Chips Act: Intel inside + EU crisis mana • Table.Briefings

Dear reader,

The economy needs chips, then more chips, and soon even more chips. Last week, Commissioner for Internal Market Thierry Breton presented his plans for turning Europe from a cut-off buyer into a leading-edge producer. Till Hoppe has found out for you why large parts of the German industry are nevertheless not enthusiastic and why the role of the US chip manufacturer Intel is viewed particularly critically.

Europe has plenty of crisis managers when it comes to the Russia-Ukraine conflict. Eric Bonse analyzes why Ursula von der Leyen now plays an essential role and how competition for importance rages even in times of crisis.

The revision of the Renewable Energy Directive (RED III) occupies Parliament – rapporteur Markus Pieper (EPP) has now presented his draft report. Timo Landenberger explains to you where the parliamentarian wants to take additional steps and why.

The second trilogue on the Digital Services Act brought little immediate progress, but clarification of the circumstances: Some are clearly in more of a hurry than others. This is a good starting position for the parliamentarians, as I am pleased to report.

Cancer cannot yet be cured, but the European parliamentarians agree that more can be done to prevent cancer. Eugenie Ankowitsch explains how this can be achieved.

The CDU/CSU parliamentary group in the Bundestag is calling on the federal government to build up a gas reserve in the event of a crisis. Lukas Scheid has seen the motion and tells you what the CDU/CSU is asking from the traffic light government.

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Falk Steiner

Intel inside: how the US company influenced the Chips Act

By

Till Hoppe

Pat Gelsinger did not spare with big words: “The EU Chips Act is a historic opportunity to make up for lost ground,” praised the Intel boss. The plan, presented last week by the European Commission, facilitates the US chip company’s plans to significantly expand its presence in Europe. Intel is currently looking for sites for two new mega chip factories.

German industry is less excited about the Commission’s proposal. The automotive industry, mechanical engineering, and electronics industry warn not to ignore the needs of domestic industries. The associations fear that the Commission will focus the planned funding strongly on so-called leading-edge semiconductors. In other words, chips that push the limits of what is technically feasible in terms of computing power and energy consumption.

At present, the limit for mass production is 5 nanometers (nm) structures on chips, while research on less than 2 nm is already being carried out. The Chips Act opens up “very clear opportunities” for precisely this area of “technological excellence”, said Commissioner for the Internal Market Thierry Breton at the presentation. For example, the design and testing of such chips in pilot plants will be promoted.

The Commission has a strong focus on research, design, and production of very small structure sizes, says Sven Baumann, a semiconductor expert at the German Electrical and Electronic Manufacturers Association (ZVEI). “But it’s important that this funding is also available for larger structure sizes and testing of new chips.”

The automotive industry argues similarly: In the next ten to 15 years, the industry will continue to have a growing need for semiconductors with structure sizes of more than 16 nm, says VDA Managing Director Joachim Damasky. “The Commission should give the member states the leeway to promote these technologies as well,” he demands. Unfortunately, the Chips Act is not yet clear enough in this regard.

‘Very good lobbying’

Behind this is a distribution battle for lavish but limited subsidies that the Commission and member states want to hand out in the coming years to the sector, which is considered to be strategically important. European manufacturers are no longer present in the leading-edge sector. The market is dominated by three companies: TSMC from Taiwan, Samsung from South Korea – and Intel.

The US corporation wants to invest massively in new factories with the latest technology. Gelsinger had therefore campaigned intensively in front of and behind the scenes to move the small structure sizes into the focus of the Chips Act – and to mobilize massive state aid for this. Intel had done “very good lobbying work here”, according to the competition.

It is completely unclear how great the demand for such microprocessors is in the European industry. Up to now, they have been used primarily in smartphones and laptops, which are not manufactured in Europe. Major customers in Europe, such as the automotive industry (with the exception of Tesla), pharmaceuticals, and mechanical engineering, mainly use microcontrollers, sensors, and power semiconductors with significantly larger structures. This is also where the current supply bottlenecks are causing problems for the industry.

There is no doubt that demand from domestic customers is likely to grow significantly as vehicles and machines become more connected. However, there are hardly any reliable forecasts as to how much artificial intelligence and edge computing will actually change the demand for chips in Germany.

For many projects in these future fields, “high-end chips optimized for pure performance are not necessary,” argues the German Academy of Science and Engineering (Acatech). Low costs, low energy consumption, and a long service life are often more decisive.

Commissioned study provides arguments

The management consultancy Kearney argues quite differently in a study from last fall. The authors even dare to make a concrete prediction for the European market: The demand for leading-edge chips in Europe will “skyrocket” by 2030, the study says, with the share of total demand rising from 19 to 43 percent. At the very end of the paper, there is a discreet reference to who commissioned the study: Intel.

Other experts consider such growth rates in this area to be unrealistic. The think tank Bruegel argues that Europe has no demand for a mega-fab with these structural dimensions. The Commission, however, takes over the data from the Kearney study – without the classification that is actually due – in its own presentations.

As the bill states, the authority has failed to conduct its own impact assessment of the Chips Act, nor has it conducted a public consultation – “because of the urgent need for action”. A survey of stakeholders is now to collect information on how great the current and future chip demand is, and the collected data will be published in a staff working document later this year.

Jan-Peter Kleinhans, chip expert at the German think tank Stiftung Neue Verantwortung, criticizes the lack of information. “In view of the Chips Act’s focus on manufacturing state-of-the-art chips, it would be important to be able to classify the future demand for these in relation to older technologies for Europe,” he says. “So far, the data in this area seems very thin.”

Commission appeased

In Commission circles, attempts are being made to dampen concerns in the industry. They are aware that the semiconductor industry also has growing needs in other areas, such as sensors or power semiconductors, and they also want to promote these in the planned programs, says an EU official. The “first-of-a-kind facility” concept under state aid law also allows member states to provide state aid for technical advances in more mature technologies and structure sizes.

The Commission also refers to other studies that also predicted strong growth in demand for leading-edge semiconductors. Explicitly mentioned, for example, is a study by the Federal Agency for Disruptive Innovations (SPRIND) from last September. In the publicly available summary, the agency advocates the construction of a contract foundry for 3nm semiconductors in order not to be dependent on Asian manufacturers to develop technologies for autonomous driving or artificial intelligence. At the same time, however, the authors warn that “it is difficult to predict how great the European industry’s need for such high-end production technologies will be”.

This recommendation caused considerable anger in the industry. It is not acceptable for a federal agency to lobby on behalf of a US corporation, industry circles say. Others report an “intimate relationship” between SPRIND and Intel. When asked, a SPRIND spokesperson said that for the study, they had “spoken with numerous market participants, including Intel.” The spokesperson did not want to provide further details on the participants or the long version of the study, citing confidentiality agreements. An Intel spokesperson did not want to comment on this.

Intel also has excellent contacts within the German government. Like his CDU predecessor Peter Altmaier, the new Federal Minister of Economics, Robert Habeck (Greens), is currently trying to convince the company to invest billions in Germany. Gelsinger has made it clear what is important to him in this regard: “If you are competing with Asian competitors who are massively subsidized by the state, you have to do the same here – or you are out of the game.”

Once again, the Kearney study provides the appropriate figures: According to the study, the lack of government incentives accounts for around 80 percent of the cost disadvantage that a leading-edge factory in Europe has compared to countries such as South Korea or Taiwan. The authors cite a provider called “Fab Economics” as the source for their calculation model, however, their online footprint consists only of a shady-looking website lacking contact details. The Kearney authors did not respond to a query by the end of the reporting period.

EU bickering over crisis management

By

Eric Bonse

Germany and France are claiming a leadership role. Following French leader Emmanuel Macron, German Chancellor Olaf Scholz also underscored his claim with a visit to Moscow on Tuesday. Scholz stressed his willingness to engage in dialogue after talks with Kremlin leader Vladimir Putin. At the same time, the SPD politician reiterated that further aggression against Ukraine would have serious consequences for Russia.

