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European small biz owners impacted by Ukraine war and COVID, says head of industry group
What's the outlook for European small businesses these days?
Not as good as SME owners would like, according to Véronique Willems, secretary general of SMEUnited, an organization representing some 22.5 million European small businesses that employ almost 82.4 million people across 30 European countries.
In recent months, European SMEs have been hit by the double whammy of COVID spikes due to the omicron variant and now higher energy prices due to Russia's war in Ukraine, Willems explains during a livestream conversation on small businesses and pandemic recovery hosted by GZERO Media in partnership with Visa.
"I hear entrepreneurs who have tripled or more of their energy costs," she says.
"So the sentiment, let's say, is a big uncertainty at the moment." What about the EU's COVID stimulus program for SMEs? Willem points out that a lot of the funds have already been used for things like digitalization and green transition, which has been a big success, but complains that not all the money has gone to small firms.
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Italy in Europe's spotlight: insights from former PM Enrico Letta
Whoever said, "when in Rome, do as the Romans do" clearly could not envision what would become of Italian politics. Since 1989 the country has had 18 prime ministers, six in the last decade alone. And while the pandemic afforded the government some much-needed political unity in the short-term, the warm feelings cooled quickly this winter as political infighting forced a popular prime minister to resign. But Italy's new leader, Mario Draghi (nicknamed "Super Mario"), looks like he just might break the mold and deliver positive change—and political stability—to Italy. That's according to Enrico Letta, one of those six prime ministers to have resigned in the last ten years. Letta joins Ian Bremmer on this episode of GZERO World.
Podcast: Italy In Europe's spotlight: insights from former PM Enrico Letta
Listen: Whoever said, "when in Rome, do as the Romans do" clearly could not envision what would become of Italian politics. Since 1989 the country has had 18 prime ministers, six in the last decade alone. And while the pandemic afforded the government some much-needed political unity in the short-term, the warm feelings cooled quickly this winter as political infighting forced a popular prime minister to resign. But Italy's new leader, Mario Draghi (nicknamed "Super Mario") looks like he just might break the mold and deliver positive change—and political stability—to Italy. That's according to Enrico Letta, one of those six prime ministers to have resigned in the last ten years. Letta joins Ian Bremmer on this episode of the GZERO World podcast.
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Why Europe’s vaccine rollout has been so tortured
The EU acted swiftly, decisively, and effectively to respond to the pandemic's economic fallout. A nearly trillion dollar bailout package, agreed to late last July, has kept much of the continent afloat. But it failed on the public health response, first on testing and then rolling out vaccines. Enrico Letta, Italy's former prime minister, shares his thoughts on the reasons why in a conversation with Ian Bremmer on the latest episode of GZERO World, airing on public television stations nationwide starting this Friday, March 26. Check local listings.
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What We're Watching: Biden's immigration dilemma, "illiberals" sue EU, China tramples on HK democracy, Lego sales soar
Immigrants flock to the US-Mexico border: President Biden has already undone many of the Trump administration's harsh immigration programs, saying that he is ushering in more "humane" policies. Since then, an influx of migrants mainly from Central America has flocked to the US-Mexico border in the hopes of seeking asylum in the United States. The number of children and families reaching the border increased by more than 100 percent between January and February 2021, according to US Customs and Border Protection. Importantly, the number of children arriving on their own has also surged 60 percent in that time, presenting a particular challenge for the US president, who campaigned heavily against Trump's policy of detaining unaccompanied minors. The Biden administration says that the recent surge is linked to a renewed sense of "hope" after Trump's hardline immigration stance, but this development puts Biden in a massive bind: he wants to stay true to his image as a humane and compassionate leader, while also not opening the floodgates on immigration — still a hot button issue in the United States. Indeed, this problem is only going to get worse in the months ahead.
"Illiberals" vs EU: EU member states Hungary and Poland have filed a petition with the European Court of Justice over the bloc's budget provision that conditions disbursement of funds on respect for the "rule of law" within member states. The provision, which is baked into the EU's 2021-2027 budget as well as the 750 billion euro pandemic relief package passed last summer, has irked Budapest and Warsaw, who argue that doling out the cash should be linked solely to meeting key economic objectives and fiscal rules. For years, Hungary's Prime Minister Viktor Orbán, who often boasts of his country's "illiberal democracy," has been at loggerheads with the EU over his attacks on the independent judiciary and stifling of the media. Meanwhile, Polish President Andrzej Duda and his ruling Law and Justice Party have also clashed with Brussels over the conservative Polish government's erosion of democratic principles and discrimination against the LGBTQ community. The complaint now makes its way through the courts, a process that could take up to two years — delaying the disbursement of some funds that desperate Europeans need as the continent continues to grapple with a rising caseload and a sluggish vaccine drive.
