European Commission

More stories

  • 138 Shares189 Views

    in Economy

    U.S. and Key Allies Will Bar Some Russian Banks From SWIFT

    by

    WASHINGTON — The Biden administration and key allies announced on Saturday that they would remove several of the largest Russian banks from the SWIFT financial messaging system, essentially barring them from international transactions. They also said they would impose new restrictions on Russia’s central bank to prevent it from using its large international reserves to undermine sanctions.The actions, agreed to by the European Commission, Britain, Canada, France, Germany, Italy and the United States, represented a significant escalation in the effort to impose severe economic costs on Russia over President Vladimir V. Putin’s decision to invade Ukraine.“Russia’s war represents an assault on fundamental international rules and norms that have prevailed since the Second World War, which we are committed to defending,” the countries said in a joint statement. “We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”The action was a remarkable change of direction for European powers that, until recent days, were reluctant to end a 30-year effort to integrate Russia in the European economy. Now, like the Biden administration, European nations appear to be headed toward a policy of containment.But, out of a sense of political self-preservation, they stopped short of barring energy transactions with Russia. The result is that Germany, Italy and other European nations will continue purchasing and paying for natural gas that flows through pipelines from Russia — through Ukrainian territory that is suddenly a war zone.Some in Europe, along with President Volodymyr Zelensky of Ukraine, had called for all Russian institutions and individuals to be cut off from SWIFT in an effort to bring the Russian economy to its knees. About 40 percent of the Russian government’s budget comes from energy sales.Nonetheless, Ursula von der Leyen, the president of the European Commission, said that “cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports.”Ms. von der Leyen said that the trans-Atlantic coalition would also try to cripple Russia’s central bank by freezing its transactions and making it “impossible for the central bank to liquidate assets.”The targeting of Russia’s central bank could, in the end, prove more consequential than the SWIFT measures. Russia has spent the last several years bolstering its defenses against sanctions, amassing more than $630 billion in foreign currency reserves by diverting its oil and gas revenue. Those reserves can be used to prop up the ruble, whose value has fallen dramatically amid the latest rounds of sanctions.Biden administration officials said on Saturday that there would be new restrictions by the United States and allies against selling rubles to Russia, undercutting the country’s ability to support its currency in the face of new sanctions on its financial sector. That, in turn, could cause inflation — and while administration officials did not say so explicitly, they are clearly hoping that could fuel protests against Mr. Putin’s rule in Russia.“We know that Russia has been taking steps since 2014 to sanctions-proof its economy, in part through the stockpiling of foreign exchange reserves,” said Emily Kilcrease, a senior fellow at the Center for a New American Security. “The central bank sanctions will limit their ability to leverage this asset, along with constraining their ability to conduct monetary policy of any sort to manage the economic damage from other sanctions.”The United States and its allies also took measures to put pressure on Russia’s elites. A senior American official, briefing reporters on Saturday evening, said that Europe and the United States would create a task force to “identify, hunt down and freeze the assets” of Russian companies and oligarchs that are subject to sanctions, “their yachts, their mansions and any ill-gotten gains that we can find and freeze under the law.” He said the goal would also be to throw them out of “their luxury apartments” and end “their ability to send their kids to fancy colleges in the West.”The idea is to strike those who are closest to Mr. Putin and undermine their ability to live in both Russia and the West. One step, the United States and its allies said, will be to limit the sale of so-called golden passports that allow wealthy Russians who are connected to the Russian government to become citizens of Western nations and gain access to their financial systems.While the steps are some of the harshest taken yet, the announcement falls short of a blanket cutoff of Russia from SWIFT, which some officials see as a nuclear option of sorts. Such a move would have essentially severed Russia from much of the global financial system.And some experts say that it may only drive Russia to expand the alternative to the SWIFT system that it created several years ago when it began attempting to “sanction-proof” its economy. But Russia’s equivalent system is primarily domestic; making it a competitor to SWIFT, officials say, would require it to team up with China.The moves on Saturday came on the same day that Germany’s chancellor, Olaf Scholz, announced that his government was approving a transfer of antitank weapons to the Ukrainian military, ending his insistence on providing only nonlethal aid, such as helmets.At the same time, in a post on Twitter, Germany’s foreign minister, Annalena Baerbock, and its economy minister, Robert Habeck, acknowledged that the country’s government was now moving from opposing a SWIFT ban to favoring a narrowly targeted one.Understand Russia’s Attack on UkraineCard 1 of 7What is at the root of this invasion? More

