Table.Briefing: Europe

Defense Fund + Gas: mandatory energy saving + EU-China trade dialogue + Enlargement talks

  • €500 million for EU defense
  • Mandatory energy saving for EU members
  • China and EU move closer in trade dialogue
  • Nationalization of EDF to cost France €9.7 billion
  • Accession talks begin with Albania and North Macedonia
  • EU to add Sberbank and copper company chief to sanctions list
  • Three candidates left for Johnson’s successor
  • Google allows use of competing payment systems
  • Katharina Zweig – researcher on fair AI
Dear reader,

With a fund of over €500 million, the EU wants to create short-term incentives for EU countries to jointly pursue armaments projects. Such an instrument is nothing new – but in light of the war in Ukraine, it is finally receiving the necessary support from individual members, which have so far tended to procure armaments on their own, writes Ella Joyner.

The EU also wants to display greater unity in the gas crisis. Member states are now to be “encouraged” to save energy, and later even obliged to do so if necessary. Furthermore, a new Union-wide alarm is to be sounded whenever supply crises are imminent. And that could happen if no gas arrives in Europe via Nord Stream in a few days. But the signals are not so clear at the moment. Manuel Berkel explains why.

They also want to present a united front toward China. The list of problems between the EU and China is long. After a break of almost two years, at least the trade dialogue has now been resumed. Xi Jinping’s invitation, which he supposedly sent to European heads of government, also caused irritation. He said he did not know where this information came from. My colleague Amelie Richter reports on the matter.

Your
Lisa-Martina Klein
Image of Lisa-Martina  Klein

Feature

€500 million for the defense of the EU

On Tuesday, the EU Commission presented a new joint procurement instrument that will allow buying at least a part of the required new equipment for member states. For this purpose, €500 million will be allocated from the EU budget for two years (probably 2023/2024). The Commission will not finance the direct arms purchases themselves, but will use the money to provide an incentive if three or more member states want to jointly procure weapons.

“As war rages on at Europe’s borders, we are responding to the call of EU heads of state,” Commissioner for the Internal Market Thierry Breton said at the presentation of the program. At the Versailles summit in March, EU governments tasked the Commission with preparing such an initiative.

So it is a short-term instrument. However, Breton also says it is intended to support a longer-term restructuring of the EU arms market. The fragmentation of the EU arms market has been considered a problem for years. Member states procure most of their equipment domestically, which is considered inefficient and expensive.

In essence, this fragmentation means that the EU gets less bang for its buck than, for example, the United States, which has a very consolidated industrial foundation, as High Representative of the EU for Foreign Affairs, Josep Borrell, has pointed out several times in recent months. There are also problems with the interoperability of defense equipment.

Grant for joint projects

According to the Commission, the new initiative also aims to prevent displacement effects, meaning the inability of smaller member states to cover their defense equipment needs due to peak demand. Approved projects will be supported by the Commission and receive a grant, but the initiative and most of the money will come from member states.

Breton said on Tuesday that the industrial foundation of European defense production is currently not fit for purpose. He called the new initiative a pilot project that, with more funding, should become a permanent tool. More details could be announced later this year.

So the commission is sending a message to industry: Get ready – large-scale joint procurement is coming. “Right now, the industry is focused on small and medium demand volumes,” Breton said. The Commission is focused on the medium and long term, and production capacity is expected to grow.

For this reason, Breton considers the instrument “a historic step forward in European defence integration“. But how historic is it really? For nearly two years, EU institutions have been trying to encourage EU states to improve the coordination of their defense policies. The initiative unveiled Tuesday is the first time the Commission has directly funded a joint arms procurement in this way. However, a similar instrument already exists that has so far failed to make a significant impact.

The Commission of President Jean-Claude Juncker has paved the way for the European Defense Fund (EDF), which became operational in 2019 and can provide €8 billion for R&D projects from 2021 to 2027. It is too early to judge the success of the EDF as a project. What is clear, however, is that the years of debate and warnings from the Commission have had little effect on the member states.

Not a lot of money for the project

In 2020, the 27 member states spent nearly €200 billion on armaments and defense, according to the European Defense Agency (EDA). Member states spent a total of €4.1 billion on new joint equipment procurement, down 13 percent from 2019. In 2020, member states made only 11 percent of their total equipment procurements in cooperation with other EU members.

“The data submitted to EDA shows a significant reduction in European collaborative defence equipment procurement since 2016″, the agency wrote in December 2021. However, with the new instrument, experts see the problem that €500 million is simply not a lot of money – definitely not enough to trigger a major market restructuring. Although Breton never claimed that.

What is certain is that the Commission finally has the blessing of the member states to act as a major coordinator in defense policy, something that has been traditionally closely guarded by national governments. There is also closer cooperation with major arms manufacturers, which does not always please activists.

If this new instrument becomes a multi-billion dollar project, the Commission will find itself in a far stronger position In any case, it would take years to consolidate the fragmented production sector. Production chains cannot be transformed overnight. But putting money on the table is an important first step.

But the Ukraine war could finally push member states to do exactly what the Commission has been calling for years. Member states have already committed to increasing their collective defense spending by €200 billion, according to Breton. Almost all of them want to reach the miraculous 2 percent mark. The question now is whether enough of this new money can really be spent collectively.

  • European Defense
  • European policy
  • Geopolitics
  • Security policy
  • Sicherheitspolitik

EU countries are to pass mandatory energy-saving legislations

The Commission wants a binding short-term energy savings target for all member states in the current energy crisis, if necessary. According to a new draft for the emergency gas plan, which was available to Europe.Table on Tuesday, the Commission intends to propose that the Council adopt a corresponding regulation today. Parliament would not have to approve the act, which would speed up the process. The next Council meeting of energy ministers is scheduled for next Tuesday.

First, according to the Commission’s plans, a voluntary energy-saving target will apply, although the actual target is still marked with an “X” in the draft. However, should it prove insufficient, the Commission is to be granted the authority to set a mandatory energy-saving target.

A prerequisite is the declaration of a new “Union-wide alert,” which at least two member states would have to request “if the situation and prospects regarding the balance between supply and demand develop negatively and may lead to emergencies.” This alert can be declared “at any time” in the coming weeks or months.