China "fixes" Hong Kong elections: China's rubber-stamp parliament approved on Thursday the ruling Communist Party's plan to reduce the number of Hong Kong lawmakers elected by the public and replace them with appointees picked by a pro-Beijing committee. This means that more members of the city's legislature will now be chosen by the Chinese politburo than by Hong Kong voters. China's National People's Congress also consented to a rule requiring all aspiring lawmakers to pledge their loyalty to China in order to qualify as candidates under Beijing's draconian national security law. We've said this before, but Hong Kong democracy is effectively over since it'll be impossible for the pro-democracy bloc to ever win control of the territory's legislative council. Interestingly, the two proposals were backed by 2,985 members of the National People's Congress with zero votes against... and one (gasp!) abstention. We now expect to see the usual strong-worded condemnations from democratic governments around the world, which are likely to be met with the usual eye-rolls in China.
Soaring plastic bricks: Sales of Lego's colorful plastic bricks jumped nearly 20 percent in 2020. Kids trapped at home by the pandemic need something to do, and many parents want their diversions to be less digital and more imaginative. Fun bonus fact: many adults play with Lego sets too. #ThankYouDenmark.Has Italy's far right really changed its tune?
Italian politician Matteo Salvini has long been one of Italy's most outspoken critics of the EU — just a year ago he called the Union a "den of snakes and jackals." But the plain-spoken firebrand has abruptly changed his tune in recent weeks, joining the national unity government led by Prime Minister Mario Draghi. As far European politicians go, Draghi, a former head of the European Central Bank, is about as pro-EU as you can get. So what might have prompted Salvini's surprising about-face? And what does it mean for the future of far-right populism in the EU's third-largest country?
At a basic level, the chance to have a say in how Italy spends the €209 billion of EU grants and low-interest loans Italy is slated to receive from the EU's coronavirus recovery effort was probably too tempting to pass up. In joining the government, Salvini's Lega party has secured two cabinet portfolios — tourism and economic development — that will play an important role in supporting the recovery.
Yet strategic considerations probably informed the decision too. The coronavirus pandemic has diminished Italians' appetite for the kind of nationalist, anti-establishment rhetoric that has helped to make Lega the country's most popular party. As the health crisis took center-stage, the public has looked instead to predictable, established leadership for reassurance. Perceptions of science and expert opinion have improved.
As a result, joining the national unity government will further the goal of Lega's moderate faction of building a reputation as responsible stakeholders in the eyes of the business community and foreign counterparts. With the erstwhile center-right powerhouse Forza Italia expected to fall apart when 85-year-old party boss Silvio Berlusconi retires from active politics, Lega could be in a position to pick up the pieces by tacking slightly more to the center.
That said, shifts like Lega's are hardly uncommon in Italian politics. In fact, two other major parties have made similar flip-flops of their own: the center-left Democratic Party had vowed never to participate in a government with Lega, and the left-wing populist Five Star had traditionally opposed governments led by technocrats such as Draghi. Now, both are in government again.
In this context, Lega could very well reverse course again if the political winds change direction, as they likely will. If the European debt crisis of the early 2010s is any indication, the political backlash came during the long, grueling process of recovery. Though the EU's decision to ease strict fiscal rules and embrace aggressive stimulus spending have helped soften the blow and might allow for a swifter recovery this time, economic pain is still likely to be intense and long-lasting, creating the conditions for a resurgence of Lega's more openly nationalistic, anti-immigrant rhetoric.
Moreover, the small print of EU's coronavirus recovery funds says that they are conditioned on a series of reforms to Italy's sclerotic economy. Any inkling that these funds, which the public has come to expect, could be delayed or withdrawn for noncompliance would feed a political backlash that Lega will be certain to exploit. And further down the road, the EU's strict debt and deficit rules — a favorite target of Salvini's — will eventually come back into effect in some form, probably with the 2023 budget.
These dynamics will bear close watching in the months ahead, especially given questions about how long this peculiar national unity government will last. New elections must be held by 2023 but could come sooner, for example, if rumors prove correct that Draghi will move to occupy the presidency himself when President Sergio Matarella's term ends in February 2022. Current polling suggests that Lega is well-placed to win the next elections.
If those elections do take place, the EU could soon be facing against an emboldened Lega-led government in Italy. If that happens, would Salvini's party change its stripes again?
Federico Santi is Senior Analyst, Europe at Eurasia Group.
