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26th Sep 2021

Agenda

Quantitative easing, Russia sanctions on EU agenda this WEEK

  • A decision on quantitative easing could alter the nature of the ECB (Photo: Images_of_Money)

A key ECB meeting, Greek debt, Russia sanctions, and terrorism will dominate events in Frankfurt and Brussels in a big week for the EU.

The European Central Bank (ECB) will in Frankfurt on Thursday (22 January) announce if it plans to start buying its 19 member states’ bonds, in a process also known as quantitative easing (QE) or printing money.

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QE is designed to stimulate the economy by putting more treasure in governments' pockets.

If it works, it will lower the value of the euro, helping exports, and boost market confidence, increasing the worth of European firms’ shares.

It is also meant to counter deflation, which threatens to stymie growth as investors hoard an ever-more-valuable currency instead of spending it on new projects.

The EU court in Luxembourg gave the scheme a preliminary green light last week.

But it would violate a long-held German taboo.

The eurozone’s top economy is wary of underwriting wobbly countries such as Greece or Italy. It’s also wary of giving governments a carte blanche to overspend, with France, for one, already angling for laxity in EU debt rules.

At the same time, QE would alter the nature of the ECB.

The EU court opinion noted that if it goes ahead, the bank could no longer play the role of fiscal watchdog in troikas - the EU and International Monetary Fund groups which oversee bailouts.

"It’s an indication that the troika as we know it today would not have a bright future," European Commission president Jean-Claude Juncker said at a seminar in Paris last Friday, Reuters reports.

Markets will also keep an eye on what the ECB says about Greece.

Thursday’s ECB meeting comes three days before elections in the bailout state on Sunday, which are expected to bring the far-left, anti-austerity Syriza party into power.

Its leader, Alexis Tsipras, wants Europe to convene a post-WWII-type debt amnesty conference.

The idea is also taboo.

But Ireland last week came out in support, saying Irish, Portuguese, and Spanish debt should be included, while some German economists say Berlin could afford it.

Who cares about Crimea?

On the international front, EU foreign ministers will on Monday in Brussels discuss Russia sanctions, north African and Middle East crises, and the terrorist challenges they pose.

EU foreign relations chief Federica Mogherini has said the EU should end Russia sanctions if it stops the war in east Ukraine, while letting it off the hook on the annexation of Crimea.

Juncker in Paris on Friday added: “We must find points of common interest that we need to cultivate with Russia without having to talk all the time about Crimea … however important it is, however unacceptable the violation of international law by the Russians is, we must find something else to talk about”.

Austria, the Czech Republic, Cyprus, France, Italy, Hungary, and Slovakia want to go back to business as usual.

The German ruling coalition is divided.

But the Baltic states, some Nordic countries, Poland, the UK, and the US believe the sanctions, coupled with the rouble crisis, are the best way to stop Russian aggression.

Ministers won’t take any immediate decision. But their debate will set the scene for EU leaders’ talks on Russia in March.

Foreign ministers will also debate what to do about Isis, the Middle East Peace Process, and Libya.

The ministers’ talks on “how diplomatic instruments can be used in the fight against radicalisation” will feed into an EU summit on counter-terrorism in February.

The talks come after the recent attacks in Paris and a thwarted terrorist plot in Verviers, Belgium last week.

But Libya, which is descending into civil war and which is seeing a growing number of Isis flags, shows the limits of what Europe can do.

A Mogherini options paper on Libya, seen by Reuters, suggests imposing an oil embargo in order to put pressure on warring factions to come to terms.

But the same paper notes “it would take a heavy toll on the Libyan economy and society, and may trigger unforeseen reactions”.

Blair in town

In the European Parliament, MEPs on the international trade committee will on Wednesday and Thursday forge a new draft position on the EU-US free trade agreement.

Their debate comes amid waning public support, with critics saying the pact will let US firms erode health and consumer standards in Europe.

Deputies on the civil rights committee will on Thursday discuss human rights problems in Hungary.

Parliament will also host Latvian ministers come to present Riga’s EU presidency agenda.

On the informal side, Juncker and some commissioners will on Tuesday join a New Year’s party at the Belgian royal palace.

Juncker’s right-hand man, Frans Timmermans, and Mogherini will on Wednesday lead an EU delegation to the Davos forum in Switzerland.

The EU capital will also host three VIP guests: League of Arab States chief Nabil El Araby (Monday); Middle East peace envoy Tony Blair (Tuesday); and Microsoft founder Bill Gates (Thursday).

Gates is coming as the head of the Bill & Melinda Gates Foundation, a charity.

EU top lawyer backs ECB bond programme

An EU court opinion has said the ECB's bond-buying programme is within EU law but added caveats that have implications for the unpopular troika of lenders to bailout countries.

UN annual meeting plus Poland in focus This WEEK

The Polish Constitutional Tribunal is holding a hearing on the issue of whether EU law has primacy in the country. It is not clear whether the tribunal will deliver a ruling.

All eyes on von der Leyen's state of the EU This WEEK

MEPs expect the EU Commission president to also address issues such as the economy, climate change, digital transformation, the EU's role in the world, migration policy, and the Conference on the Future of Europe.

EU bubble prepares for state of the union This WEEK

One of the topics for the keynote speech will certainly be the Covid-19 recovery fund - with Belgium, Denmark, France, Germany, Greece, Italy, Lithuania, Luxembourg, Spain, and Portugal having already received their pre-financing.

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