With this proposal, the Commission intends to go significantly beyond the SoS Regulation currently in force. It sees the legal basis for the new Council Regulation in Article 122 of the Treaty on the Functioning of the European Union, which was created specifically for shortages of certain goods such as energy carriers.

The Commission would also like to see stricter supervision laid down in the regulation. The foundation will be the evaluation of the level of success of member states regarding investments in alternatives to Russian gas and the reduction of consumption.

Common energy platform could help

The Commission also calls on states to update their national contingency plans by the end of September and identify their measures to reduce demand. Elsewhere, the Commission advocates strengthening the recently launched energy platform. “A necessary next step is to move to joint procurement within the framework of the Energy Platform to achieve greater coordination on both the demand and supply side.” According to a report in the German magazine Der Spiegel over the weekend, the industry is growing concerned that gas will be solely allocated by the EU platform should it become mandatory.

The German government wants to use auctions to encourage industrial companies to voluntarily abandon gas. The Commission also supports this mechanism. In the current paper, it now announces to “quickly” investigate the option of EU-wide auctions.

However, if market-based mechanisms were no longer sufficient, “new instruments” could be developed for strategically important industries to “encourage” them to diversify supply sources, replace gas as an energy source, and save energy.

The Commission is preparing for all scenarios regarding the restart of Nord Stream 1. That includes the eventuality that gas deliveries through the Baltic Sea pipeline would not resume on Thursday, a spokesman said yesterday. Reuters and Bloomberg yesterday reported in unison that the pipeline would resume operations on Thursday at reduced capacity. Both agencies cited two people familiar with the matter. According to Bloomberg, however, the final decision rests with the Kremlin. The German government reportedly plans to wait at least until Monday before assessing whether and to what extent gas will resume flowing through Nord Stream.

On Tuesday afternoon, some gas flowed through the pipeline for several hours. Nord Stream’s operator explained that the gas volumes displayed on the company’s website were related to the technically required pressure equalization before maintenance work could be finished.

New sites for LNG terminals

Meanwhile, the German government is pushing ahead with the acquisition of floating LNG terminals off Germany’s coasts. In addition to the FSRU vessels in Brunsbüttel and Wilhelmshaven, two additional sites are to be built in Stade and Lubmin, the Ministry of Economics announced yesterday.

Wilhelmshaven and Brunsbüttel are scheduled to begin operations as early as this winter. According to the government, the terminals in Stade and Lubmin will probably not be ready for operation until the end of 2023. In addition, a fifth terminal will be built in Lubmin by the end of the year by a private consortium. “We have to build a new infrastructure within a very short time in order to be able to replace Russian gas as quickly as possible,” said Minister for Economic Affairs Robert Habeck. “It is therefore very good news that in addition to the four federal vessels, a fifth private regasification vessel is now to be added.”

The German company Deutsche Regas wants to co-invest with the French company TotalEnergies in Lubmin. Lubmin is a suitable location because it is also where the Nord Stream pipelines from Russia end and continue inland.

Each of the four ships in the federal contract has a capacity of over five billion cubic meters (bcm) of gas per year. However, a tie-in pipeline still has to be built in Brunsbüttel, which means that reduced volumes will initially be fed in during the summer of 2023, according to the BMWK. Pipeline capacities for Stade and Lubmin would currently be determined with local stakeholders. With rtr

  • Energy
  • European policy
  • Natural gas

Rapprochement between China and EU at trade dialogue

As EU Director-General for Trade Sabine Weyand quite fittingly summarized yesterday: “Many problems have accumulated since the last high-level trade dialogue in 2020,” she wrote on Twitter after the first trade talks between Brussels and Beijing in just over two years. The shelved CAI investment agreement and the trade embargo against EU member Lithuania are just two of those problems – the list of agenda items for the 9th meeting of the so-called EU-China High-Level Economic and Trade Dialogue (HED for short) was long.

EU Vice President and Trade Commissioner Valdis Dombrovskis and Chinese Vice Premier Liu He discussed supply shortages due to the Covid pandemic as well as the impact of Russia’s invasion of Ukraine, as the EU Commission informed after the talks. The EU “took note of China’s willingness to work together on ensuring the stability of global markets and tackling global food insecurity, including through the export of fertilizers,” a statement from Brussel said.

It was also agreed that the disruption of supply chains must be prevented. There is to be more transparency in information on supplies of certain critical raw materials (China.Table reported). There was progress regarding cooperation on financial services. However, also addressed were the deteriorating business environment for European companies in China, market-distorting subsidies, and the role of state-owned enterprises. So were the economic pressures exerted on Lithuania and the next steps towards a WTO reform.

According to the official statement, Human rights violations or the situation in Xinjiang – where some EU companies operate plants – were not addressed. It seems a bit as if Brussels wanted to make sure the trade dialogue would be constructive after the disastrous EU-China summit in April. After a two-year break, however, the dialogue is a good sign, even if it could once again only take place as a video call. There will not be a second HED this year; the next one will not take place until 2023. But perhaps it will then again be held in person.

Beijing denies Xi’s invitation to Europeans

There was confusion, however, about an invitation for European leaders to the People’s Republic: The daily newspaper South China Morning Post reported on a presumed offer of talks from Xi Jinping. It was said he invited German Chancellor Olaf Scholz, French President Emmanuel Macron, Italian Prime Minister Mario Draghi, and Spanish Prime Minister Pedro Sánchez to a personal meeting in Beijing in November, the SCMP wrote, citing a person familiar with the matter. There were no confirmations or comments on the report from the four European capitals. Berlin refused to comment on travel schedules.

However, Beijing responded on Tuesday with a clear denial: “I don’t know where the information came from,” Foreign Ministry spokesman Zhao Lijian said. The invitation to European leaders would have meant a return to personal diplomacy with European politicians for Xi. Since the beginning of the Covid pandemic, no European politician has met directly with the Chinese leader bilaterally. All exchange has taken place via video call.

After the report was published, there has been criticism of the alleged invitation to Scholz, Macron, Draghi, and Sánchez. Doubts also arose because the offer of talks was said to be scheduled for a day after the CCP party congress in October. At this congress, however, Xi wants to be confirmed for another term in office. Perhaps Beijing noticed that it is not particularly advantageous for the public image of a genuine election if a president, who is supposedly still “anxious” about his election, is already issuing large invitations – hence the public withdrawal.

