AMSTERDAM — The world’s financial system needs a “massive adjustment” to cope with higher interest rates, and key rules will have to be revisited, according to a top global regulator.
Klaas Knot, chair of the Financial Stability Board, an international standard-setting body, told POLITICO that rising interest rates fueled problems at several regional U.S. banks and similar losses may show up elsewhere.
“The speed with which interest rates have changed, that, of course, implies a massive adjustment in the financial system,” the Dutchman said in an interview from his office in Amsterdam. He added it was unclear exactly where those losses would be.
“In many, many places of the financial system, that adjustment will go well because it has been well-anticipated and has been well-managed. But history teaches us that is not always the case everywhere.”
The warning of potential trouble ahead echoes fears of other global officials and comes after the failure of Silicon Valley Bank, a $200 billion lender to the tech sector, sparked contagion across U.S. regional banks. The subsequent market panic contributed to bringing down Credit Suisse in Europe, forcing the Swiss government to hastily merge the lender with UBS.
Any domino effect can have huge impacts for the economy, businesses and households.
“We’ve seen the impact of rapidly changing interest rates manifest in the second tier of the regional U.S. banks,” Knot said. “But I would be very surprised if that was the only sub-sector of the financial system where you would have a significant impact.”
Despite the turmoil, Knot said he was more worried about risks stashed at “nonbanks” — a term that encompasses investment funds, insurers, private equity, pension funds and hedge funds — where authorities have less visibility on hidden losses.
“If they are hidden for a very long period of time, sometimes the problem then grows so big, that it only becomes unhidden or visible when it’s too big to deal with,” he said.
The FSB boss pointed to financial players that took the wrong side of a bet on interest-rates and may now be nursing losses. “I hope, of course, that this is well-dispersed over the financial sector,” he said. “Where we are worried is specific concentrations of such risk.”
In particular, he said, those losses could be amplified when there is a mismatch between hard-to-sell assets and easy withdrawals, and borrowed money is used to juice returns.
That combination has worried authorities for some time — but Knot said this didn’t mean regulators are behind. For instance, the FSB, whose membership includes central bankers, financial regulators and finance ministries, will issue recommendations for open-ended investment funds in July.
Under the plans, regulators would get more powers to trigger restrictions in a crisis, rather than leaving those decisions in the hands of the fund manager.
Rewriting the rules
The financial rulebook will need to be revisited substantially in light of recent events, he said.
“It’s a mistake to see the regulatory framework as something that is fixed, and something that should not be touched,” he said. “The financial industry is not at all fixed, it is continuously evolving. So, the regulatory framework should evolve with the evolving risks.”
The Dutchman said this means revisiting assumptions about how quickly banks can sell assets to meet depositor withdrawals, the speed of those withdrawals in a digital era, and the reserves that have to be set aside to cover potential unrealized losses from interest-rate risks — all of which were factors in the U.S. bank collapses.
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( With inputs from : www.politico.eu )
MOSCOW — A Russian court on Monday slapped opposition activist Vladimir Kara-Murza with 25 years in prison for treason and other claimed offenses.
Moscow City Court sentenced Kara-Murza to a penal colony for spreading “fake news” about the army and “cooperation with an undesirable organization,” as Russian President Vladimir Putin steps up his crackdown on dissent and Russian civil society. But the bulk of his sentence had to do with another, third charge: treason, in the first time anyone has been convicted on that count for making public statements containing publicly available information.
On the courthouse steps, British Ambassador Deborah Bronnert called the sentence for Kara-Murza, who holds both Russian and British citizenship, “shocking.” Her U.S. counterpart said the verdict was an attempt “to silence dissent in this country.”
The U.K. summoned the Russian ambassador after the conviction, with Foreign Secretary James Cleverly calling for Kara-Murza’s “immediate release.”
Upon traveling to Russia in April 2022, Kara-Murza was detained for disobeying police orders. From that moment the charges piled up: first for spreading “fake news” about the Russian armed forces, then for his participation in an “undesirable organization,” and last for treason, on account of three public speeches he gave in the U.S., Finland and Portugal. The charges, all of which Kara-Murza denies, were expanded to treason last October.
A close associate of the late opposition figure Boris Nemtsov, who was assassinated near the Kremlin in 2015, Kara-Murza was one of the last remaining prominent Putin critics still alive and walking free. But over the years he has ruffled many feathers as a main advocate for the Magnitsky Act, which long before the war called upon countries to target Russians involved in human rights violations and corruption.
The defense’s attempts to remove the judge — who is also on the Magnitsky list — were dismissed.
Kara-Murza continued to speak out against the Kremlin despite mounting personal risks, including what he described as poisonings by the Russian security services in 2015 and 2017, where he suddenly became ill, falling into a coma before eventually recovering.
Neither journalists nor high-ranking diplomats were allowed into the courtroom to witness the ruling and instead followed the sentencing on a screen.
Kara-Murza was in a glass cage, dressed in jeans and a gray blazer, with his mother and his lawyer standing outside of the cage. He smiled when the sentence was read out.
After the verdict Oleg Orlov, the co-chair of Russia’s oldest human rights group, Memorial, who himself is facing charges for “discrediting the Russian army,” drew a parallel with the Soviet Union, when “people were also jailed for words.” Kara-Murza compared the legal process to Stalin-era trials, in his appearance at court.
Kara-Murza’s lawyer Maria Eismont said the sentence was “a boost to his self esteem, the highest grade he could have gotten for his work as a politician and active citizen,” but added that there were serious concerns about his health.
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( With inputs from : www.politico.eu )
BERLIN — German Foreign Minister Annalena Baerbock is heading to China to represent Berlin, but she’ll likely have more explaining to do about Paris in the wake of French President Emmanuel Macron’s explosive comments on Taiwan.
As Baerbock embarked on her two-day visit Wednesday evening, officials in Berlin were eager to stress that Germany and the EU care about Taiwan and stability in the region, arguing it’s mainly China that must contribute to de-escalation by refraining from aggressive military maneuvers close to the island nation.