  • 113 Shares189 Views

    in Economy

    E.U. Considers Due Diligence Law for Company Supply Chains

    by

    Large companies operating in the European Union could be held responsible for environmental violations or human rights abuses committed by businesses in their supply chains under a law proposed on Wednesday by the European Commission, the bloc’s administrative arm.“We can no longer turn a blind eye on what happens down our value chains,” said Didier Reynders, the European Union’s commissioner for justice.Under the legislation, known as a due diligence law, businesses would need to establish regulations to detect, prevent and mitigate breaches of human rights, such as child labor, as well as environmental hazards in their supply chains. National governments would define the financial penalties for companies violating the rules.Victims could sue for compensation in domestic courts of E.U. member nations, even if the harm occurred outside the bloc.The commission proposed the rules after some member nations, including Germany and France, introduced different versions of due diligence law at the national level.The legislation will now be discussed by the European Parliament and the 27 national governments, with all parties able to modify the language. The final draft will require passage by the E.U. lawmakers and member nations. The whole process could take a year or more.The proposal would initially apply to companies with more than 500 employees and annual revenue over 150 million euros (about $170 million), a group that includes about 10,000 E.U. businesses, about 1 percent of the total. Around 2,000 companies based outside the bloc but doing business in the European Union, amounting to an annual revenue of more than €150 million, would also be covered. After two years, the range would be expanded to include smaller businesses in so-called high-impact sectors, such as textiles, food products and mining.Businesses expressed concern over the proposal.“It is unrealistic to expect that European companies can control their entire value chains across the world,” said Pierre Gattaz, president of BusinessEurope, a trade organization. “Ultimately these proposals will harm our companies’ ability to remain competitive worldwide.”But Richard Gardiner of Global Witness said the legislation had the potential to become “a watershed moment for human rights and the climate crisis,” if the European Union resisted efforts to water down the proposed measures.“We’ve been investigating big corporations for decades, and when we reveal the harm they’re causing to people and planet, the response is invariably the same: ‘We weren’t aware,’” Mr. Gardiner said. “Today’s proposal from the commission may make that response illegal.”But some analysts remained skeptical, pointing out that the commission’s final proposal, which was delayed several times, is much less ambitious than what was initially planned.“This outcome is the result of an unprecedented level of corporate lobbying,” said Alberto Alemanno, a professor of European Union law at the business school HEC Paris. He said the final result “was downgraded into yet another narrow piece of tick-the-boxes compliance law.”Julia Linares Sabater, a senior officer at the WWF European Policy Office, said the businesses affected “represent a drop in the ocean of the E.U.’s total economy.”“The E.U. needs to be far more ambitious to successfully tackle the climate and biodiversity crises,” she added. More

  • 113 Shares129 Views

    in Economy

    Inflation in Europe Expected to Peak Early This Year

    by

    Inflation in countries using the euro, which has soared to record-setting heights in recent months, is expected to peak in the first quarter of this year, the European Commission said on Thursday, as consumers feel the bite of higher energy prices and rising costs of key goods.Euro area inflation for the January-March period will reach 4.8 percent, up from 4.6 percent in the fourth quarter of last year, which was a record since the bloc started measuring inflation collectively in 1997, the commission said in its quarterly economic forecast. Inflation is expected to move down over the course of the year, but it won’t reach the 2 percent benchmark target set by the European Central Bank until 2023, the forecast said.Economies will continue to grow as the impacts of the pandemic ease, by an expected 4 percent in the euro area this year, according to the forecasts, and by the end of this year will have recovered all their pandemic-era economic losses.But inflation will outpace that average rate of economic expansion, eroding gains and the benefits that such growth would otherwise bring to Europeans.In comments to the news media, Paolo Gentiloni, the European commissioner for the economy, said that the mix of high energy prices and persistent staff shortages caused by the coronavirus were hitting Europe’s economic recovery.“Supply constraints have grown and energy prices have continued to be very high,” Mr. Gentiloni said. “This has contributed to dent further manufacturing production and again pushed inflation above expectations, with a negative impact on consumers’ purchasing power.” More