EU must make a united response to Beijing

The selection of the invited Europeans was also not particularly well received: With Germany, France, Italy, and Spain, China would have invited the largest EU economic partners. These countries would then pay their respects to the “party emperor” in Beijing directly after the party congress, criticized Green MEP Reinhard Buetikofer. He urged to carefully consider the response to the invitation. Also criticized was the exclusion of other EU members. Central and Eastern European states had been “accused of being Trojan horses for years,” Slovak China analyst Matej Šimalčík wrote on Twitter. The only morally acceptable step for the four EU states is therefore to “politely decline and ask for a full EU27+China meeting,” Šimalčík said.

It will be a long time before there is a high-ranking visit from Europe to China. That is one of the reasons why the Taiwan trip of Nicola Beer, Vice President of the European Parliament and German FDP MEP, has now received considerable attention. From Tuesday, Beer will be in Taipei for a three-day official visit. This is Beer’s first visit to Taiwan as Vice President of the EU Parliament. On Tuesday, the FDP politician met Taiwan’s Prime Minister Su Tseng-chang, and talks with President Tsai Ing-wen are to follow on Wednesday. Beers’ visit drew familiar criticism from Beijing, which accused the EU politician of disregarding the “One China Principle”.

FDP European politician Beer visits Taiwan

Beer kicked off her visit by calling for support for the island nation against China. “Taiwan’s bloom is also Europe’s bloom. We won’t have a blind eye on China’s threat to Taiwan,” Beer said, according to media reports. She drew a direct comparison between her visit and Russia’s invasion of Ukraine. Beer said, according to the AFP news agency, “There is no room for Chinese aggression in democratic Taiwan. Currently, we are witnessing a war in Europe. We don’t want to witness a war in Asia.”

According to a report that is already infuriating Beijing, Taipei is set to receive yet another visit in August. The Financial Times, citing several insiders, reported that Nancy Pelosi, the Speaker of the House of Representatives, plans to visit Taipei before the end of August. According to the report, the visit is part of a trip by a US delegation that is also scheduled to visit Japan, Malaysia, Singapore, and the US Armed Forces Indo-Pacific Command in Hawaii. The trip has so far not been officially confirmed by either the US State Department or Taiwan. Originally, a visit was planned in April. However, it had to be canceled due to Pelosi’s Covid infection. Chinese Foreign Minister Wang Yi already said in April that a visit by Pelosi to Taiwan would be a “malicious provocation”.

  • European policy
  • Trade
  • Trade Policy

News

Nationalization of EDF costs France €9.7 billion

The French government wants to pay almost €10 billion for the nationalization of the utility company EDF. By taking over the remaining 16 percent for €9.7 billion, the government wants to stabilize EDF and secure the country’s energy supply.

The heavily indebted company, which is Europe’s largest operator of nuclear power plants, struggles with the fallout of the Ukraine war. EDF currently has to source power from abroad at record high rates, but has to sell it cheaper to its competitors due to the government’s price cap. But even before, nuclear power plants suffered unplanned outages, the cost of new nuclear reactors skyrocketed, and construction was delayed.

The finance ministry in Paris is offering the remaining EDF shareholders €12 per share, it announced on Tuesday. That is 53 percent more than the share’s value on July 5, the day before the nationalization plans were announced, but far less than the €33 for which EDF was floated on the stock market in 2005.

After trading resumed, the shares soared up 15 percent to €11.80 on Tuesday. Trading had been suspended for a week. The offer is to be submitted by September, and the withdrawal from the stock exchange is to be completed by the end of October, according to ministry circles. For this, the government needs a majority of at least 90 percent of the shares.

EDF’s debts will continue to increase

“Nationalisation is ultimately the only way to save the company and ensure electricity production,” said Ingo Speich, head of sustainability and corporate governance at Deka Investment. “This is a bitter but necessary step.” France, which would normally be exporting electricity at this time of the year, is currently importing from Spain, Switzerland, Germany and Britain, and the supply crunch is likely to worsen this winter.

Rating agency S&P expects EDF’s debt mountain to exceed €100 billion before the end of this year. In the spring, the government already financed the bulk of a capital increase of €3 billion. A banker familiar with the matter said that EDF would soon need another money infection. The turmoil on the energy markets in the wake of the Russian invasion of Ukraine is plaguing many electricity and gas suppliers. The German government is clashing with Uniper’s majority owner, Finland’s state-owned Fortum, over the bailout cost of its largest gas importer. rtr

  • Energy
  • France
  • Nuclear power

EU begins accession negotiations with Albania and North Macedonia

After several years of slumber, European enlargement policy continues to gain momentum. Around four weeks after the decision to grant Ukraine and Moldova candidate status, the European Union began formal accession talks with Albania and North Macedonia in Brussels on Tuesday.

Originally, negotiations were supposed to begin two years ago. However, Bulgaria had repeatedly delayed the start. “You have shown strategic patience, in abundance,” said Commission President Ursula von der Leyen, praising the heads of state and government of the candidate countries, Petr Fiala and Edi Rama, who had traveled to Brussels specifically for the occasion. Von der Leyen stressed that North Macedonia and Albania had worked hard for this “historic moment”. As examples, she cited progress on the rule of law, the fight against corruption and economic reforms. North Macedonia has been a candidate for EU membership since 2005, Albania since 2014.

The fact that the way is now clear for accession negotiations is due to a compromise proposal from Paris. This proposal, which was drafted in June under the then French EU presidency, provides for the rights of the Bulgarian minority in North Macedonia to be protected by the constitution.

No rapid accession expected

However, the amendment of the constitution could prove difficult because the government does currently not have the necessary two-thirds majority in parliament. The main opposition party, the right-wing nationalist VMRO-DPMNE, has been up in arms against the compromise for days. It accuses the government in Skopje of “treason”.

Von der Leyen stated that North Macedonia need not worry. All EU documents would be negotiated in Macedonian. This would also apply to an agreement with the EU border protection agency Frontex, which is to be deployed to the country soon. In addition, Skopje could count on more investments and trade concessions. Albania can also expect benefits from the accession talks, according to the German EU leader. Von der Leyen promised rapid inclusion in the EU’s civil defense mechanism, which helps, for example, in the event of forest fires. However, neither Albania nor North Macedonia can expect fast EU accession.

