EU clears 50 billion pound UK ‘umbrella’ scheme to support economy By Reuters


© Reuters. FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels

BRUSSELS (Reuters) – The European Commission said on Monday it had approved a 50 billion pound ($61.5 billion) British “umbrella” scheme to support companies affected by coronavirus outbreak.

The approval is in line with modified EU rules allowing a temporary and limited amount of aid to businesses facing a sudden shortage of liquidity. The British aid would take the form of grants, equity injections, tax advantages and loans.

Britain left the European Union at the end of January, but continues to be subject to EU rules for a transition period set to last until the end of 2020.

With the coronavirus lockdown ravaging European economies, the bloc has stepped up calls for London to extend that time to allow the sides to agree on a new trade partnership after talks came to a virtual halt as capitals switched focus to fighting the pandemic.($1 = 0.8135 pounds)

British Prime Minister Boris Johnson, who has previously repeatedly ruled out such a possibility, was in hospital in London for tests on Monday suffering persistent coronavirus symptoms.

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EU executive moves to formalize suspension of EU budget rules By Reuters



BRUSSELS (Reuters) – The European Union executive moved to formalize an agreement reached by EU finance ministers on March 5 to suspend EU budget rules that put limits on borrowing so that governments have a free hand in fighting the coronavirus.

The European Commission, the guardian of EU rules, proposed late on Friday to activate the ‘general escape clause’ in the rules to respond to the pandemic that has caused lockdowns in most EU countries and the closure of Europe’s borders.

“It will allow Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework,” the Commission said.

EU rules say that governments have to keep cutting their budget deficits until they reach balance or surplus and have to reduce public debt every year to bring it below 60% of GDP.

Once the Commission proposal is formally accepted by EU finance ministers at their next meeting, government spending to fight the coronavirus will be excluded from Commission calculations of deficit and debt.

EU finance ministers, who have ultimate control of EU rules that limit government borrowing, agreed already on March 5 the economic impact of the virus was an emergency and an event outside their control and therefore EU budget rules should not apply to spending related to it.

They repeated the message last on Monday, agreeing that the rules will not stand in the way of responding to the epidemic, which the Commission expects to cause a 1-2.5% recession in Europe this year.

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EU Eyes Options to Activate Rescue Fund, Bring ECB Into Play By Bloomberg


© Reuters. EU Eyes Options to Activate Rescue Fund, Bring ECB Into Play

(Bloomberg) —

Euro-area officials are looking at activating the region’s bailout fund to help contain the impact of the coronavirus, a crucial step toward triggering the European Central Bank’s most powerful bond-buying powers.

With government bond yields spiraling, officials are giving serious consideration to a plan that would see the European Stability Mechanism set up multiple credit lines for euro-area governments, according to three people familiar with the discussions. Italian bonds trimmed losses after the report, with the yield on securities trading up 5 basis points at 2:46 p.m. in London. Earlier it had been more than 60 basis points higher.

In addition to tapping into 410 billion euros ($450 billion) of ESM money to bring down borrowing costs, such agreements could also pave the way for the ECB to buy vast amounts of sovereign bonds through its Outright Monetary Transactions program if the stability of the euro area is in jeopardy.

Discussions are accelerating as policy makers witness the rout in euro-area bonds, one of the officials said. All three cautioned that no decisions have been taken, and asked not to be named due to the sensitivity of the issue. Spokesmen for the ECB and the ESM declined to comment.

Originally built to bail out nations at the peak of the debt crisis, the ESM has been mostly idle since Greece exited its aid program in 2018. OMT was the program that grew out of the then-ECB President Mario Draghi’s “whatever it takes” pledge in 2012. Draghi’s promise and the existence of OMT steered the euro zone out of its debt crisis, although the program itself has never actually been used.

While sovereign bond yields across the euro area are nowhere near their crisis-era highs, the prospect of a deep recession caused by the coronavirus pandemic has led to a sharp spike in borrowing costs over recent days.

