Tag: Europe

“Reverse” Sanctions?

President Biden has been credited in the media and in democratic circles for having responded swiftly and effectively to Russia’s invasion of Ukraine.  While it is true that the sanctions plan that his administration has orchestrated against Russia was one of the few available arrows in his quiver that didn’t risk a wider conflict, it is becoming quite apparent that the sanctions are not effective, or at least not as intended.

A few weeks after the start of the war Biden boasted that “sanctions are working”, with the ruble in free fall worth not much more than an American penny. However, six months later, the ruble has more than doubled in value since mid-March and is now worth more (61 to the Dollar) than it was worth before the war (83 for one Dollar). In addition, Russia’s income on its Crude and Gas exports are higher than before, with a lower level of sales more than compensated by higher prices. If Russia were a corporation, it would be having a great quarter, with stable income and a fraction of Cost of Goods Sold.

So who is suffering from these sanctions? Very simple: Europe. While one should remember that Europe’s ills are mainly of its own making, with a disastrous energy policy that relied on Russia being their friend forever, it doesn’t take a sophisticated econometric model to understand that in the zero sum game of trade economics, Russia is not losing, rather it is actually winning, while European consumers and factories have to pay for its gas up to ten times the cost of last year. This is ravaging energy-heavy industries such as steel and ceramics for example, and in a way all heavy industry which is dependent on energy. We are now hearing of factories in the continent that will not reopen after the August break, as in many industries production cost is now higher than prices. Producing means losing money. If this vicious circle is not corrected, look for industrial production to take a nosedive in the fall, with all the economic and social consequences. Requests for layoffs are already being made.

The sanctions on Russia have become sanctions on Europe. There may not be a quick fix, but it is obvious that Biden’s sanctions have failed miserably. Time for a change, before the European united front fractures and populist parties gain.

Toxic Cocktails

The combination of Covid-19 and Brexit have turned back the clock on the traveling smoothly by 70 years.

Until 2019, frequent and not so frequent travellers used to take for granted that they could whisk in and out of their countries without ever speaking again to a border agent. E-gates had become the norm, at least in European countries.

Travelling now in 2021 is more akin to dodging landmines. Every week states come out with new and more complex regulations, including paper based and digital forms, first pioneered by the UK and now imitated by EU states. The PLF (Passenger Locator Form) has become a dPLF in the EU; however, not all European countries demand it, yet, and there doesn’t appear to be a site that informs passengers which countries do or don’t ask for it.

Travelling on the Eurostar between Paris and London and vice versa has the added complication of Brexit. Travellers going from Paris to London will have to have their travel documents checked four or even five times before they get on the train. They will have to come up with a good reason to leave France, and a better one to go back to the UK. Once they reach the UK, they will see a barrage of customs/border police officers looking for….? Given that all passengers are already checked at the Paris UK Border Police booth, what is the need for the extra scrutiny in London?

The same is true for the opposite direction of travel. Travellers landing at la Gare du Nord will see a dozen French customs agents scrutinising their faces and luggage looking for…?

If all of this is not enough, the French authorities have just announced that they will require travellers from the UK to isolate for a week; however, they are also told that nobody will bother to come and check. The UK of course does the same thing (but there they do check with ‘volunteers’ that look like Uber drivers that visit your house at random) as France is of course, an Amber country.

I have a simple question. Why does a traveller from France need to be checked five times when a traveller from Colombia will get away with one or two? What incredible extra danger do these Eurostar travellers present that they should be scrutinised to such an infuriating degree?

It is possible that a lot of these extra doses of attention are actually needed to prevent Claret coming back into the UK or the Indian variant to contaminate Europe…. but this degree of zeal smacks a lot like a political tit for tat. The French and the English have had periods of tolerance and periods of mutual antipathy, you can guess what is today’s direction of travel…

When More is Less

French President Emmanuel Macron has criticised Austria and Denmark for their declaration of wanting to cooperate with Israel in the production of vaccines. This comes on the heels of Austria’s eastern neighbours’ decision to approve the Chinese and Russian vaccines. According to M. Macron, European states should not attempt to forge alliances outside the EU perimeter but rather concentrate their efforts to centralise solutions within the EU frameworks.

M. Macron is wrong on multiple counts. Firstly, centralisation is very often less effective than states competing to get best results. Older readers will recall the famous/infamous 5 year economic plans of the Warsaw Pact countries. It was a recipe for economic disaster, which took decades to unfold but at the end, in 1990, unfold it did. Federal countries like the United States have honed the centralist/state model for nearly 250 years, and they are still bickering about it, witness the recent decisions of some states, led by Texas, who will drop Covid measures next week.

Furthermore, the EU bureaucracy has proven inept at managing the procurement process. Britain and Israel, free from centralised shackles have understood very early that vaccination was a health and economic must that had to be approached in a non-conventional fashion. Britain was lucky enough to have left Europe at just the right time to be able to make preparations and orders independently, while Israelis, who can’t usually be criticised for over-paying, decided to do just that in their quest for national vaccination.

Picture this. By some counts, one day of lockdown in the UK costs £500m-1bln to its economy. The average double dose of vaccine costs, say, £25. This means that the cost of all the vaccines to cover an entire country can be financed by avoiding a few, extra days of lockdowns. Which means that the cost paid per dose is completely irrelevant, yet the EU allegedly spent weeks if not months bickering on price. These delays will translate into a 3-6 month delay in vaccinating their populations, which will costs EU countries hundreds of billions of Euros. A CEO making such a mistake would be fired by his board. A prime minister would face his angry voters. What are the consequences of the lack of foresight of the EU executives?

Irrelevance: Europe’s Eventual Demise?

If there was a time when a top down concentrated effort was needed from Brussels, the Coronavirus crisis should have been the textbook reason as to why it makes sense to have such a European overstructure.

What could central Europe have done?

Medically: enforce a similar quarantine for all the Schengen countries. Why? So that when one country reaches the peak and infection rates start receding, they will not be forced to close internal borders (intra-Europe) to stop late reacting countries’ citizens from starting the infection all over again.

Economically: create a level playing field in terms of unemployment benefits, tax breaks, rent assistance.  In addition, a synchronised quarantine that can end at roughly the same time, would allow inter block tourism and business travel to start again very quickly.

Instead, what did we get: a wide spectrum of reactions ranging from Laissez Faire to police enforced quarantine, medically. And economically we got Ms Lagarde’s stuttered response that costs markets hundreds of billions of euros.

Maybe it’s time to send all these Brussels bureaucrats home and invest the savings in the member state economies?