However, it remains unclear whether Macron and Scholz have been able to make substantial progress in their shuttle diplomacy between Paris, Berlin, Kiev, and Moscow that will also convince the other heads of state and government. Brussels Council circles said on Tuesday that there is still a lack of “deliverables” that justify convening a special EU summit. Council President Charles Michel is in contact with all 27 EU states.

While Michel was still consulting, EU Commission President Ursula von der Leyen moved ahead. She spoke on the phone with Japanese Prime Minister Kishida Fumio and agreed to coordinate closely on the Ukraine crisis.

High Representative of the European Union for Foreign Affairs Josep Borrell also spoke out. It is “quite clear” that the controversial Nord Stream 2 Baltic gas pipeline cannot go into operation if war breaks out, he told the BBC. However, there is no EU decision yet. Nord Stream 2 is part of a sanctions package von der Leyen is preparing. The final say goes to the heads of state and government, who must give the green light.

Von der Leyen as European Defense Minister

Von der Leyen has a big advantage in this procedure: She enjoys the trust of Macron and Scholz – after all, it was Berlin and Paris that hoisted her into office. And she is leading the talks with the USA. The CDU politician took part in consultations with US President Joe Biden no less than twice in recent weeks. Her head of cabinet, Björn Seibert, has coordinated with Biden’s security adviser, Jake Sullivan.

Von der Leyen has also secured a central role in preparations for the event of war. Her new responsibilities range from gas supplies to a possible wave of refugees from Ukraine. The EU Commissioners, who are actually responsible for this, now play only a secondary role, at least in the way the Commission President presents herself to the outside world. In the press releases, they are mentioned only in passing.

Foreign Affairs Commissioner Josep Borrell has also been sidelined. To this day, the Spaniard has not recovered from his ill-fated meeting with his Russian counterpart Sergei Lavrov in Moscow in February 2021. Borrell was downright humiliated at the time, with Russia expelling European diplomats during his ongoing visit. Since then, he has shown no interest in traveling to Moscow again to mend fences. That is why von der Leyen can now set the tone when it comes to Russia.

The transatlanticist does this with zeal, sometimes overzealously. At times, it seems as if she has slipped back into the old familiar role of defense minister – this time not for Germany, but for all of Europe. This role is so important to her that she even snubs the European Parliament for it. So von der Leyen canceled an appointment on Wednesday in Strasbourg that was supposed to be about the rule of law. Her spokesman said the Ukraine crisis was more important, and she had to hurry back to Brussels.

Charles Michel waits for his opportunity

However, there is not only crisis management awaiting her, but also a power-conscious rival: Council President Charles Michel is just waiting for an opportunity to intervene and push von der Leyen into the background.

Since the so-called “Sofagate” during a joint visit to Istanbul in April 2021, a feud has broken out between the two EU leaders over foreign policy. Michel was allowed to sit next to President Recep Tayyip Erdoğan at the time, while von der Leyen was banished to the sofa. She was discriminated against as a woman, von der Leyen complained and has since done everything she can to assert herself against Michel. In the Russia-Ukraine crisis, she has so far succeeded. The Belgian had to hold back – and give way to Macron and Scholz.

But after the temporary end of Franco-German travel diplomacy, the European Council is likely to come into play again soon – with Michel as chairman. Michel wants to shine at the EU-Africa summit on Thursday and Friday and put von der Leyen in her place. Of course, this won’t help anyone. Michel and von der Leyen must work together again at the latest at the next crisis meeting with US President Biden. Otherwise, they will weaken the EU, which has been sitting at the side table since the beginning of the crisis.

RED draft report: welcoming technology and reducing bureaucracy

After the European Commission presented a proposal for the revision of the Renewable Energies Directive (RED III) as part of its Fit for 55 package, the Parliament’s rapporteur, Markus Pieper (EPP), has now presented his draft. The energy policy spokesman for the CDU/CSU group advocates making the expansion of renewables technology-neutral and allowing transitional solutions. He criticizes the instruments proposed by the Commission as “half-hearted and uncreative”.

In this regard, Pieper supports the Commission’s plan to increase the interim target from 32 percent to 40 percent share of renewable energy in total consumption by 2030 so far. This is very ambitious but achievable and will lead to greater independence from fossil fuels, which in turn will have a positive impact on energy prices, Pieper told reporters on Wednesday. The MEP also welcomes the introduction of specific sectoral targets for transport, buildings, and industry, providing an important guidance framework for the decarbonization of each sector.

However, the binding target of 50 percent green hydrogen in the industry by 2030 is hardly achievable, as the Commission is standing in its own way. For example, the planned requirements for hydrogen production are too strict (Europe.Table reported). Therefore, the use of so-called low-carbon fuels (especially blue hydrogen) must also be taken into account for the transition period. The interim target of 49 percent renewables in the building sector is also very ambitious. Pieper suggests that, in addition to electrification, the focus should also be on the greater use of green district heating and the integration of renewable gases (admixture of hydrogen) into the existing gas network.

In contrast, the target for the transport sector is too low and should be increased from 13 to 20 percent. This could be achieved through higher quotas for synthetic fuels. “These would be real signals for technology openness, opening up options even for economic and transport sectors that are difficult to electrify,” Pieper said.

Criticism of the instruments

In addition, the MEP also sharply criticized the path envisaged by the Commission for the expansion of renewables in parts. “The proposed instruments are half-hearted. If we want to use synergies of the internal market, we need more cross-border infrastructure projects for green electricity and hydrogen.” Pieper, therefore, proposes doubling the number of projects from one to two per member state. In addition, according to the draft, all member states with annual electricity consumption of more than 100 TWh (including Germany, Spain, and France) should adopt a third project by 2025.

The proposals for accelerating approval procedures are also too vague. In the case of conflicts with species protection, the population approach, and not the protection of each individual, must be the focus in the future. The draft also provides for the inclusion of innovation quotas in the expansion of renewables in the directive. In this way, Pieper wants to promote promising technologies such as floating wind turbines.

The introduction of a new and digital system for guarantees of origin should also reduce bureaucracy and give more small and medium-sized enterprises access to the renewables market. Nevertheless, the rapporteur anticipates a significantly limited availability of own resources in the EU and therefore proposes the inclusion of an import strategy for green electricity and green hydrogen. Within this framework, the member states are obliged to stipulate measures for implementing this strategy in their national energy plans.

Pieper plans to present his report to the Industry Committee on March 3. Then the MEPs will have just under two weeks to submit their amendments. The committee is due to vote on the common position in mid-July, followed by the plenary session of the EU Parliament in September. til

DSA trilogue: Council is pushing, Parliament is in no hurry

At the second trilogue round of negotiations on the Digital Services Act (DSA), it became clear that the pressure to reach an agreement is primarily on the Council’s side. The French Council Presidency wants to have negotiated the two major digital dossiers, the DMA and the DSA, in time for the presidential elections in France in mid-April. According to negotiators, the parliamentary motto is thoroughness before speed.

Quick agreements were not expected for this second trilogue and were not reached. This was because several highly controversial regulatory proposals were up for debate, including the risk impact assessment, the enforcement of the DSA, and the exemption for small and medium-sized enterprises desired by Parliament, as well as the issue of marketplace regulations.

For example, the Council wants the Commission to supervise particularly large online platforms and search engines – which could, however, overburden the Commission in terms of personnel. On France’s initiative, the Council had called for greater centralization at the EU Commission. The Parliament, on the other hand, wants to see more national responsibility for supervision. The background to the member states’ unusual demand for a transfer of authority is their experience with the enforcement of the General Data Protection Regulation (GDPR), where individual states are suspected of deliberately undermining the level of regulation.

