Monthly Archives: February 2021

In making the switch from law professor Giuseppe Conte to former European Central Bank (ECB) president Mario Draghi as prime minister, Italy is ostensibly transitioning from one independent government to another.

Conte, after all, belonged to no political party. Instead, after taking office as a useful figurehead for the populist coalition government between the left-wing Five Star Movement and the right-wing League, Conte came into his own as a politician a year later, keeping his job even as the League tried to pull the electoral rug out from under him. Mere months ago, Italy’s outgoing premier enjoyed broad public support for his handling of the COVID-19 pandemic, with his popularity exceeding all of the leaders of the fractious party system.

While Conte may have been independent of his populist backers on paper, his economic policies nonetheless reflected the dirigism of the Five Stars who brought him to power. Conte took advantage of his “golden powers” to launch heavy-handed state interventions in the economy. These include a push to have Milan-based Unicredit buy the state’s share of Monte dei Paschi di Siena; the re-nationalization of failing national carrier Alitalia; the hostile takeover of toll road operator Autostrade per l’Italia; and the state’s insistence that broadband operators Telecom Italia (TIM) and Open Fiber merge into one company.

Thanks to Matteo Renzi, Conte is now leaving each of these dossiers half-finished. As Italy looks to Draghi, one of its most renowned financial minds, to lead the country out of dual financial and public health crises, one of the new premier’s first decisions will be whether to continue Conte’s statist economic policies. In both Rome and Brussels, many hope – and expect – the answer will be a simple “no”.

Italy’s market guided by a very visible hand
After all, whereas Conte came into office with no political experience or economic track record, Draghi was the architect of the privatisations which energised the Italian economy in the 1990s – and which Conte’s populist backers in the Five Star Movement have invested so much effort in trying to undo. The immediate boost to Italy’s reputation in global financial markets signals just how much Conte’s retrograde statism had damaged the country’s economic credibility: ten-year yields on Italian bonds have dropped to record lows since the announcement of his replacement by Draghi.

Given the context of the economic situation, Draghi is now stepping into, that enthusiasm is easy to understand. Over the past two and a half years, Conte’s government has become infamous for its rough handling of international investors in Italy. Wielding the state-controlled investment bank Cassa Depositi e Prestiti (CDP) as a cudgel, Rome last year sought to name its own price in taking control of Autostrade away from Atlantia, owned by the Benetton family. The highly-publicised spat between the Italian state and Atlantia provoked the ire of shareholders such as Christopher Hohn, who led a number of investors in turning to Margrethe Vestager and the European Commission for recourse against Italian violations of EU law.

Not that Conte and the Five Star Movement were more willing to listen to advice coming from inside Italy. Acting on an idea put forward by former Five Star leader and deputy prime minister Luigi Di Maio, Conte’s government has been adamant that competing broadband providers Telecom Italia (TIM) and Open Fiber must merge their networks into a single entity, just a few years after then-prime minister Renzi’s government-backed the creation of Open Fiber to stimulate competition and help make up Italy’s substantial shortfall in broadband connectivity compared to the rest of Europe.

Despite claims by TIM that its rival is a “failure,” the move to encourage competition has worked admirably well, with Open Fiber expanding broadband access to 8.5 million homes in its first three years of operation. In pursuing the merger, Conte’s government disregarded both that record of success and the probability that the European Commission would have to approve any such deal on competition grounds, as Margrethe Vestager confirmed just this month. It also ignored fears voiced by Italian consumer groups that a monopoly in the broadband sector would hurt customers.

Draghi offers a return to sound policy
Against this backdrop of haphazard state intervention, whose only guiding principle seemed to be the inclinations of Conte’s Five Star backers, it was hardly surprising that the now-former prime minister’s ability to manage the €209 billion Brussels is handing over to Rome would raise doubts.

Italy’s tranche of the European recovery package, the largest attributed to any country in Europe, represents a historic opportunity to implement long-overdue reforms in the Italian economy – in the right hands. The last three decades have shown those hands are not to be found in the Italian political class.