Negotiations with Brussels tend to take many years, and there is no guarantee of success. In fact, candidate countries can be downgraded or talks suspended should problems persist. Turkey is a negative example. Talks there have been on hold for years, and EU accession is no longer considered realistic.

“All legal, political and economic criteria must be fully met,” warned CDU MEP David McAllister. The pace would depend on the “individual efforts” of candidates. Germany’s Minister of State for Europe Anna Lührmann (Greens) was more optimistic. “This sends a very clear signal that the countries of the Western Balkans belong in the EU,” she said in Brussels. ebo

  • Albania
  • European policy
  • North Macedonia

EU wants to add Sberbank and UMMC CEO to sanctions list

The European Union wants to add Russia’s largest bank and the head of mining company UMMC to its sanctions list. It accuses Sberbank and UMMC CEO Andrey Kozitsyn of supporting Russia’s war against Ukraine, according to a draft document obtained by Reuters.

This would have far-reaching consequences for the bank: In this case, authorities would freeze the bank’s assets in the West and suspend all transactions except payments for food and fertilizer deliveries, an EU insider said. The EU has already blocked Sberbank’s access to the SWIFT international payments system, restricting the Russian financial institution’s business.

In total, the EU wants to add 48 individuals and 9 groups to the sanctions list – including the “Night Wolves” motorcycle club, actors, politicians, the deputy head of a Russian security agency, family members of already sanctioned oligarchs and members of the armed forces. The planned sanctions against UMMC head Kozitsyn are based on the fact that he works in a business sector that generates significant revenue for the Russian government.

The EU will decide on further sanctions on Wednesday. If the proposals are passed, the number of individuals sanctioned by the EU would increase to 1,229 and the number of sanctioned companies to 110. rtr

  • European policy

Three candidates left for Johnson successor

In the race to succeed Boris Johnson as Prime Minister and leader of the British Conservative Party, the number of contenders has been further reduced. On Tuesday, Kemi Badenoch, an MP from the right-wing fringe of the Tory Party, dropped out.

Rishi Sunak, the former Minister of Finance who is of Indian immigrant descent, is considered to be almost certain for the final round; he again received the majority of votes by a wide margin in the ballot. Competing for second place are Secretary of State Liz Truss and Minister of State for Trade Policy Penny Mordaunt. The deciding factor will likely be who can win over the most MPs who last voted for Badenoch. Some observers expect a boost for Truss, who is also considered part of the right wing of the party.

The remaining candidates are to face a final round of voting within the party on Wednesday. The result is expected at 5 PM (CEST). The person with the least votes will be removed from the race for succession. Who of the two finalists will ultimately succeed Boris Johnson will be decided by party members in a runoff election over the summer. The process is expected to be concluded on September 5.

Bad news for Sunak came with the results of a poll of Tory Party members conducted by the polling firm Yougov on Tuesday. The results indicate that he is likely to lose the runoff – regardless of which of the two women runs against him. How many members the Tory Party currently has is unclear. In the last party leader election in 2019, there were around 160,000 members. dpa

  • Boris Johnson
  • United Kingdom

Google allows use of competing payment systems

Alphabet-owned Internet company Google is lowering fees for developers of non-gaming apps in its app store who switch to competing payment systems, effective immediately. With the fee reduction from 15 to 12 percent, which only applies to European customers, the company is complying with the new EU tech regulations, the US technology giant announced on Tuesday.

The reduction is to be extended to gaming apps in the future. The EU’s Digital Markets Act (DMA) rules will come into force next year and require tech giants to allow app developers to use competing payment platforms for in-app payments – otherwise they could risk fines of up to 10 percent of their global revenue. Google’s move continues a string of concessions to regulators that includes settling a copyright dispute in France and paying compensation in Australia. rtr

  • Digital Markets Act
  • Digital policy
  • Google

Heads

Katharina Zweig – researcher for fair AI

Katharina Zweig researches artificial intelligence at the TU Kaiserslautern.

Katharina Zweig, a professor for theoretical computer science at the TU Kaiserslautern, wants to make artificial intelligence systems better and fairer. In the Algorithm Accountability Lab headed by her, she, therefore, investigates how to measure the quality and fairness of algorithmic decision-making systems.

She is convinced that, in addition to improved AI, knowledge is the best protection against AI-based decisions with serious consequences. With her book “An Algorithm Has No Sense of Tact,” Katharina Zweig wants to empower people to better assess AI systems and their decisions: “Every person who comes into contact with AI decisions needs to have a rough idea of what AI can and cannot do. I wrote the book for these individuals.”

Warning of consequences from AI

Katharina Zweig already wanted to become a scientist since her childhood. After graduating from high school in 1995, the then 18-year-old enrolled to study biochemistry at the University of Tübingen: “I wanted to know people inside out, from the atom to psychology.” During her preliminary diploma exams, Zweig decided to also study bioinformatics. It was here that her new passion was sparked: “I fell in love with theoretical computer science, or more specifically, algorithm development.” Zweig graduated in 2006 and earned her Ph.D. in theoretical computer science in 2007.

Algorithms are the basis of all AI. And this is already being used successfully to predict the purchasing behavior of humans. “But the success of AI in e-commerce has led to the idea that machines could predict human behavior better than human experts, even beyond the economic sphere.”

However, great caution should be exercised here, the scientist warns: “In the economic sphere, incorrect prognoses do not have serious consequences; in other areas, for example, when assessing creditworthiness or in court, an incorrect prognosis can ruin a person’s life.”

Regulation with careful judgment

With the Artificial Intelligence Act, the European Commission has presented a draft law that is intended to regulate the use of AI. The draft law divides AI systems into risk groups and regulates corresponding protective measures. High-risk AI systems are systems that pose significant risks to the health and safety or fundamental rights of individuals.

Katharina Zweig supports strong regulation regarding critical AI, but sees the current draft in part as a potential opportunity killer: “The definition of AI in the current draft is so broad that a great many non-critical systems are included. This can prevent useful applications. So a careful judgment is needed in regulation, so that protection is provided against potential threats, without the EU preventing any opportunities.” Alina Jensen

  • Artificial intelligence
  • Digitization
  • Technology

Europe.Table Editorial Office

EUROPE.TABLE EDITORS

Licenses:
    • €500 million for EU defense
    • Mandatory energy saving for EU members
    • China and EU move closer in trade dialogue
    • Nationalization of EDF to cost France €9.7 billion
    • Accession talks begin with Albania and North Macedonia
    • EU to add Sberbank and copper company chief to sanctions list
    • Three candidates left for Johnson’s successor
    • Google allows use of competing payment systems
    • Katharina Zweig – researcher on fair AI
    Dear reader,

    With a fund of over €500 million, the EU wants to create short-term incentives for EU countries to jointly pursue armaments projects. Such an instrument is nothing new – but in light of the war in Ukraine, it is finally receiving the necessary support from individual members, which have so far tended to procure armaments on their own, writes Ella Joyner.

