A Huawei logo is pictured at their store at Vina del Mar, Chile July 18, 2019.
Rodrigo Garrido | Reuters
Italy‘s new government on Thursday approved its use of special powers in supply deals for fifth-generation (5G) telecom services by a number of domestic firms with providers including China’s Huawei and ZTE.
The measure was adopted under a law passed by the previous government in July to broaden powers Rome has over companies of national interest.
A government source told Reuters at the time the decision to strengthen Rome’s so-called “golden powers” reflected concerns over the potential involvement of Chinese equipment makers Huawei and ZTE in the development of 5G networks.
The United States has lobbied Italy and other European allies to stay clear of Huawei equipment and to also pay close scrutiny to ZTE, saying the vendors could pose a security risk. Both companies have strongly denied any such risk.
The new government, sworn in on Thursday, said in a statement it had imposed “conditions and requirements” in relation to purchases of goods and services for 5G networks made by Vodafone‘s Italian unit. It gave no further details.
It also imposed undisclosed requirements on accords between Wind Tre, a unit of CK Hutchison, and Huawei — the first time Italy’s special powers over 5G networks have affected the Chinese firm.
Italy also said it would exercise special powers over Fastweb’s purchases of radio components from ZTE, supply deals signed by Linkem and accords agreed by former incumbent Telecom Italia for systems that could adopt 5G technologies.
The companies involved were either not immediately available or declined to comment, saying they had not yet received any communication from the government.
Finland’s PM Antti Rinne warns no-deal Brexit seems likely
HELSINKI, FINLAND – A no-deal Brexit looks likely, Finland’s Prime Minister Antti Rinne told CNBC Friday, though he is still hopeful that both sides of the English Channel will have good relations going forward.
The U.K.’s departure from the European Union is a constant source of concern for European leaders as the exit date approaches without any clear agreement on future relations. In such a scenario, and without being granted further time beyond the October 31 deadline, there would be a no-deal Brexit – meaning trade would immediately be done with higher tariffs imposed by both sides.
When asked about the probability of a no-deal Brexit, Antti Rinne told CNBC: “I will say that now it seems that it’s going to happen, and we need to accept that it’s going to happen, but I hope that we can reach a situation where we can together, with British and EU27, to create a better world…”
The U.K. is the first member state to ask to leave the European Union – a political and economic group, which started more than six decades ago. It started the official departure process in March of 2017.
Boris Johnson, the U.K. Prime Minister, is due to meet Jean-Claude Juncker, the head of the EU’s executive arm on Monday in Luxembourg to discuss Brexit over a “working lunch.” It marks their first meeting since Johnson took office in August. Johnson has previously met the German and the French leaders at their respective capitals.
However, the EU’s Brexit negotiator, Michel Barnier, has criticized the new U.K. government for not presenting concrete proposals.
“We will see in the coming weeks if the British are able to make concrete proposals in writing that are legally operational,” Barnier told European lawmakers Thursday, according to the Guardian.
The U.K. government has made the point that it is against the Withdrawal Agreement – the document that the former Prime Minister, Theresa May, had negotiated with the other EU members. At the same time, Boris Johnson has said, on separate occasions, that the U.K. is ready for a no-deal Brexit and that he would “rather be dead in a ditch” than asking for an extension to the current departure date.
“I made very clear to (Prime Minister Boris Johnson) there is no possibility to get a new deal,” Rinne said about a phone call with his U.K. counterpart conducted “some weeks ago.”
When asked if he would be willing to grant another extension to the U.K. to sort out Brexit, Rinne said “it seems there is no interest to get more extension to this situation,” provided that there is no new solution.
“I hope if (Johnson) is going to ask for more time it means that he has something to say. How we can solve the situation after this time? – that’s a big question for us in all the EU27,” he added.
Finland is currently holding the EU’s rotating presidency – meaning that it has a key role in shaping the European agenda. Rinne told CNBC that he hopes climate and migration will be the biggest topics until the end of the year, but conceded “I think Brexit is going to be the biggest question.”
