The member states have (still) not reached a final agreement on the tenth sanctions package against Russia. This morning at ten o’clock, the EU ambassadors will meet once again to resolve the last point of contention – transitional periods for a ban on imports of synthetic rubber. Time is running out to implement the sanctions as announced on the anniversary of Russia’s large-scale attack on Ukraine. The current sanctions regime has major loopholes, as you can read in today’s Feature by Till Hoppe and Gabriel Bub.
Ruslan Hrechanyk, Ukraine’s Deputy Minister of Environmental Protection and Natural Resources, puts the environmental damage one year after the war began at €48 billion. In an interview with Claire Stam, he reveals the extent of the environmental damage suffered: “To date, more than 30 percent of Ukraine’s territory is contaminated.”
Internal Market Commissioner Thierry Breton presented the EU’s Gigabit Infrastructure Initiative on Thursday. According to the initiative, all EU citizens should have access to fast Internet, but the question of who should pay for this high-speed network remains unanswered. Corinna Visser explains in her Feature why it is highly controversial to have platforms such as Google, Meta or Netflix share the costs of investments in the networks.
Joe Biden and Ursula von der Leyen have announced it: By Feb. 24, the first anniversary of Russia’s invasion of Ukraine, the US and EU plan to impose new punitive measures against Moscow.
Brussels could miss this symbolic moment, however, according to EU diplomats: Negotiations on the tenth sanctions package were held up again on Thursday – Poland reportedly raised concerns about the planned transition periods that would apply to the ban on synthetic rubber imports from Russia. Even if EU ambassadors resolve the last remaining point of contention at their meeting this Friday at 10 a.m., time will be short to publish the sanctions text in the EU’s Official Journal on the same day.
At the same time, the Western allies have recognized that they need to make significant adjustments in the confrontation with Moscow. The sanctions regime is no longer having as much effect as hoped. Russia’s economy has slumped less than many experts predicted last spring. GDP shrank by 2.1 percent last year, according to Russia’s state statistics agency. The IMF even expects slight growth for 2023.
The export sanctions may have worked quickly, says Guntram Wolff, director of the German Council on Foreign Relations. But “I would be cautious about saying that they have a lasting effect.” Russia has found ways of adapting and circumventing them.
The EU, the USA and their allies, therefore, want to make adjustments. They want to make it more difficult for states and companies to undermine the sanctions. And they want to focus the sanctions more on the area that is crucial for Russia’s war against Ukraine: the military machinery. Those in charge have come to realize that Russia and Ukraine, along with their Western supporters, are “in a battle of military-industrial attrition,” says Tobias Gehrke, senior policy fellow at the European Council on Foreign Relations (ECFR).
After the tenth package of sanctions should therefore be before the eleventh package, which German Economy Minister Robert Habeck already called for on Thursday. “There are clear evasions of the sanctions, and there are also clear evasions from Germany,” the Green politician said.
Russian companies now purchase the goods they need from manufacturers in other countries or Western products via third countries. While exports to Russia from the EU and the USA fell sharply with the invasion, China, Turkey, Kazakhstan and other neighboring countries of Russia have recently been supplying, in some cases significantly, more there than before the war.
According to a study by the European Bank for Reconstruction and Development (EBRD), exports from the EU to several former Soviet republics increased significantly at the same time – an indication of possible circumvention effects.
The hurdles are not too high, according to industry sources: Russian companies set up branches under other names abroad, for example, or call in consultants who order the goods from companies in the West and then send them on to Russia under different declarations. The straw men also sign the end-use declarations, which the Federal Office for Economic Affairs and Export Control (BAFA) requires for export licenses for dual-use goods.
Suppliers from the EU only have to follow up if they have clear indications of sanctions violations – for example, if a dealer in Dubai ordered winter equipment in large quantities. At least the large German companies take this obligation seriously, says Roland Stein, an expert in foreign trade law at the law firm Blomstein: “If they have indications that their products are reaching Russia in a roundabout way, they follow them up.”
But Russia has a lot of experience in this gray market: Some evidence suggests that President Vladimir Putin, as a young KGB officer in Dresden, was himself tasked with covertly transferring Western technology to the Soviet Union. In her book “Putin’s Net,” journalist Catherine Belton describes how the clandestine networks survived even the collapse of the USSR.
The packages planned for the anniversary of the war already contain some measures against the undermining of sanctions. For example, the G7 countries want to create an Enforcement Coordination Mechanism to exchange relevant information among themselves.
