, Tether is pegged to the US currency.
This is supposed to protect investors from the volatility that can affect Bitcoin, Ethereum, Ripple and Litecoin. Tether is the ninth-biggest cryptocurrency by market capitalization, with coins worth around $3.5 billion in existence.
Not to be outdone China is inevitably also pioneering its own digital Yuan, a payment system created by the Chinese state and known as Digital Currency Electronic Payment (DCEP).
Like Bitcoin, DCEP utilises a blockchain technology, a type of digitised ledger used to verify transactions. Blockchain acts as a universal record of every transaction ever made on that network, and users collaborate to verify new transactions when they occur.
While China has not offered a timetable for an official launch of the DCEP, the country’s central bank, is aiming for a wider test of the digital yuan before the start of the 2022 Winter Olympics, scheduled to take place in Beijing next February.
One other class of cryptocurrency that is proving to be very popular and perhaps stands a better chance at becoming more popular than physical currency are so-called ‘stable-coins’, that is cryptocurrencies whose value is linked to ‘normal’ currencies like the US dollar, the euro and the pound, so that unlike Bitcoin, one unit can’t be worth £26,000 one year, and £6,000 two years later. Some controversy surrounds such currencies, though. For example, an Israeli crypto-currency trading company, CoinDash, reporting that $7m was stolen from investors last July after its website was breached and an initial coin offering's contact address altered and a South Korean exchange, Yapizon, was breached in April with hackers suspected of stealing about $5m worth of funds
Like any fast developing space mushrooming with new technologies, there are higher quality cryptocurrencies and lower quality ones.
Whether cryptocurrency becomes more popular than physical currency in the future remains to be seen but, speaking to EU Reporter, Dutch MEP Derk Jan Eppink, said, "Central Bank Digital Currency, or CBDC, raises a fundamental question about the role of a central bank. Certainly, the digital euro would provide consumers with a digital claim on the central bank that is as safe as cash.
"But on the other hand, with the issue of CBDC commercial banks would lose an essential source of funding and would have to rely increasingly on bonds or central bank credit for funding."
Looking to the future, the European Conservatives and Reformists deputy declares, "Let us hope that the call from Benoît Cœuré for a “monetary Hippocratic oath” will serve us all."
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