The third trialogue on the DSA is now not scheduled until mid-March. Until then, the so-called technical level, i.e., the staff of the Council, Parliament, and Commission, is to sound out possible compromises and draw up proposals for agreement. The timetable for this is tight; this week alone, several rounds are scheduled for the working level, in which possible agreements are to be prepared in terms of content.

Naumann Foundation publishes expert opinion

The Friedrich Naumann Foundation, which has close ties to the FDP, also published an expert opinion on the DSA yesterday by the Munich-based legal scholar Henrike Weiden, which analyzes the Commission’s proposal and gives it a fundamentally positive assessment. The former Federal Minister of Justice and Deputy Chairwoman of the Naumann Foundation, Sabine Leutheusser-Schnarrenberger, sees the DSA as a milestone: With it, the EU has the chance to set global standards. “Platform operators like Telegram, who ignore the rule of law, will also come under economic pressure with the DSA,” says Leutheusser-Schnarrenberger.

However, the report also expresses concerns and some criticism of the DSA, particularly of regulations for dealing with disputed content. For example, the author criticizes that although legal enforcement by platform operators is understandable, it would also entail “further privatization in the evaluation of the content”. In addition, the concept of illegal content is dependent on the respective national law and is “significantly broader than the definition of illegal content” under network enforcement law, which contains a predetermined catalog of criminal offenses.

In the case of particularly large online platforms, the requirements of the Commission’s proposal, together with sector-specific regulations, “due to the sheer volume, would probably in fact amount to a canon of tasks that is suspiciously close to a general obligation for automated content review,” the report continues. fst

EU Parliament votes on own-initiative report on cancer prevention

Fair access to cancer screening, diagnosis, and treatment, the promotion of cross-border research, stricter measures against tobacco, new regulations on e-cigarettes, and warning labels on alcoholic beverages: These are the key demands in the report of the Special Committee on Beating Cancer (BECA), which the EU Parliament discussed and voted on yesterday. The chances of surviving cancer in the European Union still depend heavily on where one lives, said BECA rapporteur Véronique Trillet-Lenoir (Renew Europe). This inequity should be eliminated. It is considered certain that the own-initiative report – if necessary weakened in some controversial points – will be adopted by the plenum. However, the vote results were not yet available at the time of going to press.

“Our most important lever is ambitious, multidisciplinary, independent, coordinated, and adequately funded European research that relies heavily on data sharing and artificial intelligence,” Trillet-Lenoir stressed. The recommendations in the report would guide member states toward a European charter for cancer patients.

MEPs are calling for the appointment of a special envoy at the European Commission to look into any obstacles to cross-border cancer research and find ways to remove them. “Cross-border research is essential to fight cancer,” said Peter Liese (EPP). Only through European cooperation would enough patients be found sufficiently quickly, for example, for clinical trials, to bring innovations to market promptly. However, he stressed, researchers currently suffer from excessive bureaucracy and different data protection regulations in the member states.

Alcohol and e-cigarettes dispute

Another key aspect is prevention. The final report calls for warning labels on alcoholic beverages, standardized packaging for cigarettes and other tobacco products, and increased tobacco taxes. However, the handling of e-cigarettes was controversial. The draft report called for the EU Commission to propose to ban flavors that are particularly attractive to children.

MEPs also disagree on the subject of alcohol. The EU Parliament’s special committee on cancer calls for warning labels for all alcoholic beverages. Most members are convinced that alcohol poses an increased risk of cancer and base this on statements by the World Health Organization (WHO). Others, however, argue that moderate alcohol consumption is justifiable and that the prevention of cancer is primarily about avoiding harmful consumption.

This is about tangible economic interests and also about public funding. Stefania Zambelli (Identity and Democracy / Lega Italy), warned of the loss of three million jobs in the EU. “We cannot bring the entire wine sector to its knees,” she said. Manuela Ripa (Greens), sees it differently. She said that tightening for consumption is also always a fight against economic interests. No profit before health, she appealed. However, the report will likely be weakened by amendments on this point as well.

The right to be forgotten

MEPs also call on member states to grant all European patients the right to be forgotten by 2025 at the latest. This should be effective no later than ten years after the end of their treatment or up to five years after the end of treatment for patients whose diagnosis took place before they reached the age of 18. “It must not be the case that people who have had cancer, for example as a child or young person, are still discriminated against decades later, for example by being made more difficult to access insurance or credit,” Liese said. This must change, including through concrete legislation, for example, in the context of the European Insurance Directive. The EU Commission should quickly implement concrete measures.

About a year ago, the EU Commission presented Europe’s Beating Cancer Plan. In 42 points, it covers the entire disease pathway from prevention, diagnosis, and treatment to promoting the quality of life of cancer patients and survivors. The Commission plans to spend around €4 billion on relevant measures in the coming years. ank

Energy prices: CDU/CSU call for strategic gas reserves

The CDU/CSU parliamentary group in the Bundestag is calling on the German government to support the establishment of a non-state strategic gas reserve to “make the energy system more crisis-proof”. This emerges from an as yet undated Bundestag motion by the opposition parties, which is available to Europe.Table. In it, the CDU/CSU calls for both immediate measures and the implementation of medium- and long-term measures within the framework of the toolbox presented by the EU Commission in October.

In addition to building up strategic gas reserves, the German government should work at the European level to install instruments to “safeguard the competitiveness of German and European industry” to protect companies from carbon leakage. Furthermore, dependence on fossil fuels must be reduced, and energy efficiency in the EU increased, the motion says.

To cushion the economic and social consequences of energy price developments for consumers and companies in the short term, the government should drastically reduce other energy taxes in addition to the already announced abolition of the EEG levy. CDU/CSU demand that the electricity tax of currently €20.5 per megawatt-hour “be reduced to the minimum tax rate of 1 EUR/MWh for non-commercial use and 0.5 EUR/MWh for commercial use permitted under EU law”. The sales tax on electricity, gas, and district heating supplies is also to be reduced to seven percent by the end of 2023.

In addition, the taxation of the biofuel portion of diesel, super, and gasoline is to be abolished, the electricity tax refund for energy-intensive industry – the so-called peak compensation – is to be extended and the commuter allowance is to be increased to 0.38 EUR/km. Currently, the rate is 0.30 EUR/km (0.35 EUR/km from the 21st kilometer). luk

Data protectionists examine cloud use by public agencies

Data protection regulators have begun a Europe-wide review of the use of cloud services by public bodies. The review, which has been planned since the fall, will now examine in a coordinated way how public authorities use network-based storage and processing services.

The General Data Protection Regulation also applies to public bodies, with the exception of security, police, and judicial authorities. However, public authorities do not face fines for violations of the law.

German data protection supervisory authorities are also participating in the European audit project, which is taking place within the “Coordinated Enforcement Framework”. In addition to actual enforcement, cooperation between the European data protection supervisory authorities in taking action against suspected law violations is also a key aspect of this. In a first step, a total of more than 80 public bodies are to receive a questionnaire from the responsible 44 European data protection supervisory authorities on the cloud services they use. fst

Poland calls for control mechanisms for emissions trading

Poland has urged the European Union to introduce “control mechanisms” to the bloc’s carbon market and curb financial speculators’ participation in the scheme, the Polish government said on Tuesday. Polish Climate Minister Anna Moskwa met with EU climate chief Frans Timmermans in Brussels on Monday to discuss the EU’s plans to reform the Emissions Trading Scheme (ETS).

Poland relies on coal for more than 70 percent of its power and has long argued that EU climate policies must take into account that such an energy mix makes reaching the climate targets more costly than for other EU members. The EU and other countries see higher CO2 prices as an essential incentive for companies to invest in the green technologies. Poland sent its demands regarding the ETS to Brussels last week, forming a coalition of countries that also want to reform the trading system, Warsaw said in a statement.