Washington and Brussels also want to take those states and companies to task that are helping Russia to undermine Western measures. “They are also signaling that they are keeping their options open for extraterritorial sanctions – in the belief that this will bring about changes in behavior,” says ECFR expert Gehrke.
Germany and twelve other EU states want to go even further. In a joint position paper, they call for further steps: It is “urgently necessary for the EU and its partners to take joint action against the circumvention of sanctions”. For example, the obligation to submit end-use certificates should be extended to other product groups. In addition, the EU should be able to use its trade defense instruments against states if a state helps to circumvent sanctions on a large scale.
Russia is also receiving more military aid from abroad than its Western allies had expected: Iran supplies drones, North Korea large quantities of artillery ammunition and China apparently semiconductors and other high-tech goods.
In the joint position paper, 13 EU states, therefore, call for “special attention to be paid to Western components that are crucial for the Russian defense industry“. Another focus should be placed on Western technology for industries such as energy or aerospace, which are indispensable for the Russian state budget, they said. With Gabriel Bub
Mr. Hrechanyk, what is the financial cost of the war’s impact on the environment in Ukraine?
In one year of war, the environmental damage already amounts to $51.65 billion, or €48.65 billion.
Kyiv is building a legal case against Moscow to force it to finance the reconstruction of the country and its ecosystem. The environment will play an important role in this process. How do you plan to approach this task?
Already in the first days of the war, we introduced several tools to document the environmental damage suffered. I am thinking primarily of the dashboard for monitoring the impact of the war on the environment, EcoZagroza. There is also the work of the State Environmental Inspectorate and special units that collect evidence in the form of photos, videos and satellite images. When possible, they try to collect air and soil samples that can be analyzed in a laboratory. There has also been work on developing methods for calculating the monetary value of environmental damage, and we have developed seven different methods.
With what result?
Currently, more than 2,300 cases of environmental damage are registered in Ukraine. Of these, around 1,163 cases have already been handed over to the judicial authorities.
Have you received any assistance with your project?
We consulted with various stakeholders, including the EU, the US State Department, the World Bank and other international organizations. We needed help to design the process of recording damages and gathering evidence in the most appropriate way so that this evidence can later be accepted by international courts. Ultimately, this will allow Ukraine to be awarded its compensation. In fact, this is a process for which there is no precedent in history.
Ukraine pushes for the creation of a global platform to record the environmental damage caused by the war. What are the broad outlines?
We want a unified global approach to be able to capture the environmental damage caused by war. This global platform initiated by Ukraine has two main objectives: First, as far as we are concerned as a country, it is about receiving compensation in the amount of the environmental damage suffered. The second goal is more global: Any country that engages in an aggressive war in the future should think twice. That is, this platform will enable the international community to pick up the calculator to determine the amount of compensation that this war will generate. So in our opinion, this platform is a tool that will help prevent future wars.
In terms of environmental damage, how does the war affect soil pollution? What does this mean for the Ukrainian agricultural sector?
It is common knowledge that Ukraine is the granary of Europe and the world. Today, because of the war, we are losing the most valuable thing there is – people’s lives. But the war also has an impact on our soils. Agricultural land is particularly affected, preventing farmers from using the fields and contaminating the soil. This will have a long-term impact on global food security.
What are the figures for the impact of war on soils?
As a result of armed aggression and fighting in Ukraine, 281 thousand square meters of soil have already been contaminated with hazardous substances. We are talking about 31,486 tons of petroleum derivatives, 2,000 cubic meters of toxic substances and 12,277.5 thousand square meters of soil polluted by remnants of destroyed objects and ammunition.
Besides soil pollution, there is also the issue of mines. How many hectares of land need to be cleared of mines?
Ukraine is now the largest minefield in the world, which has serious consequences for its future development. The pyrotechnic units of the State Emergency Service clear about 50 hectares of land every day. However, to date, more than 30 percent of Ukraine’s territory is contaminated. Currently, an area of about 80,000 hectares has been combed, rendering harmless 321,000 explosive items. The first phase of demining lasts from one to three years from the time of clearance. Complete demining, especially of rivers and forest areas, can take more than five years.
What is the impact of European Union support on environmental protection?
In June, Ukraine became the first non-EU country to join the LIFE program, the largest European funding instrument for environmental and climate action. Another EU project that helps us is the Phoenix initiative and the Horizon project. These funds will be used for the reconstruction of the country. Ukraine also receives help from EU-backed expert groups, including international technical assistance such as the Reform Support Team. In short, the EU is supporting Ukraine in a variety of ways. I must also mention the support of the German GIZ, with whom we have a very long list of projects and initiatives supporting Ukraine.