Baerbock’s trip comes amid international backlash against Macron’s comments in an interview with POLITICO, arguing Europe should avoid becoming America’s follower, including on the matter of Taiwan’s security. Although German government spokespeople refused to comment directly on the French president’s remarks, a spokesperson for the foreign ministry specifically called out Beijing when expressing “great concern” over the situation in the Taiwan Strait.
“We expect all parties in the region to contribute to peace. That applies equally to the People’s Republic of China,” the spokesperson said, adding: “And it seems to us that actions such as military threatening gestures are counter to that goal and, in fact, increase the risk of unintended military clashes.”
Nils Schmid, the foreign policy spokesperson for German Chancellor Olaf Scholz’s Social Democratic Party (SPD), said he expects Baerbock to “set the record straight” during her trip to China, which will involve meetings with Beijing’s Foreign Minister Qin Gang, Vice President Han Zheng and top diplomat Wang Yi.
“We clearly defined in the [government] coalition agreement that we need a changed China policy because China has changed. The chancellor made that clear during his visit. Above all, Scholz also issued clear warnings about Taiwan during his visit [last year],” Schmid wrote in a tweet. “I assume that Foreign Minister Baerbock will repeat exactly that and thus set the record straight and make a clarification after Macron’s botched visit.”
Berlin traditionally has been much more in sync with the U.S. on foreign and security policy than France has, which is why many politicians and officials in the German capital reacted with horror to Macron’s comments. The French president said Europe should not take its “cue from the U.S. agenda and a Chinese overreaction,” suggesting the EU stood between the two sides, rather than being aligned with its longtime democratic partners in Washington.
Macron gave the impression to some in the U.S. that Europeans see Beijing and Washington as “equidistant” from Brussels in terms of values and as allies, said SPD foreign policy lawmaker Metin Hakverdi, who is currently on a parliamentary visit to the U.S.
“That was foolish,” Hakverdi told POLITICO, adding that “Macron potentially damaged the peaceful status quo around Taiwan” by giving “the public impression that Europe has no particular interest in the conflict over Taiwan.
“The issue of Taiwan is not an internal matter for the People’s Republic of China. Anything else would virtually invite Beijing to attack Taiwan,” Hakverdi added. “I am confident that our foreign minister will make that clear during her trip to Asia — both to Beijing and to our Asian partners.”
Katja Leikert from the main German opposition party, the center-right CDU, criticized Macron’s comments as “extremely short-sighted,” and added: “Should China decide to strike Taiwan militarily, either by invading it or by starting a maritime blockade, this would have significant political and economic repercussions for us. We cannot just wish that away.
“What we actually need to do right now is strengthen our defense against aggressive measures from Beijing,” Leikert said.
For Berlin, Macron’s comments also come at a particularly bad moment for transatlantic ties. The German government is keen to mend cracks in its relationship with Washington that have emerged over the controversial benefits for U.S. businesses under Joe Biden’s Inflation Reduction Act. Europe hopes to reach an agreement so that its own companies may also be eligible for these subsidies.
Macron’s comments “will not help in renegotiations on the Inflation Reduction Act, nor will they help Joe Biden in the election campaign against populist Republican candidates,” said the SPD’s Hakverdi.
The German foreign ministry spokesperson was quick to stress that both France and Germany were involved in shaping a joint EU-China policy | Ludovic Marin/AFP via Getty Images
The German foreign ministry spokesperson was quick to stress that both France and Germany were involved in shaping a joint EU-China policy, which was also done in cooperation “with our transatlantic partner.”
During her trip to China, Baerbock plans to raise the situation in the Taiwan Strait; Russia’s war of aggression against Ukraine; the human rights situation in China; as well as the fight against climate crisis, the spokesperson said.
Baerbock’s foreign ministry is also currently drafting Germany’s first China strategy. A draft of this seen by POLITICO last year vowed to take a much harder line toward Beijing. Baerbock and her Green party are at the forefront of pushing such a tougher position, while Scholz has long preferred a softer approach.
Incidentally, however, the German government said Wednesday it is reassessing whether to potentially take a firmer stance and ban Chinese state company Cosco from going through with a highly controversial move to buy parts of a Hamburg port terminal.
Scholz had strongly pushed for the port deal ahead of his own trip to Beijing last year, but the future of the transaction is now in doubt after German security authorities classified the terminal as “critical infrastructure.”
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( With inputs from : www.politico.eu )
LONDON — Joe Biden is not someone known for his subtlety.
His gaffe-prone nature — which saw him last week confuse the New Zealand rugby team with British forces from the Irish War of Independence — leaves little in the way of nuance.
But he is also a sentimental man from a long gone era of Washington, who specializes in a type of homespun, aw-shucks affability that would be seen as naff in a younger president.
His lack of subtlety was on show in Belfast last week as he issued a thinly veiled ultimatum to the Democratic Unionist Party (DUP) — return to Northern Ireland’s power sharing arrangements or risk losing billions of dollars in U.S. business investment.
The DUP — a unionist party that does not take kindly to lectures from American presidents — is refusing to sit in Stormont, the Northern Ireland Assembly, due to its anger with the post-Brexit Northern Ireland protocol, which has created trade friction between the region and the rest of the U.K.
The DUP is also refusing to support the U.K.-EU Windsor Framework, which aims to fix the economic problems created by the protocol, despite hopes it would see the party reconvene the Northern Irish Assembly.
The president on Wednesday urged Northern Irish leaders to “unleash this incredible economic opportunity, which is just beginning.”
However, American business groups paint a far more complex and nuanced view of future foreign investment into Northern Ireland than offered up by Biden.
Biden told a Belfast crowd on Wednesday there were “scores of major American corporations wanting to come here” to invest, but that a suspended Stormont was acting as a block on that activity.
One U.S. business figure, who spoke on condition of anonymity, said Biden’s flighty rhetoric was “exaggerated” and that many businesses would be looking beyond the state of the regional assembly to make their investment decisions.
The president spoke as if Ulster would be rewarded with floods of American greenbacks if the DUP reverses its intransigence, predicting that Northern Ireland’s gross domestic product (GDP) would soon be triple its 1998 level. Its GDP is currently around double the size of when the Good Friday Agreement was struck in 1998.
