German unemployed the first in EU for poverty risk

Be careful to keep the job place, or the situation won't be easy at all. Eurostat unveiled the fake news of a country where everything is OK

by Emanuele Bonini

Germany is the strongest European economy and the country is consired a winning model for its performances in all sectors. Public finances are sound, export is robust and the unemployment rate is the third lowest of the entire European Union. Yet data suggest that something is wrong with Germany: its share of people at risk of monetary poverty is the highest of Europe. Latest Eurostat figures on unemployment confirmed the virtuous trend of the norther country, with the not working citizens fallen down to 3,6% in January 2018 compared to 3,9% in the same month of 2017. There are actually some 1,547,000 people out of the labour market, 131,000 less that the first month of the previous year. According to the same EU institute of statistics, at the end of 2016 in Germany the 70.8% of unemployed persons was at risk of poverty. This is the highest European rate, meaning first of all that in Germany there are about more than 1,1 million people with a vulnerability status (in December 2017 the total amount reached the threshold of 1,188,732 persons, in relation to the unemployment rate of that period). In absolute number the situation is less negative than other country. In Italy, for instance, at the end of 2016 there were 1,427,380 unemployed persons was at risk of poverty (or 46% of total unemployed population). In Spain that category of people counted for 2,064,426 individuals (49,4%).

Italy wants a «multi-year» period to assess reforms

Finance minister Pier Carlo Padoan stressed the importance of giving structural intervention the proper time to bear fruits. «It is no a way to escape our duties»

Pier Carlo Padoan

by Emanuele Bonini

The European Union should reconsider the approach at the base of the European Semester, the cycle of economic and fiscal policy coordination within the EU. Reforms should be evaluated in the medium term instead of the current year-by-year attitude, the Italian Finance minister, Pier Carlo Padoan, said today. «One year is not enough to see if reforms are on track», he said intervening at the "Reinventing convergence" conference, held in Brussels by the European Commission. «We need a multi-year period to assess whether reforms are bearing fruits or not». The concept expressed is not new to Padoan. Indeed, it is not the fist time the Italian minister insists on longer-lasting framework as key elements of reforms, and once again he reiterated what has been stating since he took office, in the previous legislature. «Reforms need time to be passed and implemented, need time to be perceived by the people as the good idea, need time to produce effects». That doesn't want to be a smart move to avoid responsibilities. Padoan assured partners Italy will remain committed to what the EU rules foresee. A multi-year approach in the national reform programme assessment «has not be seen as a way to escape from obligations».

Padoan recalled how much Italy has done in these last years. «The beginning of the story» of the country, as he said, was a situation made by «three challenges», namely the stability of the public finance with the related debt reduction issue, the need of enhancing the growth potential, and the reform of the banking sector. Italy had all these three problems, three aspects that «severly interact» and that turn in «a worse example of vicious circle» especially in situation of harsh crisis such as the one Europe experienced since 2008. «Since then we turned a page, starting a virtuos circle», the Italian minister stressed in his intervention. He recalled all the reformes already passed by the Parliament, the one of the labour market (Jobs act), the one for the civil just, «one of the main obstacles for business», and the several measures tabled for the banking sector. Here the italian minister wanted to point out that the bank restructuring process «is still underway, is not over, but is in the right direction».

EU to put an end the profitable detached work

Draft amending proposal of the posted workers directive wants to eliminate the wage differences. In name of labour protection and fair competition

by Emanuele Bonini

Same remuneration and same conditions as local workers, no salary level change in case of subcontractor, publication of all elements of the different remuneration policies in force in the Member States. The European Union made a step forward in the revision of posting workers directive, by adopting the draft proposal containing the new measures. The Employment and Social Affairs Committee approved the legislative text by with 32 votes to 8 and 13 abstentions, paving the way to the negotiations with the European Council. Unless of last-minute surprises, with every probability the Plenary will back the draft bill in the vote scheduled next week. Then representative from the Parliament and from the Member States (Council) will be in the position of table negotiations.

Posted workers account for less than 1% of the overall EU working population, but they are growing in number. According to the EU figures, in 2015 they were 2.05 million, a value increased by 41,3% between 2010 and 2015. The growth of the single market has led to increased wage differences, generating automatic incentives for posting. Workers sent working abroad often earn considerably less than local workers, which can lead to unfair competition between posting and domestic companies, social dumping and exploitation of posted workers. The new draft rules are supposed to stop all that, pointed out one of the two co-rapporteur. «The agreement we have is politically clear: improve the protection of workers and ensure a level playing field for companies in the internal market», said the Elisabeth Morin-Chartier after the commitee vote.