Internal Market Commissioner Thierry Breton on Thursday unveiled the EU’s Gigabit Infrastructure Initiative. “Today, we are ensuring that everyone everywhere in the EU has access to fast and secure connectivity,” Breton announced. High investments are needed for the corresponding high-speed networks, he said.
“This is why we are not only promoting network expansion in the short term but also addressing the important question of who should pay for next-generation connectivity infrastructure,” Breton said. That’s because it’s highly controversial whether platforms such as Google, Meta and Netflix, which drive the most traffic on the network, should also share the cost of investing in next-generation networks with telecom operators.
The EU’s gigabit connectivity package consists of three parts:
Both Breton and his spokeswoman stressed several times on Thursday that the consultation, which will run for more than twelve weeks, is an exploration on all sides and open-ended. The background to this is that Breton, formerly head of France Télécom, is considered to be the driver of the idea to have the American tech corporations share the costs of the network operators for network expansion.
“Fair share”, “fair contribution” or “sender pays” – no matter what you want to call it, the debate is many years old and has been raised again and again by the major European telecommunications companies, including Deutsche Telekom. The Association of European Telecommunications Network Operators (ETNO), for example, welcomes the consultation as an urgent step toward eliminating major imbalances in the Internet ecosystem.
And Wolfgang Kopf, Head of Central Policy and Regulation at Deutsche Telekom, recalls that “massive investments are needed to achieve the ambitious 2030 connectivity targets.” That is why the Commission is right to address the question of whether the largest content providers, which generate the majority of data traffic in our networks, should share in the costs of the infrastructure.
However, another European organization, Berec, which brings together national regulators, sees no reason to regulate the compensation paid by large content and application providers (CAPs) to Internet service providers (ISPs).
BEREC clarified this again just last fall: “There is no indication that the network costs of operators in the Internet value chain (from CAPs, on the one hand, to end users on the other) are not already fully recovered and paid for.” He added that a study had already shown this in 2012, and that this would still be the case in 2022.
Civil society organizations, in particular, also fear that a payment obligation on the part of content providers will jeopardize net neutrality. This stipulates that network operators must treat all information on the network equally.
Since the arguments are widely known on all sides, the debate that can now be expected is less exciting than the question of who will ultimately prevail in the Commission, Breton or Competition Commissioner Margrethe Vestager.
The goal of the EU and the Gigabit Package is for all Europeans to have access to gigabit connections by 2030. However, the prerequisites and the actual rollout in the countries are very different. Although Germany has a relatively high number of broadband connections, it is lagging behind in terms of fiber-optic expansion.
Today, gigabit connections in this country are largely realized via upgraded TV cable (a combination of fiber optic and copper cable), but in perspective, this is less powerful than fiber optic networks. It would therefore be desirable to promote the expansion of fiber optics.
However, both VATM, the association of telecom competitors, and Breko, the German Broadband Communications Association, are critical of the EU’s planned regulation (as an update of the Broadband Cost Reduction Directive). “The draft does not reflect the reality of the German fiber optics market,” notes VATM managing director Jürgen Grützner. “In many European countries, there are only a few companies rolling out fiber, but in Germany, there are more than 250 companies. That is an important difference.”
Breko also sees an urgent need for improvement. “The proposed law is designed as a regulation,” says Breko policy head Sven Knapp. “This deprives the member states of the leeway to adapt the regulations to the different needs in the individual countries.” Breko is particularly critical of the fact that the EU Commission’s planned new access rules would facilitate the economically nonsensical double expansion of fiber-optic networks.
Both associations fear that this could benefit Telekom rather than competitors. “I expect the German government and the German members of parliament to work in the legislative process to ensure that German, and not just French, conditions are also taken into account appropriately here,” says Grützner.
Breko is also critical of the far-reaching transparency obligations for network operators in the GIA. “In light of the current debates on network resilience, cybersecurity and critical infrastructure protection, legislators should consider that excessive transparency obligations do not make networks vulnerable,” says Knapp.
From Telekom’s point of view, on the other hand, the draft gigabit recommendation “does not fit in with the future-oriented initiatives” of the EU. “No new incentives for investment are being created here,” says Kopf. “Instead, the EU Commission is getting lost in old regulatory approaches and making the necessary fiber rollout more difficult.” For once, Telekom and its competitors agree on this.
