A low bar is set for Greek-Turkish talks

Good morning and welcome to Europe Express.

On this bank holiday in the UK and US, we focus on Greece, where the Turkish foreign minister is visiting for talks — and the minefields the two sides will (presumably) try to avoid.

Spain is expected to extend its furlough scheme today. We will take a look at how much difference government aid can make to an economy battered by the pandemic.

And we will analyse the parliamentary election result in Cyprus.

Avoiding another clash

Sparks flew the last time Greece and Turkey’s top diplomats met, when a press conference in Ankara went off-script in April as they traded blame over bitter territorial disputes, write Ayla Jean Yackley in Istanbul and Eleni Varvitsioti in Athens.

Greek Foreign Minister Nikos Dendias hosts his counterpart Mevlut Cavusoglu in Athens today, and while both sides intend to keep their differences off-camera the meeting still promises to be fraught. “Our positions are so far off that we are not aiming for any convergence,” a Greek diplomat told Europe Express.

Kyriakos Mitsotakis, Greece’s prime minister, warned Turkey last week to refrain from “provocations, illegal actions and aggressive rhetoric”. On his way to the Greek capital, Cavusoglu yesterday visited religious leaders of a Muslim minority in Greece that Turkey claims faces official discrimination. 

Greek diplomats are hoping for a low-key visit that will set the tone for a potential meeting between Mitsotakis and Recep Tayyip Erdogan, Turkey’s president, on the sidelines of the Nato summit on June 14.

We want to keep channels of communication open, not create any further tensions so we can have a peaceful summer

The agenda is open-ended, with thorny matters expected to be discussed, including: sovereign rights in the Aegean Sea; migration; and minority issues. 

The two Nato members are meant to be de-escalating tensions after a military showdown on the high seas last year, when Turkey sent a seismic research vessel, accompanied by warships, into eastern Mediterranean waters internationally recognised as belonging to Greece and Cyprus.

Ankara avoided EU sanctions when its ships returned to shore but the confrontation could flare again. Last week Turkey’s energy minister said the country could drill more boreholes in the east Mediterranean. The country insists it will not be “imprisoned” on its shores and it wants to thwart Greece and other rivals in their efforts to exploit a potential natural gas bonanza beneath the seabed. 

Integrating Turkey into projects to extract and export the gas to Europe could help reduce the country’s use of hard power to press its neighbours for a share of the resources, analysts at the International Crisis Group said in a report released today. 

With so much at stake, the foreign ministers need to avoid showboating this time, wrote the think-tank’s Alissa de Carbonnel. “If their talks now collapse again into the kind of brinkmanship we saw last year, it will breed fresh mistrust and they could find themselves locked in an even more dangerous stalemate,” she said.

Extending hand

The furlough scheme that has kept millions of Spaniards away from the dole queue will be extended today, writes Daniel Dombey in Madrid. While the country’s Socialist-led government touts its success, others worry about the long-term outlook.

The ERTE programme, which had been due to expire at the end of May, will be prolonged until the end of September, after agreements with business and unions and formal cabinet approval last week.

It may be the last such extension for a scheme that covered about 3.6m people at its peak in April 2020. The programme currently encompasses 555,000 people, largely in sectors such as tourism that have been heavily affected by the pandemic.

Some economists worry that many of those still benefiting from the state support may ultimately find themselves without work. It is too soon, they say, to determine the extent to which the ERTEs have saved jobs.

Not only has the Spanish economy been hit hard by the Covid-19 epidemic — the 10.8 per cent contraction last year outstripped all other industrialised countries — but it is contending with profound structural problems.

An OECD report last week noted that the country’s GDP per capita was significantly lower and inequality higher than other advanced economies, largely because of persistently high unemployment. Because of the country’s rigid labour system, pandemic-era job losses have been concentrated on young and temporary workers.