    The EU also wants to display greater unity in the gas crisis. Member states are now to be “encouraged” to save energy, and later even obliged to do so if necessary. Furthermore, a new Union-wide alarm is to be sounded whenever supply crises are imminent. And that could happen if no gas arrives in Europe via Nord Stream in a few days. But the signals are not so clear at the moment. Manuel Berkel explains why.

    They also want to present a united front toward China. The list of problems between the EU and China is long. After a break of almost two years, at least the trade dialogue has now been resumed. Xi Jinping’s invitation, which he supposedly sent to European heads of government, also caused irritation. He said he did not know where this information came from. My colleague Amelie Richter reports on the matter.

    Your
    Lisa-Martina Klein
    Image of Lisa-Martina  Klein

    Feature

    €500 million for the defense of the EU

    On Tuesday, the EU Commission presented a new joint procurement instrument that will allow buying at least a part of the required new equipment for member states. For this purpose, €500 million will be allocated from the EU budget for two years (probably 2023/2024). The Commission will not finance the direct arms purchases themselves, but will use the money to provide an incentive if three or more member states want to jointly procure weapons.

    “As war rages on at Europe’s borders, we are responding to the call of EU heads of state,” Commissioner for the Internal Market Thierry Breton said at the presentation of the program. At the Versailles summit in March, EU governments tasked the Commission with preparing such an initiative.

    So it is a short-term instrument. However, Breton also says it is intended to support a longer-term restructuring of the EU arms market. The fragmentation of the EU arms market has been considered a problem for years. Member states procure most of their equipment domestically, which is considered inefficient and expensive.

    In essence, this fragmentation means that the EU gets less bang for its buck than, for example, the United States, which has a very consolidated industrial foundation, as High Representative of the EU for Foreign Affairs, Josep Borrell, has pointed out several times in recent months. There are also problems with the interoperability of defense equipment.

    Grant for joint projects

    According to the Commission, the new initiative also aims to prevent displacement effects, meaning the inability of smaller member states to cover their defense equipment needs due to peak demand. Approved projects will be supported by the Commission and receive a grant, but the initiative and most of the money will come from member states.

    Breton said on Tuesday that the industrial foundation of European defense production is currently not fit for purpose. He called the new initiative a pilot project that, with more funding, should become a permanent tool. More details could be announced later this year.

    So the commission is sending a message to industry: Get ready – large-scale joint procurement is coming. “Right now, the industry is focused on small and medium demand volumes,” Breton said. The Commission is focused on the medium and long term, and production capacity is expected to grow.

    For this reason, Breton considers the instrument “a historic step forward in European defence integration“. But how historic is it really? For nearly two years, EU institutions have been trying to encourage EU states to improve the coordination of their defense policies. The initiative unveiled Tuesday is the first time the Commission has directly funded a joint arms procurement in this way. However, a similar instrument already exists that has so far failed to make a significant impact.

    The Commission of President Jean-Claude Juncker has paved the way for the European Defense Fund (EDF), which became operational in 2019 and can provide €8 billion for R&D projects from 2021 to 2027. It is too early to judge the success of the EDF as a project. What is clear, however, is that the years of debate and warnings from the Commission have had little effect on the member states.

    Not a lot of money for the project

    In 2020, the 27 member states spent nearly €200 billion on armaments and defense, according to the European Defense Agency (EDA). Member states spent a total of €4.1 billion on new joint equipment procurement, down 13 percent from 2019. In 2020, member states made only 11 percent of their total equipment procurements in cooperation with other EU members.

    “The data submitted to EDA shows a significant reduction in European collaborative defence equipment procurement since 2016″, the agency wrote in December 2021. However, with the new instrument, experts see the problem that €500 million is simply not a lot of money – definitely not enough to trigger a major market restructuring. Although Breton never claimed that.

    What is certain is that the Commission finally has the blessing of the member states to act as a major coordinator in defense policy, something that has been traditionally closely guarded by national governments. There is also closer cooperation with major arms manufacturers, which does not always please activists.

    If this new instrument becomes a multi-billion dollar project, the Commission will find itself in a far stronger position In any case, it would take years to consolidate the fragmented production sector. Production chains cannot be transformed overnight. But putting money on the table is an important first step.

    But the Ukraine war could finally push member states to do exactly what the Commission has been calling for years. Member states have already committed to increasing their collective defense spending by €200 billion, according to Breton. Almost all of them want to reach the miraculous 2 percent mark. The question now is whether enough of this new money can really be spent collectively.

    • European Defense
    • European policy
    • Geopolitics
    • Security policy
    • Sicherheitspolitik

    EU countries are to pass mandatory energy-saving legislations

    The Commission wants a binding short-term energy savings target for all member states in the current energy crisis, if necessary. According to a new draft for the emergency gas plan, which was available to Europe.Table on Tuesday, the Commission intends to propose that the Council adopt a corresponding regulation today. Parliament would not have to approve the act, which would speed up the process. The next Council meeting of energy ministers is scheduled for next Tuesday.

    First, according to the Commission’s plans, a voluntary energy-saving target will apply, although the actual target is still marked with an “X” in the draft. However, should it prove insufficient, the Commission is to be granted the authority to set a mandatory energy-saving target.

    A prerequisite is the declaration of a new “Union-wide alert,” which at least two member states would have to request “if the situation and prospects regarding the balance between supply and demand develop negatively and may lead to emergencies.” This alert can be declared “at any time” in the coming weeks or months.

    With this proposal, the Commission intends to go significantly beyond the SoS Regulation currently in force. It sees the legal basis for the new Council Regulation in Article 122 of the Treaty on the Functioning of the European Union, which was created specifically for shortages of certain goods such as energy carriers.