Europe needs migrants, EU report shows

According to the 2017 edition of the European Commission's ESDE review extra-EU people are key to solve the issue of the economic demographic decline

by Emanuele Bonini

Intolerance can't be the answer, fences can't be the political agenda. EU countries need migrants more than ever to address the demographic challenge and its future implication, a study from the European Commission revealed today. Without people coming Europe will collapse, it basically says. Europeans are getting older, and the active population in the labour market is projected to shrink by 0.3% every year with all the consequences. Nowadays there are four working-age people per pensioner, in 2060 they will be just two. «No further migration would exacerbate the demographic challenge», states the document. «Without any further net migration into the EU from now on, the decline of the working-age population would be much stronger» than foreseen.

The 2017 Employment and Social Developments in Europe (ESDE) review offers two different scenarios, by which in 2040 the the active EU population could decline to 247 million people or even to 210 million people. With less active people available and more pensions to pay, future poses critical challenges for the 27+1 EU member States. The only possibility at disposal to host migrants and integrated them into the social and labour environment. «Higher net immigration would allow growth in the working age population to resume in the medium term», according to the 268 pages report. In time of fence-building, it appears hard to see national governments allowing asylum seeker applicants come and stay. Decision makers should therefore revise their immigration policies.

«No EU-UK flights after Brexit», Ryanair chief warns

Air carriers can't wait the end of negotiations, scheduled for March 2019. Connections to be disrupted already in September 2018, with British government considered as no problem-solver

by Emanuele Bonini

Brexit «will bring chaos for aviation», with no EU-UK air connections of any kind after March 2019, Ryanair CEO Michael O'Leary warned today. Although the conditions for exiting the European Union has to be found the 29th of March of that year at the latest, «for carriers the deadline is September-October 2018, when flights will be abolished», he said in a public hearing held in Brussels. «The aviation sector won't wait» so long, and clear conditions have to be in place before the scheduled roadmap in order to allow companies to operate. Both technical and praticals reason require the commercial environment to be clearly defined and predictable. Slots have to be resersed in advance, but in order to ask for them it is necessary to know whether operating flights is possible. So, be ready for the worst. «There is the perspective of not having EU-UK flights in April, 2019. With no deals, flights will be deleted, as the 2019 summer holidays will»

The major concern for the Irish carrier is the uncapability of the British government to find the way out. «British have no idea of they are doing, have no plans, and have no idea what the want» for the future, O'Leary criticised. With these premises it has not a surprise if the touristic sector is in allarm. TUI Group, the world's number one tourism business, has commissioned a study with the aim of investigating the possibile side effects of Brexit. In case of EU-UK flights black-out the EU27 tourism industry stands to lose some €21 billion in business, warned Ralf Pastleitner, Director International Public Policy, Group Corporate & External Affairs of TUI Group. GDP could shrink of 2.8% in Malta, and of 0,5% in Spain, just to give an example. The fact that such a study has been tabled is the proof that concerns are there, are real and the business world is working in order to be ready to address all the possible scenarios, included the worst ones.

«Elections not a reason for inaction», ECB chief blamed

Mario Draghi criticized the Member States do very little to implement structural reforms

by Emanuele Bonini

Reforms, reforms, reforms. Once again, the president of the ECB, Mario Draghi, urged the governments to implement what is needed to exit the crisis once and for all, calling the Member States not to hide behind the elections as a pretext to avoid maintaining the promised efforts. Draghi has been insisting on the need for structural reforms since he assumed his post, and he still renews his appeal. The latest call was made on at the end of the meeting of the governing council of the European Central Bank, which to decided to maintain unchanged the interest rates and to go on with the Quantitative Easing. The non-standard monetary policy measures, confirmed at the net asset purchases of the new monthly pace of €60 billion, are intended to run until the end of December 2017 or beyond, if necessary. It's the same old story: the ECB does its own part, but the Member States have to do their own. «Things are going better. Recovery previously fragile and uneven, is now solid and broad», the Eurotower chief said at the end of the board meeting. Nevertheless, «economic growth continues to be dampened by a sluggish pace of implementation of structural reforms», whose responsibility lies on the countries of the Euro area. Always. «It’s quite clear that once countries enter into a very important political and election cycle, the push for legislating structural reforms becomes less vigorous. However, this by itself doesn’t justify any absence of action, because even without legislation you have implementation of previously legislated reforms».