Emanuel Adam, executive director of BritishAmerican Business, said this sounded like a “magic figure” unless Biden “knows something we don’t know about.”
DUP MP Ian Paisley Jr. told POLITICO that U.S. politicians for “too long” have “promised some economic El Dorado or bonanza if you only do what we say politically … but that bonanza has never arrived and people are not naive enough here to believe it ever will.”
“A presidential visit is always welcome, but the glitter on top is not an economic driver,” he said.
Joe Biden addresses a crowd of thousands on April 14, 2023 in Ballina, Ireland | Charles McQuillan/Getty Images
Facing both ways
The British government is hoping the Windsor Framework will ease economic tensions in Northern Ireland and create politically stable conditions for inward foreign direct investment.
The framework removes many checks on goods going from Great Britain to Northern Ireland and has begun to slowly create a more collaborative relationship between London and Brussels on a number of fronts — two elements which have been warmly welcomed across the Atlantic.
Prime Minister Rishi Sunak has said Northern Ireland is in a “special” position of having access to the EU’s single market, to avoid a hard border with the Republic of Ireland, and the U.K.’s internal market.
“That’s like the world’s most exciting economic zone,” Sunak said in February.
Jake Colvin, head of Washington’s National Foreign Trade Council business group, said U.S. firms wanted to see “confidence that the frictions over the protocol have indeed been resolved.”
“Businesses will look to mechanisms like the Windsor Framework to provide stability,” he said.
Marjorie Chorlins, senior vice president for Europe at the U.S. Chamber of Commerce, said the Windsor Framework was “very important” for U.S. businesses and that “certainty about the relationship between the U.K. and the EU is critical.”
She said a reconvened Stormont would mean more legislative stability on issues like skills and healthcare, but added that there were a whole range of other broader U.K. wide economic factors that will play a major part in investment decisions.
This is particularly salient in a week where official figures showed the U.K.’s GDP flatlining and predictions that Britain will be the worst economic performer in the G20 this year.
“We want to see a return to robust growth and prosperity for the U.K. broadly and are eager to work with government at all levels,” Chorlins said.
“Political and economic instability in the U.K. has been a challenge for businesses of all sizes.”
Prime Minister Rishi Sunak has said Northern Ireland is in a “special” position of having access to the EU’s single market | Pool photo by Paul Faith/Getty Images
Her words underline just how much global reputational damage last year’s carousel of prime ministers caused for the U.K., with Bank of England Governor Andrew Bailey recently warning of a “hangover effect” from Liz Truss’ premiership and the broader Westminster psychodrama of 2022.
America’s Northern Ireland envoy Joe Kennedy, grandson of Robert Kennedy, accompanied the president last week and has been charged with drumming up U.S. corporate interest in Northern Ireland.
Kennedy said Northern Ireland is already “the number-one foreign investment location for proximity and market access.”
Northern Ireland has been home to £1.5 billion of American investment in the past decade and had the second-most FDI projects per capita out of all U.K. regions in 2021.
Claire Hanna, Westminster MP for the nationalist SDLP, believes reconvening Stormont would “signal a seriousness that there isn’t going to be anymore mucking around.”
“It’s also about the signal that the restoration of Stormont sends — that these are the accepted trading arrangements,” she said.
Hanna says the DUP’s willingness to “demonize the two biggest trading blocs in the world — the U.S. and EU” — was damaging to the country’s future economic prospects.
‘The money goes south’
At a more practical level, Biden’s ultimatum appears to carry zero weight with DUP representatives.
DUP leader Jeffrey Donaldson made it clear last week that he was unmoved by Biden’s economic proclamations and gave no guarantee his party would sit in the regional assembly in the foreseeable future.
“President Biden is offering the hope of further American investment, which we always welcome,” Donaldson told POLITICO.
“But fundamental to the success of our economy is our ability to trade within our biggest market, which is of course the United Kingdom.”
A DUP official said U.S. governments had been promising extra American billions in exchange “for selling out to Sinn Féin and Dublin” since the 1990s and “when America talks about corporate investment, we get the crumbs and that investment really all ends up in the Republic [of Ireland].”
“President Biden is offering the hope of further American investment, which we always welcome,” Donaldson said | Behal/Irish Government via Getty Images
“The Americans talk big, but the money goes south,” the DUP official said.
This underscores the stark reality that challenges Northern Ireland any time it pitches for U.S. investment — the competing proposition offered by its southern neighbor with its internationally low 12.5 percent rate on corporate profits.
Emanuel Adam with BritishAmerican Business said there was a noticeable feeling in Washington that firms want to do business in Dublin.
“When [Irish Prime Minister] Leo Varadkar and his team were here recently, I could tell how confident the Irish are these days,” he said. “There are not as many questions for them as there are around the U.K.”
Biden’s economic ultimatum looks toothless from the DUP’s perspective and its resonance may be as short-lived as his trip to Belfast itself.
This story has been updatedto correct an historical reference.
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( With inputs from : www.politico.eu )
For Turkey’s President Recep Tayyip Erdoğan, next month’s election is of massive historical significance.
It falls 100 years after the foundation of Mustafa Kemal Atatürk’s secular republic and, if Erdoğan wins, he will be empowered to put even more of his stamp on the trajectory of a geostrategic heavyweight of 85 million people. The fear in the West is that he will see this as his moment to push toward an increasingly religiously conservative model, characterized by regional confrontationalism, with greater political powers centered around himself.
The election will weigh heavily on security in Europe and the Middle East. Who is elected stands to define: Turkey’s role in the NATO alliance; its relationship with the U.S., the EU and Russia; migration policy; Ankara’s role in the war in Ukraine; and how it handles tensions in the Eastern Mediterranean.
The May 14 vote is expected to be the most hotly contested race in Erdoğan’s 20-year rule — as the country grapples with years of economic mismanagement and the fallout from a devastating earthquake.
He will face an opposition aligned behind Kemal Kılıçdaroğlu, nicknamed the “Turkish Gandhi,” who is promising big changes. Polls suggest Kılıçdaroğlu has eked out a lead, but Erdoğan is a hardened election campaigner, with the full might of the state and its institutions at his back.