Despite congratulatory statements about Spain’s success in reincorporating people from furlough back into work, much of the country’s jobs challenge has yet to be addressed.

Chart du jour: Breakfast turns into luxury

The cost of raw materials that goes into making breakfasts has spiked since the pandemic began — raising fears that a broad commodity boom could push up global food prices. The increase will particularly hurt low-income countries, where food is less processed and the portion of disposable income spent on staples tends to be higher. (Find out why)

Cyprus gloom

Cypriots voted yesterday to elect a new House of Representatives with a clear agenda. Corruption scandals, Covid-19 and talks over the future of the island defined the result, which saw the ruling conservatives punished, writes Eleni Varvitsioti in Athens. 

The ruling Democratic Rally fell to 27.8 per cent compared to 30.7 per cent in 2016. The Communist opposition party stayed on as second-largest party but won fewer votes than five years ago.

By contrast, ELAM, an anti-migrant nationalist party with strong affiliations with the outlawed Golden Dawn party of Greece, almost doubled its showing compared to the 2016 election. It won 6.78 per cent of the vote, placing it fourth in voter preferences.

Democratic Rally has been weakened over the past year and had to rely on the support of ELAM to pass a series of laws, including the budget.

The government’s reliance on an extreme rightwing party will affect the Cyprus talks. Multiple rounds of the UN-led discussions have failed to reunite Cyprus, which has been split since 1974 when Turkey invaded the north in response to a coup aimed at uniting the island with Greece.

“The results show that not only reforms will be harder to be implemented but will have an impact on the Cyprus problem,” said Fiona Mullen, director of the Cyprus-based consultancy Sapienta Economics. “Democratic Rally will be more reliant on ELAM, the far-right party, which rejects any federal solution on the Cyprus problem.”

Corruption dominated the campaign, even in the talking points of the ruling Democratic Rally party, because the present administration has faced widespread criticism for establishing a cash-for-passports scheme. An official investigation showed that high-level politicians were involved in illegally giving thousands of passports to rich foreigners.

The scheme was abandoned last November but left deep scars on the rightwing government, which was subjected to the largest street protests in years despite Covid-19 restrictions.

Two things to watch today

1. German Chancellor Angela Merkel and French President Emmanuel Macron hold a virtual summit

2. Turkish foreign minister visits Greece

. . . and later this week

1. The European Public Prosecutor’s Office will start working on Tuesday

2. The European Commission will put forward the European Semester spring package on Wednesday. Also that day: Schengen reform proposals and how to secure electronic IDs.

Notable, Quotable

The chance of any normalisation of relations with Lukashenko in charge is gone

• Alexander Lukashenko’s decision to divert a Ryanair flight to arrest an opposition blogger has driven relations between Belarus and the west to a new low. But diplomats say this is a price the pugnacious 66-year-old is prepared to pay as he battles to reassert his authority. Read more in this FT profile.

• Mario Draghi, the Italian prime minister, has set up a dedicated watchdog on how EU money from the €800bn recovery fund is spent. The “technical secretariat” will report to the PM office and remain in place for five years. (More here)

• EU tech regulation should focus on the five largest US tech companies and perhaps China’s Alibaba, said German centre-right MEP Andreas Schwab, the lawmaker steering this new law through the European parliament.

• A sharp rise in the cost of polluting in Europe hit low-cost carriers Ryanair, easyJet and Wizz Air hard, as the EU and the UK’s emissions trading schemes only cover European flights — the bulk of the airlines’ routes. (More here)

• Denmark’s spying capabilities were used by the US National Security Agency in tapping into the communications of leading politicians in Europe, including German chancellor Angela Merkel, according to a joint investigation by DR and Süddeutsche Zeitung.

FT Event: Made in Italy, Setting a new course

On June 8, the Financial Times, Il Sole 24 Ore and Sky TG24 are partnering for a digital event that will explore key measures planned for relaunching the Italian economy in the post-pandemic landscape. Register here today.