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EU presidency - Portugal finds itself in the spotlight for the EU’s post-pandemic recovery

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The job of steering the bloc through the huge upheaval caused by the health crisis has fallen to Portugal. But the dispersal of massive sums of EU funding under its recovery plan also once again highlights Portugal’s chequered history regarding good financial housekeeping, including the relative recent BES banking debacle, writes Martin Banks.

Portugal, as holder of the six-month presidency, is currently steering the EU ship towards what most hope will be calmer waters. In February, the Portuguese Prime Minister, António Costa, signed the formal approval of the Recovery and Resilience Facility (RRF).The RRF will be used to fund the national recovery plans of the Member States.

The main instrument of the €750 billion Recovery Fund is the European Recovery and Resilience Facility. Portugal, which was among the first member states to submit its national plan, is to receive €15.3bn in grants, including €13.2bn between now and 2023, through the Recovery and Resilience Facility, the fund's main instrument for financing reform and investment programmes.

The €13.2bn is to come to Portugal in two tranches, one of €9.1 billion and the other of €4.1bn.

Portugal's government is considering using loans from the European Recovery Fund to make €4.3 billion in investments in affordable public housing, support for business and railway rolling stock.

Costa recently told MEPs that EU's Recovery and Resilience Facility is a 'vitamin' to aid Europe's economic revival.

He also hopes it will help aid recovery in Portugal which, in recent years, has been trending as one of the most successful destinations for foreign investors. One of the main reasons is because of Portugal's legal environment, political, social, and economic stability.  Each of these help encourage foreign investors.

COVID-19 came to suspend a steady and continuous growth of this foreign investment stream in Portugal.

At this point it is probably worth revisiting the BES case in some detail, not least because of its capacity to shed light on the political issues surrounding the aims of the European project, especially for the banking system.

In August 2014, Portugal decided to put the bank Banco Espírito Santo (BES) into resolution under the Portuguese resolution framework and determined the strategy for its resolution. To enable an orderly resolution, Portugal designed a number of support measures, including State aid for the transfer of certain BES assets to a bridge bank – Novo Banco.

In 2017, the European Commission approved, under EU state aid rules, Portuguese aid for the sale of Novo Banco. The measures allowed the new private owner to launch its ambitious restructuring plan aimed at ensuring the long-term viability of the bank, while limiting distortions to competition.

The rescue, which came a year after Greece spent €28bn to rescue four of its banks, suggested that despite years of efforts to improve the eurozone’s financial and economic management, hidden problems still may lurk in the region’s banking systems. Much of the Espirito Santo group, whose activities included tourism, health and agriculture, sought bankruptcy protection in a remarkable fall from grace of one of Europe’s most prominent business clans. By using the bank resolution fund, Portuguese authorities hoped to limit the political fallout of using taxpayer money to prop up a bank.

 UK-based financial expert Thomas Hale said: “The Novo Banco case should provide extremely important precedents regarding the capacity of the “public interest” to overwhelm contractual claims or the benefits afforded by legal processes.

“The overall debacle is not so much the story of a rogue peripheral regulator flying in the face of international capital but an early expression of new European banking legislative principles which complicate the rule of law itself.”

Portuguese political commentator, Conceicao Gomes, goes on to say that, as in other countries, in Portugal interest in the debate on the redefinition of territorial jurisdiction has also increased. The current Government has placed the reform of the judicial organization and the redefinition of territorial jurisdiction on the political agenda.

Reform of the Portuguese administrative courts is a priority set out by the EU to Portugal. Some have cited the BES case as a prime example of why these courts need reform.

The Portuguese courts, like in the early 1990s, are still mostly preoccupied with “low intensity disputes”. In the period 2000-2004, civil litigation represented on average 83% of all cases brought before the courts. Portuguese courts are still overused when it comes to debt claims, which largely dominate civil litigation.

Gomes says that one of the major problems faced by the Portuguese courts is that of “management inabilities”.

The reform of the judicial organization, he argues, may be an excellent way to introduce changes in the management of human and material resources and of judicial cases.

He adds: “Its main goal must be to seek the better quality, efficiency and effectiveness of and wider access to the law and to justice, thus allowing for the re-centring of the courts’ functions on high intensity disputes, on the response to serious crime and on the promotion and defence of citizens’ rights.”

Novo Banco, meanwhile, has reportedly sent letters out to the hundreds of small investors caught out in the BES banking debacle, telling them that they have to “reclaim credits” from various banking subsidiaries based in Luxembourg.

Financial journalist Peter Wise says that the ‘victims’ of this aspect of the BES collapse were predominantly “middle-aged, middle class” people – many of whom lost their life savings, been forced to close small businesses and/or are struggling to support elderly relatives”.

Administrative reform has been a big issue for recent Portuguese Governments and there has been international and domestic pressures for change and reform  in the Portuguese public administration.

Whether the BES case proves to be an isolated case in which problems had grown too big to be hidden any more or as something more systematic and endemic remains to be seen.

But most experts do agree that the issue of BES is a clear warning sign to potential foreign investors in Portugal.