Poland: Do not abolish free certificates

“It is crucial for us to withdraw financial institutions from the ETS market as soon as possible. Our second demand is to abandon the withdrawal of free allowances,” Moskwa said. Brussels wants to phase out free allowances to encourage industry to reduce emissions.

Moskwa said Brussels should also introduce “control mechanisms” to the market, without specifying what these would do. “At present, the European Commission is helpless and legally and formally unable to interfere in this market,” she said, adding that it cannot remain that way if it is to serve as a political tool.

Moskwa also said that EU climate policy reforms should be adopted unanimously by EU countries – meaning that one state could block them. Poland has said it supports green transformation goals, but they must take into account their social and economic impact. rtr

EU data protection commissioner wants ban on spy software like Pegasus

European Data Protection Supervisor Wojciech Wiewiórowski has called for a ban on the controversial Pegasus spy program and similar tools. The software from Israeli company NSO Group leads to an “unprecedented level of surveillance that reaches into the most intimate spheres of our daily lives,” the Data Protection Supervisor said Tuesday.

Israel has come under global pressure for allegedly using the software to spy on the smartphones of human rights activists, journalists, and politicians. NSO Group claims to be in no way involved in the operation of the software after the sale. “Banning the development and use of spy software with Pegasus’ capabilities in the EU would be the most effective option to protect our fundamental rights and freedoms,” Wiewiórowski said.

The European Parliament wants to set up a special committee on the Pegasus operation. Last year, several media organizations led by the journalist group Forbidden Stories had found that the spy software was used in attempted and successful hacks of smartphones on a global scale. rtr

The return of global inflation

By Carmen Reinhart and Clemens Graf von Luckner

Clemens Graf von Luckner is an economist at the World Bank; Carmen Reinhart is Chief Economist of the World Bank Group.

Inflation has come back faster, spiked more markedly, and proved to be more stubborn and persistent than major central banks initially thought possible. After initially dominating headlines in the United States, the problem has become a centerpiece of policy discussions in many other advanced economies. In 15 of the 34 countries classified as AEs by the International Monetary Fund’s World Economic Outlook, 12-month inflation through December 2021 was running above 5%. Such a sudden, shared jump in high inflation (by modern standards) has not been seen in more than 20 years.

Nor is this inflationary surge limited to wealthy countries. Emerging markets and developing economies have been hit by a similar wave, with 78 out of 109 EMDEs also confronting annual inflation rates above 5%. That share of EMDEs (71%) is about twice as large as it was at the end of 2020. Inflation thus has become a global problem – or nearly so, with Asia so far immune.

The primary drivers of the inflation spike are not uniform across countries, particularly when comparing AEs and EMDEs. Diagnoses of “overheating,” prevalent in the US discourse, do not apply to many EMDEs, where fiscal and monetary stimulus in response to COVID-19 was limited, and where economic recovery in 2021 lagged well behind the AE rebound.

Moreover, the pandemic-induced bust-and-recovery patterns differ markedly across country income groups, with recovery being defined as an economy’s return to its 2019 level of per capita income. About 41% of high-income AEs met that threshold at the end of 2021, compared to 28% of middle-income EMDEs and just 23% of low-income countries.

Per capita incomes develop very differently

But the disparity between advanced and developing economies is even greater than this comparison suggests, because many EMDEs were already experiencing declines in per capita income before the pandemic, whereas AEs were mostly at new highs. While many EMDEs have marked down their estimates of potential output over the past two years, there is little to suggest that their inflationary pressures are driven primarily by overheating in the aftermath of significant policy stimulus.

One development that is common across advanced and developing economies is the increase in commodity prices alongside rising global demand. As of January 2022, oil prices were up 77% from their December 2020 level.

Another major issue affecting advanced and developing economies alike is global supply chains, which continue to be severely affected by the events of the past two years. Transport costs have skyrocketed. And unlike the oil-based supply shock of the 1970s, the COVID-19 supply shocks are more diverse and opaque, and therefore more uncertain, as the World Bank’s most recent Global Economic Prospects stresses.

In EMDEs, currency depreciation (owing to lower inflows of foreign capital and downgrades of sovereign credit ratings) has contributed to inflation among imported goods. And because inflation expectations in EMDEs are less anchored and more attune to currency movements than in AEs, the passthrough from exchange rates to prices tends to be faster and more pronounced.

Another important factor is food price inflation. During 2021, 12-month increases in food prices exceeded 5% in 79% (86 out of 109) of EMDEs. While AEs have not been immune to rising food prices, just 27% of them experienced price hikes exceeding 5%.

Rising energy prices mean rising food costs

Worse, food price inflation also generally hits lower-income countries (and lower-income households everywhere) particularly hard, which makes it tantamount to a regressive tax. Food accounts for a much larger share of the average household consumption basket in EMDEs, which means that inflation in those economies is likely to prove persistent. Today’s higher energy prices will translate directly into higher food prices tomorrow (through higher costs for fertilizer, transport, and so forth).

Although most EMDEs no longer have fixed exchange rates – as they did during the inflation-prone 1970s – the scope for “truly independent” monetary policy in small open economies remains limited, floating exchange rates notwithstanding. The risk of them importing inflation from the global financial centers is not some relic of the past.

Indeed, the most salient feature of today’s inflation is its ubiquity. In the absence of global policy options to resolve supply-chain disruptions, the task of addressing inflation is left to the major central banks. While the US is poised to undergo a modest tightening (by historical standards) in 2022, this is unlikely to be sufficient to rein in price growth. As Kenneth Rogoff and I document in a 2013 paper, much of the inflation persistence of the 1970s stemmed from the US Federal Reserve’s tendency to do too little, too late (until Paul Volcker’s arrival).

To be sure, a more timely and robust policy response from major central banks would not be good news for EMDEs in the short run. Most would experience higher funding costs, and debt crises could become significantly more likely for some. Nonetheless, the longer-term costs of delaying action would be greater. Because the US and other advanced economies failed to tackle inflation quickly during the 1970s, they ultimately needed far more draconian policies, which led to America’s second-deepest post-war recession, along with a developing-country debt crisis

As the old saying goes, “A stitch in time saves nine.” In the meantime, the resurgence of inflation will continue to reinforce inequality, both within and across countries.

In cooperation with Project Syndicate, 2022.

Space. Infinite expanses. These are the adventures… Stop! Wrong film. Or is it? Yesterday, Industry, Internal Market, Defense Industry, and Space Commissioner Thierry Breton outlined his plan to build a European satellite communications network in more detail.

“Our new connectivity infrastructure will deliver high-speed internet access, serve as a back-up to our current internet infrastructure, increase our resilience and cyber security, and provide connectivity to the whole of Europe and Africa,” said the European Starfleet commander-in-waiting. Strategically super-relevant, extremely capable, future-proofing Europe, that’s simply as good as it gets with Breton.

It’s just that high-speed Internet access from space isn’t blazingly fast, and every 3D gamer would swear at these connections – because, by their very nature, the signal first has to travel from the ground to the satellite and then back again, which takes longer than the speed-of-light journey through fiber-optic cables close to Earth.

The satellites also need a line of sight to the Earth’s surface, if possible, and some clouds are against this. The worse the weather, the more likely performance losses will occur. To halfway work around this problem, huge numbers of small communications satellites are needed. This is also the case with Elon Musk’s Starlink project, in which a few days ago, a solar storm sent 40 satellites that were still too close to the Earth to burn up, and which Breton obviously took as a model for his plans. Thierry Breton, an industrial policy Elon Musk?

