Brussels awaits concrete action from Biden

Good morning and welcome to Europe Express.

Joe Biden embarks on his first trip abroad on Wednesday as he heads for Europe. The US president will meet fellow members of the G7 group of advanced economies in the UK, before holding Nato and EU-US summits in Brussels next week. We’ll look at his declared goals and ask why the EU is looking for more concrete proposals from Washington.

The European parliament returns to Strasbourg this week, though lawmakers can still tune in virtually if they find the French curfew, Covid-19 testing and paperwork too cumbersome. We’ll dive into one of the issues they are voting on: the row with the prime minister of the Czech Republic over an alleged conflict of interest.

We’ll also take a look at French president Emmanuel Macron’s surprise pre-election tour of his country.

Waiting for Joe

Joe Biden’s trip to Europe this week is all about rekindling the transatlantic alliance and showing a united front to Russia and China, as he laid out in the Washington Post. But while the window of opportunity has been wide open for quite some time on the European side, the US has yet to sign up to concrete joint actions, write Jim Brunsden and Valentina Pop in Brussels.

On China in particular, the stars have been aligning in recent months: the European parliament has frozen an EU-China investment agreement; Italy under Prime Minister Mario Draghi has reversed course on the country’s previously Beijing-friendly policy; the up-and-coming Greens in Germany could strike a more hawkish course on China if they get into government; and eastern EU countries involved in Beijing’s Belt and Road Initiative, notably Lithuania and Romania, have also cooled on China.

We will focus on ensuring that market democracies, not China or anyone else, write the 21st-century rules around trade and technology 

But in Washington, these shifts seem to have barely registered.

EU officials complain privately that the main message they have received from the US when it comes to trade issues, including on China, is that policies are under review. 

The EU remains eager to ignite a process of reform of the World Trade Organization to tackle Beijing’s state-capitalism model. But the bloc is unsure how much weight the Biden administration attaches to such endeavours. 

Valdis Dombrovskis, the EU’s trade policy chief, and US trade representative Katherine Tai issued a joint statement last month saying the two powers could “partner to promote high standards, address shared concerns, and hold countries like China that support trade-distorting policies to account”.

But beyond these vague statements of intention, nothing concrete has emerged.

There is, however, one likely “deliverable” that will come out of next week’s EU-US summit: the creation of a Trade and Technology Council to help shape standards and regulations in emerging sectors such as artificial intelligence. 

“The world’s major democracies will be offering a high-standard alternative to China for upgrading physical, digital and health infrastructure that is more resilient and supports global development,” Biden wrote in the Washington Post, in a nod to the very rationale of the EU-US Trade and Technology Council.

“As new technologies reshape our world in fundamental ways, exposing vulnerabilities like ransomware attacks and creating threats such as invasive AI-driven surveillance, the democracies of the world must together ensure that our values govern the use and development of these innovations — not the interests of autocrats,” he added.

The intention is for the joint initiative is to support the EU and the US in developing the standards for cutting-edge technologies, while avoiding damaging transatlantic rows over issues such as data privacy.

Brussels’ hope is that it can also help protect Europe from taking collateral damage from unilateral US moves: memories are still fresh of the continent’s tech manufacturers finding themselves shut out of China because of US sanctions on companies such as Huawei.

But there is a recognition in Brussels that perhaps the biggest message the EU and US could send to Beijing would be to end their own longstanding trade disputes. Intensive efforts are under way to resolve the 17-year row over subsidies for aerospace companies Airbus and Boeing, with EU officials holding out hope that this could be done in time for next week’s summit.

Chart du jour: The Draghi effect

The direction of Italian spreads has repercussions beyond its borders. As the eurozone’s largest government bond market, Italy sets the tone for high-risk assets across the bloc. For now, the “Draghi effect” has helped to paper over worries about the country’s substantial public debt of more than 160 per cent of GDP. (More here)

Czech woes

There is little love lost between Andrej Babis and the European parliament— and the coming week is unlikely to improve relations, writes James Shotter, FT’s central Europe correspondent.

In April, a long-awaited EU audit found the billionaire Czech prime minister breached conflict of interest rules because of his links to the Agrofert business empire he built before going into politics. During their session in Strasbourg this week, MEPs will vote on a resolution demanding a series of actions in response to the report’s findings.

Babis, who put the business into trust in 2017, has repeatedly rejected allegations of a conflict of interest. He dismissed the audit as “manipulated” by his political enemies and has accused the European Parliament of meddling.

