Wed. Dec 1st, 2021

Good morning and welcome to Europe Express.

EU is barely six months old digital Covid-19 certificate, announced with big fanfare in July as a way to boost travel across the block, faces some existential problems.

The European Commission designed the system to be valid for one year, but some countries went ahead and limited the validity of people’s vaccination status to as short as six months from the second shot.

We will keep you up to date with the latest thinking and what to expect tomorrow when the commission makes its proposals on how to keep the pace alive, even though countries have very different approaches to strengthening.

Meanwhile, the central bank in Germany has thrown its weight behind falcon voices calling for a speedy return to fiscal rules. In its latest monthly report, the Bundesbank sees no reason why the suspension of the country’s “debt brake” would not end as soon as next year.

And in Swedish politics, the country’s potential new prime minister, Magdalena Andersson, is facing an uphill battle to gather the majority needed for her rule and to accept the country’s budget.

Booster coordination

Reviving infection rates in the EU once again arouse the specter of a fragmented approach to the fight against Covid-19 between different member states, writes Sam Fleming and Mehreen Khan in Brussels.

In an effort to keep a lid on disharmony, the European Commission has discussed an update to its digital Covid-19 certificate, which has been seen as a success story when it comes to reviving free movement between member states over the summer holidays.

EU Health Commissioner Stella Kyriakides confirmed yesterday that Brussels was working with the “greatest urgency” to ensure that rules for free movement within the union remained coordinated. That meant looking at the duration of the validity of the certificates and the role of amplifiers, she told MEPs.

There is evidence of waning immunity after two vaccinations, which raises the question of how long the certificates should last. One of the options is to determine the validity up to 12 months after the second stitch. But the commission is also looking at how to recognize boosters on the certificates.

Kyriakos Mitsotakis, Prime Minister of Greece, said last week that a third stitch should be required after six months to keep the certificates valid.

Brussels will come up with “specific proposals” this week on free movement and the certificates, Kyriakides told the European Parliament in Strasbourg on Monday, stressing the risks of fragmentation. “We are aware that we need to give clear, coherent messages to citizens.”

The application of booster shots poses a practical and technical problem in many parts of the EU. Not only does access to additional jabs differ between member states, but in countries where it is available, recipients may not always have the shots in their digital Covid-19 certificates.

The French government has said that 65-year-olds will have their existing vaccine pass annulled by December 15, unless they have received a booster or if they are still within six months of their second sample. Austria earlier this month lower the expiration date of 12 to nine months after the second shot.

European Affairs Ministers will discuss boosters and broader coordination on social constraints at a meeting in Brussels this morning. Some diplomats already warn that any commission’s efforts to impose binding new legal requirements on how and when Covid passes should be valid will be satisfied in the short term. “It is still up to governments to decide,” one diplomat said.

Falcon leadership

Germany’s central bank has said the country’s new government should reinstate Germany’s ‘debt brake’ next year – advice that could be difficult for some of the coalition partners to accept. Guy Chazan in Berlin.

The debt brake, enshrined in the German constitution, places strict limits on new government loans. It was suspended when the coronavirus pandemic forced a massive increase in spending to save the country’s economy from collapse, and will not apply in 2022 either.

But in his latest monthly report, the Bundesbank says it must be reinstated next year. There is, it says, “good reason to believe that 2022 will not be a crisis year”. “This means that there should be relatively little need for pandemic-related government spending,” he adds.

The bank says there is a “general expectation”, partly reflected in the German government’s own forecasts, that “normal economic conditions” will return soon, citing the latest estimates that tax revenues are likely to exceed expectations before the crisis.

Based on that, any decision to suspend the debt brake for another year seems “not justified as things stand now”. “In any case, it will be extremely difficult to justify the financing of non-crisis-related budget burdens by loans made possible by the [temporary suspension of the debt brake], “it says.

The Bundesbank’s intervention comes with ongoing negotiations between the Social Democrats (SPD), Greens and Liberals over the formation of a new “traffic light” coalition government – talks in which fiscal policy came to the fore as a major point of contention.

The Liberals (FDP) want a quick return to fiscal orthodoxy while the Greens campaign on a debt brake reform platform to provide massive investment to stem climate change and upgrade Germany’s impoverished infrastructure .