“There will be a change from an authoritarian single-man rule, towards a kind of a teamwork, which is a much more democratic process,” Ünal Çeviköz, chief foreign policy adviser to Kılıçdaroğlu told POLITICO. “Kılıçdaroğlu will be the maestro of that team.”
Here are the key foreign policy topics in play in the vote:
EU and Turkish accession talks
Turkey’s opposition is confident it can unfreeze European Union accession talks — at a standstill since 2018 over the country’s democratic backsliding — by introducing liberalizing reforms in terms of rule of law, media freedoms and depoliticization of the judiciary.
The opposition camp also promises to implement European Court of Human Rights decisions calling for the release of two of Erdoğan’s best-known jailed opponents: the co-leader of the pro-Kurdish Peoples’ Democratic Party Selahattin Demirtaş and human rights defender Osman Kavala.
“This will simply give the message to all our allies, and all the European countries, that Turkey is back on track to democracy,” Çeviköz said.
Even under a new administration, however, the task of reopening the talks on Turkey’s EU accession is tricky.
Turkey’s opposition is aligned behind Kemal Kılıçdaroğlu, nicknamed the “Turkish Gandhi” | Burak Kara/Getty Images
Anti-Western feeling in Turkey is very strong across the political spectrum, argued Wolfango Piccoli, co-founder of risk analysis company Teneo.
“Foreign policy will depend on the coherence of the coalition,” he said. “This is a coalition of parties who have nothing in common apart from the desire to get rid of Erdoğan. They’ve got a very different agenda, and this will have an impact in foreign policy.”
“The relationship is largely comatose, and has been for some time, so, they will keep it on life support,” he said, adding that any new government would have so many internal problems to deal with that its primary focus would be domestic.
Europe also seems unprepared to handle a new Turkey, with a group of countries — most prominently France and Austria — being particularly opposed to the idea of rekindling ties.
“They are used to the idea of a non-aligned Turkey, that has departed from EU norms and values and is doing its own course,” said Aslı Aydıntaşbaş a visiting fellow at Brookings. “If the opposition forms a government, it will seek a European identity and we don’t know Europe’s answer to that; whether it could be accession or a new security framework that includes Turkey.”
“Obviously the erosion of trust has been mutual,” said former Turkish diplomat Sinan Ülgen, a senior fellow at the Carnegie Europe think tank, arguing that despite reticence about Turkish accession, there are other areas where a complementary and mutually beneficiary framework could be built, like the customs union, visa liberalization, cooperation on climate, security and defense, and the migration agreement.
The opposition will indeed seek to revisit the 2016 agreement with the EU on migration, Çeviköz said.
“Our migration policy has to be coordinated with the EU,” he said. “Many countries in Europe see Turkey as a kind of a pool, where migrants coming from the east can be contained and this is something that Turkey, of course cannot accept,” he said but added. “This doesn’t mean that Turkey should open its borders and make the migrants flow into Europe. But we need to coordinate and develop a common migration policy.”
NATO and the US
After initially imposing a veto, Turkey finally gave the green light to Finland’s NATO membership on March 30.
But the opposition is also pledging to go further and end the Turkish veto on Sweden, saying that this would be possible by the alliance’s annual gathering on July 11. “If you carry your bilateral problems into a multilateral organization, such as NATO, then you are creating a kind of a polarization with all the other members of NATO with your country,” Çeviköz said.
A protester pushes a cart with a RRecep Tayyip Erdoğan doll during an anti-NATO and anti-Turkey demonstration in Sweden | Jonas Gratzer/Getty Images
A reelected Erdoğan could also feel sufficiently empowered to let Sweden in, many insiders argue. NATO allies did, after all, play a significant role in earthquake aid. Turkish presidential spokesperson İbrahim Kalın says that the door is not closed to Sweden, but insists the onus is on Stockholm to determine how things proceed.
Turkey’s military relationship with the U.S. soured sharply in 2019 when Ankara purchased the Russian-made S-400 missile system, a move the U.S. said would put NATO aircraft flying over Turkey at risk. In response, the U.S. kicked Ankara out of the F-35 jet fighter program and slapped sanctions on the Turkish defense industry.
A meeting in late March between Kılıçdaroğlu and the U.S. Ambassador to Ankara Jeff Flake infuriated Erdoğan, who saw it as an intervention in the elections and pledged to “close the door” to the U.S. envoy. “We need to teach the United States a lesson in this elections,” the irate president told voters.
In its policy platform, the opposition makes a clear reference to its desire to return to the F-35 program.
Russia and the war in Ukraine
After the Russian invasion of Ukraine, Turkey presented itself as a middleman. It continues to supply weapons — most significantly Bayraktar drones — to Ukraine, while refusing to sanction Russia. It has also brokered a U.N. deal that allows Ukrainian grain exports to pass through the blockaded Black Sea.
Highlighting his strategic high-wire act on Russia, after green-lighting Finland’s NATO accession and hinting Sweden could also follow, Erdoğan is now suggesting that Turkey could be the first NATO member to host Russian President Vladimir Putin.
“Maybe there is a possibility” that Putin may travel to Turkey on April 27 for the inauguration of the country’s first nuclear power reactor built by Russian state nuclear energy company Rosatom, he said.
Çeviköz said that under Kılıçdaroğlu’s leadership, Turkey would be willing to continue to act as a mediator and extend the grain deal, but would place more stress on Ankara’s status as a NATO member.
“We will simply emphasize the fact that Turkey is a member of NATO, and in our discussions with Russia, we will certainly look for a relationship among equals, but we will also remind Russia that Turkey is a member of NATO,” he said.
Turkey’s relationship with Russia has become very much driven by the relationship between Putin and Erdoğan and this needs to change, Ülgen argued.
Turkey brokered a U.N. deal that allows Ukrainian grain exports to pass through the blockaded Black Sea | Ozan Kose/AFP via Getty Images
“No other Turkish leader would have the same type of relationship with Putin, it would be more distant,” he said. “It does not mean that Turkey would align itself with the sanctions; it would not. But nonetheless, the relationship would be more transparent.”