On Nov. 9, 2022, the European Commission published a blueprint for reforming the European Union’s economic-governance framework. Among other things, the document envisions a more integrated approach to EU economic surveillance, strengthened national ownership, simplified rules for governing fiscal risks, and better enforcement of those rules. But the details of the proposal raise doubts about the feasibility of achieving these goals. Specifically, the fiscal component of the proposed framework leaves three fundamental questions unanswered.
The first question is whether the new rules would prevent sovereign insolvency. As of 2021, seven eurozone countries had general government gross debt exceeding 100 percent of GDP, which means that it is only a matter of time before financial markets become nervous about some countries’ debt sustainability. But the Commission’s proposed method of dealing with excessive debt is even more lenient than the old one under the Stability and Growth Pact (SGP).
The blueprint rejects the previous “1/20th rule” for debt reduction on the grounds that requiring governments to cut their debt each year by 1/20th of the excess above 60 percent of GDP is too demanding. Instead, the Commission wants member states with “substantial” or “moderate” debt challenges to negotiate a medium-term fiscal plan that will include a downward debt trajectory. The document neither elaborates on the speed of the fiscal adjustment – that will be detailed later in the methodology for debt sustainability analysis (DSA) – nor specifies the criteria for categorizing debt challenges as “substantial,” “moderate,” or “low.”
A second question concerns the blueprint’s promise of greater simplicity. The old rules were criticized for being too complicated, and for relying on fuzzy categories such as potential output or cyclically adjusted fiscal positions. Since these indicators are hard to measure and forecast, producing them has consistently given rise to arbitrary assumptions and methodological doubts.
Here, too, the new framework would take things even further in the wrong direction. Member states are to present a medium-term fiscal program based on a multiannual adjustment path that the Commission will provide after conducting a DSA. These proposals will then be negotiated with the Commission before receiving final approval from the Economic and Financial Affairs Council (ECOFIN).
At first sight, this approach looks attractive, because it departs from the current one-size-fits-all practice. But, given the mandatory nature of fiscal-adjustment programs backed by potential sanctions, a more individualized approach will inevitably lead to much more bargaining between member states and the Commission (and potentially ECOFIN). After all, many different assumptions and variables could factor into negotiations – from the DSA, the fiscal-adjustment path, and its impact on growth, to other factors such as macroeconomic conditions and special fiscal needs (like those relating to the green transition).
Complicating matters further, the new surveillance framework will operate largely on the basis of forecasts, whereas the old SGP primarily monitored actual variables. Obviously, economic projections can be subject to all manner of errors and faulty assumptions. More to the point, they cannot predict unexpected shocks.
Given the need to shape fiscal policy according to approved medium-term fiscal programs (with potential sanctions for delivery failures), member states will have strong incentives to negotiate for less ambitious adjustment paths, and to suggest rosier macroeconomic forecasts.
And while the Commission will try to push for more ambitious paths to avoid the risk of fiscal crises, member states will have the informational advantage in this overly complex process, because they know domestic conditions better than anyone else. And we already know from experience that larger, politically influential member states will tend to receive favorable treatment.
The third question concerns the lack of political appetite to enforce fiscal rules. Between 1997 (two years before the euro’s introduction) and 2021, the general government deficit exceeded 3 percent of GDP (the maximum level established by the Treaty of the Functioning of the European Union) in eurozone countries in 143 out of 394 observations. Greece and Portugal each breached the deficit ceiling in 18 of those years, while France did so in 17, and Spain in 12.
Similarly, general government gross debt exceeded the 60-percent-of-GDP limit of 229 times out of 394 observations. Austria, Belgium, Greece, and Italy never recorded a gross debt below the threshold, and France did so only twice (in 2000 and 2001). Portugal’s debt exceeded the limit for 20 years, and Germany’s did so for 19 years. The number of eurozone members with debt above 60 percent of GDP grew steadily, to 12 out of 19 in 2021.
More importantly, despite the numerous breaches of the Treaty’s deficit and debt limits, the financial sanctions envisioned in the SGP were never adopted. Clearly, eurozone member states have a collective-action problem that any debate about future fiscal discipline will need to address head-on. (In this light, the Commission’s proposal for introducing reputational sanctions also looks problematic, both in terms of potential efficacy and political acceptance.)
Fiscal discipline is essential for euro stability, and for financial and macroeconomic stability in the EU more broadly. Any new framework must minimize the risk of cross-border negative spillovers and contagion, discourage free riding, and address the risk of moral hazard. Unfortunately, the Commission’s new proposals fall far short.