Instead, in moments of acute crisis, Italy relies on apolitical technocrats to make difficult decisions and demonstrate the long-term thinking its elected politicians cannot. It thus falls to Draghi, who saved the euro in the midst of the EU’s last economic crisis, to craft a recovery plan that will once again set the foundations for healthy market competition and economic growth in Italy.

While the populist forces which pushed Conte in an overtly statist direction remain powerful actors on the Italian political scene, Draghi will take up the premiership with the experience and understanding to recognise Conte’s attempted restructuring of the market for what it was – an unnecessary, counterproductive distraction from the economic dynamism Italy’s new leader is being asked to deliver.

(20. 2. 2021 via euronews.com)

President János Áder sent a letter to Klaus Iohannis, his Romanian counterpart, on Friday, calling on him to take steps over the latter country’s repeated pollution of Hungarian rivers.

In his letter, Áder noted that the Hungarian section of the river Szamos had recently been polluted by heavy metals from unused mines in northern Romania. Áder asked his counterpart to promote his country’s meeting obligations under bilateral and international environmental agreements.

Hungarian authorities were alerted to the pollution of the Szamos on Thursday. Áder said in his letter that concentrations of zinc, copper and cadmium were still “above acceptable levels”. It is not yet known what impact the current pollution will have on water quality and the flora and fauna of the river, Áder said, but he added that “what we are facing is the umpteenth occasion of water pollution from Romania.”

He noted that similar disasters had happened in 2000, 2013 and 2018, when toxic waste from unused mines in Romania had reached Hungarian riverways.

“I am convinced that we must resolve this dangerous situation without delay,” Áder said, adding that the ecosystems of Hungarian rivers have been “extremely fragile since the devastating cyanide spill of 2000”.

“Mutually agreed obligations” under international agreements offer legal ways “to take a firm stance against polluters” and to prevent further damage to the environment, Áder said in his letter.

(20. 2. 2021 via hungarytoday.hu)

The Visegrad Group (V4) countries will continue to work on strengthening regional cooperation and fighting the coronavirus pandemic, the prime ministers of the four nations pledged in a declaration following a regional summit in Kraków, southern Poland.

The gathering was held to mark the 30th anniversary of the founding of the group, which brings together Poland, Hungary, the Czech Republic and Slovakia.

The Visegrad Group came to life in the historic Hungarian town of Visegrad on February 15, 1991.

On Wednesday in Kraków, the V4 leaders discussed future challenges, regional cooperation, relations with the US, the EU’s eastern policy and relations with Russia.

(18. 2. 2021 via thenews.pl)

Business leaders had mixed reactions after their consultation with German Economic Minister Peter Altmaier, but welcome steps proposed.

Economy Minister Peter Altmaier announced a slew of planned improvements to Germany’s shutdown that would support businesses and self-employed people following a consultation with more than 40 business associations on Tuesday.

The minister, a member of German Chancellor Angela Merkel’s Christian Democrats (CDU), revealed plans for a one-off payment of €7,500 ($9,080) to self-employed workers who have been hit hard by the pandemic shutdown.

He also said a “hardship fund” would ease some of the problems that certain businesses have had in accessing government financial support. Large companies with revenues of over €750 million would also be able to request interim aid.

A schedule for when different branches of the economy will be able to reopen would be discussed at the beginning of March at the next pandemic-related meeting between Germany’s federal and state governments, Altmaier promised.

Germany’s current shutdown is set to last until at least March 7, and politicians have made it clear that it is not likely to end then. They have, however, raised the prospect of a potential loosening of some restrictions, especially if variants do not spread widely in the country.

How did the business community react?
The president of the German Employers’ Association (BDA) Rainer Dulger said after the consultations with Altmaier that a “comprehensive overall approach” for the entire counrty was still necessary.

He called for a road map using “evidence-based decisions,” combined with a vaccination and testing strategy for a rapid start after the coronavirus restrictions begin to be lifted.

The German Retail Association (HDE) welcomed the inclusion of aid for large companies — something the association had been calling for “for months.”

The president of the HDE, Josef Sanktjohanser, also said in a statement that “the political decision-makers must now ensure transparency with clear and understandable statements.”