    The Commission would also like to see stricter supervision laid down in the regulation. The foundation will be the evaluation of the level of success of member states regarding investments in alternatives to Russian gas and the reduction of consumption.

    Common energy platform could help

    The Commission also calls on states to update their national contingency plans by the end of September and identify their measures to reduce demand. Elsewhere, the Commission advocates strengthening the recently launched energy platform. “A necessary next step is to move to joint procurement within the framework of the Energy Platform to achieve greater coordination on both the demand and supply side.” According to a report in the German magazine Der Spiegel over the weekend, the industry is growing concerned that gas will be solely allocated by the EU platform should it become mandatory.

    The German government wants to use auctions to encourage industrial companies to voluntarily abandon gas. The Commission also supports this mechanism. In the current paper, it now announces to “quickly” investigate the option of EU-wide auctions.

    However, if market-based mechanisms were no longer sufficient, “new instruments” could be developed for strategically important industries to “encourage” them to diversify supply sources, replace gas as an energy source, and save energy.

    The Commission is preparing for all scenarios regarding the restart of Nord Stream 1. That includes the eventuality that gas deliveries through the Baltic Sea pipeline would not resume on Thursday, a spokesman said yesterday. Reuters and Bloomberg yesterday reported in unison that the pipeline would resume operations on Thursday at reduced capacity. Both agencies cited two people familiar with the matter. According to Bloomberg, however, the final decision rests with the Kremlin. The German government reportedly plans to wait at least until Monday before assessing whether and to what extent gas will resume flowing through Nord Stream.

    On Tuesday afternoon, some gas flowed through the pipeline for several hours. Nord Stream’s operator explained that the gas volumes displayed on the company’s website were related to the technically required pressure equalization before maintenance work could be finished.

    New sites for LNG terminals

    Meanwhile, the German government is pushing ahead with the acquisition of floating LNG terminals off Germany’s coasts. In addition to the FSRU vessels in Brunsbüttel and Wilhelmshaven, two additional sites are to be built in Stade and Lubmin, the Ministry of Economics announced yesterday.

    Wilhelmshaven and Brunsbüttel are scheduled to begin operations as early as this winter. According to the government, the terminals in Stade and Lubmin will probably not be ready for operation until the end of 2023. In addition, a fifth terminal will be built in Lubmin by the end of the year by a private consortium. “We have to build a new infrastructure within a very short time in order to be able to replace Russian gas as quickly as possible,” said Minister for Economic Affairs Robert Habeck. “It is therefore very good news that in addition to the four federal vessels, a fifth private regasification vessel is now to be added.”

    The German company Deutsche Regas wants to co-invest with the French company TotalEnergies in Lubmin. Lubmin is a suitable location because it is also where the Nord Stream pipelines from Russia end and continue inland.

    Each of the four ships in the federal contract has a capacity of over five billion cubic meters (bcm) of gas per year. However, a tie-in pipeline still has to be built in Brunsbüttel, which means that reduced volumes will initially be fed in during the summer of 2023, according to the BMWK. Pipeline capacities for Stade and Lubmin would currently be determined with local stakeholders. With rtr

    • Energy
    • European policy
    • Natural gas

    Rapprochement between China and EU at trade dialogue

    As EU Director-General for Trade Sabine Weyand quite fittingly summarized yesterday: “Many problems have accumulated since the last high-level trade dialogue in 2020,” she wrote on Twitter after the first trade talks between Brussels and Beijing in just over two years. The shelved CAI investment agreement and the trade embargo against EU member Lithuania are just two of those problems – the list of agenda items for the 9th meeting of the so-called EU-China High-Level Economic and Trade Dialogue (HED for short) was long.

    EU Vice President and Trade Commissioner Valdis Dombrovskis and Chinese Vice Premier Liu He discussed supply shortages due to the Covid pandemic as well as the impact of Russia’s invasion of Ukraine, as the EU Commission informed after the talks. The EU “took note of China’s willingness to work together on ensuring the stability of global markets and tackling global food insecurity, including through the export of fertilizers,” a statement from Brussel said.

    It was also agreed that the disruption of supply chains must be prevented. There is to be more transparency in information on supplies of certain critical raw materials (China.Table reported). There was progress regarding cooperation on financial services. However, also addressed were the deteriorating business environment for European companies in China, market-distorting subsidies, and the role of state-owned enterprises. So were the economic pressures exerted on Lithuania and the next steps towards a WTO reform.

    According to the official statement, Human rights violations or the situation in Xinjiang – where some EU companies operate plants – were not addressed. It seems a bit as if Brussels wanted to make sure the trade dialogue would be constructive after the disastrous EU-China summit in April. After a two-year break, however, the dialogue is a good sign, even if it could once again only take place as a video call. There will not be a second HED this year; the next one will not take place until 2023. But perhaps it will then again be held in person.

    Beijing denies Xi’s invitation to Europeans

    There was confusion, however, about an invitation for European leaders to the People’s Republic: The daily newspaper South China Morning Post reported on a presumed offer of talks from Xi Jinping. It was said he invited German Chancellor Olaf Scholz, French President Emmanuel Macron, Italian Prime Minister Mario Draghi, and Spanish Prime Minister Pedro Sánchez to a personal meeting in Beijing in November, the SCMP wrote, citing a person familiar with the matter. There were no confirmations or comments on the report from the four European capitals. Berlin refused to comment on travel schedules.

    However, Beijing responded on Tuesday with a clear denial: “I don’t know where the information came from,” Foreign Ministry spokesman Zhao Lijian said. The invitation to European leaders would have meant a return to personal diplomacy with European politicians for Xi. Since the beginning of the Covid pandemic, no European politician has met directly with the Chinese leader bilaterally. All exchange has taken place via video call.

    After the report was published, there has been criticism of the alleged invitation to Scholz, Macron, Draghi, and Sánchez. Doubts also arose because the offer of talks was said to be scheduled for a day after the CCP party congress in October. At this congress, however, Xi wants to be confirmed for another term in office. Perhaps Beijing noticed that it is not particularly advantageous for the public image of a genuine election if a president, who is supposedly still “anxious” about his election, is already issuing large invitations – hence the public withdrawal.