Thanks to Germany’s broadband expansion policy, there are still enough areas that could actually benefit from such a project. And by the way, the whole thing would also act as a fountain of youth for the Franco-German, pardon me, European space industry. The €6 billion envisaged for developing the Breton-European Starfleet would be money well spent. However, whether the project will go ahead after the French presidential elections remains to be seen. Falk Steiner

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

The economy needs chips, then more chips, and soon even more chips. Last week, Commissioner for Internal Market Thierry Breton presented his plans for turning Europe from a cut-off buyer into a leading-edge producer. Till Hoppe has found out for you why large parts of the German industry are nevertheless not enthusiastic and why the role of the US chip manufacturer Intel is viewed particularly critically.

Europe has plenty of crisis managers when it comes to the Russia-Ukraine conflict. Eric Bonse analyzes why Ursula von der Leyen now plays an essential role and how competition for importance rages even in times of crisis.

The revision of the Renewable Energy Directive (RED III) occupies Parliament – rapporteur Markus Pieper (EPP) has now presented his draft report. Timo Landenberger explains to you where the parliamentarian wants to take additional steps and why.

The second trilogue on the Digital Services Act brought little immediate progress, but clarification of the circumstances: Some are clearly in more of a hurry than others. This is a good starting position for the parliamentarians, as I am pleased to report.

Cancer cannot yet be cured, but the European parliamentarians agree that more can be done to prevent cancer. Eugenie Ankowitsch explains how this can be achieved.

The CDU/CSU parliamentary group in the Bundestag is calling on the federal government to build up a gas reserve in the event of a crisis. Lukas Scheid has seen the motion and tells you what the CDU/CSU is asking from the traffic light government.

Your
Falk Steiner

Intel inside: how the US company influenced the Chips Act

By

Till Hoppe

Pat Gelsinger did not spare with big words: “The EU Chips Act is a historic opportunity to make up for lost ground,” praised the Intel boss. The plan, presented last week by the European Commission, facilitates the US chip company’s plans to significantly expand its presence in Europe. Intel is currently looking for sites for two new mega chip factories.

German industry is less excited about the Commission’s proposal. The automotive industry, mechanical engineering, and electronics industry warn not to ignore the needs of domestic industries. The associations fear that the Commission will focus the planned funding strongly on so-called leading-edge semiconductors. In other words, chips that push the limits of what is technically feasible in terms of computing power and energy consumption.

At present, the limit for mass production is 5 nanometers (nm) structures on chips, while research on less than 2 nm is already being carried out. The Chips Act opens up “very clear opportunities” for precisely this area of “technological excellence”, said Commissioner for the Internal Market Thierry Breton at the presentation. For example, the design and testing of such chips in pilot plants will be promoted.

The Commission has a strong focus on research, design, and production of very small structure sizes, says Sven Baumann, a semiconductor expert at the German Electrical and Electronic Manufacturers Association (ZVEI). “But it’s important that this funding is also available for larger structure sizes and testing of new chips.”

The automotive industry argues similarly: In the next ten to 15 years, the industry will continue to have a growing need for semiconductors with structure sizes of more than 16 nm, says VDA Managing Director Joachim Damasky. “The Commission should give the member states the leeway to promote these technologies as well,” he demands. Unfortunately, the Chips Act is not yet clear enough in this regard.

‘Very good lobbying’

Behind this is a distribution battle for lavish but limited subsidies that the Commission and member states want to hand out in the coming years to the sector, which is considered to be strategically important. European manufacturers are no longer present in the leading-edge sector. The market is dominated by three companies: TSMC from Taiwan, Samsung from South Korea – and Intel.

The US corporation wants to invest massively in new factories with the latest technology. Gelsinger had therefore campaigned intensively in front of and behind the scenes to move the small structure sizes into the focus of the Chips Act – and to mobilize massive state aid for this. Intel had done “very good lobbying work here”, according to the competition.

It is completely unclear how great the demand for such microprocessors is in the European industry. Up to now, they have been used primarily in smartphones and laptops, which are not manufactured in Europe. Major customers in Europe, such as the automotive industry (with the exception of Tesla), pharmaceuticals, and mechanical engineering, mainly use microcontrollers, sensors, and power semiconductors with significantly larger structures. This is also where the current supply bottlenecks are causing problems for the industry.

There is no doubt that demand from domestic customers is likely to grow significantly as vehicles and machines become more connected. However, there are hardly any reliable forecasts as to how much artificial intelligence and edge computing will actually change the demand for chips in Germany.

For many projects in these future fields, “high-end chips optimized for pure performance are not necessary,” argues the German Academy of Science and Engineering (Acatech). Low costs, low energy consumption, and a long service life are often more decisive.

Commissioned study provides arguments

The management consultancy Kearney argues quite differently in a study from last fall. The authors even dare to make a concrete prediction for the European market: The demand for leading-edge chips in Europe will “skyrocket” by 2030, the study says, with the share of total demand rising from 19 to 43 percent. At the very end of the paper, there is a discreet reference to who commissioned the study: Intel.

Other experts consider such growth rates in this area to be unrealistic. The think tank Bruegel argues that Europe has no demand for a mega-fab with these structural dimensions. The Commission, however, takes over the data from the Kearney study – without the classification that is actually due – in its own presentations.

As the bill states, the authority has failed to conduct its own impact assessment of the Chips Act, nor has it conducted a public consultation – “because of the urgent need for action”. A survey of stakeholders is now to collect information on how great the current and future chip demand is, and the collected data will be published in a staff working document later this year.

Jan-Peter Kleinhans, chip expert at the German think tank Stiftung Neue Verantwortung, criticizes the lack of information. “In view of the Chips Act’s focus on manufacturing state-of-the-art chips, it would be important to be able to classify the future demand for these in relation to older technologies for Europe,” he says. “So far, the data in this area seems very thin.”

Commission appeased

In Commission circles, attempts are being made to dampen concerns in the industry. They are aware that the semiconductor industry also has growing needs in other areas, such as sensors or power semiconductors, and they also want to promote these in the planned programs, says an EU official. The “first-of-a-kind facility” concept under state aid law also allows member states to provide state aid for technical advances in more mature technologies and structure sizes.

The Commission also refers to other studies that also predicted strong growth in demand for leading-edge semiconductors. Explicitly mentioned, for example, is a study by the Federal Agency for Disruptive Innovations (SPRIND) from last September. In the publicly available summary, the agency advocates the construction of a contract foundry for 3nm semiconductors in order not to be dependent on Asian manufacturers to develop technologies for autonomous driving or artificial intelligence. At the same time, however, the authors warn that “it is difficult to predict how great the European industry’s need for such high-end production technologies will be”.

This recommendation caused considerable anger in the industry. It is not acceptable for a federal agency to lobby on behalf of a US corporation, industry circles say. Others report an “intimate relationship” between SPRIND and Intel. When asked, a SPRIND spokesperson said that for the study, they had “spoken with numerous market participants, including Intel.” The spokesperson did not want to provide further details on the participants or the long version of the study, citing confidentiality agreements. An Intel spokesperson did not want to comment on this.

Intel also has excellent contacts within the German government. Like his CDU predecessor Peter Altmaier, the new Federal Minister of Economics, Robert Habeck (Greens), is currently trying to convince the company to invest billions in Germany. Gelsinger has made it clear what is important to him in this regard: “If you are competing with Asian competitors who are massively subsidized by the state, you have to do the same here – or you are out of the game.”

Once again, the Kearney study provides the appropriate figures: According to the study, the lack of government incentives accounts for around 80 percent of the cost disadvantage that a leading-edge factory in Europe has compared to countries such as South Korea or Taiwan. The authors cite a provider called “Fab Economics” as the source for their calculation model, however, their online footprint consists only of a shady-looking website lacking contact details. The Kearney authors did not respond to a query by the end of the reporting period.

EU bickering over crisis management

By

Eric Bonse

Germany and France are claiming a leadership role. Following French leader Emmanuel Macron, German Chancellor Olaf Scholz also underscored his claim with a visit to Moscow on Tuesday. Scholz stressed his willingness to engage in dialogue after talks with Kremlin leader Vladimir Putin. At the same time, the SPD politician reiterated that further aggression against Ukraine would have serious consequences for Russia.

