Fri. Jan 21st, 2022


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France is now in the driving force of the rotating EU presidency and its ambition for a more autonomous European security and defense policy is being tested in a spate of meetings with Russia over Ukraine, where Washington (and to some extent Paris and Berlin) abolishes the EU’s own diplomatic service. We will unpack the arguments that EU foreign policy chief Josep Borrell made for the bloc not to be left out of forthcoming NATO-Russia talks.

Meanwhile, on the pandemic front, the French government extends its assistance to businesses struggling with the new wave of restrictions set to stop the spread of the Omicron variant. The government’s lack of action three months before the presidential election would have been easily apprehended by opponents, which is already criticize the latest restrictions on large gatherings.

And a fresh Brexit statistics, we will look at why Europe is importing less and less food from the UK – while Britain is still strong in importing European wine.

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No seat at the table

What a difference a half year makes. Last June, Brussels was upset at a Franco-German proposal that the EU sit down with Russian President Vladimir Putin. Now Brussels is furious that it has been rejected in favor of the US and NATO, and demanded given the chance to talk to the Kremlin about Ukraine next week, writes Henry Foy in Brussels.

Josep Borrell, head of the EU’s foreign and security arm, who has personal experience of how it feels to be dismissed by Moscow as a geopolitical lightweight, said the EU “can not be a neutral spectator” when discussing European security. The Kremlin would beg to differ.

As many EU officials privately admit to Europe Express, the bloc only has itself to blame for not being seen as a worthy defense and security saving partner, as it is torn apart by differences of opinion and divisions in precisely these areas.

Case in point: the EU-NATO declaration. With 21 countries being members of both organizations, it was supposed to be a simple task to agree on a largely symbolic declaration of cooperation that effectively restores those made in 2016 and 2018.

But despite a majority of member states calling on EU Council President Charles Michel to make short work of a draft submitted by NATO in September, it has been delayed until this year.

This, by accident or – more likely – design, brings the debate on its content under the French EU Presidency, and the Elysée’s conviction that the EU needs more “strategic autonomy”And defense capabilities independent of the US-led military alliance.

Speaking of France, while Borrell is asking for a united EU voice to speak to Russia, Paris and Berlin would rather send envoys to speak privately with Moscow. This will please the Kremlin, which of course prefers to talk to individual countries anyway, as it is easier to find out where their geopolitical and business interests coincide.

Eastern EU states, which are members of NATO precisely because they fear Russia and are careful that their Western counterparts go softly on Moscow, will get their time across the table with the Russians next Wednesday, when the Moscow delegation for a summit with the alliance.

But the Russians will come to Brussels for NATO headquarters, not the EU’s. Despite Borrell’s sadness, the EU will have to accept its role as a neutral spectator – and readings from the meetings after they have concluded.

For all the dreams of “strategic autonomy” and Michel’s proclamation that 2022 theyear of European defense“, When Moscow has to talk power politics, he knows who to call.

French aid, continued

France provides new financial aid to small businesses struggling due to new health measures and easing repayment terms on state-backed loans, while trying to keep an economic recovery on track despite a surge in Covid-19 infections, writes Sarah White in Paris.

Like many European counterparts, France avoided mass defaults during the pandemic and screened businesses such as restaurants that had to close for months on end thanks to a large aid package that included leave schemes, government-guaranteed loans and help with welfare bills and rental costs.

Picking up a fifth Covid wave, with a nail in infections led by the highly transmissible Omicron variant, France has so far avoided any form of complete restraint and is aiming to bolster a vaccination reinforcement campaign.

But new restrictions, including a ban on events for more than 2,000 people, are going to hit the entertainment industry. Nightclubs are closed and bars and restaurants can struggle as people are told to return to work from home and to reduce socialization.

Economy Minister Bruno Le Maire said companies under pressure in sectors such as tourism or hospitality could apply for help to cover their fixed costs if their revenues halved in January. The government will also allow some businesses to renegotiate their state-subsidized loans, with those having to start repaying it from March to apply for a six-month extension.