«Non-performing loans still a serious issue for Europe»

Valdis Dombrovskis pointed out the main challenges for the Eurozone viability. Italy the major concern, German banks with a past of risky attitude

by Emanuele Bonini

Banks in Europe «are stronger and better capitalised» than the previous years, according to the European commissioner for the Euro and the Financial stability, Valdis Dombrovskis. This means the worst is passed. Just theoretically. Risks are in fact not over at all, because of non performing loans. Non-performing loans are all those kind of credits of difficult repayment. It means that financial institutions give money to borrowers who are not in the position to give those money back, finishing to be exposed to the risk of shock due to insolvent debtors. It is not just a matter of isolated cases. On the contrary, that of non-performing loans «is a serious issue we are facing in several Member States», pointed out once again Dombrovskis. Once again because the problem is not a new one, and the story is not an unknown one.

Italy. A Member State with long-date problem is Italy. The country is «in a context of high non-performing loans», as the European Commission underlined in the latest winter economic package. The scale of risk exposure is source of concerns, since «the stock of non-performing loans has only started to stabilize and still weighs on banks’ profits and lending policies». In numbers, the sector’s gross stock of  non-performing loans stabilized only recently at around 329 billion Euro. In practice, Italy lives in «persistent uncertainty» related to the adequacy of loan loss provisions and capital buffers, given the existing high stock of non-performing loans and banks’ limited ability to absorb losses in a context of subdued profitability. Italy is the third economy of the Euro area, and spill-over effects need to be avoided, according to the European Commission, worried for the viability of the Member States. Italy was identified as having excessive macroeconomic imbalances relating to its high public debt and weak external competitiveness in a context of weak productivity growth and the high level of non-performing loans on banks' balance sheets.

CETA to harm the least developed countries

According to an analysis for the European Parliament the EU-Canada trade agreement will likely erode the economic power of poorest States, condemned to be much poorer. 

by Emanuele Bonini

It has been considered «a Trojan horse», an asymptomatic carrier of infectious diseases for the «made in», the workers' health and the national economies. Now CETA, the Comprehensive Economic and Trade Agreement between the EU and Canada, can harshly hit the developing countries. In other words the new trade deal is against the poors, according to a report from the European Parliament. Written under the request of the Committee on Development, the report pointed out that «it is likely that the implementation of mega-regional agreements will result in some preference erosion for developing countries». There is no doubt that CETA is a mega-regional agreement, so it is expectable to see the European Union and Canada trading more between themselves and less with other partners. Less business in the developing countries means to put at stake their future, and for such a reason the report suggested that the EU development assistance «should be targeted at these vulnerable countries and producers». The same report considered to recommend «a more targeted and perhaps extended programme of support» for those third countries affected by CETA».

Despite the impossibility of calculating the real impact of the new trade agreement, the European Parliament recognised side effects. The report made a distinction between the so-called ACP countries (African, Caribbean and Pacific states) and the Least Developed Countries (LDC). According to the different scenarios, losses for the ACP countries are estimated from 21.78 billion Dollars up to 50.31 billion Dollars, while for the second group of States losses range from 11.39 billion Dollars up to 16.24 billion Dollars. To put under pressure the least rich part of the world is the end of trade barriers between the EU and Canada. «CETA will have a very aggressive tariff elimination regime», making goods and products from different markets less attractive because less profitable. So, in the case of CETA analyses suggest that «there may be some preference erosion effects for developing countries, particularly those with concentrated export structures vis-à-vis the EU and those competing directly with Canada in EU markets». It's not only about that. In fact it is not clear whether such trade diversion could be offset by trade creation arising from the growth-enhancing effects of the CETA, particularly vis-à-vis the EU.

EU for a minimum wage for all (but they can't promise)

Amongst the first centre-right men, European Commission president became the last of leftists by proposing the idea of basic salary for every job category

by Emanuele Bonini

It's time for Europe to introduce basic salary standards, said the president of the European Commission yesterday. According to Jean-Claude Juncker, «we need a minimum wage for every job, in every Member State», and that's what the executive body of the EU has the intention to do in March, when the college of commissioners will have to approve the new social package. Juncker didn't entered into details, but speaking during a conference in Bruxelles, he underlined the importance to have a measure like the one he mentioned. «If everybody had a minimum wage, we could fight the phenomenon of social dumping, which is eroding our societies», stressed Juncker. Despite the best intentions, it is unclear how the European Commission could be able to introduce a minimum wage (that - it has to be specified - should be fixed at different levels taking into account the different realities of the Member States). The European Commission has in fact limited power on this, since by treaties the competence on social policies is shared with the Member States.