However, it remains unclear whether Macron and Scholz have been able to make substantial progress in their shuttle diplomacy between Paris, Berlin, Kiev, and Moscow that will also convince the other heads of state and government. Brussels Council circles said on Tuesday that there is still a lack of “deliverables” that justify convening a special EU summit. Council President Charles Michel is in contact with all 27 EU states.

While Michel was still consulting, EU Commission President Ursula von der Leyen moved ahead. She spoke on the phone with Japanese Prime Minister Kishida Fumio and agreed to coordinate closely on the Ukraine crisis.

High Representative of the European Union for Foreign Affairs Josep Borrell also spoke out. It is “quite clear” that the controversial Nord Stream 2 Baltic gas pipeline cannot go into operation if war breaks out, he told the BBC. However, there is no EU decision yet. Nord Stream 2 is part of a sanctions package von der Leyen is preparing. The final say goes to the heads of state and government, who must give the green light.

Von der Leyen as European Defense Minister

Von der Leyen has a big advantage in this procedure: She enjoys the trust of Macron and Scholz – after all, it was Berlin and Paris that hoisted her into office. And she is leading the talks with the USA. The CDU politician took part in consultations with US President Joe Biden no less than twice in recent weeks. Her head of cabinet, Björn Seibert, has coordinated with Biden’s security adviser, Jake Sullivan.

Von der Leyen has also secured a central role in preparations for the event of war. Her new responsibilities range from gas supplies to a possible wave of refugees from Ukraine. The EU Commissioners, who are actually responsible for this, now play only a secondary role, at least in the way the Commission President presents herself to the outside world. In the press releases, they are mentioned only in passing.

Foreign Affairs Commissioner Josep Borrell has also been sidelined. To this day, the Spaniard has not recovered from his ill-fated meeting with his Russian counterpart Sergei Lavrov in Moscow in February 2021. Borrell was downright humiliated at the time, with Russia expelling European diplomats during his ongoing visit. Since then, he has shown no interest in traveling to Moscow again to mend fences. That is why von der Leyen can now set the tone when it comes to Russia.

The transatlanticist does this with zeal, sometimes overzealously. At times, it seems as if she has slipped back into the old familiar role of defense minister – this time not for Germany, but for all of Europe. This role is so important to her that she even snubs the European Parliament for it. So von der Leyen canceled an appointment on Wednesday in Strasbourg that was supposed to be about the rule of law. Her spokesman said the Ukraine crisis was more important, and she had to hurry back to Brussels.

Charles Michel waits for his opportunity

However, there is not only crisis management awaiting her, but also a power-conscious rival: Council President Charles Michel is just waiting for an opportunity to intervene and push von der Leyen into the background.

Since the so-called “Sofagate” during a joint visit to Istanbul in April 2021, a feud has broken out between the two EU leaders over foreign policy. Michel was allowed to sit next to President Recep Tayyip Erdoğan at the time, while von der Leyen was banished to the sofa. She was discriminated against as a woman, von der Leyen complained and has since done everything she can to assert herself against Michel. In the Russia-Ukraine crisis, she has so far succeeded. The Belgian had to hold back – and give way to Macron and Scholz.

But after the temporary end of Franco-German travel diplomacy, the European Council is likely to come into play again soon – with Michel as chairman. Michel wants to shine at the EU-Africa summit on Thursday and Friday and put von der Leyen in her place. Of course, this won’t help anyone. Michel and von der Leyen must work together again at the latest at the next crisis meeting with US President Biden. Otherwise, they will weaken the EU, which has been sitting at the side table since the beginning of the crisis.

RED draft report: welcoming technology and reducing bureaucracy

After the European Commission presented a proposal for the revision of the Renewable Energies Directive (RED III) as part of its Fit for 55 package, the Parliament’s rapporteur, Markus Pieper (EPP), has now presented his draft. The energy policy spokesman for the CDU/CSU group advocates making the expansion of renewables technology-neutral and allowing transitional solutions. He criticizes the instruments proposed by the Commission as “half-hearted and uncreative”.

In this regard, Pieper supports the Commission’s plan to increase the interim target from 32 percent to 40 percent share of renewable energy in total consumption by 2030 so far. This is very ambitious but achievable and will lead to greater independence from fossil fuels, which in turn will have a positive impact on energy prices, Pieper told reporters on Wednesday. The MEP also welcomes the introduction of specific sectoral targets for transport, buildings, and industry, providing an important guidance framework for the decarbonization of each sector.

However, the binding target of 50 percent green hydrogen in the industry by 2030 is hardly achievable, as the Commission is standing in its own way. For example, the planned requirements for hydrogen production are too strict (Europe.Table reported). Therefore, the use of so-called low-carbon fuels (especially blue hydrogen) must also be taken into account for the transition period. The interim target of 49 percent renewables in the building sector is also very ambitious. Pieper suggests that, in addition to electrification, the focus should also be on the greater use of green district heating and the integration of renewable gases (admixture of hydrogen) into the existing gas network.

In contrast, the target for the transport sector is too low and should be increased from 13 to 20 percent. This could be achieved through higher quotas for synthetic fuels. “These would be real signals for technology openness, opening up options even for economic and transport sectors that are difficult to electrify,” Pieper said.

Criticism of the instruments

In addition, the MEP also sharply criticized the path envisaged by the Commission for the expansion of renewables in parts. “The proposed instruments are half-hearted. If we want to use synergies of the internal market, we need more cross-border infrastructure projects for green electricity and hydrogen.” Pieper, therefore, proposes doubling the number of projects from one to two per member state. In addition, according to the draft, all member states with annual electricity consumption of more than 100 TWh (including Germany, Spain, and France) should adopt a third project by 2025.

The proposals for accelerating approval procedures are also too vague. In the case of conflicts with species protection, the population approach, and not the protection of each individual, must be the focus in the future. The draft also provides for the inclusion of innovation quotas in the expansion of renewables in the directive. In this way, Pieper wants to promote promising technologies such as floating wind turbines.

The introduction of a new and digital system for guarantees of origin should also reduce bureaucracy and give more small and medium-sized enterprises access to the renewables market. Nevertheless, the rapporteur anticipates a significantly limited availability of own resources in the EU and therefore proposes the inclusion of an import strategy for green electricity and green hydrogen. Within this framework, the member states are obliged to stipulate measures for implementing this strategy in their national energy plans.

Pieper plans to present his report to the Industry Committee on March 3. Then the MEPs will have just under two weeks to submit their amendments. The committee is due to vote on the common position in mid-July, followed by the plenary session of the EU Parliament in September. til

DSA trilogue: Council is pushing, Parliament is in no hurry

At the second trilogue round of negotiations on the Digital Services Act (DSA), it became clear that the pressure to reach an agreement is primarily on the Council’s side. The French Council Presidency wants to have negotiated the two major digital dossiers, the DMA and the DSA, in time for the presidential elections in France in mid-April. According to negotiators, the parliamentary motto is thoroughness before speed.

Quick agreements were not expected for this second trilogue and were not reached. This was because several highly controversial regulatory proposals were up for debate, including the risk impact assessment, the enforcement of the DSA, and the exemption for small and medium-sized enterprises desired by Parliament, as well as the issue of marketplace regulations.

For example, the Council wants the Commission to supervise particularly large online platforms and search engines – which could, however, overburden the Commission in terms of personnel. On France’s initiative, the Council had called for greater centralization at the EU Commission. The Parliament, on the other hand, wants to see more national responsibility for supervision. The background to the member states’ unusual demand for a transfer of authority is their experience with the enforcement of the General Data Protection Regulation (GDPR), where individual states are suspected of deliberately undermining the level of regulation.