The German Travel Association called for a plan from the government on how and when the tourism industry would be able to get up and running again.

“We will have to live with coronavirus for a long time, despite the start of vaccinations,” according to the association. “We finally need a political solution that permanently guarantees a maximum of public life, leisure and mobility with and despite it.”

How did opposition parties react?
A senior member of the pro-business Free Democratic Party (FDP), Michael Theurer, belittled the consultation as “basically just a therapeutic talk session.”

“Altmaier could have long ago presented a hardship fund and a concept for an opening perspective for the economy, instead of just announcing this today,” Theurer said.

Klaus Ernst from the Left Party said the Economy Ministry had “failed” to set up structures in the summer to ensure the quick distribution of financial aid.

The Green economic expert Katharina Dröge also lamented the “meager” results of the consultation, calling the “minor adjustments” announced a disappointment and pointing out the absence of Finance Minister Olaf Scholz.

(16. 2. 2021 via dw.com)

Borrell faces Moscow trip critics…
Coming back from his recent trip to Moscow last week, the EU’s foreign affairs chief Josep Borrell faced an avalanche of criticism.

MEPs dubbed the visit ill-prepared, ill-advised, ill-timed, disastrous and humiliating.

They claimed Borrell did not do enough to push back against his Russian counterpart Sergey Lavrov over the recent jailing of Kremlin critic Alexei Navalny.

The humiliation came when he learned of Russia’s expelling of three European diplomats via Twitter, during a working lunch, they said.

Beyond the European Parliament, Poland’s president, Andrzej Duda, was among those keen to criticise Borrell.

“Mr Borrell should have demanded that Mr Navalny be released and that political harassment be stopped,” Duda said. “This goal has not been achieved at all, and I would go further and ask a basic question: what was the purpose of this visit in this case and what did it bring not only to Mr Borrell but above all to the European Community? And I am counting on the fact that these questions will soon be answered.”

Borrell defended himself in front of MEPs at the European Parliament Tuesday, but more than 70 were already demanding his resignation in a strongly worded letter addressed to European Commission President Ursula von der Leyen.

… before von der Leyen defends EU’s vaccine strategy
It wasn’t just Borrell facing down critics. Von der Leyen was in the spotlight too, responding to flak for the bloc’s slow vaccine rollout.

She admitted failures but tried to explain away the botched process on technical grounds.

“There is not a compromise we can make when it comes to injecting people with biologically active substances into an individual with good health. And that`’s the reason why we rely on the European Medicines Agency procedure, and yes, that means that the approval takes from three to four weeks more,” von der Leyen told MEPs.

The European vaccination strategy has been criticised from many angles.

One is, of course, the question of who gets the vaccine when and who gets it first.

An argument that is gaining traction in some parts, is that Europe is getting its vaccination strategy entirely wrong by not focusing on young people and only on the elderly and health care workers.

According to Dr Julian Tang, a clinical virologist in respiratory sciences at the University of Leicester, the idea is to immunise the young people to protect the older people.

“If there is no source of the virus in young people, then older people are actually not exposed to any danger,” Tang told Euronews.

“And also, if you immunise younger adults, they can actually go back into the economy, open their business and shops, the services that old people tend to use normally and also allow our young people who are customers to then support those businesses. And if they’re all immunised, all protected, there is no source of virus for the old people to be infected from. And this actually solves two problems, the economy and also the service industry, including the schools and universities.”

(12. 2. 2021 via euronews.com)

With recovery fund billions to be spent, suddenly Brussels doesn’t seem so bad to Italian populist leader.

Last spring, with Europe’s governments at a stalemate over measures to help the most pandemic-ravaged countries, Matteo Salvini denounced the European Union as “a den of snakes and jackals.”

Less than a year on, the leader of Italy’s right-wing League has promised the populist party’s support for a new government to be led by one of EU’s staunchest defenders, former European Central Bank President Mario Draghi.

Draghi agreed to try to form a government of national unity to steer the country out of the pandemic, after the ruling center-left coalition collapsed.