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EU has not yet ordered more AstraZeneca vaccines, says internal market commissioner

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Syringes are prepared to administer the AstraZeneca coronavirus disease (COVID-19) vaccine at a new mass vaccination centre in WiZink sports arena in Madrid, Spain, April 9, 2021. REUTERS/Sergio Perez

The European Union has not yet made any new orders for AstraZeneca (AZN.L) vaccines beyond June when their contract ends, European Internal Market Commissioner Thierry Breton (pictured) said on Sunday (9 May).

Breton also said he expected that the costs of the EU’s recent order for more doses of Pfizer-BioNTech (PFE.N) vaccines would be higher than the earlier versions.

The Commission last month launched legal action against AstraZeneca for not respecting its contract for the supply of COVID-19 vaccines and for not having a “reliable” plan to ensure timely deliveries.

"We did not renew the order after June. We’ll see what happens," said Breton, adding that it was "a very good vaccine".

Concerns has risen on potential side-effects of the Anglo-Swedish COVID-19 vaccine.

Europe's medicines regulator said on Friday it is reviewing reports of a rare nerve-degenerating disorder in people who received the shots, a move that comes after it found the vaccine may have caused very rare blood clotting cases. Read more.

Breton said an increase in prices for second generation vaccines could be justified by the extra research required and potential changes to industrial equipment.

The European Union signed a new contract with Pfizer-Biontech to receive 1.8 billion doses of COVID-19 vaccines for 2021-2023, to cover booster shots, donations and reselling of doses, the European Commission said on Friday (7 May). Read more.

“There may be a little extra cost but I will let the competent authorities unveil it in due course,” he told France Inter radio.

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Hoping to lure back tourists, Greece reopens beaches after lockdown

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With widely spaced sun loungers and regular disinfections, Greece reopened its organised beaches on Saturday as the popular Mediterranean holiday destination eases COVID-19 curbs in preparation for the return of foreign visitors this week.

Tourism accounts for about a fifth of Greece's economy and jobs, and - after the worst year on record for the industry last year - the country can ill afford another lost summer. Read more

"We're pinning our hopes on tourism," said Nikos Venieris, who manages a sandy beach in the seafront suburb of Alimos, just outside the capital, Athens, where social distancing measures will remain in place.

"We're one of the places along the Athens riviera ... that receives many tourists so the number of visitors from abroad will play a big role in our finances," he added.

Under current measures, beach managers like Venieris will have to place umbrellas at least four metres (13 feet), carry out regular disinfections and test beach bar employees and other staff for COVID-19.

People enjoy the sun during the official reopening of beaches to the public, following the easing of measures against the spread of the coronavirus disease (COVID-19), in Athens, Greece, May 8, 2021. REUTERS/Costas Baltas
People enjoy the sea during the official reopening of beaches to the public, following the easing of measures against the spread of the coronavirus disease (COVID-19), in Athens, Greece, May 8, 2021. REUTERS/Costas Baltas

Greece fared well in keeping the first wave of the pandemic under control last year but a resurgence in cases pushed health services to the limit and prompted authorities to impose a second lockdown in November.

As infections have fallen and vaccinations gathered pace, authorities have steadily eased restrictions, opening bars and restaurants earlier this week.

On Friday, they announced that museums would reopen next week before the lifting of travel restrictions on vaccinated foreign visitors on May 15.

Greek Prime Minister Kyriakos Mitsotakis has said a combination of widespread testing, immunisation, and the fact that many activities would take place outdoors gave authorities confidence that tourists would be able to visit safely.

For Greek beach lovers, Saturday's reopening of the country's largest beaches was a chance to let off steam after months of lockdown.

"We've been longing for this for six months now, because we're winter swimmers and we've really missed it," said Spiros Linardos, a pensioner, reclining on a sun lounger at Alimos.

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EU calls on US and others to export their vaccines

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European Commission President Ursula von der Leyen speaks during the opening ceremony of an EU summit at the Alfandega do Porto Congress Center in Porto, Portugal May 7, 2021. Luis Vieira/Pool via REUTERS

The European Commission called on Friday (7 May) on the United States and other major COVID-19 vaccine producers to export what they make as the European Union does, rather than talk about waiving intellectual property rights to the shots.

Commission head Ursula von der Leyen told a news conference on the sidelines of a summit of EU leaders that discussions on the waiver would not produce a single dose of COVID-19 vaccine in the short- to medium-term.

"We should be open to lead this discussion. But when we lead this discussion, there needs to be a 360 degree view on it because we need vaccines now for the whole world," she said.

"The European Union is the only continental or democratic region of this world that is exporting at large scale," von der Leyen said.

She said about 50% of European-produced coronavirus vaccine is exported to almost 90 countries, including those in the World Health Organization-backed COVAX program.

"And we invite all those who engage in the debate of a waiver for IP rights also to join us to commit to be willing to export a large share of what is being produced in that region," she said.

Only higher production, removing exports barriers and the sharing of already-ordered vaccines could immediately help fight the pandemic quickly, she said.

"So what is necessary in the short term and the medium term: First of all vaccine sharing. Secondly export of vaccines that are being produced. And the third is investment in the increasing of the capacity to manufacture vaccines."

Von der Leyen said the European Union had started its vaccine sharing mechanism, citing delivery of 615,000 doses to the Western Balkans as an example.

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