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24 May 2024

Au revoir, AfD

There will be briefing on Monday, May 27, due to the Spring Bank Holiday in the UK; in our lead story this morning we write about important shifts going on right now in European politics - the far-right Identity and Democracy group has kicked out the AfD to reposition itself closer to Meloni's group; we also have stories on the Socialists refusing to cooperate with Meloni in Brussels - a precursor of potentially new alliances; on yesterday's TV between Attal and Bardella; on Macron's firefighting on a remote island; on why Europe is not growing; and, below, on something that is both ethically wrong, and not working at the same time.

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Today's free story

How migrant pacts compromise the EU

The investigative Lighthouse Reports on Europe’s migration pact highlights human rights abuses in African countries that we have deals with. They are a reminder that those unethical pacts not only undermine our own values. They also don't solve the problem.

In a year-long investigation in collaboration with Der Spiegel, El Pais and Le Monde, they found evidence that EU is funding, and in some cases contributing directly, to systematic racial profiling, detention, and expulsion of black communities across at least three North African countries. In Morocco, Mauritania and Tunisia, refugees and workers are reportedly apprehended and loaded on buses to be left with nothing to drink or eat in arid desert areas. There are also reports of cases where authorities take migrants to hand them over at the border to human traffickers and gangs that use them to extract ransom money.

The team used testimony of 50 survivors to geolocate their journey and find open source evidence in support of those cases. In Tunesia the team found 13 such incidents between March 2023 and May 2024, where migrants were rounded up and dumped in desert areas usually close to the Libyan or Algerian borders.

The team got information that EU officials and Frontex were well aware of such practices, some told the team that this is part of making migration unattractive.

Then there is the question of funding. The EU has given Tunisia, Mauritania and Morocco more than €400m for migration management. Some of the vehicles that were used in these round-ups in Tunesia were funded by Germany and Italy. Funding such practices could make the European Union liable for human rights violations.

Outsourcing re-enforces unethical behaviour, while it does not prevent migrants from coming.

23 May 2024

Recognising first

Spain, Ireland and Norway announced that they will recognise the state of Palestine in an official ceremony on 28 May. The three countries will be recognising Palestine based on 1967 borders, which includes the West Bank and Gaza, irrespective of the settlements. More EU countries may follow their move, while the majority of EU states continue to consider that this is not the right time.

When is the right time? Under the Oslo peace process, recognition by the western states was to come last, after the two sides agree on a two-state solution. But this agreement never came, while more settlements have been built in the occupied territories since 1993.

Recognising a Palestinian state based on its 1967 borders confirms the sovereign rights of Palestinians to live next to the Israeli state. It is meant to support more moderate voices in Palestine by giving them what they want, a recognition that they have equal rights to exist. Recognition does not end the war in Gaza. Nor does it produce a two-state solution or the modalities that statehood comes with. It offers no solution to the conditions in the West Bank. But it opens the door to a peace process based on mutual rights.

The three European countries spearheaded an effort to reverse the logic of the Oslo peace process as a way to force facts on the ground. Norway was the country that negotiated the outlines of a peace deal that led to the Oslo accords in the early 1990s. Norway’s prime minister said yesterday that in times of war where thousands get killed and injured, recognition of the state of Palestine is to keep alive the idea that there is a political solution for both people to live side by side in peace and security.

The three EU countries join the 139 UN countries that already recognise Palestine as an independent state. Most of them come from the South or the East, while the West mainly followed the logic of the Oslo accord.They are not the first European states though, Sweden already recognised Palestine in 2014, while countries from the former Soviet Union did so in the 1980s.

What will be the political impact of their decision moving forward? The Guardian points out that the European countries’ recognition drive could lead to the erosion of the US ownership of the peace process. The most important message it sends is that Palestinians no longer require Israel’s permission for their fundamental right to self determination, which was at the heart of the US-mediated Oslo process. How far could this divergence from the US go? That depends amongst other things on what the large EU countries will do. Would Labour after winning the UK elections in July be more inclined to recognise Palestine now? That would be a game-changer for Europe and its role in the region.

22 May 2024

Political faultlines over ICC move

The International Criminal Court’s prosecutor’s move to seek arrest warrants against Benjamin Netanyahu and Yoav Gallant reveals splits amongst EU countries, and between the EU and the US. It will test the universality of international law as described in the statutes of Rome, the legal basis for the ICC. The court’s decision is about accountability for actions already taken. If the warrants were to be issued, politics could take its own course in reaction to this.