Minimal Conditions

In theory, lending from the ESM comes with conditions attached, though one of the officials said that in this case they would be narrowly focused on tackling the contagion and its impact on the economy and the fund wouldn’t demand any belt tightening. What’s more, establishing credit lines with several countries at once would remove the stigma that typically goes with financial aid.

All the same, deploying these tools would need unanimous approval by euro-area member states and officials insisted that would still be difficult. Even limited conditionality could be a red flag for Italy but without it countries like Germany, Finland and the Netherlands might not be prepared to sign off, the officials said.

EU leaders discussed the possibility of deploying the ESM during a teleconference on Tuesday and German Chancellor Angela Merkel cautioned that it would be difficult to use the fund without attaching conditions. Dutch Premier Mark Rutte was even more skeptical, saying that any changes in the way the ESM operates would struggle to get approval from the Dutch parliament, according to an EU official with knowledge of the discussion. Still, neither of them shot down the idea, the official said.

In a further indication that leaders are prepared to forego budget restrictions while the tackle the virus, the European Commission is expected in the coming days to propose that governments to invoke a general crisis clause allowing them to spend as much as the need to. The suggestion may be presented to leaders ahead of a videoconference next week, one of the officials said.

The option of using the ESM’s credit lines is less complicated and faster than other ideas being floated, such as the joint issuance of debt, in the form of so-called “coronabonds.” Among other obstacles, that plan would require the backing of the German Bundestag and there are doubts as to whether Merkel could secure that given her domestic weakness as she prepares to step down.

(Updates with markets in second paragraph.)

©2020 Bloomberg L.P.

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Germany, under EU pressure, amends decree on exports of protective equipment By Reuters


© Reuters. Germany, under EU pressure, amends decree on exports of protective equipment

BERLIN (Reuters) – Germany said on Saturday that, in agreement with the European Commission, it was amending a decree issued earlier this month that required a government agency to approve exports of protective equipment such as masks, goggles and gloves.

The step came a day after European Commission President Ursula von der Leyen said limits placed on exports of medical equipment by countries including France and Germany undermined the EU single market at a time when it had to function.

“The government’s aim is to protect people in Germany. Equally, the government’s central principle is to ensure European solidarity at the time of the coronavirus crisis,” the German Economy Ministry said in a statement.

“Both objectives will be achieved by means of the adapted general decree,” it added.

Under the amendment, the government agency concerned, BAFA, can approve in advance exports of protective equipment, for example, “to counteract a threat to the vital needs in a member state of the European Union”, the ministry said.

It added that protective equipment covered by the decree included protective glasses, face shields, surgical masks, respiratory protection masks, protective gowns and suits, and gloves.

Separately, Germany and Italy have spearheaded a national scramble for ventilators. Manufacturers warned on Friday that hospitals everywhere face a lack of vital equipment needed to treat coronavirus patients.

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Seeking to avoid EU tariffs, Washington state House passes bill to drop Boeing tax break By Reuters


© Reuters. FILE PHOTO: Boeing Co’s logo is seen above the front doors of its largest jetliner factory in Everett

By Eric M. Johnson

SEATTLE (Reuters) – Washington state’s House of Representatives passed a measure on Wednesday night that removes a key tax break for Boeing Co (N:) and other aerospace firms, in a bid to head off possible European tariffs on U.S. goods and ease a transatlantic trade dispute over aircraft subsidies.

“This measure is important to protect our state’s economy,” House Democratic Majority Leader Pat Sullivan said by phone. “We don’t want tariffs levied by the European Union on the aerospace industry but also on other key industries in the state like wine and agricultural products.”

The measure passed 73-24 after winning approval on Tuesday in the Senate, a spokeswoman for House Democrats said.

However, late changes to the legislation means it must be put to another vote in the Senate before it can go to Washington state Governor Jay Inslee’s desk for signing.

The World Trade Organization has found that Boeing and Europe’s Airbus (PA:), the world’s two largest planemakers, received billions of dollars of unfair subsidies in cases dating back to 2004. The global trade body has faulted both sides for failing to comply fully with previous rulings, opening the door to a tariff war.