The third trialogue on the DSA is now not scheduled until mid-March. Until then, the so-called technical level, i.e., the staff of the Council, Parliament, and Commission, is to sound out possible compromises and draw up proposals for agreement. The timetable for this is tight; this week alone, several rounds are scheduled for the working level, in which possible agreements are to be prepared in terms of content.

Naumann Foundation publishes expert opinion

The Friedrich Naumann Foundation, which has close ties to the FDP, also published an expert opinion on the DSA yesterday by the Munich-based legal scholar Henrike Weiden, which analyzes the Commission’s proposal and gives it a fundamentally positive assessment. The former Federal Minister of Justice and Deputy Chairwoman of the Naumann Foundation, Sabine Leutheusser-Schnarrenberger, sees the DSA as a milestone: With it, the EU has the chance to set global standards. “Platform operators like Telegram, who ignore the rule of law, will also come under economic pressure with the DSA,” says Leutheusser-Schnarrenberger.

However, the report also expresses concerns and some criticism of the DSA, particularly of regulations for dealing with disputed content. For example, the author criticizes that although legal enforcement by platform operators is understandable, it would also entail “further privatization in the evaluation of the content”. In addition, the concept of illegal content is dependent on the respective national law and is “significantly broader than the definition of illegal content” under network enforcement law, which contains a predetermined catalog of criminal offenses.

In the case of particularly large online platforms, the requirements of the Commission’s proposal, together with sector-specific regulations, “due to the sheer volume, would probably in fact amount to a canon of tasks that is suspiciously close to a general obligation for automated content review,” the report continues. fst

EU Parliament votes on own-initiative report on cancer prevention

Fair access to cancer screening, diagnosis, and treatment, the promotion of cross-border research, stricter measures against tobacco, new regulations on e-cigarettes, and warning labels on alcoholic beverages: These are the key demands in the report of the Special Committee on Beating Cancer (BECA), which the EU Parliament discussed and voted on yesterday. The chances of surviving cancer in the European Union still depend heavily on where one lives, said BECA rapporteur Véronique Trillet-Lenoir (Renew Europe). This inequity should be eliminated. It is considered certain that the own-initiative report – if necessary weakened in some controversial points – will be adopted by the plenum. However, the vote results were not yet available at the time of going to press.

“Our most important lever is ambitious, multidisciplinary, independent, coordinated, and adequately funded European research that relies heavily on data sharing and artificial intelligence,” Trillet-Lenoir stressed. The recommendations in the report would guide member states toward a European charter for cancer patients.

MEPs are calling for the appointment of a special envoy at the European Commission to look into any obstacles to cross-border cancer research and find ways to remove them. “Cross-border research is essential to fight cancer,” said Peter Liese (EPP). Only through European cooperation would enough patients be found sufficiently quickly, for example, for clinical trials, to bring innovations to market promptly. However, he stressed, researchers currently suffer from excessive bureaucracy and different data protection regulations in the member states.

Alcohol and e-cigarettes dispute

Another key aspect is prevention. The final report calls for warning labels on alcoholic beverages, standardized packaging for cigarettes and other tobacco products, and increased tobacco taxes. However, the handling of e-cigarettes was controversial. The draft report called for the EU Commission to propose to ban flavors that are particularly attractive to children.

MEPs also disagree on the subject of alcohol. The EU Parliament’s special committee on cancer calls for warning labels for all alcoholic beverages. Most members are convinced that alcohol poses an increased risk of cancer and base this on statements by the World Health Organization (WHO). Others, however, argue that moderate alcohol consumption is justifiable and that the prevention of cancer is primarily about avoiding harmful consumption.

This is about tangible economic interests and also about public funding. Stefania Zambelli (Identity and Democracy / Lega Italy), warned of the loss of three million jobs in the EU. “We cannot bring the entire wine sector to its knees,” she said. Manuela Ripa (Greens), sees it differently. She said that tightening for consumption is also always a fight against economic interests. No profit before health, she appealed. However, the report will likely be weakened by amendments on this point as well.

The right to be forgotten

MEPs also call on member states to grant all European patients the right to be forgotten by 2025 at the latest. This should be effective no later than ten years after the end of their treatment or up to five years after the end of treatment for patients whose diagnosis took place before they reached the age of 18. “It must not be the case that people who have had cancer, for example as a child or young person, are still discriminated against decades later, for example by being made more difficult to access insurance or credit,” Liese said. This must change, including through concrete legislation, for example, in the context of the European Insurance Directive. The EU Commission should quickly implement concrete measures.

About a year ago, the EU Commission presented Europe’s Beating Cancer Plan. In 42 points, it covers the entire disease pathway from prevention, diagnosis, and treatment to promoting the quality of life of cancer patients and survivors. The Commission plans to spend around €4 billion on relevant measures in the coming years. ank

Energy prices: CDU/CSU call for strategic gas reserves

The CDU/CSU parliamentary group in the Bundestag is calling on the German government to support the establishment of a non-state strategic gas reserve to “make the energy system more crisis-proof”. This emerges from an as yet undated Bundestag motion by the opposition parties, which is available to Europe.Table. In it, the CDU/CSU calls for both immediate measures and the implementation of medium- and long-term measures within the framework of the toolbox presented by the EU Commission in October.

In addition to building up strategic gas reserves, the German government should work at the European level to install instruments to “safeguard the competitiveness of German and European industry” to protect companies from carbon leakage. Furthermore, dependence on fossil fuels must be reduced, and energy efficiency in the EU increased, the motion says.

To cushion the economic and social consequences of energy price developments for consumers and companies in the short term, the government should drastically reduce other energy taxes in addition to the already announced abolition of the EEG levy. CDU/CSU demand that the electricity tax of currently €20.5 per megawatt-hour “be reduced to the minimum tax rate of 1 EUR/MWh for non-commercial use and 0.5 EUR/MWh for commercial use permitted under EU law”. The sales tax on electricity, gas, and district heating supplies is also to be reduced to seven percent by the end of 2023.

In addition, the taxation of the biofuel portion of diesel, super, and gasoline is to be abolished, the electricity tax refund for energy-intensive industry – the so-called peak compensation – is to be extended and the commuter allowance is to be increased to 0.38 EUR/km. Currently, the rate is 0.30 EUR/km (0.35 EUR/km from the 21st kilometer). luk

Data protectionists examine cloud use by public agencies

Data protection regulators have begun a Europe-wide review of the use of cloud services by public bodies. The review, which has been planned since the fall, will now examine in a coordinated way how public authorities use network-based storage and processing services.

The General Data Protection Regulation also applies to public bodies, with the exception of security, police, and judicial authorities. However, public authorities do not face fines for violations of the law.

German data protection supervisory authorities are also participating in the European audit project, which is taking place within the “Coordinated Enforcement Framework”. In addition to actual enforcement, cooperation between the European data protection supervisory authorities in taking action against suspected law violations is also a key aspect of this. In a first step, a total of more than 80 public bodies are to receive a questionnaire from the responsible 44 European data protection supervisory authorities on the cloud services they use. fst

Poland calls for control mechanisms for emissions trading

Poland has urged the European Union to introduce “control mechanisms” to the bloc’s carbon market and curb financial speculators’ participation in the scheme, the Polish government said on Tuesday. Polish Climate Minister Anna Moskwa met with EU climate chief Frans Timmermans in Brussels on Monday to discuss the EU’s plans to reform the Emissions Trading Scheme (ETS).

Poland relies on coal for more than 70 percent of its power and has long argued that EU climate policies must take into account that such an energy mix makes reaching the climate targets more costly than for other EU members. The EU and other countries see higher CO2 prices as an essential incentive for companies to invest in the green technologies. Poland sent its demands regarding the ETS to Brussels last week, forming a coalition of countries that also want to reform the trading system, Warsaw said in a statement.

