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EU coronavirus response: ‘Frugals’ oppose Merkel-Macron plan

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BERLIN, GERMANY – MAY 18: German Chancellor Angela Merkel and French President Emmanuel Macron, seen present live via video, speak to the media at the Chancellery during the coronavirus crisis on May 18, 2020.

Pool

EU member states Austria, Sweden, Denmark and the Netherlands stated their opposition on Saturday to a French-German plan for a 500 billion euro ($545 billion) coronavirus recovery fund that would issue grants, calling for a loans-based approach instead.

French President Emmanuel Macron and German Chancellor Angela Merkel made the surprise proposal on Monday to set up a fund that would offer grants to European Union regions and sectors hit hardest by the pandemic. 

The idea of grants, however, is anathema to the EU’s self-styled “frugal four”, who generally oppose big spending and fear the proposal will lead to a mutualization of member states’ debt.

“We propose to create an Emergency Recovery Fund based on a ‘loans for loans’ approach,” the four countries said in a so-called “non-paper” outlining their position to other member states and released by Austria.

The two-page document listed principles they wanted the fund to adhere to, including “not leading to any mutualisation of debt” and that it be of a “temporary, one-off nature with an explicit sunset clause after 2 years”.

Paris and Berlin, whose agreements often pave the way for broader EU deals, proposed that the European Commission borrow the money on behalf of the whole EU and spend it as an additional top-up to the 2021-2027 EU budget that is already close to 1 trillion euros.

The European Commission is to present its own proposal for a recovery fund linked to the EU’s next long-term budget on May 27 and said it welcomed the initiative from France and Germany.

But the document from the “frugal four” said the Commission predicts member states will suffer an “unprecedented economic contraction in 2020, with only a partial recovery in 2021”.

“Additional funds for the EU, regardless of how they are financed, will strain national budgets even further,” they said.

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EU unveils plan to borrow 750 billion euros to aid coronavirus recovery

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The EU flags are seen in front of the Berlaymont, the EU Commission headquarter on May 19, 2020, in Brussels, Belgium.

Thierry Monasse

The European Commission has unveiled plans for a 750 billion euro ($826.5 billion) recovery fund as the region faces the worst economic crisis since the 1930s.

The announcement came after France and Germany opened the door to issuing mutual EU debt last week, suggesting that the Commission, the EU’s executive arm, should raise 500 billion euros on the public markets.

The Franco-German initiative was described as a “breakthrough” and a “historic” step as Germany had always opposed the idea of jointly;y-issued debt, even during previous crises.

There are four European countries that still oppose the Franco-German plan and want the EU to issue loans rather than grants as a way to mitigate the economic fallout from the Covid-19 crisis. Austria, the Netherlands, Sweden and Denmark also want strong economic reform commitments in return for any financial help.

Wednesday’s proposal kicks off a discussion among the 27 EU member states. Each leader will meet, maybe via video call, on June 18 in the hope of finding a consensus over the exact details of the recovery fund. 

The European Parliament, the only-directly elected EU institution, will also have to approve any new financial aid as well.

In the meantime, there are other short-term measures available across Europe. The European Central Bank is buying government bonds as part of its 750 billion euro program and there are 540 billion euros available in unemployment schemes, business investments and loans to governments. 

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Hong Kong police fire pepper pellets to disperse protests over security bill

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Police use pepper spray projectile during a Lunch With You rally in Central district on May 27, 2020 in Hong Kong, China.

Anthony Kwan | Getty Images

Hong Kong riot police fired pepper pellets to disperse protesters in the heart of the global financial center on Wednesday, as new national security laws proposed by Beijing revived anti-government demonstrations.

Police also surrounded the Legislative Council where a bill was due to be debated that would criminalize disrespect of the Chinese anthem, amid soaring tensions over perceived threats to the semi-autonomous city’s freedoms.

People of all ages took to the streets, some dressed in black, some wearing office clothes, and some hiding their identities with open umbrellas in scenes reminiscent of the unrest that shook the city last year.

“Although you’re afraid inside your heart, you need to speak out,” said Chang, 29, a clerk and protester dressed in black with a helmet respirator and goggles in her backpack.