Syria and migration
The role of Turkey in Syria is highly dependent on how it can address the issue of Syrians living in Turkey, the opposition says.
Turkey hosts some 4 million Syrians and many Turks, battling a major cost-of-living crisis, are becoming increasingly hostile. Kılıçdaroğlu has pledged to create opportunities and the conditions for the voluntary return of Syrians.
“Our approach would be to rehabilitate the Syrian economy and to create the conditions for voluntary returns,” Çeviköz said, adding that this would require an international burden-sharing, but also establishing dialogue with Damascus.
Erdoğan is also trying to establish a rapprochement with Syria but Syrian President Bashar al-Assad says he will only meet the Turkish president when Ankara is ready to completely withdraw its military from northern Syria.
“A new Turkish government will be more eager to essentially shake hands with Assad,” said Ülgen. “But this will remain a thorny issue because there will be conditions attached on the side of Syria to this normalization.”
However, Piccoli from Teneo said voluntary returns of Syrians was “wishful thinking.”
“These are Syrians who have been living in Turkey for more than 10 years, their children have been going to school in Turkey from day one. So, the pledges of sending them back voluntarily, it is very questionable to what extent they can be implemented.”
Greece and the East Med
Turkey has stepped up its aggressive rhetoric against Greece in recent months, with the Erdoğan even warning that a missile could strike Athens.
But the prompt reaction by the Greek government and the Greek community to the recent devastating earthquakes in Turkey and a visit by the Greek Foreign Minister Nikos Dendias created a new backdrop for bilateral relations.
A Turkish drill ship before it leaves for gas exploration | Adem Altan/AFP via Getty Images
Dendias, along with his Turkish counterpart Mevlüt Çavuşoğlu, announced that Turkey would vote for Greece in its campaign for a non-permanent seat in the United Nations Security Council for 2025-26 and that Greece would support the Turkish candidacy for the General Secretariat of the International Maritime Organization.
In another sign of a thaw, Greek Defense Minister Nikos Panagiotopoulos and Migration Minister Notis Mitarachi visited Turkey this month, with Turkish Defense Minister Hulusi Akar saying he hoped that the Mediterranean and Aegean would be a “sea of friendship” between the two countries. Akar said he expected a moratorium with Greece in military and airforce exercises in the Aegean Sea between June 15 and September 15.
“Both countries are going to have elections, and probably they will have the elections on the same day. So, this will open a new horizon in front of both countries,” Çeviköz said.
“The rapprochement between Turkey and Greece in their bilateral problems [in the Aegean], will facilitate the coordination in addressing the other problems in the eastern Mediterranean, which is a more multilateral format,” he said. Disputes over maritime borders and energy exploration, for example, are common.
As far as Cyprus is concerned, Çeviköz said that it is important for Athens and Ankara not to intervene into the domestic politics of Cyprus and the “two peoples on the island should be given an opportunity to look at their problems bilaterally.”
However, analysts argue that Greece, Cyprus and the EastMed are fundamental for Turkey’s foreign policy and not much will change with another government. The difference will be more one of style.
“The approach to manage those differences will change very much. So, we will not hear aggressive rhetoric like: ‘We will come over one night,’” said Ülgen. “We’ll go back to a more mature, more diplomatic style of managing differences and disputes.”
“The NATO framework will be important, and the U.S. would have to do more in terms of re-establishing the sense of balance in the Aegean,” said Aydıntaşbaş. But, she argued, “you just cannot normalize your relations with Europe or the U.S., unless you’re willing to take that step with Greece.”
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( With inputs from : www.politico.eu )
ABOARD COTAM UNITÉ (FRANCE’S AIR FORCE ONE) — Europe must reduce its dependency on the United States and avoid getting dragged into a confrontation between China and the U.S. over Taiwan, French President Emmanuel Macron said in an interview on his plane back from a three-day state visit to China.
Speaking with POLITICO and two French journalists after spending around six hours with Chinese President Xi Jinping during his trip, Macron emphasized his pet theory of “strategic autonomy” for Europe, presumably led by France, to become a “third superpower.”
He said “the great risk” Europe faces is that it “gets caught up in crises that are not ours, which prevents it from building its strategic autonomy,” while flying from Beijing to Guangzhou, in southern China, aboard COTAM Unité, France’s Air Force One.
Xi Jinping and the Chinese Communist Party have enthusiastically endorsed Macron’s concept of strategic autonomy and Chinese officials constantly refer to it in their dealings with European countries. Party leaders and theorists in Beijing are convinced the West is in decline and China is on the ascendant and that weakening the transatlantic relationship will help accelerate this trend.
“The paradox would be that, overcome with panic, we believe we are just America’s followers,” Macron said in the interview. “The question Europeans need to answer … is it in our interest to accelerate [a crisis] on Taiwan? No. The worse thing would be to think that we Europeans must become followers on this topic and take our cue from the U.S. agenda and a Chinese overreaction,” he said.
Just hours after his flight left Guangzhou headed back to Paris, China launched large military exercises around the self-ruled island of Taiwan, which China claims as its territory but the U.S. has promised to arm and defend.
Those exercises were a response to Taiwanese President Tsai Ing-Wen’s 10-day diplomatic tour of Central American countries that included a meeting with Republican U.S. House Speaker Kevin McCarthy while she transited in California. People familiar with Macron’s thinking said he was happy Beijing had at least waited until he was out of Chinese airspace before launching the simulated “Taiwan encirclement” exercise.
Beijing has repeatedly threatened to invade in recent years and has a policy of isolating the democratic island by forcing other countries to recognize it as part of “one China.”
Taiwan talks
Macron and Xi discussed Taiwan “intensely,” according to French officials accompanying the president, who appears to have taken a more conciliatory approach than the U.S. or even the European Union.
“Stability in the Taiwan Strait is of paramount importance,” European Commission President Ursula von der Leyen, who accompanied Macron for part of his visit, said she told Xi during their meeting in Beijing last Thursday. “The threat [of] the use of force to change the status quo is unacceptable.”