Copyright: Project Syndicate, 2023.
www.project-syndicate.org
The member states have (still) not reached a final agreement on the tenth sanctions package against Russia. This morning at ten o’clock, the EU ambassadors will meet once again to resolve the last point of contention – transitional periods for a ban on imports of synthetic rubber. Time is running out to implement the sanctions as announced on the anniversary of Russia’s large-scale attack on Ukraine. The current sanctions regime has major loopholes, as you can read in today’s Feature by Till Hoppe and Gabriel Bub.
Ruslan Hrechanyk, Ukraine’s Deputy Minister of Environmental Protection and Natural Resources, puts the environmental damage one year after the war began at €48 billion. In an interview with Claire Stam, he reveals the extent of the environmental damage suffered: “To date, more than 30 percent of Ukraine’s territory is contaminated.”
Internal Market Commissioner Thierry Breton presented the EU’s Gigabit Infrastructure Initiative on Thursday. According to the initiative, all EU citizens should have access to fast Internet, but the question of who should pay for this high-speed network remains unanswered. Corinna Visser explains in her Feature why it is highly controversial to have platforms such as Google, Meta or Netflix share the costs of investments in the networks.
Joe Biden and Ursula von der Leyen have announced it: By Feb. 24, the first anniversary of Russia’s invasion of Ukraine, the US and EU plan to impose new punitive measures against Moscow.
Brussels could miss this symbolic moment, however, according to EU diplomats: Negotiations on the tenth sanctions package were held up again on Thursday – Poland reportedly raised concerns about the planned transition periods that would apply to the ban on synthetic rubber imports from Russia. Even if EU ambassadors resolve the last remaining point of contention at their meeting this Friday at 10 a.m., time will be short to publish the sanctions text in the EU’s Official Journal on the same day.
At the same time, the Western allies have recognized that they need to make significant adjustments in the confrontation with Moscow. The sanctions regime is no longer having as much effect as hoped. Russia’s economy has slumped less than many experts predicted last spring. GDP shrank by 2.1 percent last year, according to Russia’s state statistics agency. The IMF even expects slight growth for 2023.
The export sanctions may have worked quickly, says Guntram Wolff, director of the German Council on Foreign Relations. But “I would be cautious about saying that they have a lasting effect.” Russia has found ways of adapting and circumventing them.
The EU, the USA and their allies, therefore, want to make adjustments. They want to make it more difficult for states and companies to undermine the sanctions. And they want to focus the sanctions more on the area that is crucial for Russia’s war against Ukraine: the military machinery. Those in charge have come to realize that Russia and Ukraine, along with their Western supporters, are “in a battle of military-industrial attrition,” says Tobias Gehrke, senior policy fellow at the European Council on Foreign Relations (ECFR).
After the tenth package of sanctions should therefore be before the eleventh package, which German Economy Minister Robert Habeck already called for on Thursday. “There are clear evasions of the sanctions, and there are also clear evasions from Germany,” the Green politician said.
Russian companies now purchase the goods they need from manufacturers in other countries or Western products via third countries. While exports to Russia from the EU and the USA fell sharply with the invasion, China, Turkey, Kazakhstan and other neighboring countries of Russia have recently been supplying, in some cases significantly, more there than before the war.
According to a study by the European Bank for Reconstruction and Development (EBRD), exports from the EU to several former Soviet republics increased significantly at the same time – an indication of possible circumvention effects.
The hurdles are not too high, according to industry sources: Russian companies set up branches under other names abroad, for example, or call in consultants who order the goods from companies in the West and then send them on to Russia under different declarations. The straw men also sign the end-use declarations, which the Federal Office for Economic Affairs and Export Control (BAFA) requires for export licenses for dual-use goods.
Suppliers from the EU only have to follow up if they have clear indications of sanctions violations – for example, if a dealer in Dubai ordered winter equipment in large quantities. At least the large German companies take this obligation seriously, says Roland Stein, an expert in foreign trade law at the law firm Blomstein: “If they have indications that their products are reaching Russia in a roundabout way, they follow them up.”
But Russia has a lot of experience in this gray market: Some evidence suggests that President Vladimir Putin, as a young KGB officer in Dresden, was himself tasked with covertly transferring Western technology to the Soviet Union. In her book “Putin’s Net,” journalist Catherine Belton describes how the clandestine networks survived even the collapse of the USSR.
The packages planned for the anniversary of the war already contain some measures against the undermining of sanctions. For example, the G7 countries want to create an Enforcement Coordination Mechanism to exchange relevant information among themselves.