A call to gather around the Legislative Council was scrapped due to a heavy presence of riot police.

Many shops, bank branches and office buildings closed early. Dozens of people were seen rounded up by riot police and made to sit on a sidewalk.

Protests have returned to the streets of Chinese-ruled Hong Kong after Beijing proposed national security laws aimed at tackling secession, subversion and terrorist activities. The planned laws could see Chinese intelligence agencies set up bases in the semi-autonomous city.

The move triggered the first big street unrest in Hong Kong in months on Sunday, with police firing tear gas and water cannon to disperse protesters.

The United States, Australia, Britain, Canada and others have expressed concerns about the legislation, widely seen as a potential turning point for China’s freest city and one of the world’s leading financial hubs.

Police said they had arrested at least 16 people on Wednesday, aged 14-40, for alleged crimes including possession of offensive weapons, possession of tools for illegal use and dangerous driving.

Protesters in a downtown shopping mall chanted “Liberate Hong Kong! Revolution of our times” and “Hong Kong independence, the only way out”, but dispersed as lookouts shouted a warning to “go shopping!” at the sight of police vans outside.

One protester was seen with a placard reading “one country, two systems is a lie”, referring to the political system put in place at Britain’s 1997 handover of the city to China that is meant to guarantee Hong Kong’s freedoms until at least 2047.

“I’m scared … if you don’t come out today, you’ll never be able to come out. This is legislation that directly affects us,” said Ryan Tsang, a hotel manager.

Chinese authorities and the Beijing-backed government in Hong Kong say there is no threat to the city’s high degree of autonomy and the new security laws will be tightly focused.

“It’s for the long-term stability of Hong Kong and China, it won’t affect the freedom of assembly and speech and it won’t affect the city’s status as a financial center,” Hong Kong Chief Secretary Matthew Cheung told reporters. “It would provide a stable environment for businesses.”

Hong Kong’s most prominent tycoon, Li Ka-shing, said in a statement security laws were within every nation’s right, but Hong Kong had the “mission-critical task” to maintain trust in “one country, two systems”.

Hong Kong media reported Beijing had expanded the scope of the draft security legislation to include organisations as well as individuals.

The law was being revised to cover not just behavior or acts that endanger national security, but also activities, broadcaster RTHK and the South China Morning Post reported.

U.S. President Donald Trump on Tuesday said the United States this week would announce a strong response to the planned security legislation for Hong Kong.

Hong Kong shares slide

The U.S.-China Business Council (USCBC) urged “all leaders to take those steps necessary to de-escalate tensions, promote economic recovery and the rule of law, and preserve the ‘one country, two systems’ principle.”

Asian shares slipped over rising tensions between the United States and China. Hong Kong shares led declines with the Hang Seng falling 0.46%, though it kept a bit of distance from a two-month low touched on Monday. 

Protesters and pro-democracy politicians say Hong Kong’s National Anthem Bill, which aims to govern the use and playing of the Chinese national anthem, represents another sign of what they see as accelerating interference from Beijing.

The bill carries penalties of up to three years jail and/or fines of up to HK$50,000 ($6,450) for those who insult the anthem. It also orders that primary and secondary school students in Hong Kong be taught to sing the “March of the Volunteers”, along with its history and etiquette.

“As long as citizens don’t disrespect the anthem law, there’s no need to worry, I hope people can discuss the bill rationally,” Chief Secretary Cheung said.

The anthem bill is set for a second reading on Wednesday and is expected to become law next month.

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Sweden’s no-lockdown could mean it’s excluded from Nordics reopening

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People sit on terrace tables at cafe in Stockholm, Sweden, on Thursday, March 26, 2020. Sweden is starting to look like a global outlier in its response to the coronavirus.

Bloomberg

As Sweden’s Nordic neighbors look to reopen borders and lift travel restrictions, worries over Stockholm’s controversial approach to the coronavirus has increased concerns that it could be excluded from those plans.

Sweden’s Foreign Minister Ann Linde said Tuesday that the EU had cautioned against discriminating when opening borders, and that any decision to exclude the country from an agreement between the Nordic states would be a political decision.