 The European Commission has the duty of promoting social policies. It has foreseen that «in defining and implementing its policies and activities, the Union shall take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health» (article 9 of the treaty of the EU). Nevertheless, when it comes to employment and social inclusion, most of the actions are left in the hands of governments. It's up to the national authorities to define and set out reforms in labour market. The EU Commission can just «encourage cooperation between the Member States and facilitate the coordination of their action in all social policy fields under this Chapter, particularly in matters relating to employment, labour law and working conditions, social security». (art. 156 of the Treaty on the functioning of the EU).

Erasmus programme for workers starting in 2017

The European Commission announced the launch of ErasmusPro, the new initiative for the exchange of young apprentices

by Emanuele Bonini

Young students of work, go ahead! Starting from 2017 the European Commission will activate Erasmus Pro, the new programme for the mobility of apprentices and trainees. Finally the EU executive body will launch the real Erasmus programme for workers, an initiative sponsored already during the previous legislature by Antonio Tajani, in charge for Industry and the entrepreneurship under the Barroso Commission. The idea was to reproduce the well known EU project of student exchange in a new model thought just for the labour market. No the dream comes true.

Until today small period of apprentices abroad have been financing through Erasmus+, the14.7 billion Euro catch-all framework programme for education, training, youth and sport. Next year  the Commission will launch "ErasmusPro", a new dedicated activity within the Erasmus+ programme to support long-duration (6-12 months) placements of apprentices abroad. In addition to the current 650.000 apprentices that will benefit from mobility under Erasmus+, in the period 2017-2020 these measures will open up the possibility for 50,000 additional young people to spend at least 6 months of their learning experience in another Member State, compared to the much shorter period (1 month on average) registered so far.

The Erasmus programme for workers will be financed by the EU funds. In addition to the already EU-level financial allocations, on 14 September 2016 in the context of the mid-term review of the Multiannual Financial Framework (MFF) 2014–2020, the Commission proposed to increase the budget of Erasmus+ by €200 million. These new extra money will be used for the new initiatives such as ErasmusPro

End of a dream

Anti-establishment players and populists swept away the myth of globalization, followed by a new season of nationalism

Opinions

Where there hadn't to be limits, there are fences; where there had to be free trade, there is protectionism; and where there was supposed to be the global village, there are nation-States. Something went wrong. The model chosen, decided and in somehow imposed, has finished to don't work: instead of globalization there is nationalism. It can't be! How is that possible? That's exactly what millions of people in Europe and worldwide thought on June 23rd after Brexit, that's exactly what millions of people in Europe and worldwide thought immediately after having watched Donald Trump becoming the 45th president of the United States of America. Unbelievable, isn't it? Nobody was ready to believe Trump could do it, but he did. It can't be! How is that possible? The answer is simple: voters were called to choose between two opponents, and they made their choice. It is called democracy. Looking at what happened in the latest American elections, somebody - and even more than somebody - is considering democracy as an epic fail. Points of view, of course. It can be said that Democrats chose the wrong candidate, it can be said that Americans are out of mind, a lot of things can be said. Considerations, opinions, analysis, are all elements which have to take into account one thing: a model has collapsed.

It failed the idea that globalization without neither rules nor ethics could bring wealth and prosperity. On the contrary, wealth and prosperity have been transferred from a country to another, as well as people. Poorest countries saw their living conditions improving, while countries once with good economic and social standards saw the deterioration of the domestic tissue. In name of competitiveness social dumping was promoted, corporations were given carte blanche, the idea of a flexible labour market was translated in precarity. No more rights and less money. Finance did the rest. While millions Dollar cannot be created with strokes of a magic wand, they can be instantly burned on the stock markets. Unreal economy forgot the real world, where the survival instinct was the answer to all of that. Incredible choices produced unpredictable results. The rise of uncompromising and populist movements is nothing but the result of a system which has become no longer sustainable. Marine Le Pen, Beppe Grillo, Geert Wilders, they are all the expression of the general discontent. In time of uncertainty, economic crisis, weakness, they offered (well, they promised to do so) the alternative to the contemporary world. Asking for no Europe, no free trade agreements, no immigrants and no foreigners, isn't perhaps a clear call for putting an end to the globalisation? The one which was offered is a national recipe rather than global.