After years of debate, the focus of the European case against the United States involves a preferential state tax rate for aerospace introduced 16 years ago and renewed in 2013 to help attract production work for Boeing’s 777X.

The planned law changes would remove the 40% saving on Business and Occupation tax, which saved Boeing some $118 million in 2018 based on published jetliner revenues.

“We applaud the House for its commitment to full WTO compliance,” a Boeing spokesman said by email on Wednesday evening. “We support this legislation and look forward to the Senate concurrence vote.”

The United States in February toughened its own tariffs on aircraft built by Boeing’s arch-rival Airbus after winning approval last year from the WTO to penalize European goods over Airbus subsidies.

The European Union is widely expected to win approval to use a similar trade weapon to penalize imports of U.S. goods when a parallel case over U.S. support for Boeing comes to a head during the spring.

Makers of products ranging from luxury goods to whisky have raised concerns over the impact of a tit-for-tat tariff war spreading beyond the aerospace industry.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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EU grants governments fiscal leeway to fight coronavirus impact, eyes more By Reuters


© Reuters. EU grants governments fiscal leeway to fight coronavirus impact, eyes more

By Jan Strupczewski

BRUSSELS (Reuters) – The European Union is giving governments all the fiscal leeway they need to individually deal with the economic impact of the coronavirus and may decide on a more concerted stimulus if the economy severely suffers, officials said on Thursday.

EU finance ministers discussed on Wednesday a response to the impact of the epidemic on growth as the European Commission issued a note estimating the outbreak would curb euro zone growth this year below the 1.2% forecast just weeks ago in mid-February, although it was still impossible to say by how much.

The ministers, who have ultimate control of the application of EU rules that limit government borrowing to underpin the euro, agreed the impact of the coronavirus on EU economies was an emergency and an event outside their control.

In such exceptional cases, EU budget rules, called the Stability and Growth Pact, allow governments to stop cutting deficits and public debt, and address the challenge at hand. There is no limit set in this flexibility clause.

“In general, there is political agreement that governments are free to fiscally address the emergency and we will worry about the Stability and Growth Pact later,” one official involved in the Wednesday teleconference said.

Two others confirmed that, but noted the extra spending would have to be clearly linked to mitigating the effects of the epidemic, which would be verified by the European Commission.

“The key is to have a system in place to verify we are actually targeting expenses connected to the coronavirus,” a second official involved in the teleconference said.

“We did something similar during the migration crisis (in 2015). At that time, only expenses above a multi-year average were excluded from the rule, and the amount excluded decreased gradually over 3 years,” the official said.

GOOD NEWS FOR ITALY

The choice of individual government responses rather than an pan-EU one was, for now, more convenient to speed things up.

It is also good news for highly indebted Italy, which has been struggling to respect EU requirements to cut deficit and debt, but which is also one of the hardest hit by the virus outbreak which has most affected the north which produces almost one third of the entire country’s GDP.

Rome introduced 900 million euros of financial support for the worst-hit areas last week and later promised spending of 3.6 billion euros to help the wider economy, a sum which might rise to 4.5 billion, or 0.25% GDP.

“As this is an emergency it is … more effective for countries to act first,” a third official involved in the discussions said.

“Fiscal rules have a clause available to cope with this, the European Commission will try to make clear in the meantime how this will be implemented, what policies, that it has to be targeted, timely, temporary,” the official said.

“On top of this, if growth is deeply hurt, we will consider a more accommodative stance at aggregate level,” the official said, adding the commitment would remain vague for now.

In the wake of the Lehman Brothers bank collapse, the EU decided in late 2008 on a European Economic Recovery Plan that would pump some 200 billion euros, 1.5% of the then EU GDP, into the economy to boost demand and stimulate confidence in 2009.

The number was an aggregate number of stimulus estimated to be adequate and was to be a reference for governments on how much to boost spending, but many countries went above that.