Over the years, Salvini has sounded like a committed Euroskeptic, blasting EU fiscal rules, taking aim at Brussels, flirting with leaving the euro and railing against migrants. He fronted the League’s 2019 European election campaign with a slogan starting “Stop Bankers, Stop Bureaucrats. Stop Do-Gooders, Stop Boats.”

He once called Draghi “an accomplice” in the “massacre” of Italy’s economy, for having saved the euro.

But this week, in a glaring U-turn, Salvini affirmed his willingness to support Draghi and his plans for greater European integration.

“Right, left, Europhile or nationalist are just labels,” Salvini told Italian Radio24. “I am a very pragmatic person.”

In this case, Salvini’s pragmatism is directly linked to having a say in the spending of €209 billion in grants and loans Italy expects to receive from the EU’s post-pandemic recovery fund.

“I prefer to be in the room where we decide how the money is to be spent, well or badly,” Salvini said after consultations with Draghi last week.

League officials claim the party is acting in the national interest. Jacopo Morrone, a League MP, said Salvini had taken “a courageous important decision, made out of a sense of responsibility and concern for the country’s economic difficulties.”

But the League’s sudden conversion to a pro-EU path also appears to reflect a cold political calculation.

If Draghi fails to form a government, there is a strong chance a general election would bring Salvini’s right-wing alliance to power. But stranding Italy without an effective government in the meantime, as it emerges from a pandemic responsible for the highest annual death toll since World War II, would be unpopular with many voters.

Support for the League in polls increased slightly following the decision to join Draghi in government.

Salvini’s show of faith for Draghi seems to represent a long-term bet that the party will be better off by shifting from the nationalist Euroskeptic far right towards more moderate, center-right ground.

Salvini’s populist-anti-immigration message carried the party from a small separatist group to highs of 34 percent in the 2019 election. But, having forged associations with the likes of Donald Trump and Hungary’s Viktor Orbán, the party also suffers from a lack of trust among many voters.

When Draghi opened talks to establish a new government last week, Salvini initially hesitated. But moderates in his group, particularly deputy leader Giancarlo Giorgetti, saw an opportunity for the League to detoxify their image by governing with Draghi, creating a respectable identity, worthy of office.

Salvini also had to take into account the wishes of business leaders in the League’s northern power bases, who indicated the party should go into government and help distribute the recovery fund spoils.

Draghi effect
The appetite to return to power reflects Draghi’s revered status in Italy. After Draghi was asked to lead the government, the stock market shot up, and the cost of borrowing fell immediately.

A better qualified person to steer the country out of a crisis that saw the economy contract 9 percent last year would be hard for any party to present.

“Draghi is perceived as Italy’s strongest weapon, the Everest or K2 of competence, and to set themselves against that would be more damaging than looking inconsistent with voters,” said Pierluigi Testa of the Trinita dei Monti think tank.

League supporters have also justified the party’s shift by arguing that a figure with Draghi’s authority could be a boon for Italy’s position in Europe, giving the country more sway in EU decisions.

“As someone in favor of national sovereignty, as soon as I saw this possibility, I said: It is the best choice we can make in favor of national sovereignty,” said Claudio Borghi, an economic adviser to Salvini.

But that argument may be a tough sell to some of the League’s far-right voters.

Draghi has told parties that the number one item on his government’s program is greater European integration, towards centralized EU budgets and tax-raising powers — something that would entail giving up some national sovereignty.

For now, the League say they are satisfied by reassurances from Draghi that he won’t implement unpopular reforms recommended by Europe such as a property tax increase, and is aligned with some of their policies such as boosting infrastructure and simplifying tenders.

They are also arguing that it’s not the League that’s moved closer to the EU, but the other way round.

“To say the league is anti-Europe because we said that some rules that govern Europe were wrong is nonsense. It’s not us that changed — it is Europe that came closer to our ideas,” said Marco Zanni, a League MEP who chairs the far-right Identity and Democracy Group in the European Parliament.

League MP Morrone said: “Europe is supporting Italy by investing, it is not the austerity of the past.”