«Brain drain harms Italy's competitiveness»

The European Commission's warning in the 2016 report on Education

by Emanuele Bonini

Italy should care of national high-skill workers, since the migration of professionally valid people risks to harshly hit the country in terms of loss of competitiveness, the European Commission warned today. In its 2016 edition of the Education and Training Monitor report, the EU body stressed that in Italy «transition from education to work is difficult, even for highly qualified people» and «this is causing a "brain drain"». National authorities have not to underestimate the impact of such a phenomenon, but it appears the country is not putting in place neither measures nor wider policies to address the matter. In other terms the Italian education system is a good one, but completely incapable of keeping those who are ready for the labour market.

Problem with no solutions
The number of Italian citizens with a tertiary education degree leaving the country has been rapidly increasing since 2010. «This has not been compensated by inflows of equally well qualified Italians returning to the country». This means governments couldn't react, and not only that. There is not only a lack of political action. As the European Commission observed, the increasing emigration reflects better job opportunities and conditions abroad. As underlined in the report, survey data show that compared with their peers working in Italy, young Italian graduates working abroad earn higher and more rapidly increasing salaries, work more frequently under open-ended contracts and consider their formal qualification more appropriate for their job. Furthermore, Italians with a doctoral degree working abroad report having both better job opportunities and significantly higher earnings. «This may explain why highly qualified Italian workers have very little inclination to return to their home country. The emigration of highly qualified Italian workers therefore does not qualify as "brain circulation"» (i.e. when people temporarily go abroad to study or work, but then go back to their home country).

Europe in economic troubles with migrants

Not enough in the EU budget to deal with the current crisis. Adding money not an easy task

by Emanuele Bonini

Migration is not only a matter of political approach and will, it is also a matter of money. Despite the different political ideas, the European Union need resources which are not there. The EU in the sense of the Member States should revise the common budget in order to put new, fresh money with the aim of better addressing a situation otherwise impossible to solve. This is the only way out, and of course it is not an easy one. Far-right populist movements are rising up all across Europe, the European Union opted for strict fiscal rules, and amongst the governments there are those who neither can't nor don't want to invest on migration. There is still the possibility of changing the current Multi-annual Financial Framework (MFF), the single EU budget for the 2014-2020 period, but it is unclear how such a possibility will be used by the Member States.

Resources made available
The EU can spend for migration €9,26 billion, which are the resources foreseen in the heading 3 («Security and Citizenship»). These money are mainly channelled through the Asylum, Migration and Integration Fund (AMIF, €3,1 billion), the Internal Security Fund (ISF, €3,8 billion) and the main EU Home Affairs agencies involved (Frontex, Easo, Europol, that got €2,36 billion). In addition, under humanitarian aid and development cooperation, the EU budget and EU Trust Funds, as well as, outside the EU budget, the European Development Fund (EDF), address migration and asylum both geographically and thematically. As a new element at the end of 2015, the €3 billion Refugee Facility for Turkey was set up under the EU-Turkey deal on migration, with €1 billion coming from the EU budget.

Is the Youth European Initiative a success or not?

In the Euro area 66.400 jobs created per year with a budget of over six billion. Time to take stock of the situation. And ask questions.

by Emanuele Bonini

According to the European Commissioner for Employment and social affairs, Marianne Thyssen, Europe «is on the right track». Despite the official declarations, is the Youth European Initiative (YEI) a real success or a true failure? Of course those whose idea is YEI is the answer to youth unemployment strongly defend the scheme. On the contrary, those who believe the programme is nothing but much ado for nothing continue to talk in Shakespeare's language. It is not an easy task to understand whether the Youth European Initiative has delivered of not; something has been achieved, but is that enough? Numbers are the real problem behind the debate. Politicians from all parties considered them as positive, public opinion as negative, talking about a flop.