    EU must make a united response to Beijing

    The selection of the invited Europeans was also not particularly well received: With Germany, France, Italy, and Spain, China would have invited the largest EU economic partners. These countries would then pay their respects to the “party emperor” in Beijing directly after the party congress, criticized Green MEP Reinhard Buetikofer. He urged to carefully consider the response to the invitation. Also criticized was the exclusion of other EU members. Central and Eastern European states had been “accused of being Trojan horses for years,” Slovak China analyst Matej Šimalčík wrote on Twitter. The only morally acceptable step for the four EU states is therefore to “politely decline and ask for a full EU27+China meeting,” Šimalčík said.

    It will be a long time before there is a high-ranking visit from Europe to China. That is one of the reasons why the Taiwan trip of Nicola Beer, Vice President of the European Parliament and German FDP MEP, has now received considerable attention. From Tuesday, Beer will be in Taipei for a three-day official visit. This is Beer’s first visit to Taiwan as Vice President of the EU Parliament. On Tuesday, the FDP politician met Taiwan’s Prime Minister Su Tseng-chang, and talks with President Tsai Ing-wen are to follow on Wednesday. Beers’ visit drew familiar criticism from Beijing, which accused the EU politician of disregarding the “One China Principle”.

    FDP European politician Beer visits Taiwan

    Beer kicked off her visit by calling for support for the island nation against China. “Taiwan’s bloom is also Europe’s bloom. We won’t have a blind eye on China’s threat to Taiwan,” Beer said, according to media reports. She drew a direct comparison between her visit and Russia’s invasion of Ukraine. Beer said, according to the AFP news agency, “There is no room for Chinese aggression in democratic Taiwan. Currently, we are witnessing a war in Europe. We don’t want to witness a war in Asia.”

    According to a report that is already infuriating Beijing, Taipei is set to receive yet another visit in August. The Financial Times, citing several insiders, reported that Nancy Pelosi, the Speaker of the House of Representatives, plans to visit Taipei before the end of August. According to the report, the visit is part of a trip by a US delegation that is also scheduled to visit Japan, Malaysia, Singapore, and the US Armed Forces Indo-Pacific Command in Hawaii. The trip has so far not been officially confirmed by either the US State Department or Taiwan. Originally, a visit was planned in April. However, it had to be canceled due to Pelosi’s Covid infection. Chinese Foreign Minister Wang Yi already said in April that a visit by Pelosi to Taiwan would be a “malicious provocation”.

    • European policy
    • Trade
    • Trade Policy

    News

    Nationalization of EDF costs France €9.7 billion

    The French government wants to pay almost €10 billion for the nationalization of the utility company EDF. By taking over the remaining 16 percent for €9.7 billion, the government wants to stabilize EDF and secure the country’s energy supply.

    The heavily indebted company, which is Europe’s largest operator of nuclear power plants, struggles with the fallout of the Ukraine war. EDF currently has to source power from abroad at record high rates, but has to sell it cheaper to its competitors due to the government’s price cap. But even before, nuclear power plants suffered unplanned outages, the cost of new nuclear reactors skyrocketed, and construction was delayed.

    The finance ministry in Paris is offering the remaining EDF shareholders €12 per share, it announced on Tuesday. That is 53 percent more than the share’s value on July 5, the day before the nationalization plans were announced, but far less than the €33 for which EDF was floated on the stock market in 2005.

    After trading resumed, the shares soared up 15 percent to €11.80 on Tuesday. Trading had been suspended for a week. The offer is to be submitted by September, and the withdrawal from the stock exchange is to be completed by the end of October, according to ministry circles. For this, the government needs a majority of at least 90 percent of the shares.

    EDF’s debts will continue to increase

    “Nationalisation is ultimately the only way to save the company and ensure electricity production,” said Ingo Speich, head of sustainability and corporate governance at Deka Investment. “This is a bitter but necessary step.” France, which would normally be exporting electricity at this time of the year, is currently importing from Spain, Switzerland, Germany and Britain, and the supply crunch is likely to worsen this winter.

    Rating agency S&P expects EDF’s debt mountain to exceed €100 billion before the end of this year. In the spring, the government already financed the bulk of a capital increase of €3 billion. A banker familiar with the matter said that EDF would soon need another money infection. The turmoil on the energy markets in the wake of the Russian invasion of Ukraine is plaguing many electricity and gas suppliers. The German government is clashing with Uniper’s majority owner, Finland’s state-owned Fortum, over the bailout cost of its largest gas importer. rtr

    • Energy
    • France
    • Nuclear power

    EU begins accession negotiations with Albania and North Macedonia

    After several years of slumber, European enlargement policy continues to gain momentum. Around four weeks after the decision to grant Ukraine and Moldova candidate status, the European Union began formal accession talks with Albania and North Macedonia in Brussels on Tuesday.

    Originally, negotiations were supposed to begin two years ago. However, Bulgaria had repeatedly delayed the start. “You have shown strategic patience, in abundance,” said Commission President Ursula von der Leyen, praising the heads of state and government of the candidate countries, Petr Fiala and Edi Rama, who had traveled to Brussels specifically for the occasion. Von der Leyen stressed that North Macedonia and Albania had worked hard for this “historic moment”. As examples, she cited progress on the rule of law, the fight against corruption and economic reforms. North Macedonia has been a candidate for EU membership since 2005, Albania since 2014.

    The fact that the way is now clear for accession negotiations is due to a compromise proposal from Paris. This proposal, which was drafted in June under the then French EU presidency, provides for the rights of the Bulgarian minority in North Macedonia to be protected by the constitution.

    No rapid accession expected

    However, the amendment of the constitution could prove difficult because the government does currently not have the necessary two-thirds majority in parliament. The main opposition party, the right-wing nationalist VMRO-DPMNE, has been up in arms against the compromise for days. It accuses the government in Skopje of “treason”.

    Von der Leyen stated that North Macedonia need not worry. All EU documents would be negotiated in Macedonian. This would also apply to an agreement with the EU border protection agency Frontex, which is to be deployed to the country soon. In addition, Skopje could count on more investments and trade concessions. Albania can also expect benefits from the accession talks, according to the German EU leader. Von der Leyen promised rapid inclusion in the EU’s civil defense mechanism, which helps, for example, in the event of forest fires. However, neither Albania nor North Macedonia can expect fast EU accession.

    Negotiations with Brussels tend to take many years, and there is no guarantee of success. In fact, candidate countries can be downgraded or talks suspended should problems persist. Turkey is a negative example. Talks there have been on hold for years, and EU accession is no longer considered realistic.