Poland: Do not abolish free certificates

“It is crucial for us to withdraw financial institutions from the ETS market as soon as possible. Our second demand is to abandon the withdrawal of free allowances,” Moskwa said. Brussels wants to phase out free allowances to encourage industry to reduce emissions.

Moskwa said Brussels should also introduce “control mechanisms” to the market, without specifying what these would do. “At present, the European Commission is helpless and legally and formally unable to interfere in this market,” she said, adding that it cannot remain that way if it is to serve as a political tool.

Moskwa also said that EU climate policy reforms should be adopted unanimously by EU countries – meaning that one state could block them. Poland has said it supports green transformation goals, but they must take into account their social and economic impact. rtr

EU data protection commissioner wants ban on spy software like Pegasus

European Data Protection Supervisor Wojciech Wiewiórowski has called for a ban on the controversial Pegasus spy program and similar tools. The software from Israeli company NSO Group leads to an “unprecedented level of surveillance that reaches into the most intimate spheres of our daily lives,” the Data Protection Supervisor said Tuesday.

Israel has come under global pressure for allegedly using the software to spy on the smartphones of human rights activists, journalists, and politicians. NSO Group claims to be in no way involved in the operation of the software after the sale. “Banning the development and use of spy software with Pegasus’ capabilities in the EU would be the most effective option to protect our fundamental rights and freedoms,” Wiewiórowski said.

The European Parliament wants to set up a special committee on the Pegasus operation. Last year, several media organizations led by the journalist group Forbidden Stories had found that the spy software was used in attempted and successful hacks of smartphones on a global scale. rtr

The return of global inflation

By Carmen Reinhart and Clemens Graf von Luckner

Inflation has come back faster, spiked more markedly, and proved to be more stubborn and persistent than major central banks initially thought possible. After initially dominating headlines in the United States, the problem has become a centerpiece of policy discussions in many other advanced economies. In 15 of the 34 countries classified as AEs by the International Monetary Fund’s World Economic Outlook, 12-month inflation through December 2021 was running above 5%. Such a sudden, shared jump in high inflation (by modern standards) has not been seen in more than 20 years.

Nor is this inflationary surge limited to wealthy countries. Emerging markets and developing economies have been hit by a similar wave, with 78 out of 109 EMDEs also confronting annual inflation rates above 5%. That share of EMDEs (71%) is about twice as large as it was at the end of 2020. Inflation thus has become a global problem – or nearly so, with Asia so far immune.

The primary drivers of the inflation spike are not uniform across countries, particularly when comparing AEs and EMDEs. Diagnoses of “overheating,” prevalent in the US discourse, do not apply to many EMDEs, where fiscal and monetary stimulus in response to COVID-19 was limited, and where economic recovery in 2021 lagged well behind the AE rebound.

Moreover, the pandemic-induced bust-and-recovery patterns differ markedly across country income groups, with recovery being defined as an economy’s return to its 2019 level of per capita income. About 41% of high-income AEs met that threshold at the end of 2021, compared to 28% of middle-income EMDEs and just 23% of low-income countries.

Per capita incomes develop very differently

But the disparity between advanced and developing economies is even greater than this comparison suggests, because many EMDEs were already experiencing declines in per capita income before the pandemic, whereas AEs were mostly at new highs. While many EMDEs have marked down their estimates of potential output over the past two years, there is little to suggest that their inflationary pressures are driven primarily by overheating in the aftermath of significant policy stimulus.

One development that is common across advanced and developing economies is the increase in commodity prices alongside rising global demand. As of January 2022, oil prices were up 77% from their December 2020 level.

Another major issue affecting advanced and developing economies alike is global supply chains, which continue to be severely affected by the events of the past two years. Transport costs have skyrocketed. And unlike the oil-based supply shock of the 1970s, the COVID-19 supply shocks are more diverse and opaque, and therefore more uncertain, as the World Bank’s most recent Global Economic Prospects stresses.

In EMDEs, currency depreciation (owing to lower inflows of foreign capital and downgrades of sovereign credit ratings) has contributed to inflation among imported goods. And because inflation expectations in EMDEs are less anchored and more attune to currency movements than in AEs, the passthrough from exchange rates to prices tends to be faster and more pronounced.

Another important factor is food price inflation. During 2021, 12-month increases in food prices exceeded 5% in 79% (86 out of 109) of EMDEs. While AEs have not been immune to rising food prices, just 27% of them experienced price hikes exceeding 5%.

Rising energy prices mean rising food costs

Worse, food price inflation also generally hits lower-income countries (and lower-income households everywhere) particularly hard, which makes it tantamount to a regressive tax. Food accounts for a much larger share of the average household consumption basket in EMDEs, which means that inflation in those economies is likely to prove persistent. Today’s higher energy prices will translate directly into higher food prices tomorrow (through higher costs for fertilizer, transport, and so forth).

Although most EMDEs no longer have fixed exchange rates – as they did during the inflation-prone 1970s – the scope for “truly independent” monetary policy in small open economies remains limited, floating exchange rates notwithstanding. The risk of them importing inflation from the global financial centers is not some relic of the past.

Indeed, the most salient feature of today’s inflation is its ubiquity. In the absence of global policy options to resolve supply-chain disruptions, the task of addressing inflation is left to the major central banks. While the US is poised to undergo a modest tightening (by historical standards) in 2022, this is unlikely to be sufficient to rein in price growth. As Kenneth Rogoff and I document in a 2013 paper, much of the inflation persistence of the 1970s stemmed from the US Federal Reserve’s tendency to do too little, too late (until Paul Volcker’s arrival).

To be sure, a more timely and robust policy response from major central banks would not be good news for EMDEs in the short run. Most would experience higher funding costs, and debt crises could become significantly more likely for some. Nonetheless, the longer-term costs of delaying action would be greater. Because the US and other advanced economies failed to tackle inflation quickly during the 1970s, they ultimately needed far more draconian policies, which led to America’s second-deepest post-war recession, along with a developing-country debt crisis

As the old saying goes, “A stitch in time saves nine.” In the meantime, the resurgence of inflation will continue to reinforce inequality, both within and across countries.

In cooperation with Project Syndicate, 2022.

Space. Infinite expanses. These are the adventures… Stop! Wrong film. Or is it? Yesterday, Industry, Internal Market, Defense Industry, and Space Commissioner Thierry Breton outlined his plan to build a European satellite communications network in more detail.

“Our new connectivity infrastructure will deliver high-speed internet access, serve as a back-up to our current internet infrastructure, increase our resilience and cyber security, and provide connectivity to the whole of Europe and Africa,” said the European Starfleet commander-in-waiting. Strategically super-relevant, extremely capable, future-proofing Europe, that’s simply as good as it gets with Breton.

It’s just that high-speed Internet access from space isn’t blazingly fast, and every 3D gamer would swear at these connections – because, by their very nature, the signal first has to travel from the ground to the satellite and then back again, which takes longer than the speed-of-light journey through fiber-optic cables close to Earth.

The satellites also need a line of sight to the Earth’s surface, if possible, and some clouds are against this. The worse the weather, the more likely performance losses will occur. To halfway work around this problem, huge numbers of small communications satellites are needed. This is also the case with Elon Musk’s Starlink project, in which a few days ago, a solar storm sent 40 satellites that were still too close to the Earth to burn up, and which Breton obviously took as a model for his plans. Thierry Breton, an industrial policy Elon Musk?

Thanks to Germany’s broadband expansion policy, there are still enough areas that could actually benefit from such a project. And by the way, the whole thing would also act as a fountain of youth for the Franco-German, pardon me, European space industry. The €6 billion envisaged for developing the Breton-European Starfleet would be money well spent. However, whether the project will go ahead after the French presidential elections remains to be seen. Falk Steiner