Was the EU’s bungled vaccine rollout inevitable?
"We're still not where we want to be," European Commission President Ursula von der Leyen said this week about the European Union's sluggish vaccine rollout. It was a sort of concession from the EU chief, who's been criticized for overseeing a bungled inoculation rollout in the world's largest trading bloc.
To date, around four percent of the bloc's population has been vaccinated, compared to 13 percent in the US, and 20 percent in the UK.
Why has the EU rollout been so slow, and what does this mean for Europe and its politics?
Stronger together? EU states are usually responsible for their own public health policies, but the 27-member bloc shifted course last summer by deciding to procure vaccines as a single bloc. While this approach prevents larger and richer countries (Germany, France) from buying up all the stock and leaving smaller and poorer ones (Bulgaria, Romania) behind, the process has been a bureaucratic and logistical nightmare.
For starters, before it could ink a deal with a pharma company, the Commission had to hold lengthy negotiations, and wait for individual EU countries to sign the contract separately. Hampered by political machinations, the back-and-forth took months, costing the bloc precious time.
The EU's vaccine procurement strategy also appears to have slowed things down. Focused on obtaining drugs at the lowest cost, Brussels — which signed a deal with AstraZeneca two months after the UK did — bargained with drug companies while other governments pursued a whatever-it takes strategy, buying up the jabs first.
When asked about the speedy vaccine rollout in Israel, for instance, Prime Minister Benjamin Netanyahu said, we "did not quibble about the price of vaccines." Of course, Israel only had to secure vaccines for 9 million people, compared to the EU's 450 million. Still, during a deadly pandemic, a 7-day negotiation delay can result in a large number of deaths.
Aversion to risk. The EU made clear from the start that it was not going to rush the vaccine regulatory approval process. While the US, Canada, Britain and others were willing to give speedy emergency authorizations for use — often bypassing traditional clinical trial protocols — the EU took an unhurried approach, authorizing the Pfizer vaccine on December 21, three weeks after the UK. This was further complicated by supply shortages, with pharma companies reneging on commitments made to the EU.
The Union also has other challenges to contend with. In France, home to a large anti-vaccine movement, some 60 percent of adults recently said they would not get a COVID jab, compromising France's bid to reach herd immunity. Compare that to the US, where 67 percent of residents now say they'll get vaccinated.
These factors complicate the EU's efforts to get back to normal anytime soon. It's no small feat that last summer the bloc passed a 750 billion euro coronavirus relief package, where for the first time, all EU countries agreed to share the financial burden of rescuing some members. (Compare that with the responses of EU governments to the sovereign debt crisis that followed the US global financial market meltdown and migrant crisis in 2015-2016.)
But those funds can only go so far in aiding Europe's economic recovery. Tourism-dependent economies (think Greece, Portugal, and Spain) need to reopen soon to avoid worsening economic crises, and that's not going to happen until most EU residents — 20 percent of whom are over the age of 65 — and visitors alike are protected from COVID-19.
Was this shortfall unavoidable considering the enormous task at hand?Mujtaba Rahman, Europe practice head at Eurasia Group, our parent company, says this outcome "definitely was not inevitable; more the result of several tactical missteps made by both the Commission and the member states." Rahman predicts "a reckoning" post-COVID "just as there was in the aftermath of the Greek debt crisis."
Who's filling the gap? Naturally, Russia and China are eager to help. Hungary, an EU member state often at odds with Brussels that has repeatedly criticized the bloc-wide procurement process, has bypassed Brussels by approving Russia's Sputnik V vaccine for use, and sealing a deal with Chinese-owned Sinopharm. Will other EU states follow suit?
The trade-off: The European Commission has prioritized European unity ahead of vaccine nationalism. This has clearly delayed the bloc's pandemic response. But how will voters in wealthy EU countries respond when they next go to the polls? Will they agree with Euroskeptic parties that EU unity was not worth the botched outcome? Only time will tell.
Xi Jinping's WEF speech on China's global leadership falls flat; Italy PM resigns over stimulus
Ian Bremmer shares his perspective on global politics on this week's World In (More Than) 60 Seconds:
What did you think of Xi Jinping's speech at the virtual World Economic Forum?