Figures
The European Member States decided to take stock of the situation after three of the launch of YEI. In the Eurozone alone youth unemployment has dropped from a peak of 24.4 % in the first quarter of 2013 (when YEI was created) to 18.9 % in the second quarter of 2016. It means a decrease of 5.5% of people out of job. In absolute terms, this -5,5% means 199.320 people less. Considering that in April 2013 there were 3.624.000 young people without a job, on average Eurozone countries have been able to attract just 66.400 people per year. It doesn't sound really good, even because such trends «should be seen in the context of cyclical factors», admitted the European Commission. Which means people got a job because of the mild recovery experienced by the EU during the last years. So, the Youth Guarantee played a role in inverting trends, but it is unclear in which measure. Furthermore, only 1,4 million people out of the 14 million people who participated to the programme got supported actions. Only the 10% of applicants had a work experience.

Low wages an opportunity, said Renzi's government

«Invest in Italy» official brochure calls investors to the country, insisting in the chance of having less costs for employees' contracts

by Emanuele Bonini

Can the low level of wage be a reason to feel satisfied? Yes, if you are the chief of the Italian government. Instead of inverting trends giving citizens more economic power, in Italy low salaries are something to be proud of. Something to promote, according to the prime minister Matteo Renzi, whose secretary for Economic development issued an official brochure where the general poverty is described as an attractive business model for investors. «Italy offers a competitive wage level (that grows less than in the rest of EU) and a highly skilled workforce» points out the official brochure. In absolute figures, an engineer in Italy earns an average annual salary of 38,500€, while in other European countries the same profile earns on average over 48,500€ per year. Something to don't miss, according to the Italian authorities, whose aim is to attract investors in the hope of generating new jobs.

The national administration led by Matteo Renzi is at work in order to «make Italy a much better place to do business», stressed the Secretary of State for the Economic development, Ivan Scalfarotto. The Italian Trade Promotion Agency (ITA) offices in Italy and abroad «are able to provide support to investors throughout the project life cycle: from obtaining all relevant authorizations, to identifying any suitable incentive package». According to the Italian authorities a low index in salaries is good incentive to make business in the country.
a series of charts and tables shows the least cost of the Italian national workers compared to other countries of Europe. In case of problem in reading the chats, the official brochure explains that «Italy’s labour costs are well below other peer economies, like Germany and France». In addiction, it is well specified that labour cost growth rates registered in Italy between 2012 and 2014) «are lower than those recorded by Eurozone countries (+1.2% vs. +1.7%)».

Draghi called States for delivering and respecting rules

«Monetary policy alone is not enough», said the president of the European Central Bank. «Trust is essential». Warnings to Italy

by Emiliano Biaggio

Rules have to be respected. This means structural reforms have to be delayed, new additional deficit is not allowed. This means also Italy has to deliver rather than complain. The president of the ECB, Mario Draghi, stressed yesterday national government have to do more, in the respect of the existing framework. All the instruments to boost economy are there, according to the chief of the European Central Bank. On the contrary, political will is still lagging behind. And a change in this sense is needed.

Member States have to act
«The monetary policy of the ECB served to limit the negative effects of the shock, but monetary policy alone is not enough to deliver growth», pointed out Draghi in the European Parliament. «Other policy actors need to do their part, with growth-friendly fiscal and structural policies which will contribute to a self-sustaining recovery and increase the economic growth potential». It is not the first time Draghi calls the EU Member States to do more. He has been repeating it since he took office, in 2011. Once again, Member States have been invited to act.

Respecting the rules
«It's important rules are respected». Draghi made clear neither deviations nor derogation from current legal framework are possible. He recalled that «for further European integration to be feasible and acceptable, trust among its nations and people is essential». As a consequence, «to bolster such trust, it is important that agreed rules are respected». In this sense, according to the ECB chief is good to keep in mind that «in the existing rules there's many flexibility». A clear warning to Italy, even though he didn't do any explicit reference.

«Western Sahara is not part of Morocco»

From the European Court of Justice comes a clear opinion over a long-lasting issue

by Emanuele Bonini

The European Union doesn't recognise the ruling rights of Morocco over Western Sahara. This was reaffirmed by Melchior Wathelet, advocat general at the European Court of Justice, in his personal opinion made public today. Called to decide whether the bilateral trade agreements between EU and Morocco are applicable to the Western Sahara, the advocat general ruled it out. In his opinion Western Sahara «is not part of Moroccan territory and, therefore, neither the EU-Morocco Association Agreement, nor the Liberalisation Agreement on the liberalisation of trade in agricultural and fishery products are applicable to it». These considerations are not new in Europe, and they create both a political and judicial problem. On the institutional side the European Union exclude any sovereignty of Morocco over Western Sahara. In giving his opinion, Melchior Wathelet recalled that the largest part of Western Sahara is controlled by the central government of Rabat, which «considers itself as having sovereignty over that territory». This doesn't mean they have it. In fact, the advocate general emphasises that «the European Union and its Member States have never recognised that Western Sahara is  part of Morocco, or that the latter has sovereignty over that territory». Something won't be welcomed by Moroccan authorities, always claiming the Western Sahara as part of the country. It is already possible to expect formal reactions from Rabat and a diplomatic case to be managed.