    “All legal, political and economic criteria must be fully met,” warned CDU MEP David McAllister. The pace would depend on the “individual efforts” of candidates. Germany’s Minister of State for Europe Anna Lührmann (Greens) was more optimistic. “This sends a very clear signal that the countries of the Western Balkans belong in the EU,” she said in Brussels. ebo

    • Albania
    • European policy
    • North Macedonia

    EU wants to add Sberbank and UMMC CEO to sanctions list

    The European Union wants to add Russia’s largest bank and the head of mining company UMMC to its sanctions list. It accuses Sberbank and UMMC CEO Andrey Kozitsyn of supporting Russia’s war against Ukraine, according to a draft document obtained by Reuters.

    This would have far-reaching consequences for the bank: In this case, authorities would freeze the bank’s assets in the West and suspend all transactions except payments for food and fertilizer deliveries, an EU insider said. The EU has already blocked Sberbank’s access to the SWIFT international payments system, restricting the Russian financial institution’s business.

    In total, the EU wants to add 48 individuals and 9 groups to the sanctions list – including the “Night Wolves” motorcycle club, actors, politicians, the deputy head of a Russian security agency, family members of already sanctioned oligarchs and members of the armed forces. The planned sanctions against UMMC head Kozitsyn are based on the fact that he works in a business sector that generates significant revenue for the Russian government.

    The EU will decide on further sanctions on Wednesday. If the proposals are passed, the number of individuals sanctioned by the EU would increase to 1,229 and the number of sanctioned companies to 110. rtr

    • European policy

    Three candidates left for Johnson successor

    In the race to succeed Boris Johnson as Prime Minister and leader of the British Conservative Party, the number of contenders has been further reduced. On Tuesday, Kemi Badenoch, an MP from the right-wing fringe of the Tory Party, dropped out.

    Rishi Sunak, the former Minister of Finance who is of Indian immigrant descent, is considered to be almost certain for the final round; he again received the majority of votes by a wide margin in the ballot. Competing for second place are Secretary of State Liz Truss and Minister of State for Trade Policy Penny Mordaunt. The deciding factor will likely be who can win over the most MPs who last voted for Badenoch. Some observers expect a boost for Truss, who is also considered part of the right wing of the party.

    The remaining candidates are to face a final round of voting within the party on Wednesday. The result is expected at 5 PM (CEST). The person with the least votes will be removed from the race for succession. Who of the two finalists will ultimately succeed Boris Johnson will be decided by party members in a runoff election over the summer. The process is expected to be concluded on September 5.

    Bad news for Sunak came with the results of a poll of Tory Party members conducted by the polling firm Yougov on Tuesday. The results indicate that he is likely to lose the runoff – regardless of which of the two women runs against him. How many members the Tory Party currently has is unclear. In the last party leader election in 2019, there were around 160,000 members. dpa

    • Boris Johnson
    • United Kingdom

    Google allows use of competing payment systems

    Alphabet-owned Internet company Google is lowering fees for developers of non-gaming apps in its app store who switch to competing payment systems, effective immediately. With the fee reduction from 15 to 12 percent, which only applies to European customers, the company is complying with the new EU tech regulations, the US technology giant announced on Tuesday.

    The reduction is to be extended to gaming apps in the future. The EU’s Digital Markets Act (DMA) rules will come into force next year and require tech giants to allow app developers to use competing payment platforms for in-app payments – otherwise they could risk fines of up to 10 percent of their global revenue. Google’s move continues a string of concessions to regulators that includes settling a copyright dispute in France and paying compensation in Australia. rtr

    • Digital Markets Act
    • Digital policy
    • Google

    Heads

    Katharina Zweig – researcher for fair AI

    Katharina Zweig researches artificial intelligence at the TU Kaiserslautern.

    Katharina Zweig, a professor for theoretical computer science at the TU Kaiserslautern, wants to make artificial intelligence systems better and fairer. In the Algorithm Accountability Lab headed by her, she, therefore, investigates how to measure the quality and fairness of algorithmic decision-making systems.

    She is convinced that, in addition to improved AI, knowledge is the best protection against AI-based decisions with serious consequences. With her book “An Algorithm Has No Sense of Tact,” Katharina Zweig wants to empower people to better assess AI systems and their decisions: “Every person who comes into contact with AI decisions needs to have a rough idea of what AI can and cannot do. I wrote the book for these individuals.”

    Warning of consequences from AI

    Katharina Zweig already wanted to become a scientist since her childhood. After graduating from high school in 1995, the then 18-year-old enrolled to study biochemistry at the University of Tübingen: “I wanted to know people inside out, from the atom to psychology.” During her preliminary diploma exams, Zweig decided to also study bioinformatics. It was here that her new passion was sparked: “I fell in love with theoretical computer science, or more specifically, algorithm development.” Zweig graduated in 2006 and earned her Ph.D. in theoretical computer science in 2007.

    Algorithms are the basis of all AI. And this is already being used successfully to predict the purchasing behavior of humans. “But the success of AI in e-commerce has led to the idea that machines could predict human behavior better than human experts, even beyond the economic sphere.”

    However, great caution should be exercised here, the scientist warns: “In the economic sphere, incorrect prognoses do not have serious consequences; in other areas, for example, when assessing creditworthiness or in court, an incorrect prognosis can ruin a person’s life.”

    Regulation with careful judgment

    With the Artificial Intelligence Act, the European Commission has presented a draft law that is intended to regulate the use of AI. The draft law divides AI systems into risk groups and regulates corresponding protective measures. High-risk AI systems are systems that pose significant risks to the health and safety or fundamental rights of individuals.

    Katharina Zweig supports strong regulation regarding critical AI, but sees the current draft in part as a potential opportunity killer: “The definition of AI in the current draft is so broad that a great many non-critical systems are included. This can prevent useful applications. So a careful judgment is needed in regulation, so that protection is provided against potential threats, without the EU preventing any opportunities.” Alina Jensen

    • Artificial intelligence
    • Digitization
    • Technology

    Europe.Table Editorial Office

    EUROPE.TABLE EDITORS

    Licenses:

      Sign up now and continue reading immediately

      No credit card details required. No automatic renewal.

      Sie haben bereits das Table.Briefing Abonnement?

      Anmelden und weiterlesen