Despite Salvini’s enthusiasm, the League’s entry into Draghi’s government is not yet a done deal and the 5Star Movement has expressed doubts about sharing power again with the League. But if Draghi does bring the League into government, the party’s bedfellows from the pro-EU camp say it’s the League that will need to change, not them.

Senator Emma Bonino, of the More Europe party, said Salvini would have to ditch some of his populist-slogan T-shirts: “It is him that will have to adapt. I will welcome him, I haven’t changed my views.”

(12. 2. 2021 via politico.eu)

Media groups warn government is trying to undermine press freedom.

Polish independent media suspended news coverage and the web pages of the country’s leading news organizations were blank Wednesday morning to protest a new advertising tax that broadcasters and publishers say is aimed not at raising money but at undermining the freedom of the press.

“This is simply extortion,” said an open letter to Polish Prime Minister Mateusz Morawiecki signed by 43 media organizations that includes Poland’s largest newspaper and magazine publishers as well as its leading independent television networks. The signatories include Ringier Axel Springer Polska, a Swiss-German joint venture that owns leading Polish media properties; Germany’s Axel Springer is also the co-owner of POLITICO Europe.

The new tax on business advertising revenue, which ranges from 2 percent to 15 percent depending on the size of the company, is being rushed through parliament. The government insists it’s a way to repair public finances strained by the pandemic, with the money going to health care and culture, and is an effort to force large international corporations to pay their fair share of taxes.

“It can’t be that the poor get poorer and the rich get richer,” Morawiecki said at a press conference on Tuesday. He argued the Polish bill is similar to levies in France, Italy and Spain.

However, he avoided addressing the publishers’ main complaint, that the tax is an unfair effort to extract money from largely Polish media operations, instead focussing on how it will affect online behemoths like Facebook or Google.

The media groups and the political opposition see the tax as an effort to cow the independent press by the government led by the nationalist Law and Justice (PiS) party.

“They are more or less copying the Hungarian approach — to diminish the viability of the independent media. They say the proceeds of the tax are for dealing with the pandemic but the money will just go to propaganda operations close to PiS,” a private media executive told POLITICO.

Poland’s state broadcaster, TVP, is also covered by the tax, but it’s been the recipient of an enormous 2 billion złoty (€440 million) subsidy and is also supported by mandatory user fees. TVP is tightly controlled by PiS and has been turned into a pro-government propaganda outlet — something that’s earned Poland international criticism.

The new tax is structured in such a way that many right-wing pro-government publishers are too small to be caught up in it.

Adam Bodnar, Poland’s human rights ombudsman, tweeted: “I have no doubt that the aim is to hit the independent media.”

The revenue from the new tax — called a “contribution” by the government — will go to Poland’s National Health Fund as well as to protecting national monuments and a newly established fund to support “culture and national heritage in the media,” the finance ministry said last week.

In their open letter, the media organizations complained the wildly varying charges facing different companies were “outrageous” and that changing the terms of existing broadcast licenses was unacceptable in a country governed by the rule of law. They also charged that the tax would raise at most 100 million złoty from global internet giants, while media companies active in Poland would pay 800 million złoty.

“Is that a meaningful sum?” asked Morawiecki. “No, it’s a step in the direction of evening the chances of domestic players in various branches compared to huge international players.”

Suspicions about the government’s motivations are backed by frequent comments from senior officials calling for greater control of independent media and complaining that foreign media companies, especially German ones, play a leading role in Poland.

“If it goes through, it would be the final thing [PiS] need to control the media. Some publishers will simply not survive, others will just sell to the government,” the media executive said.

The government-controlled refiner PKN Orlen recently bought one of the country’s largest newspaper groups from a German publisher, raising fears that it aims to bring them under the control of the ruling party.

Hungary’s government already controls the vast majority of that country’s media; on Tuesday one of the last independent broadcasters was forced to go off the air after its broadcast license was not extended.

Both Hungary and Poland have plummeted in recent press freedom rankings by Reporters Without Borders, an NGO. Poland ranked 62 out of 180 countries in 2020; it was in 18th place in 2015, the year PiS came to power. Hungary is in 89th place.

(10. 2. 2021 via politico.eu)