Apple case, some considerations

Taxation and State aid, when valid bilateral legal agreements are against the EU rules
 

source: European Commission

by Emanuele Bonini

The Apple case is by now «the case». It doesn't happen every day to see a big corporation recognised as beneficiary of 13 billion Euro of illegal state aid. The European Commission found the tax rulings signed between the Irish government and the American farm against the EU rules. After an investigation lasted more than two years, the European Commission has in fact concluded that Ireland granted undue tax benefits, leaving Apple pay an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits. This is the story, and it has been now become the cult event of the year. Apple replied by announcing all the possible negative consequences for both investments and employment that this decision can create. Call it a blackmail if you want, but of course this is story doesn't stop here. It is a very complicated case, whose solution is not easy to be found. However some considerations are possible.

No sanctions. «This is not a penalty, it is unpaid taxes to be paid», pointed out Margrethe Vestager, the European commissioner in charge of competition policy. Although everybody wrote already that the EU imposed a fine against Apple, there are no fines under EU State aid rules and recovery does not penalise the company in question. As a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to remove the distortion of competition created by the aid. The decision of this nature simply restore equal treatment with other companies. It is up to the Member State getting the money back.

No actions against Apple. As already said, the decision taken in Brussels neither hit nor penalise Apple. Illegal State aids oblige national authorities to ask the company in question to repay the unfair benefit. In case of non compliance with the European Commission requests, the European Commission can open an infringement procedure against the Member State for non-recovery of State aid. The infringement procedure can bring to a fine against the member State. So, the action of the EU Commission has been taken against the Irish authorities, as underlined by the official press release issued («State aid: Ireland gave illegal tax benefits to Apple worth up to €13 billion»). Nevertheless, Apple is the beneficiary of a tax agreement signed in violation of EU rules.

Europe growth on the downside path in light of Brexit

Up to half percentage point expected to be lost the Eurozone next year

by Emanuele Bonini

Brexit poses downside risks for European economic growth, said the European Commission in a report published today. The directorate-general for Economic and financial affairs made available the Economic outlook after the UK Referendum: a First assessment for the Euro area, document containing first consideration on potential effect of the British referendum. There is no doubt that the UK’s vote will affect not only the UK but also the rest of the EU economy «through several transmission channels», mainly uncertainty, investment, trade and migration. In the near term, the main impact will be a large increase in uncertainty, both economic and political. These factors are expected to slow private consumption and investment growth and to impact on foreign trade, mainly in the UK, but also in the other EU Member States. Simulations from the European Commission services suggest a moderate growth in 2016 (to 1.5%-1.6%) and in 2017 (to 1.3%-1.5%), meaning a cumulated loss of GDP in the range of ¼ to ½ a percentage point in the Euro area by next year and 1 to 2¾ percentage points in the UK. Figures changed compared to previous estimation. Before the UK referendum, GDP growth in the Euro area would have been expected to reach 1.7% in both 2016 and 2017. 

This is just a partial preliminary analysis. The situation is so unclear to make a definitive answer impossible, right now. As specified by the report, due to the lack of information about the new equilibrium after the UK’s exit, many elements have not yet entered the assessment but nevertheless constitute substantial risks to the outlook. The point is there are no information about the situation after the UK’s exit, such as trade patterns, mobility of goods, services and labour, policy responses. All these missing elements make impossible to specify what can happen. However it is possible to state the Euro area and the EU are already under pressure, as pointed out in the assessment of the European Commission. The banking sector, particularly in Italy, has come under significant pressure recently as the UK referendum result exacerbated pre-existing vulnerabilities and led markets to question the capacity of these banks to repair their balance sheets. This is especially true considering that «the weaker growth outlook makes it harder for many banks to improve their balance sheets by increasing capital and/or reducing non-performing loans».

FACT SHEET/ German banking system spillovers

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