Chinese President Xi Jinping and French President Emmanuel Macron in Guangdong on April 7, 2023 | Pool Photo by Jacques Witt / AFP via Getty Images
Xi responded by saying anyone who thought they could influence Beijing on Taiwan was deluded.
Macron appears to agree with that assessment.
“Europeans cannot resolve the crisis in Ukraine; how can we credibly say on Taiwan, ‘watch out, if you do something wrong we will be there’? If you really want to increase tensions that’s the way to do it,” he said.
“Europe is more willing to accept a world in which China becomes a regional hegemon,” said Yanmei Xie, a geopolitics analyst at Gavekal Dragonomics. “Some of its leaders even believe such a world order may be more advantageous to Europe.”
In his trilateral meeting with Macron and von der Leyen last Thursday in Beijing, Xi Jinping went off script on only two topics — Ukraine and Taiwan — according to someone who was present in the room.
“Xi was visibly annoyed for being held responsible for the Ukraine conflict and he downplayed his recent visit to Moscow,” this person said. “He was clearly enraged by the U.S. and very upset over Taiwan, by the Taiwanese president’s transit through the U.S. and [the fact that] foreign policy issues were being raised by Europeans.”
In this meeting, Macron and von der Leyen took similar lines on Taiwan, this person said. But Macron subsequently spent more than four hours with the Chinese leader, much of it with only translators present, and his tone was far more conciliatory than von der Leyen’s when speaking with journalists.
‘Vassals’ warning
Macron also argued that Europe had increased its dependency on the U.S. for weapons and energy and must now focus on boosting European defense industries.
He also suggested Europe should reduce its dependence on the “extraterritoriality of the U.S. dollar,” a key policy objective of both Moscow and Beijing.
Macron has long been a proponent of strategic autonomy for Europe | Ludovic Marin/AFP via Getty Images
“If the tensions between the two superpowers heat up … we won’t have the time nor the resources to finance our strategic autonomy and we will become vassals,” he said.
Russia, China, Iran and other countries have been hit by U.S. sanctions in recent years that are based on denying access to the dominant dollar-denominated global financial system. Some in Europe have complained about “weaponization” of the dollar by Washington, which forces European companies to give up business and cut ties with third countries or face crippling secondary sanctions.
While sitting in the stateroom of his A330 aircraft in a hoodie with the words “French Tech” emblazoned on the chest, Macron claimed to have already “won the ideological battle on strategic autonomy” for Europe.
He did not address the question of ongoing U.S. security guarantees for the Continent, which relies heavily on American defense assistance amid the first major land war in Europe since World War II.
As one of the five permanent members of the U.N. Security Council and the only nuclear power in the EU, France is in a unique position militarily. However, the country has contributed far less to the defense of Ukraine against Russia’s invasion than many other countries.
As is common in France and many other European countries, the French President’s office, known as the Elysée Palace, insisted on checking and “proofreading” all the president’s quotes to be published in this article as a condition of granting the interview. This violates POLITICO’s editorial standards and policy, but we agreed to the terms in order to speak directly with the French president. POLITICO insisted that it cannot deceive its readers and would not publish anything the president did not say. The quotes in this article were all actually said by the president, but some parts of the interview in which the president spoke even more frankly about Taiwan and Europe’s strategic autonomy were cut out by the Elysée.
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( With inputs from : www.politico.eu )
Chinese leader Xi Jinping had one overriding message for his visiting French counterpart Emmanuel Macron this week: Don’t let Europe get sucked into playing America’s game.
Beijing is eager to avoid the EU falling further under U.S. influence, at a time when the White House is pursuing a more assertive policy to counter China’s geopolitical and military strength.
Russia’s yearlong war against Ukraine has strengthened the alliance between Europe and the U.S., shaken up global trade, reinvigorated NATO and forced governments to look at what else could suddenly go wrong in world affairs. That’s not welcome in Beijing, which still views Washington as its strategic nemesis.
This week, China’s counter-offensive stepped up a gear, turning on the charm. Xi welcomed Macron into the grandest of settings at the Great Hall of the People in Beijing, along with European Commission chief Ursula von der Leyen. This was in sharp contrast to China’s current efforts to keep senior American officials at arm’s length, especially since U.S. Secretary of State Antony Blinken called off a trip to Beijing during the spy balloon drama earlier this year.
Both American and Chinese officials know Europe’s policy toward Beijing is far from settled. That’s an opportunity, and a risk for both sides. In recent months, U.S. officials have warned of China’s willingness to send weapons to Russia and talked up the dangers of allowing Chinese tech companies unfettered access to European markets, with some success.
TikTok, which is ultimately Chinese owned, has been banned from government and administrative phones in a number of locations in Europe, including in the EU institutions in Brussels. American pressure also led the Dutch to put new export controls on sales of advanced semiconductor equipment to China.
Yet even the hawkish von der Leyen, a former German defense minister, has dismissed the notion of decoupling Europe from China’s economy altogether. From Beijing’s perspective, this is yet another significant difference from the hostile commercial environment being promoted by the U.S.
Just this week, 36 Chinese and French businesses signed new deals in front of Macron and Xi, in what Chinese state media said was a sign of “the not declining confidence in the Chinese market of European businesses.” While hardly a statement brimming with confidence, it could have been worse.
For the last couple of years European leaders have grown more skeptical of China’s trajectory, voicing dismay at Beijing’s way of handling the coronavirus pandemic, the treatment of protesters in Hong Kong and Xinjiang’s Uyghur Muslims, as well as China’s sanctions on European politicians and military threats against Taiwan.
Then, Xi and Vladimir Putin hailed a “no limits” partnership just days before Russia invaded Ukraine. While the West rolled out tough sanctions on Moscow, China became the last major economy still interested in maintaining — and expanding — trade ties with Russia. That shocked many Western officials and provoked a fierce debate in Europe over how to punish Beijing and how far to pull out of Chinese commerce.
Beijing saw Macron as the natural partner to help avoid a nosedive in EU-China relations, especially since Angela Merkel — its previous favorite — was no longer German chancellor.