“It is a very complicated issue, and I think that all politicians in every country should also look at the long-term effect before they take very politically-motivated decisions,” she told reporters at a briefing in Stockholm Tuesday, according to Reuters.

Linde’s comments come after Cyprus said it would not permit direct flights from Sweden when it opens up on June 9, but would allow inbound flights from Norway, Denmark and Finland.

There is a nervousness over Sweden because, unlike its neighbors and most of Europe, it kept much of its public and social life open as the coronavirus spread throughout Europe in late February and March.

The government allowed Sweden’s bars, restaurants and schools for under-16s to remain open, although it banned mass gatherings and visits to elderly care homes (which have seen acute outbreaks of the virus), while advocating social distancing, working from home and good personal hygiene. 

The strategy has been controversial and attracted global attention, and some criticism. Data shows that the country of around 10 million has recorded 34,440 cases and 4,125 deaths. This is far higher than its Nordic neighbors, which each have populations of around 5 million; Norway has recorded 235 deaths, Denmark has recorded 563 deaths and Finland has reported 312 deaths.

Allowing for different testing regimes and attributions of the cause of death, according to ourworldindata.org, Sweden’s daily confirmed Covid-19 deaths per million inhabitants, on a rolling 7-day average, stood at 4.68 on Tuesday, higher than the total for the U.K. (at 4.46) and the U.S. (at 3.40) as well as Russia and Brazil, which have the largest numbers of coronavirus cases in the world.

Nervous neighbors

Given the data, it’s perhaps not surprising that Sweden’s neighbors are cautious about the reopening of borders and lifting of travel restrictions, although essential travel, such as travel for work, has continued between the countries throughout lockdown, albeit at a lower level. 

Norway and Finland are set to decide on the lifting of travel restrictions on or by June 14.  Finland is not commenting on other countries’ strategies, the Foreign Ministry told CNBC when asked for comment, but pointed to Finland’s explicit strategy to prevent the spread of the virus in the country and told CNBC “it is monitoring the corona situation very carefully and is ready to react quickly if the situation suddenly gets worse.”

Norway directed CNBC’s request for comment to its Ministry of Justice, where no one was immediately available for comment. Meanwhile, Denmark’s Foreign Ministry told CNBC that, as of Monday, the country was “expanding the possibility for travelers from the Nordic countries and Germany to enter into Denmark.”

“It will be possible for residents from these countries to travel into Denmark if they have a worthy purpose for entering, which can now also include (visiting) grandparents, grandchildren, partners, ownership of a vacation residence in Denmark or if they are undertaking business travel to Denmark,” the ministry said in a statement to CNBC. On May 29, the Danish government will present a plan for a controlled and gradual revision of the temporary border controls and travel advice for the summer period, the ministry added.

Like its neighbors, Denmark was tight-lipped on its neighbor Sweden, saying: “Unfortunately, we can’t comment further on the situation in Sweden.” Sweden itself has told its citizens not to travel abroad until July 15 unless absolutely essential.

Defense of the strategy

With global attention on Stockholm’s approach, Sweden’s Linde defended the country’s more laissez-faire approach, which has been led by its Public Health Agency and chief epidemiologist Anders Tegnell.

“Transmission is slowing down, the treatment of COVID-19 patients in intensive care is decreasing significantly, and the rising death toll curve has been flattened,” Linde told reporters, insisting that while “there is no full lockdown of Sweden … many parts of the Swedish society have shut down.”

Tegnell has defended his strategy too, telling CNBC on April 22 that Stockholm was heading toward herd immunity “within weeks,” although an official study released last week showed that only 7.3% of Stockholm’s inhabitants had developed Covid-19 antibodies by the end of April.

The country’s former chief epidemiologist, Annika Linde, who oversaw Sweden’s response to swine flu and the Sars epidemic, said earlier this week that the country’s approach to the epidemic, one aiming at herd immunity, had been mistaken.

“I think that we needed more time for preparedness. If we had shut down very early … we would have been able, during that time, to make sure that we had what was necessary to protect the vulnerable,” Linde told Britain’s The Observer newspaper on Sunday.

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