Cyberattacks against US helped fund North Korea weapons program: Treasury
President Donald Trump meets with North Korean leader Kim Jong Un at the demilitarized zone separating the two Koreas, in Panmunjom, South Korea, June 30, 2019.
Kevin Lamarque | Reuters
The U.S. Treasury Department said Friday that North Korean state-sponsored hacking groups attacked critical infrastructure, drawing illicit funds that ultimately funded the country’s weapons and missile programs.
The groups launched ransomware campaigns among other types of attacks, according to Treasury’s announcement. The direct link to North Korea’s missile program creates further ethical hurdles for companies, insurers and municipalities that must decide whether or not to pay ransoms to criminal groups that have locked up their files.
Treasury says three hacking groups are “responsible for North Korea’s malicious cyber activity on critical infrastructure.” The groups were sanctioned by Treasury’s Office of Foreign Assets Control.
One of the groups was responsible for the infamous WannaCry ransomware attacks of 2017, which cost companies and governments hundreds of millions of dollars.
“Treasury is taking action against North Korean hacking groups that have been perpetrating cyber attacks to support illicit weapon and missile programs,” Sigal Mandelker, Treasury under secretary for terrorism and financial intelligence, said in the release.
“We will continue to enforce existing U.S. and UN sanctions against North Korea and work with the international community to improve cybersecurity of financial networks,” Mandelker said.
Ethics of ransomware
The three hacking groups — known as “Lazarus Group,” “Bluenoroff,” and “Andariel” — are controlled by North Korea through their relationship to a United Nations-designated intelligence bureau, according to Treasury.
The Lazarus Group’s WannaCry attacks two years ago caused widespread havoc globally, shutting down hospitals and ambulances run by Britain’s National Health Service, halting car manufacturing by companies like Nissan and Renault and stopping shipments by FedEx, among numerous other companies.
Bluenoroff has stolen more than $1 billion from global financial institutions since 2014 through a variety of tactics, including attacks against the SWIFT messaging system. Anadriel “was observed by cyber security firms attempting to steal bank card information by hacking into ATMs to withdraw cash or steal customer information to later sell on the black market,” according to Treasury.
The move is another step in the federal government’s initiatives to identify the financial trail of cybercrimes, particularly those perpetrated by hostile nations. The fact that these illicit funds were used for North Korea’s weapons programs will put further ethical pressure on any organization dealing with breaches or ransomware. A recent ProPublica investigation called into question the ethics of paying ransom demands or even having insurance products that cover the costs of the ransom, when the funds may be going into the hands of criminals or, in these cases, North Korea’s military.
The Trump-Kim relationship
The sanctions come days after President Donald Trump fired national security advisor John Bolton, who was known for taking a more hawkish stance against North Korea than the commander-in-chief. Trump has cultivated a cordial relationship with North Korea’s dictator, Kim Jong Un, and in July became the first sitting U.S. president to set foot on North Korean soil.
Experts believed Bolton’s firing could lead to further softening of relations between the U.S. and North Korea.
Since 2011, Kim has fired more than 90 missiles and had four nuclear weapons tests, which is more than what his father, Kim Jong Il, and grandfather, Kim Il Sung, launched over a period of 27 years.
North Korea, the only nation to have tested nuclear weapons this century, spent most of Trump’s first year in office perfecting its nuclear arsenal. While North Korea has paused nuclear tests that prompted Trump’s threat to bring “fire and fury” upon that country, it had already made significant progress before the historic dialogue with the U.S. started. The nation has also launched tests of various projectiles in recent months.
Under the third-generation North Korean leader, the reclusive state has conducted its most powerful nuclear test, launched its first-ever intercontinental ballistic missile and threatened to send missiles into the waters near the U.S. territory of Guam.