Macron’s willingness to engage with anyone — including his much-criticized contacts with Putin ahead of his war on Ukraine — made him especially appealing as Beijing sought to drive a wedge between European and American strategies on China.
Xi Jinping sees Macron as the natural to Angela Merkel, his previous partner in the West who helped avoid a nosedive in EU-China relations | Ludovic Marin/AFP via Getty Images
Not taking sides
“I’m very glad we share many identical or similar views on Sino-French, Sino-EU, international and regional issues,” Xi told Macron over tea on Friday, in the southern metropolis of Guangzhou, according to Chinese state media Xinhua.
Strategic autonomy, a French foreign policy focus, is a favorite for China, which sees the notion as proof of Europe’s distance from the U.S. For his part, Macron told Xi a day earlier that France promotes “European strategic autonomy,” doesn’t like “bloc confrontation” and believes in doing its own thing. “France does not pick sides,” he said.
The French position is challenged by some in Europe who see it as an urgent task to take a tougher approach toward Beijing.
“Macron could have easily avoided the dismal picture of European and transatlantic disunity,” said Thorsten Benner, director of the Berlin-based Global Public Policy Institute. “Nobody forced Macron to show up with a huge business delegation, repeating disproven illusions of reciprocity and deluding himself about working his personal magic on Xi to get the Chinese leader to turn against Putin.”
Holger Hestermeyer, a professor of EU law at King’s College London, said Beijing will struggle to split the transatlantic alliance.
“If China wants to succeed with building a new world order, separating the EU from the U.S. — even a little bit — would be a prized goal — and mind you, probably an elusive one,” Hestermeyer said. “Right now the EU is strengthening its defenses specifically because China tried to play divide and conquer with the EU in the past.”
Xi’s focus on America was unmistakable when he veered into a topic that was a long way from Europe’s top priority, during his three-way meeting with Macron and von der Leyen. A week earlier the Biden administration had held its second Summit for Democracy, in which Russia and China were portrayed as the main threats.
“Spreading the so-called ‘democracy versus authoritarianism’ [narrative],” Xi told his European guests on Thursday, “would only bring division and confrontation to the world.”
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( With inputs from : www.politico.eu )
LONDON — As Elon Musk urged humanity to get a grip on artificial intelligence, in London ministers were hailing its benefits.
Rishi Sunak’s new technology chief Michelle Donelan on Wednesday unveiled the government’s long-awaited blueprint for regulating AI, insisting a heavy-handed approach is off the agenda.
At the heart of the innovation-friendly pitch is a plan to give existing regulators a year to issue “practical guidance” for the safe use of machine learning in their sectors based on broad principles like safety, transparency, fairness and accountability. But no new legislation or regulatory bodies are being planned for the burgeoning technology.
It stands in contrast to the strategy being pursued in Brussels, where lawmakers are pushing through a more detailed rulebook, backed by a new liability regime.
Donelan insists her “common-sense, outcomes-oriented approach” will allow the U.K. to “be the best place in the world to build, test and use AI technology.”
Her department’s Twitter account was flooded with content promoting the benefits of AI. “Think AI is scary? It doesn’t have to be!” one of its posts stated on Wednesday.
But some experts fear U.K. policymakers, like their counterparts around the world, may not have grasped the scale of the challenge, and believe more urgency is needed in understanding and policing how the fast-developing tech is used.
“The government’s timeline of a year or more for implementation will leave risks unaddressed just as AI systems are being integrated at pace into our daily lives, from search engines to office suite software,” Michael Birtwistle, associate director of data and AI law and policy at the Ada Lovelace Institute, said. It has “significant gaps,” which could leave harms “unaddressed,” he warned.
“We shouldn’t be risking inventing a nuclear blast before we’ve learnt how to keep it in the shell,” Connor Axiotes, a researcher at the free-market Adam Smith Institute think tank, warned.
Elon wades in
Hours before the U.K. white paper went live, across the Atlantic an open letter calling for labs to immediately pause work training AI systems to be even more powerful for at least six months went live. It was signed by artificial intelligence experts and industry executives, including Tesla and Twitter boss Elon Musk. Researchers at Alphabet-owned DeepMind, and renowned Canadian computer scientist Yoshua Bengio were also signatories.
The letter called for AI developers to work with policymakers to “dramatically accelerate development of robust AI governance systems,” which should “at a minimum include: new and capable regulatory authorities dedicated to AI.”
AI labs are locked in “an out-of-control race to develop and deploy ever more powerful digital minds that no one – not even their creators – can understand, predict, or reliably control,” the letter warned.
Rishi Sunak’s new technology chief Michelle Donelan unveiled the government’s blueprint for regulating AI, insisting a heavy-handed approach is off the agenda | Leon Neal/Getty Images
Back in the U.K., Ellen Judson, head of the Centre for the Analysis of Social Media at the think tank Demos, warned that the U.K. approach of “setting out principles alone” was “not enough.”
“Without the teeth of legal obligations, this is an approach which will result in a patchwork of regulatory guidance that will do little to fundamentally shift the incentives that lead to risky and unethical uses of AI,” she said.
But Technology Minister Paul Scully told the BBC he was “not sure” about pausing further AI developments. He said the government’s proposals should “dispel any of those concerns from Elon Musk and those other figures.”
“What we’re trying to do is to have a situation where we can think as government and think as a sector through the risks but also the benefits of AI — and make sure we can have a framework around this to protect us from the harms,” he said.
Long time coming
Industry concerns about the U.K.’s ability to make policy in their area are countered by some of those who have worked closely with the British government on AI policy.
Its approach to policymaking has been “very consultative,” according to Sue Daley, a director at the industry body TechUK, who has been closely following AI developments for a number of years.
In 2018 ministers set up the Centre for Data Ethics and Innovation and the Office for AI, working across the government’s digital and business departments until it moved to the newly-created Department for Science, Innovation and Technology earlier this year.
The Office for AI is staffed by a “good team of people,” Daly said, while also pointing to the work the U.K.’s well-regarded regulators, like the Information Commissioner’s Office, had been doing on artificial intelligence “for some time.”