Washington and Brussels also want to take those states and companies to task that are helping Russia to undermine Western measures. “They are also signaling that they are keeping their options open for extraterritorial sanctions – in the belief that this will bring about changes in behavior,” says ECFR expert Gehrke.
Germany and twelve other EU states want to go even further. In a joint position paper, they call for further steps: It is “urgently necessary for the EU and its partners to take joint action against the circumvention of sanctions”. For example, the obligation to submit end-use certificates should be extended to other product groups. In addition, the EU should be able to use its trade defense instruments against states if a state helps to circumvent sanctions on a large scale.
Russia is also receiving more military aid from abroad than its Western allies had expected: Iran supplies drones, North Korea large quantities of artillery ammunition and China apparently semiconductors and other high-tech goods.
In the joint position paper, 13 EU states, therefore, call for “special attention to be paid to Western components that are crucial for the Russian defense industry“. Another focus should be placed on Western technology for industries such as energy or aerospace, which are indispensable for the Russian state budget, they said. With Gabriel Bub
Mr. Hrechanyk, what is the financial cost of the war’s impact on the environment in Ukraine?
In one year of war, the environmental damage already amounts to $51.65 billion, or €48.65 billion.
Kyiv is building a legal case against Moscow to force it to finance the reconstruction of the country and its ecosystem. The environment will play an important role in this process. How do you plan to approach this task?
Already in the first days of the war, we introduced several tools to document the environmental damage suffered. I am thinking primarily of the dashboard for monitoring the impact of the war on the environment, EcoZagroza. There is also the work of the State Environmental Inspectorate and special units that collect evidence in the form of photos, videos and satellite images. When possible, they try to collect air and soil samples that can be analyzed in a laboratory. There has also been work on developing methods for calculating the monetary value of environmental damage, and we have developed seven different methods.
With what result?
Currently, more than 2,300 cases of environmental damage are registered in Ukraine. Of these, around 1,163 cases have already been handed over to the judicial authorities.
Have you received any assistance with your project?
We consulted with various stakeholders, including the EU, the US State Department, the World Bank and other international organizations. We needed help to design the process of recording damages and gathering evidence in the most appropriate way so that this evidence can later be accepted by international courts. Ultimately, this will allow Ukraine to be awarded its compensation. In fact, this is a process for which there is no precedent in history.
Ukraine pushes for the creation of a global platform to record the environmental damage caused by the war. What are the broad outlines?
We want a unified global approach to be able to capture the environmental damage caused by war. This global platform initiated by Ukraine has two main objectives: First, as far as we are concerned as a country, it is about receiving compensation in the amount of the environmental damage suffered. The second goal is more global: Any country that engages in an aggressive war in the future should think twice. That is, this platform will enable the international community to pick up the calculator to determine the amount of compensation that this war will generate. So in our opinion, this platform is a tool that will help prevent future wars.
In terms of environmental damage, how does the war affect soil pollution? What does this mean for the Ukrainian agricultural sector?
It is common knowledge that Ukraine is the granary of Europe and the world. Today, because of the war, we are losing the most valuable thing there is – people’s lives. But the war also has an impact on our soils. Agricultural land is particularly affected, preventing farmers from using the fields and contaminating the soil. This will have a long-term impact on global food security.
What are the figures for the impact of war on soils?
As a result of armed aggression and fighting in Ukraine, 281 thousand square meters of soil have already been contaminated with hazardous substances. We are talking about 31,486 tons of petroleum derivatives, 2,000 cubic meters of toxic substances and 12,277.5 thousand square meters of soil polluted by remnants of destroyed objects and ammunition.
Besides soil pollution, there is also the issue of mines. How many hectares of land need to be cleared of mines?
Ukraine is now the largest minefield in the world, which has serious consequences for its future development. The pyrotechnic units of the State Emergency Service clear about 50 hectares of land every day. However, to date, more than 30 percent of Ukraine’s territory is contaminated. Currently, an area of about 80,000 hectares has been combed, rendering harmless 321,000 explosive items. The first phase of demining lasts from one to three years from the time of clearance. Complete demining, especially of rivers and forest areas, can take more than five years.
What is the impact of European Union support on environmental protection?
In June, Ukraine became the first non-EU country to join the LIFE program, the largest European funding instrument for environmental and climate action. Another EU project that helps us is the Phoenix initiative and the Horizon project. These funds will be used for the reconstruction of the country. Ukraine also receives help from EU-backed expert groups, including international technical assistance such as the Reform Support Team. In short, the EU is supporting Ukraine in a variety of ways. I must also mention the support of the German GIZ, with whom we have a very long list of projects and initiatives supporting Ukraine.