France, Ireland and Spain unequivocally supported the ICC, its independence and their fight against impunity. Germany and Austria issued a more ambivalent message, backing its independence but dismissing the legal and moral equivalence the court’s prosecutor seems to suggest by seeking arrests against the two Israeli politicians and three Hamas leaders. Italy too found strong words, calling it absurd and unacceptable to compare Israel to Hamas.

How far would those signatory countries go to defend the Israeli government against the ICC if those warrants are issued? European countries, as signatories of the Rome statutes, would have to arrest Netanyahu and Gallant if they ever set foot on their soil. Depending on the dynamics in Israel and the US, would withdrawing from the ICC become an option for staunch Israeli supporters, especially in those countries deeply implicated in arms deliveries to Israel?

In the US, there is already a bipartisan push against the ICC. Anthony Blinken says he is working with lawmakers on sanctioning the ICC over what is seen as a wrong-headed decision. This comes as Republicans push for a sanctions bill that may come to a vote this week. The Illegitimate Court Counteraction Act would target ICC officials involved with the case by blocking their entry to the US, revoking any current US visas they hold, and prohibiting them from any property transactions within the country - unless the court ceases its cases against protected persons of the United States and its allies. At least 37 lawmakers in the Republican-led House are now co-sponsoring the legislation, according to the BBC.

It would be quite something if the US administration were to help Republicans impose sanctions on ICC officials after having removed Trump-era sanctions against top ICC prosecutor Fatou Bensouda back in 2021. This is a difficult one to swallow for those Democrats that defend universal human rights. It is a no-brainer for Republicans to support Israel, but not so for the Democrats. A Zeteo poll suggests a majority of Democrats already believing that the IDF is using too much military power in Gaza. Palestine is one of the themes of the identity faction in the Democratic party. And student protests continue through the graduation ceremonies at various elite US universities. The ICC may unite the Israelis behind Netanyahu, but Joe Biden is putting his re-election chances on the line.

21 May 2024

How not to dismantle Russia

When the leaders of the big countries have nothing important to say, the leaders of the small countries fill the void. It was always thus in the EU. We therefore don't blame the formidable Kaja Kallas for speaking her mind on Russia and Ukraine. Her country spends more per capita than any other country in the world on aid for Ukraine. Her own family has suffered from Russian oppression. She has every right to speak up.

Her positions get widely reported in the media. Outsiders, however, should understand that these are absolutely not the position of the Ukraine's western allies. At what appeared to be a casual chat, she declared the split-up of Russia into smaller states as an explicit western war goal. Previously, she tried to construct the biggest straw man that has ever been seen in European politics: if Russia wins the war, she said, there could be up to 30m Ukrainian refugees who would descend all over Europe. If that does not scare us, what else will? 

The west does not have an agreed war goal in Ukraine. But the one thing Americans, and all the large European countries, agree on is that they don't want to send troops to Ukraine, they don't want to erect a no-fly zone, and they don't seek regime change in Russia. 

Olaf Scholz, for example, never says Ukraine must win. He says Russia must not win. He would, we presume, like a settlement on terms that are deemed favourable to Ukraine, though he does not tell us what he means by that. As Germany is the largest European supporter of Ukraine in absolute terms, and likely to become more important as the role of the US diminishes, we would assume that Germany's own war goal will matter. Even with a change of government after the next year's elections, we don't think that the position of Germany would shift fundamentally. Friedrich Merz would be open to sending cruise missiles to Ukraine, but on the big picture, they are all aligned.

Her warnings about refugees is a form a scare-mongering that nobody takes seriously, if only because the most likely outcome of this war is a draw, not a total Russian victory. We hear a lot of warnings that Europe must step up its defences, or Vladimir Putin would invade our countries too. Having vastly underestimated Putin, we are not overestimating him.  

That said, a strong case be made for more defence spending, and for more efficient defence spending. But to frame this debate as a scare story won't get us anywhere.

When Kallas talks about regime change in Russia, she ends up strengthening opponents of Nato in the west. She appears to reaffirms what they always tell us - that Nato is a western conspiracy to take over the world. It falls into the not-helpful category.

20 May 2024

After Raisi

After the death of President Ebrahim Raisi and his foreign minister in a helicopter crash, what will happen next?