Greg Clark, the Conservative chairman of parliament’s science and technology committee, said he thought the government was right to “think carefully.” The former business secretary stressed that is his own view rather than the committee view.
“There’s a danger in rushing to adopt extensive regulations precipitously that have not been properly thought through and stress-tested, and that could prove to be an encumbrance to us and could impede the positive applications of AI,” he added. But he said the government should “proceed quickly” from white paper to regulatory framework “during the months ahead.”
Public view
Outside Westminster, the potential implications of the technology are yet to be fully realized, surveys suggest.
Public First, a Westminster-based consultancy, which conducted a raft of polling into public attitudes to artificial intelligence earlier this month, found that beyond fears about unemployment, people were pretty positive about AI.
“It certainly pales into insignificance compared to the other things that they are worried about like the prospect of armed conflict, or even the impact of climate change,” James Frayne, a founding partner of Public First, who conducted the polling said. “This falls way down the priority list,” he said.
But he cautioned this could change.
“One assumes that at some point there will be an event which shocks them, and shakes them, and makes them think very differently about AI,” he added.
“At that point there will be great demands for the government to make sure that they’re all over this in terms of regulation. They will expect the government to not only move very quickly, but to have made significant progress already,” he said.
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( With inputs from : www.politico.eu )
PARIS — In a typically French move, France’s top lawmakers are refusing to side with the United States and single out China’s TikTok.
This week, top members of France’s National Assembly strongly encouraged fellow MPs to “limit” their use of social media apps and messaging services, according to a damning internal email seen by POLITICO. The recommendation does include Chinese-owned TikTok — at the heart of a storm on both sides of the Atlantic — but also features American platforms such as Snap and Meta’s WhatsApp and Instagram, alongside Telegram, founded by Russian-born brothers, and Signal.
“Given the particular risks to which the exercise of their mandate exposes MPs using these applications, we wish to appeal to your extreme vigilance and recommend that you limit their use,” wrote Marie Guévenoux and Eric Woerth from Emmanuel Macron’s Renaissance party and Eric Ciotti from conservative Les Républicains.
France’s narrative of putting Chinese and American companies in the same basket is in stark contrast to moves by other European countries, including the Dutch government, which decided to target apps from countries that wage an “offensive cyber program” against the Netherlands, such as China, Russia, North Korea and Iran.
But refusing to pick sides and follow the United States’ geopolitical lead is a long political tradition in France, which is often accused of anti-American bias. During the Cold War, French President Charles de Gaulle tried to position his country as an alternative between the U.S.’s capitalism and the Soviet Union’s communism.
“France has not mourned the loss of its power and is trying to resurrect the so-called third way, also carried by [European commissioner] Thierry Breton,” said Asma Mhalla, a tech geopolitics lecturer at Columbia University and Sciences Po. “This will serve as a political argument to put French sovereignty and French tech back on the table,” she added, arguing that the next step will likely be to promote French apps instead.
And indeed, the top lawmakers’ letter encourages members of parliament to use French software WIMI for project management and collaborative work.
Their main issue with foreign social media apps is that Chinese and American laws are extraterritorial. The personal data gathered via the platforms — including contacts, photos, videos, and both professional and personal documents — could be used by foreign intelligence services, they argued in their email.
During Macron’s tenure, France has fought tooth and nail against the U.S. Cloud Act, a piece of legislation that allows American authorities to seize data stored on American servers even if they’re located abroad. Paris has even come up with a specific set of rules for cloud services to try and shield European data from Washington’s extraterritorial reach.
In China, an intelligence law also requires domestic technology companies to hand over data to state authorities on subjects anywhere in the world.
“The U.S. are well aware that all their arguments used against TikTok — namely that Chinese law is extraterritorial — awkwardly echo what the Europeans have been reproaching them for some time,” said Mathilde Velliet, a researcher in tech geopolitics at the French Institute of International Relations (IFRI).
“On the other hand,” she added, “the U.S. also believes they cannot be put on the same footing as China, because they’re a European ally with a different political and security relationship, and because it’s a democracy.”
Washington and EU capitals including Paris and Brussels also engage in dialogue on data security issues and cyber espionage, which is not the case with Beijing.
In the National Assembly’s corridors, however, the top lawmakers’ decision to call out foreign platforms from both the U.S. and China was very much welcome. “It’s all starting to look like a third way, which would be European sovereignty,” said Philippe Latombe, an MP from Macron’s allied party Modem. “And that’s good news.”
Océane Herrero contributed reporting.
This article has been updated.
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( With inputs from : www.politico.eu )
The outlook for the global economy is likely to remain weak in the medium term amid heightened risks to financial stability, according to International Monetary Fund Managing Director Kristalina Georgieva.
“We expect 2023 to be another challenging year, with global growth slowing to below 3 percent as scarring from the pandemic, the war in Ukraine, and monetary tightening weigh on economic activity,” Georgieva said on Sunday at a conference in China. “Even with a better outlook for 2024, global growth will remain well below its historic average of 3.8 percent,” she said.
“It is also clear that risks to financial stability have increased,” Georgieva said. “At a time of higher debt levels, the rapid transition from a prolonged period of low-interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies.”
Policymakers have acted decisively in response to threats to financial stability, helping ease market stress to some extent, she said. But “uncertainty is high, which underscores the need for vigilance,” she added.
Georgieva also warned about risks of geo-economic fragmentation, which she said “could mean a world split into rival economic blocs — a ‘dangerous division’ that would leave everyone poorer and less secure. Together, these factors mean that the outlook for the global economy over the medium term is likely to remain weak,” she said.
Georgieva spoke during the second day of the China Development Forum in Beijing. The three-day annual event is a social mixer of politics and business, bringing together members of the Chinese Politburo with dozens of CEOs from Western companies like Siemens, Mercedes-Benz and Allianz.
“Fortunately, the news on the world economy is not all bad. We can see some ‘green shoots,’ including in China,” Georgieva said, adding that Beijing is set to account for around a third of the global growth this year.
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( With inputs from : www.politico.eu )