Internal Market Commissioner Thierry Breton on Thursday unveiled the EU’s Gigabit Infrastructure Initiative. “Today, we are ensuring that everyone everywhere in the EU has access to fast and secure connectivity,” Breton announced. High investments are needed for the corresponding high-speed networks, he said.
“This is why we are not only promoting network expansion in the short term but also addressing the important question of who should pay for next-generation connectivity infrastructure,” Breton said. That’s because it’s highly controversial whether platforms such as Google, Meta and Netflix, which drive the most traffic on the network, should also share the cost of investing in next-generation networks with telecom operators.
The EU’s gigabit connectivity package consists of three parts:
Both Breton and his spokeswoman stressed several times on Thursday that the consultation, which will run for more than twelve weeks, is an exploration on all sides and open-ended. The background to this is that Breton, formerly head of France Télécom, is considered to be the driver of the idea to have the American tech corporations share the costs of the network operators for network expansion.
“Fair share”, “fair contribution” or “sender pays” – no matter what you want to call it, the debate is many years old and has been raised again and again by the major European telecommunications companies, including Deutsche Telekom. The Association of European Telecommunications Network Operators (ETNO), for example, welcomes the consultation as an urgent step toward eliminating major imbalances in the Internet ecosystem.
And Wolfgang Kopf, Head of Central Policy and Regulation at Deutsche Telekom, recalls that “massive investments are needed to achieve the ambitious 2030 connectivity targets.” That is why the Commission is right to address the question of whether the largest content providers, which generate the majority of data traffic in our networks, should share in the costs of the infrastructure.
However, another European organization, Berec, which brings together national regulators, sees no reason to regulate the compensation paid by large content and application providers (CAPs) to Internet service providers (ISPs).
BEREC clarified this again just last fall: “There is no indication that the network costs of operators in the Internet value chain (from CAPs, on the one hand, to end users on the other) are not already fully recovered and paid for.” He added that a study had already shown this in 2012, and that this would still be the case in 2022.
Civil society organizations, in particular, also fear that a payment obligation on the part of content providers will jeopardize net neutrality. This stipulates that network operators must treat all information on the network equally.
Since the arguments are widely known on all sides, the debate that can now be expected is less exciting than the question of who will ultimately prevail in the Commission, Breton or Competition Commissioner Margrethe Vestager.
The goal of the EU and the Gigabit Package is for all Europeans to have access to gigabit connections by 2030. However, the prerequisites and the actual rollout in the countries are very different. Although Germany has a relatively high number of broadband connections, it is lagging behind in terms of fiber-optic expansion.
Today, gigabit connections in this country are largely realized via upgraded TV cable (a combination of fiber optic and copper cable), but in perspective, this is less powerful than fiber optic networks. It would therefore be desirable to promote the expansion of fiber optics.
However, both VATM, the association of telecom competitors, and Breko, the German Broadband Communications Association, are critical of the EU’s planned regulation (as an update of the Broadband Cost Reduction Directive). “The draft does not reflect the reality of the German fiber optics market,” notes VATM managing director Jürgen Grützner. “In many European countries, there are only a few companies rolling out fiber, but in Germany, there are more than 250 companies. That is an important difference.”
Breko also sees an urgent need for improvement. “The proposed law is designed as a regulation,” says Breko policy head Sven Knapp. “This deprives the member states of the leeway to adapt the regulations to the different needs in the individual countries.” Breko is particularly critical of the fact that the EU Commission’s planned new access rules would facilitate the economically nonsensical double expansion of fiber-optic networks.
Both associations fear that this could benefit Telekom rather than competitors. “I expect the German government and the German members of parliament to work in the legislative process to ensure that German, and not just French, conditions are also taken into account appropriately here,” says Grützner.
Breko is also critical of the far-reaching transparency obligations for network operators in the GIA. “In light of the current debates on network resilience, cybersecurity and critical infrastructure protection, legislators should consider that excessive transparency obligations do not make networks vulnerable,” says Knapp.
From Telekom’s point of view, on the other hand, the draft gigabit recommendation “does not fit in with the future-oriented initiatives” of the EU. “No new incentives for investment are being created here,” says Kopf. “Instead, the EU Commission is getting lost in old regulatory approaches and making the necessary fiber rollout more difficult.” For once, Telekom and its competitors agree on this.