“It is not clear how this would work this time, it would surely need to be linked with investment in policy priorities,” the third official said. “But it is too soon to say. Also because it is not clear how a demand push would solve a supply chain problem.”

Officials said a response to the economic impact of the coronavirus would have been easier had the 19 countries sharing the euro had a euro zone budget to cushion such external shocks.

But a miniscule euro zone fiscal capacity of 12.5 billion euros over 7 years now only under consideration as part of a wider EU budget, excludes such purposes on the insistence of Germany and the Netherlands.



USTR vows to push for trade deals with Britain, EU; seeks reforms at WTO


WASHINGTON (Reuters) – The Trump administration on Friday said it would focus on concluding new trade agreements with Britain, the European Union and Kenya over the coming year, while strictly enforcing trade laws and pushing for reforms of the World Trade Organization.

FILE PHOTO: U.S. and European Union flags are pictured during the visit of Vice President Mike Pence to the European Commission headquarters in Brussels, Belgium February 20, 2017. REUTERS/Francois Lenoir

In its annual report to the U.S. Congress, the U.S. Trade Representative’s office said members of the global trade body needed to fundamentally rethink what it called “an outdated tariff framework” that no longer reflected economic realities.

USTR delivered a scathing indictment of the WTO in the 338-page document, calling it an organization that had “strayed far from its original mission and purpose,” while highlighting the Trump administration’s push over the past year to confront what it said were China’s unfair trade policies and practices.

It said 2019 was “a historic year for American trade” in which the administration reached trade agreements with China and Japan, and secured congressional approval of a new North American trade deal with Mexico and Canada.

It also hailed a WTO decision giving Washington the right to impose tariffs on $7.5 billion of EU goods in a long-running dispute over aircraft subsidies to Airbus (AIR.PA).

The U.S. government also initiated action against France over its digital services taxes that Washington says will harm U.S. tech companies such as Facebook (FB.O), Alphabet Inc’s Google (GOOGL.O), Amazon Inc (AMZN.O) and Apple (AAPL.O), and is monitoring developments in other countries, the report said.

Washington and Paris have agreed to a truce staving off those tariffs through year-end to allow work on broader tax reforms by the Organization for Economic Cooperation and Development.

“Going forward, President Trump will continue to rebalance America’s relationship with its trading partners, aggressively enforce our trade laws, and take prompt action in response to unfair trade practices by other nations,” the report said.

In addition to pursuing trade agreements with Britain and the EU, USTR said it would work on trade agreements with new partners, including Kenya, which would be the first U.S. free trade deal in sub-Saharan Africa.

USTR said it hoped a recent change in EU leadership and appointment of a new trade commissioner would lead to “more progress in the coming year” than was possible in the past.

It said it also planned to conduct further negotiations with Japan and China to reach more comprehensive trade agreements, while continuing to push for reforms at the WTO.

“The WTO’s failure to keep pace with new developments in the global economy has resulted in significant advantages for non-market economies,” USTR wrote in the report, saying China in particular benefited from the WTO’s deficiencies.

Reporting by Andrea Shalal; Additional reporting by David Shepardson; editing by Sonya Hepinstall and Leslie Adler



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UK to press for Canada-style trade deal with EU when talks start in March By Reuters


© Reuters. EU Chief Brexit negotiator Barnier meets Luxembourg’s PM Bettel in Luxembourg

LONDON (Reuters) – Britain will underline its desire for a Canada-style trade deal with the EU when formal talks start next month, Prime Minister Boris Johnson’s Downing Street office said on Saturday.

Ministers will meet on Tuesday to sign off on the formal trade mandate document which will frame Britain’s negotiating aims, before it is published on Thursday.

“The UK has made clear a number of times, and will reiterate, its desire for a Canada-style deal,” Downing Street said in a statement.

The EU-Canada deal, which came into force provisionally in 2017, removes most tariffs on goods traded between the two countries but does little to facilitate trade in financial services, which are very important for the UK economy.