Well, his last speech at the real World Economic Forum in Davos, I remember being there four years ago, and given that Trump had just been elected, Xi Jinping gives this big, "We want to stand up and be leaders while the Americans are doing America first." And generally speaking, was probably the most important speech of the week. People liked it. This is a pretty different environment, not so much because Trump has gone, but rather because support and belief in Xi Jinping is pretty low. I will say one thing that was generally well responded to was the call not to enter into a new Cold War. Anybody in the business community generally supports that. There's so much integration and interdependence between the US and the Chinese economies that when Xi Jinping says, "We need to find ways to continue to work together," I mean, this is the pro-globalization audience he's speaking to. They generally agree. But otherwise, the message fell pretty flat. So, the idea that China is going to be globally useful on issues of leadership, especially when it comes to anything that might threaten Beijing's sovereignty, they check global norms at the door. And a few examples of that, when Xi called for support for the rules-based international order, that's in obvious contrast with China's violation of the one country, two systems framework in Hong Kong. And they said, "Well, that's a domestic issue." Well, actually that's not what your agreement was with the British handover. And just because you're more powerful doesn't mean that norm doesn't matter anymore.
The call for abandoning ideological prejudice in the West, that sounds like, "But out of our affairs, we can do whatever we want to Uyghurs when there are a million in concentration and reeducation camps in our country." And we'll shut down journalists for even mentioning that if they try to operate inside China for that. The idea that the strong should not bully the weak sounds like, "Don't blame the United States. US, you better behave yourself." But what about the way the Chinese are treating Australia right now, or a host of other smaller countries that cross China's political, economic or national security interests? I mean, the willingness of Beijing to really make you pay when you engage in behaviors they don't like, is growing very quickly along with their international capacity to muscle flex.
And then on the pandemic, I mean, China is calling for greater global cooperation, but that also means that they need to cooperate in terms of transparency in what happened with coronavirus. And let's remember that there were, from my perspective, two big obscenities in terms of the world, in terms of coronavirus itself and the pandemic. One is the United States leaving the WHO in the middle of the pandemic, just an extraordinary antithesis of what a country should be doing, a country like the United States. But even more foundational was China lying to the World Health Organization about the lack of human-to-human spread for a month when we could have stopped this thing so much earlier, could have contained it, especially given the capacity we now see that China has to engage in contact tracing, quarantine and lockdown. And they chose not to. And that's a serious problem. For all of those reasons, this speech was not an enormously well-received speech by those watching.
Why did the Italian Prime Minister resign?
Well, I mean, largely it is over disagreement on how money should be spent in terms of massive coronavirus stimulus, sort of like the disagreement, the big disagreement, between Democrats and Republicans on the $1.9 trillion right now. I mean, how green, how sustainable should it be? How much money goes to healthcare? How much money goes to new technologies? How much to the workers? Former Prime Minister Renzi basically pulled out of the governing coalition over disagreements on that. And they weren't able to get a solid majority in a vote of confidence. That makes it much more difficult to governance done. And that's why Conte resigned. He is the 29th Prime Minister since World War II. If he doesn't get elected back in, if they can't put a new coalition together, they will have the 30th in Italy. Italy's kind of like the Doritos of G20 governments. Crunch all you want, they'll make more. That's kind of what we're looking at in Italy. The good news is it's not all that exciting.
Where is the international outrage for what's happening in Ethiopia's Tigray region?
And no question, there's a lot of violence. There are obvious human rights breaches across the board. There's danger of famine. There are tens of thousands of refugees. And this at the hands of a Prime Minister of Ethiopia that had won the Nobel Peace Prize, and some saying he should return the prize, just as they were saying that about Aung San Suu Kyi for some of her nationalist calls to help support minority repression in Myanmar after doing so much to stand up to the authoritarian government. A couple of points here. One is that Ethiopia, talking about this level of conflict at a time when everyone's focusing on coronavirus, everything small and local gets lost in the scrum. But also, Prime Minister Abiy in Ethiopia has led the charge in trying to move away from an ethnic-led federal government, where sort of different groups control political power, to one where it's much more of a traditional political party system, or I should say a modern political party system. And the Tigray in Ethiopia were the group that stood to lose the most party, a minority group that wielded effectively a majority of patronage and power. And so, the willingness to blame Abiy for the violence that we're seeing right now, even though he has the Ethiopian army, there's Eritrean military that's involved. It's an ally of his. I mean, clearly he has more power. But some of the initial violence clearly came at the hands of local Tigray as well who refused to recognize the Ethiopian election process and the suspension because of the pandemic, and instead held their own election, became a breakaway province. And so in these situations, there is so much conflicted narrative in terms of history, and it's very hard to lay responsibility and blame firmly at the hands of one side in this conflict. Those two things together get you why we're not paying as much attention as we perhaps should to a country with over 100 million people in Sub-Saharan Africa, and one of the strongest growth trajectories economically in the entire world.