“We are not reactivating the ‘whatever it takes’ mode,” Le Maire told RTL radio on Monday, referring to the broader aid packages introduced in 2020.

About 25,000 to 30,000 small businesses out of a total of nearly 700,000 that have taken out state-backed loans through their banks could struggle with immediate repayment, Le Maire said.

France’s banking federation said the financial sector was in talks with the government on how to articulate the loan extensions, which he said could be envisaged on a case-by-case basis for struggling companies. It is said that more than half of the businesses that have taken out state-guaranteed loans have already started repaying it.

Graph of the day: Inflation dropout

Poland’s annual inflation reached 7.8 percent in November, the highest level for two decades, and the fourth highest in the EU. This development poses a problem for the country’s ruling Law and Justice Party (PiS), which has so far remained popular thanks in large part to its success in improving the lot of less affluent Poles. (More here)

Shrinking UK exports

According to the European Commission data.

The decline in trade came even when EU exports to the UK rose slightly, by 0.5 per cent, with particularly strong increases for wine and live animals, writes Judith Evans in London.

The import decline came after new post-Brexit regulations came into effect from January 2021, the introduction of new veterinary and customs controls on goods shipped from the UK to the EU, even though the UK has delayed the full implementation of the new rules on goods traveling in the opposite direction until 2022.

The decline was particularly sharp for tropical fruits, nuts and spices, where imports fell by 88 percent, or € 217 million – a drop that Dominic Goudie, head of international trade at the UK’s Food and Drink Federation, said probably new rules of origin reflect. . It imposes tariffs on imports to the EU where food originates elsewhere and is not significantly processed in the UK.

This move has prompted some multinational corporations to reorganize supplies, he said.

“Some businesses have reoriented their supply chains – if they supply to their own factories or customers in the EU, they will trade directly in the EU instead of coming via the UK,” Goudie said.

Other areas where trade has declined sharply include wine, pet food, vegetables and sweets.

Trade has recovered somewhat from the early months of 2021, when some companies stockpiled before the new Brexit rules, and others – especially those importing and exporting animal products – struggled across the border with delays and paperwork errors. But imports from the UK in September 2021 were still 25 per cent lower than a year earlier, the commission said.

Goudie said data over the last quarter of 2021 would help show whether UK exporters would make up for that lost territory. New sanitary and phytosanitary requirements for agricultural food products moving from the EU to the UK from July will meanwhile present a new challenge for EU exporters, he added.

What to watch today

  1. Josep Borrell, EU foreign policy chief, is in Ukraine for a three-day visit

  2. German Foreign Minister Annalena Baerbock travels to Washington to discuss Russia-Ukraine relations

. . . and later this week

  1. French President Emmanuel Macron receives the EU Commissioners’ College in Paris on Thursday

  2. NATO foreign ministers discuss Ukraine Friday

Remarkable, quotable

  • Omicron effect: European tourism and airline shares rose sharply yesterday, as investors bet that the Omicron coronavirus variant will cause less travel disruption than initially feared.

  • Italian elections: Italy’s Parliament will meet on January 24 to begin voting for the country’s next president, with PM Mario Draghi signaling his readiness to be nominated. His potential resignation as prime minister could lead to elections and run the risk of delaying structural reforms and investments linked to the EU’s pandemic recovery fund.

  • Lithuanian fullback: Lithuania’s decision to allow Taiwan to open a de facto embassy in its own name was a mistake, the country’s president said said yesterday, when he reprimanded the government for a move that sparked a diplomatic struggle with China.

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Today’s Europe Express team: henry.foy@ft.com, sarah.white@ft.com, judith.evans@ft.com, valentina.pop@ft.com. Follow us on Twitter: @henryjfoy, @SarahWhites, @JudithREvans, @valentinapop.





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