Although the coalition partners remain mother, it is believed that one compromise solution would involve the creation of off-balance sheet state funds that do not count towards budget spending. This will enable the new government to increase investment while still meeting the debt brake.

The Bundesbank is skeptical. Such reform ideas are, it suggests, just a way to “hollow out and bypass the debt brake”. This would mean that Germany would no longer comply with European fiscal rules, it adds. (Those fiscal rules are also suspended, at least until 2023, and several countries are calling for an overhaul that will allow for more investment exceptions.)

The bank says if the new government wants to change Germany’s restriction on new loans, the reforms must be “publicly discussed and, where necessary, given a new legal basis”. But it is widely believed that such changes are not really necessary. “The debt brake has proven its value so far, and adjustments do not appear to be urgently needed,” it says.

Graph of the day: Tax benefits

Line graph of tone Number of specific personal income tax schemes granted to new EU residents

An increasing number of EU member states attract the super-rich with preferential tax treaties: between 1994 and 2020, the number of special tax regimes increased more than fivefold, according to this study published by EU Tax Observatory. The most attractive tax regimes have been created by Italy, Greece, Cyprus and Portugal, the study shows.

High noon

Sweden’s special kind of political unrest continues with Magdalena Andersson who is far from certain to become the country’s first female prime minister, writes Richard Milne, Nordic and Baltic correspondent.

Tomorrow promises to be a day of great drama in Sweden’s parliament. First, there will be a vote on whether Andersson, the new leader of the center-left Social Democrats, will become prime minister to succeed Stefan Lofven. thank you earlier this month.

She must ensure that a majority does not vote against her; in practice, this means that she needs the support of both the far-left party and the nominal center-right center. Center appears to be on board, but has demanded that the left have no influence over the government.

Talks between Andersson and the Left did not make a breakthrough over the weekend, so the Social Democratic leader will spend the next 24 hours frantically negotiating with the former communists, making it clear that they will vote against her without an agreement.

The second vote, tomorrow afternoon, will be on next year’s budget, which Andersson formulated in her role as finance minister. Lofven has twice been forced to rule with an opposition center-right budget, a fate she will desperately avoid.

The short-term background to all this uncertainty and angry behavior is that if Andersson does not succeed in gaining support to become prime minister, early elections in three or four months are possible. Elections will then have to be held again, as scheduled, in September. Few parties want two votes within a year.

The longer term reason, such as this piece explained is the rise of the right-wing Sweden Democrats. They are coming close to their goal of forming a Conservative bloc, along with two other mainstream center-right parties. Any slip by Andersson and they wait in the wings.

What to watch today

  1. European Commission presents European Semester

  2. EU affairs ministers meet in Brussels for next EU summit, rule of law and Brexit

  3. EU’s Ursula von der Leyen and Charles Michel debate the outcome of the October summit with MEPs in Strasbourg

Remarkable, quotable

  • Booster anxiety: Germany’s third jab campaign has had a difficult start, as many people are avoiding the American-made Moderna vaccine and insisting on getting a third dose of the BioNTech / Pfizer vaccine. Health Minister Jens Spahn defended the government’s policy in somewhat cynical terms, causing a media setback yesterday, FAZ reports.

  • Competitors with advantages: French President Emmanuel Macron and Italian Prime Minister Mario Draghi want narrower tires in Europe, especially at a time when Germany is expected to focus more on domestic politics as a new government takes office in Berlin, but the two leaders face a test of the possible sale of an Italian arms manufacturer. n French competitors.

  • Greener banks: The European Central Bank asked lenders to “urgently” improve plans to protect their businesses from climate change risk after a review found widespread shortcomings in their approach to environmental challenges.

  • Military PM: Romania’s two largest political parties yesterday agreed to form a broad coalition government led by Nicolae Ciuca, a former army general. The deal put an end to weeks of political paralysis as the country faces a surge in coronavirus cases and sharply rising energy prices.

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Today’s Europe Express team:,,,, Follow us on Twitter: @ Sam1Fleming, @MehreenKhn, @GuyChazan, @rmilneNordic, @valentinapop.

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