Raisi was a loyalist to Ali Khamenei, Iran's supreme leader. He was the ultimate regime insider and a prospective successor to Khamenei. The Iranian constitution mandates early elections within 50 days after a president dies. Any possible contender in these snap elections will need the blessings from Khamenei, while the conservatives are likely to defend their grip to power.

This interim means two months where Iran’s focus will be on internal affairs, rather than a next round of attacks on Israel. But what after the elections? If those snap elections produce another conservative president, this will not change Iran’s geopolitical position. Ties with Russia and other allies are likely to deepen, while their battle against Israel will continue. The helicopter accident could even be instrumentalised to whip up anti-Israeli support. Bad weather conditions and old helicopters are mainly held responsible for the crash. But already there are voices out there, like those of the conservative commentator Foad Izadi on the news channel Irinn, who suggested that foul play by Israel cannot be ruled out.

Benjamin Netanyahu, meanwhile, may meet his own moment of truth in Israel after Benny Gantz and Yoav Gallant pressed him publicly to present a post-conflict plan for Gaza. Gantz issued a six-point plan that includes an international civilian governance mechanism for Gaza, and gave Netanyahu an ultimatum on 9 June to present a credible exit plan. If Netanyahu does not, Gantz would pull out with his party, causing the coalition to collapse. Netanyahu himself played down its significance. It is indeed not clear that Gantz will follow through with his threat in June. What it did provoke is a response from the far-right finance minister Bezalel Smotrich, who laid out his conditions for the IDF to take complete control over Rafah and establish permanent control over the so-called Philadelphi Corridor along the border with Egypt. He also advocates a military takeover of southern Lebanon if Hezbollah does not withdraw from the border. This would be a military campaign on steroids, in complete denial of US concerns.

For the military, the lack of an exit strategy is a formidable challenge. No exit strategy means the military is to fill the void including new operations in areas that were already been cleared by the military before. Something will have to give, and Netanyahu will eventually have to decide.

17 May 2024

Keep migrants out

Are more of those unethical migration pacts with African beckoning? Just a day after the New Pact on Migration and Asylum was adopted, a letter from 15 member states was released that calls on the European Commission to identify, elaborate and propose new ways and solutions to prevent irregular migration to Europe. They advocate outside the box thinking to address migration at the European level. Does outside the box mean ditching more of our values to keep migrants out?

Migration policies have divided EU member states since the refugee wave in 2015, in particular over the question of who is responsible for what when migrants arrive illegally in an EU country. The reform of the Dublin pact was a compromise to define burden-sharing, by giving choices to member states to either pay or take migrants. It is by no means ideal, and its implementation could restrict rights of asylum seekers further. Recent migration boosts have been instrumentalised by far-right politicians in EU countries, a big theme also in the European elections.

Most of the provisions of the new migration pact will only enter into force in 2026. It thus does not offer any short term relief while the numbers of migrants are rising. The pressures are real, and they seek relief outside European borders.

The 15 EU countries call for more partnerships with countries along migration routes. They cite deals with Turkey and Tunisia or Italy’s bilateral agreement with Albania are cited as examples. The lead in this group comes from Bulgaria, the Czech Republic and Denmark and signatories include Estonia, Greece, Italy, Cyprus, Latvia, Lithuania, Malta, the Netherlands, Austria, Poland, Romania and Finland.

We have been critical about these deals from the start. It leads to Faustian pacts with autocratic regimes that defy human rights that Europe otherwise holds so dear. It gives blackmail incentives to third countries, which migrants can continue their journey towards Europe from. It signals a European position based on fear to the rest of the world, rather than strength. Shifting this to a better place would need a much bigger rethink of Europe’s role in this world, not a petty competition of not-in-my-backyard policies.

16 May 2024

EU's fear based foreign policy

In her excellent column for the Guardian, Nathalie Tocci describes Europe’s malaise as one of fear driven policy-making that risks paralysis in a world that is fast changing around us. Fear is the underlying driver in European foreign policy decision-making to the east and the west, be it in Russia’s war in Ukraine, or its anti-immigration pacts, its passive position over Israel’s war in Gaza, or terrified outlook if Donald Trump were to come back to power.