We don’t want the European parliament to control our country

“Nobody from abroad will stick their nose in here,” he said during a debate in the Czech parliament last week.

But his protestations appear to have done little to sway MEPs. The draft resolution — whose text can still be amended — calls for no funds to be paid from the EU or Czech budgets to companies “ultimately controlled” by Babis until his alleged conflict of interest has been resolved. It also calls for the European Commission to look into Babis’s influence over Czech media and the judicial system to see if there have been any breaches of the rule of law.

The scrutiny from Brussels adds to the pressures on the prime minister as he prepares for what is expected to be a closely contested parliamentary election in October. 

Babis’s minority government survived a no-confidence vote called by opposition parties last Thursday over his administration’s handling of the coronavirus pandemic. Three days before that vote, Czech police recommended he be charged with fraud over the alleged misuse of an EU subsidy in a case that has dogged him for much of the past four years.

The case was dropped by prosecutors in September 2019 but was reopened three months later. Babis has repeatedly denied any wrongdoing and dismissed the allegations as a ploy by his opponents to undermine him.

Macron’s grand tour

Emmanuel Macron has embarked on a surprise tour of provincial France. The French president’s supporters say he wants to settle the priorities for the last year of his term. But rivals call the visits a shameless abuse of his position to campaign for his party ahead of regional elections this month, writes the FT’s Paris bureau chief Victor Mallet.

“I’m going to have to take decisions, some about economic recovery and others that are more difficult,” Macron said in Martel, a small town in south-west France, on Thursday. The idea was to make the last part of his mandate “a useful year”.

The president singled out the controversial reform of France’s pensions system — a process that was suspended during the pandemic — as an area where he would tread carefully because it had “made people worried”. 

Roland Lescure, an MP for Macron’s La République en Marche party, said the purpose of the tour was to “take the pulse” of the French people. “This is the president’s de-confinement” after more than a year of Covid-19 restrictions, Lescure said. “He was dying to meet French people on the ground again so he’s doing so.”

By delaying economic reforms such as the pensions plan, Macron will seek to court voters from the left after months of cracking down on Islamism to appeal to the right. “He has to decide whether he wants recovery and unity or recovery and transformation,” Lescure said. “I don’t think he can have the three of them.” 

Macron’s rivals from the far left to the far right take a more cynical view of a tour that mirrors the “great national debate” designed to ease tensions after the anti-government gilets jaunes, or yellow vests, protests that began in 2018. 

“Is there a single person in France who hasn’t understood that Emmanuel Macron is taking advantage of his position as president to campaign for the regional elections?” asked Marine Le Pen, leader of the extreme-right Rassemblement National party.

Opinion polls show the RN to be the most popular party in several of the 13 French regions in which elections will be held on June 20 and 27 — even if it may not win control because other parties will join forces in the second round to keep it out of power. Le Pen herself is currently Macron’s main rival for next year’s presidential contest.

Two things to watch today

1. European parliament resumes its weeklong sitting in Strasbourg

2. Justice ministers meet in Luxembourg

. . . and later this week

1. EU Brexit commissioner Maros Sefcovic meets his counterpart Lord David Frost in London

2. G7 summit takes place in Cornwall from Friday to Sunday

Notable, Quotable

The EU needs a new playbook for dealing with neighbours, one that involves pragmatic solutions between friends, not the imposition of one side’s rules on the other and legal purism

• David Frost, the UK’s Brexit minister, has warned in the FT that EU “legal purism” is putting Northern Ireland’s stability at risk, as he called for progress on settling the dispute when he meets his EU counterpart this week.

• Germany’s Christian Democrats won a decisive victory in elections in the eastern state of Saxony-Anhalt on Sunday, holding off a strong challenge from the far-right Alternative for Germany. The result is a boost for CDU leader Armin Laschet and his bid to succeed Angela Merkel as chancellor.

• G7 finance ministers backed a global minimum rate of at least 15 per cent, and agreed that countries should have the right to tax a certain proportion of multinationals’ profit in the locations where it is generated. But they left much to be decided in the wider global negotiations, which are being conducted among 139 countries at the OECD in Paris.

• Germany’s port of Hamburg is negotiating with China’s Cosco which seeks to acquire a minority stake of up to 40 per cent in a Hamburg terminal, NDR reports.

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