On Nov. 9, 2022, the European Commission published a blueprint for reforming the European Union’s economic-governance framework. Among other things, the document envisions a more integrated approach to EU economic surveillance, strengthened national ownership, simplified rules for governing fiscal risks, and better enforcement of those rules. But the details of the proposal raise doubts about the feasibility of achieving these goals. Specifically, the fiscal component of the proposed framework leaves three fundamental questions unanswered.
The first question is whether the new rules would prevent sovereign insolvency. As of 2021, seven eurozone countries had general government gross debt exceeding 100 percent of GDP, which means that it is only a matter of time before financial markets become nervous about some countries’ debt sustainability. But the Commission’s proposed method of dealing with excessive debt is even more lenient than the old one under the Stability and Growth Pact (SGP).
The blueprint rejects the previous “1/20th rule” for debt reduction on the grounds that requiring governments to cut their debt each year by 1/20th of the excess above 60 percent of GDP is too demanding. Instead, the Commission wants member states with “substantial” or “moderate” debt challenges to negotiate a medium-term fiscal plan that will include a downward debt trajectory. The document neither elaborates on the speed of the fiscal adjustment – that will be detailed later in the methodology for debt sustainability analysis (DSA) – nor specifies the criteria for categorizing debt challenges as “substantial,” “moderate,” or “low.”
A second question concerns the blueprint’s promise of greater simplicity. The old rules were criticized for being too complicated, and for relying on fuzzy categories such as potential output or cyclically adjusted fiscal positions. Since these indicators are hard to measure and forecast, producing them has consistently given rise to arbitrary assumptions and methodological doubts.
Here, too, the new framework would take things even further in the wrong direction. Member states are to present a medium-term fiscal program based on a multiannual adjustment path that the Commission will provide after conducting a DSA. These proposals will then be negotiated with the Commission before receiving final approval from the Economic and Financial Affairs Council (ECOFIN).
At first sight, this approach looks attractive, because it departs from the current one-size-fits-all practice. But, given the mandatory nature of fiscal-adjustment programs backed by potential sanctions, a more individualized approach will inevitably lead to much more bargaining between member states and the Commission (and potentially ECOFIN). After all, many different assumptions and variables could factor into negotiations – from the DSA, the fiscal-adjustment path, and its impact on growth, to other factors such as macroeconomic conditions and special fiscal needs (like those relating to the green transition).
Complicating matters further, the new surveillance framework will operate largely on the basis of forecasts, whereas the old SGP primarily monitored actual variables. Obviously, economic projections can be subject to all manner of errors and faulty assumptions. More to the point, they cannot predict unexpected shocks.
Given the need to shape fiscal policy according to approved medium-term fiscal programs (with potential sanctions for delivery failures), member states will have strong incentives to negotiate for less ambitious adjustment paths, and to suggest rosier macroeconomic forecasts.
And while the Commission will try to push for more ambitious paths to avoid the risk of fiscal crises, member states will have the informational advantage in this overly complex process, because they know domestic conditions better than anyone else. And we already know from experience that larger, politically influential member states will tend to receive favorable treatment.
The third question concerns the lack of political appetite to enforce fiscal rules. Between 1997 (two years before the euro’s introduction) and 2021, the general government deficit exceeded 3 percent of GDP (the maximum level established by the Treaty of the Functioning of the European Union) in eurozone countries in 143 out of 394 observations. Greece and Portugal each breached the deficit ceiling in 18 of those years, while France did so in 17, and Spain in 12.
Similarly, general government gross debt exceeded the 60-percent-of-GDP limit of 229 times out of 394 observations. Austria, Belgium, Greece, and Italy never recorded a gross debt below the threshold, and France did so only twice (in 2000 and 2001). Portugal’s debt exceeded the limit for 20 years, and Germany’s did so for 19 years. The number of eurozone members with debt above 60 percent of GDP grew steadily, to 12 out of 19 in 2021.
More importantly, despite the numerous breaches of the Treaty’s deficit and debt limits, the financial sanctions envisioned in the SGP were never adopted. Clearly, eurozone member states have a collective-action problem that any debate about future fiscal discipline will need to address head-on. (In this light, the Commission’s proposal for introducing reputational sanctions also looks problematic, both in terms of potential efficacy and political acceptance.)
Fiscal discipline is essential for euro stability, and for financial and macroeconomic stability in the EU more broadly. Any new framework must minimize the risk of cross-border negative spillovers and contagion, discourage free riding, and address the risk of moral hazard. Unfortunately, the Commission’s new proposals fall far short.
Copyright: Project Syndicate, 2023.
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