QE infinity? Economists believe ECB bond buying could run for years
The shape and size of the European Central Bank’s new bond-buying program caught market participants off guard, with some now predicting it’ll be years until the euro zone is back to anything approaching normality.
Starting in November, the ECB will make 20 billion euros ($21.9 billion) of net asset purchases per month for as long as it takes for the euro zone’s inflation and growth outlooks to return to satisfactory levels. The purchasing will only end “shortly before” the next rate hike.
ECB President Mario Draghi pointed out Thursday that a major reason for the re-launch of net asset purchases was that inflation expectations remained consistently below the ECB’s target of just below 2%, but implored governments to deploy fiscal policy to supplement his actions.
This will be the second round of quantitative easing (QE) from the ECB, the first coming four years ago in response to the calamitous euro zone debt crisis.
Shweta Singh, managing director of global macro at TS Lombard, said the second round of asset purchases would likely have a “milder impact than QE-I, when borrowing costs were higher, fragmentation across the euro area was severe and domestic risks were far greater.”
“Crucially, there may be much less scope this time for the euro to edge lower and thus boost inflation expectations, while the pool of eligible assets that the ECB can buy has shrunk since QE-I was launched.”
The smaller increments but open-ended timescale of this second package (QE-II) surprised many, and was well below the 60 billion euro per month implemented at the beginning of QE-I in 2015. The open-ended commitment to continue until the inflation outlook improves carries several implications.
“The sequencing reference also signals that there would only be a short gap between the end of QE and the onset of rate hikes,” Ken Wattret, chief European economist at IHS Markit, said in a note Thursday.
“As we believe rate hikes are well down the line — we have the first DFR (deposit facility rate) hike only in late 2022, with an even later start increasingly likely — this implies a very long period of net asset purchases.”
The ECB forecasts inflation at 1.5% in 2021 which is still below what the ECB regards as “sufficiently close to, but below, 2%,” Berenberg senior European economist Florian Hense pointed out in a note.
“Thus, the ECB seems highly unlikely to raise rates before 2022 — unless inflation were to surprise a lot on the upside,” Hense projected.
“The asset purchase program could therefore last for at least 24 months with a total volume of 480 billion euros. More likely it will last longer.”
Barclays head of economic research Christian Keller anticipates that the asset purchase program will continue at least until the end of 2020.
“We expect the ECB will remain accommodative for a very prolonged period of time. We continue to think that risks to the EA (euro area) growth outlook are skewed to the downside and we do not expect core inflation will re-accelerate in the near term,” Keller said in a research note Thursday.
“As the euro area has arguably entered the mature stage of its economic cycle, we expect interest rates to stay low for a prolonged period and firms’ pricing strategies to remain conservative, and we believe fiscal policy is unlikely to reflate the euro area economy.”
Against this backdrop, Barclays economists do not expect businesses to feel immediate pressure to increase final output prices, and therefore project that core consumer prices are unlikely to catch up to levels consistent with the ECB’s medium-term price stability target. Keller thus expects underlying prices to remain on a “slow recovery trend.”
‘Strong signal for governments’
ECB policymakers unanimously agreed that fiscal policy rather than monetary policy should be the main tool to combat the economic downturn. The duration of the QE program may hinge on the willingness of national governments to take action.
Draghi on Thursday urged “governments with fiscal space” to act in “an effective and timely manner.”
Ana Andrade, Europe analyst at The Economist Intelligence Unit, said in a statement that the open-ended nature of the asset purchase program will be a “strong signal for governments, as it will increase their fiscal space.”
“It could potentially lead them to engage on more fiscal stimulus,” she added.
Hense agreed that by lowering funding costs further, governments may find it easier to finance a “modest fiscal expansion” and the policy might nudge countries with some extra fiscal space, such as Germany, to use it.
“On their own, purchases of 240 billion (euros) in one year will raise the balance sheet of the eurosystem by circa 2 percentage points of GDP (gross domestic product) in a year from its current level of close to 40%.”
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