How does fear play out with Ukraine? EU policymakers are more inclined to step up their support for Ukraine when their troops are about to lose, while getting uncomfortable when they win back territories, prompting fears of Russian nuclear retaliation, which eventually leads to too-little-or-too-late support for Ukraine. Fear plays a big role in explaining why the EU is stuck with its damned if you do, damned if you don’t predicament.

Fear also explains Europe’s attitude towards North Africa and the Middle East. Instead of having a rational debate about what sort of legal immigration can be beneficial for us as ageing societies, EU policymakers rush to conclude unethical deals, paying cash to keep migrants out. The recent migration pacts with Egypt, Tunisia, Mauritania, and Lebanon are examples of this fear-driven policy making, which contradicts our interests in the long run. It worsens the image of Europe amongst African countries, presenting us as one that is lecturing the world about human rights while concluding deals to keep migrants away, and lopsided economic agreements with beneficial terms for raw material extractions from their land. It is the absence of a foreign policy with those countries, reducing policy making to a pure transactional approach with a selfish motivation to keep migrants out.

On the Israel-Palestinian conflict, there are many reasons why Europe did not exert its influence. It is not a lack of leverage. After all, Germany is the second-largest military exporter to Israel and the EU as a whole is the biggest donor of Palestinian aid. Fear of being called antisemitic is behind the failure to question unconditional support for Israel, no matter what it does in Gaza. There is no hint that Europe is doing anything about the situation, despite the looming invasion in Rafah and violence in the West Bank.

Looking at the US, Europeans seem to accept that Donald Trump may indeed return back to the White House. But rather than preparing for this, they seemingly prefer to wish it away. This is not how we will emerge into a future with our bearings intact. Maybe we are doomed, as Emmanuel Macron warned. Or are we ready to address our shortcomings?

15 May 2024

Buying time over Rafah

Israeli tanks are rolling into the east of Rafah, but it is not considered a full invasion yet by neither the Israeli government nor the Biden administration. Benjamin Netanyahu is playing for time with this noisy encirclement of Rafah amid opposing pressures from the US and his far-right coalition partners. Joe Biden is playing for time too, juggling between the outrage by Democratic activists and his commitment to support Israel. Yesterday, Biden sent a $1bn weapons aid bill for Israel to Congress for review. The only concrete sanction taken by the US administration so far has been to halt a single shipment last week. Politically this was immediately exploited by Netanyahu, who united and redirected Israeli outrage against Biden's administration over this decision. This is diplomacy, where each side uses its threat potential to get the maximum out of the other.

There is also a deepening crisis in relations between Israel and Egypt, which could withdraw from its mediation efforts for a hostage deal. When Israel started its operation in Rafah, Egypt joined South Africa's ICJ case against Israel. Last night, aid trucks from the militant group Sinai Tribes Union entered Rafah from Egypt via the Philadelphia crossing without clearing those with Israel. That’s a first. This move comes after Israeli settlers looted and attacked aid trucks bound for Gaza the day before.

What a credible relocation plan should look like for those sheltered in Rafah also comes in different shades. The IDF’s highly publicised and noisy preparations to enter Rafah have already prompted some 250,000 to 450,000 Palestinians sheltering there to leave, Al-Monitor reports. This is not an orderly relocation effort as the US would have liked to see. Where they go with areas around them with no infrastructure to cope with so many people? The humanitarian situation is only to get worse. What are the red lines from the US administration in this?

These manoeuvres in and around Rafah also distract from long term solutions that would end this war. The Israeli government refuses to discuss the day after. Ideas about involving the Palestinian Authority to govern Gaza have provoked an angry reaction from the Israeli government, which accuses the PA of offering financial support to families of those Oct 7 attackers and inciting hate against Israel. Netanyahu understands that the lack of an exit strategy is a dilemma for the military, but his incentives are aligned differently.

By not acting to end this war and refusing any proposal that is put in front of them, the coalition government keeps denying the rights of Palestinian people. We think this is likely to lead to more radicalisation in the long run rather than Hamas being eradicated. The US could use its leverage for clear borders and delineation of powers between the two peoples. By choosing to play it soft, Biden is risking a never-ending humanitarian crisis in Gaza, the collapse of the Abraham accords that they brokered to stabilise the region, and even his own re-election in November.

14 May 2024

Technology is why we are losing

Much of the focus this week will be on the expected US tariff on Chinese cars, which European economists believe will drive Chinese export surpluses into the European market. We are not sure that the effect of high tariffs on Chinese electric cars will work quite as intended. We are also sceptical of hydraulic theories of global trade flows - of Chinese goods suddenly starting to swamp European markets.