EU chief negotiator Michel Barnier has said Britain cannot have such a deal free from the bloc’s rules and French president Emmanuel Macron said earlier on Saturday it was not clear whether an agreement can be reached, as Johnson wants, by the end of the year.

Johnson’s office said there were not expected to be any surprises in the mandate document, which aims for a future relationship based on friendly cooperation between sovereign equals.

British ministers were united in their objectives, it said, adding: “this is in contrast to the process of agreeing the EU’s mandate, which so far looks to be hamstrung by indecision and delay due to the competing interests of different member states.”

The EU had planned to have its mandate pinned down by Feb. 11 it said, noting that deadline had now passed and that EU countries were now locked in debate over how to agree the EU budget for the next seven years.

The first round of formal trade talks will take place in Brussels starting on March 2, with the British side led by its chief negotiator David Frost.

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France stood firm on EU farm budget By Reuters



By Gus Trompiz and Dominique Vidalon

PARIS (Reuters) – President Emmanuel Macron on Saturday told farmers that France stood its ground in opposing cuts to agricultural subsidies and would continue to do so, a day after an EU summit on the bloc’s next budget ended in deadlock.

European Union leaders failed on Friday to agree on a next seven-year budget, as a funding shortfall created by Britain’s departure sharpened debate over spending priorities.

Like his predecessors, Macron has called on Europe to maintain a large budget for its Common Agricultural Policy (CAP), of which France is the main beneficiary.

Inaugurating the annual Paris farm show on Saturday, Macron said France would resist efforts to cut the CAP envelope.

“On the CAP we defend an ambitious budget. CAP cannot be the adjustment variable of Brexit. We need to support our farmers,” Macron said.

“If we do not have a deal, we keep the current system. We are protected by the fact that without a deal, we keep the system as it is. We did not yield to those who wanted to reduce the (CAP) budget,” he added.

Macron has had an uneasy relationship with farmers, a powerful lobby in the EU’s biggest agricultural producer.

He initially won plaudits for legislation aimed at sharing profits more fairly along the food chain. But the effects have yet to be felt widely at farm level, while Macron’s determination to phase out weedkiller glyphosate has fueled farmers’ resentment at being cast as polluters.

In the aisles of the agricultural show, Macron tried to reassure farmers that glyphosate would not be scrapped in cases where there were no alternatives, while rules on safe distances for pesticide spraying would be adopted progressively.

“We are behind our farmers and peasants. They feed us everyday. We must be proud of French agriculture. I know I can count on our farm world to successfully transform, keeping a strong agriculture while managing to reduce pesticide use,” he said.

There were glimpses of recent tensions with a heated exchange with a woman about pension reforms, but hefty security kept protesters, some sporting T-shirts with “Peasants without President” at a distance.

As part of the customary presidential visit to the show, which attracts around 600,000 visitors over 10 days, Macron tasted French specialities like Charolais beef and was offered a jersey from the soccer team Olympique de Marseille. He posed in front of “Ideale”, an imposing Charolais-breed cow chosen as the mascot for this year’s event.

Macron began his visit with a tribute to former French President Jacques Chirac, a popular figure in the farming world and enthusiastic visitor to the Paris show, who died last year.

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Dutch PM says next EU budget must acknowledge Brexit gap By Reuters


Dutch PM says next EU budget must acknowledge Brexit gap

BRUSSELS (Reuters) – The Netherlands is willing to pay more into the next EU budget but the figures must take into account the Brexit hole, Dutch Prime Minister Mark Rutte said after the bloc’s national leaders failed to agree on their joint spending from 2021 in two days of fraught talks.

“We are willing to pay more because we are accepting that the budget will go up with economic growth and inflation,” Rutte told reporters, but stressed the reality of losing Britain’s contributions must be taken into account.

He said a proposal late on Friday aimed at breaking the deadlock was rejected by beneficiaries of the EU budget just as much as the “frugal” camp seeking to rein in spending.

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