The much bigger problem at least for German industry has nothing to do with trade policy, but with China crowding in on previously monopolistic and oligopolistic markets dominated by German firms.

Handelsblatt alerts to research just published by the economics team of Allianz that in our view comes much closer to explaining the current dynamics. Previously, the partnership between Germany and China was complementary. The Germans built the factories and the Chinese made the consumer products. Or the Germans specialised in fuel-driven cars, and the Chinese in electric cars. China is now challenging Germany in areas Germany dominated previously. These are the largest parts of the German industrial economy: machines, chemical and electrical engineering. The study says that in many segments of the market, the Chinese are more successful than the Germans. Ludovic Subran, the Allianz chief economist, predicts that the China boom will be followed by a China shock. 

We see this similarly. In our own research on the shifting nature of German competitiveness, we find that the most important issue is not trade, but technology. Digital technologies are encroaching on classic engineering. Apple's latest commercial of a large steel press crushing a whole bunch of analogue devices caused a lot of criticism. Apple apologised, but the commercial is a good visualisation of what is currently happening to parts of the German economy. Apple was forced to apologise, but the commercial, which goes under the title Crush!, is still on Apple's Youtube site. No trade policy is going to help here. The only effect on car tariffs is to move car production to Hungary or Mexico.

The Germans are now starting to talk the talk they previously associated with the losers of global competition. The head of mechanical engineering association is suddenly using geopolitics as a justification of subsidies. 

What's happened is that Germany made itself foolishly reliant on manufacturing exports, and that China is now playing the same game, only better. The German economic strategy was unsustainable on so many levels. 

A good example of what has been happening at a micro level is the story that Mercedes has given up on a multi-billion investment project for a new manufacturing platform for the electric versions of its larger limousines. The goal had originally been that Mercedes would start shifting all of its production to the new platform from 2028. But since demand for luxury electric cars has collapsed, this investment is not going to pay off. So Mercedes is trying to bolster its future profits not through investments but savings and efficiency gains. This is the classic play book of industrial decline. 

We recently cited an article by several German and French economists about what they called the mid-technology trap. We think this story, now available in English, goes a long way to explain the dynamics of what is going on. The issue is not only that Germany specialised on the wrong technologies, but that German companies have no incentives to move out of them. The consequence of this is that a high-tech industrial sector can only happen through new companies, not old ones. Yet European and especially German industrial policy is focused on the protection of existing commerce.

It is also interesting and telling that there is not a whiff of this in the European election campaign. We do not know of a single political party that has a strategy to address this issue.

13 May 2024

Catalan separatists are down, not out

On the face of it, Pedro Sánchez’s plan for dealing with the Catalan separatists by relying on them for support is working. In Catalonia’s regional election, which took place yesterday, the separatists lost their combined majority in Catalonia’s parliament. This is the first time they have not held a majority in more than a decade. The Socialists’ regional branch took victory, and increased their share of seats from 33 to 42 in Catalonia’s 125-seat parliament. The party is in the best position to form a government there.

Ending separatist dominance of Catalan regional politics is, without a doubt, a major development. The region having Socialist leadership will also make its relationship with the central government in Madrid less contentious. This could be important for managing financial matters between the central government and the regions in particular.

But the elections also demonstrate that neither the Socialists, nor anyone else, will be able to leave the separatists behind. They will need to rely on one of the region’s two main separatist parties to form a government. At the national level, Sanchez and his party also still depend on both of these parties for parliamentary support.

What has happened is that the Catalan separatists’ relationship with the rest of Spanish politics has moved onto a new phase. Instead of confrontation, there is now a kind of awkward coexistence. The separatists are becoming less popular, and definitely do not command enough support to press all of their demands. But they also aren’t going away completely. Any future Spanish government will have to live with them as a feature of Spain’s political life.

The separatist movement is also, arguably, radicalising as it loses followers. The ERC, the more moderate of Catalonia’s two separatist parties, was the major loser yesterday. It went from 33 to 20 seats. Carles Puigdemont’s Together for Catalonia, the more hard-line of the two parties, picked up a few seats, improving from 32 to 35. Aliança Catalana, a far-right and anti-immigrant separatist party, also entered parliament with two seats.