  • 113 Shares99 Views

    in Economy

    Gig Worker Protections Get a Push in European Proposal

    by

    A proposal with widespread political support would entitle drivers and couriers for companies like Uber to a minimum wage and legal protections.LONDON — In one of the biggest challenges yet to the labor practices at popular ride-hailing and food-delivery services, the European Commission took a major step on Thursday toward requiring companies like Uber to consider their drivers and couriers as employees entitled to a minimum wage and legal protections.The commission proposed rules that, if enacted, would affect up to an estimated 4.1 million people and give the European Union some of the world’s strictest rules for the so-called gig economy. The policy would remake the relationship that ride services, food delivery companies and other platforms have with workers in the 27-nation bloc.Labor unions and other supporters hailed the proposal, which has strong political support, as a breakthrough in the global effort to change the business practices of companies that they say depend on exploiting workers with low pay and weak labor protections.Uber and other companies are expected to lobby against the rules, which must go through several legislative steps before becoming law. The companies have long classified workers as independent contractors to hold down costs and limit legal liabilities. The model provided new conveniences for traveling across town and ordering takeout, and gave millions of people a flexible new way to work when they want.A courier in Paris last year, when lockdown measures highlighted the fragile nature of gig work.Dmitry Kostyukov for The New York TimesBut in Europe, where worker protection laws are traditionally more robust than in the United States, there has been growing momentum for change, particularly as the pandemic highlighted the fragile nature of gig work when food couriers and others continued to work even amid lockdowns and rising Covid-19 cases.While there have been some important legal victories and laws passed in some countries targeting Uber and others, the policy released by the European Commission, the executive branch of the European Union, is the most far-reaching legislative attempt to regulate companies to date.The rules would affect drivers, couriers, home cleaners, home health care aides, fitness coaches and others who use apps and online platforms to find work. As employees, they would be entitled to a minimum wage, holiday pay, unemployment and health benefits, and other legal protections depending on the country where they worked.“New forms of work organization do not automatically translate into quality jobs,” Valdis Dombrovskis, the bloc’s commissioner for trade, said as he presented the new rules. “People involved in platform work can sometimes find themselves exposed to unsafe living and working conditions.” The European Union estimates that 28 million people work through digital labor platforms in the bloc, with their number expected to grow to 43 million by 2025. The commission said on Thursday that 5.5 million workers were at risk of what it called misclassification, and that up to 4.1 million of them could be reclassified as employees through the directive.“This is not just bike riders in big cities,” said Johanna Wenckebach, a lawyer and scientific director at the Hugo Sinzheimer Institute for Labor and Social Security Law in Germany. “This is a phenomenon with millions of workers and many more ahead.”The rules are part of a broader digital agenda that European Union leaders hope to pass in the coming year. Proposals include tougher antitrust regulations targeting the largest tech companies, stricter content moderation rules for Facebook and other internet services to combat illicit material, and new regulations for the use of artificial intelligence.The new labor rules follow a landmark case in February, when Britain’s top court ruled that Uber drivers should be classified as workers entitled to a minimum wage and holiday pay. In the Netherlands, a court ruled in September that Uber drivers should be paid under collective rules in place for taxi drivers.Dutch Uber drivers calling for expanded workers’ rights outside a court in June that would later rule in their favor.Koen Van Weel/EPA, via ShutterstockSupporters of the new worker regulations said companies like Uber behave like employers by controlling workers through software that sets wages, assigns jobs and measures performance — a practice the commission called “algorithmic management.”The new European rules would require companies to disclose more about how their software systems made decisions affecting workers. For those who may remain independent, the new rules would also require companies to grant more autonomy that self-employment entails.The policy threatens the business models of Uber and other platforms, like the food delivery service Deliveroo, that already struggle to turn a profit. The E.U. law could result in billions of dollars in new costs, which are likely to be passed on to customers, potentially reducing use of the apps.Uber opposes the E.U. proposal, saying it would result in higher costs for customers. The company said roughly 250,000 couriers and 135,000 drivers across Europe would lose work under the proposal.Rather than help workers, Uber said the proposal “would have the opposite effect — putting thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on.”Just Eat, the largest food-delivery service in Europe, said it supported the policy. Jitse Groen, the company’s chief executive, said on Twitter that it would “improve conditions for workers and help them access social protections.”The E.U. rules are being closely watched as a potential model for other governments around the world. Negotiations could last through 2022 or longer as policymakers negotiate a compromise among different European countries and members of the European Parliament who disagree about how aggressive the regulations should be. The law is unlikely to take effect until 2024 or later.Enforcement would be left to the countries where the companies operated. The policy contrasts Europe with the United States, where efforts to regulate app-based ride and delivery services have not gained as much momentum except in a few states and cities.A protest in Bakersfield, Calif., against Proposition 22, a 2020 state ballot question backed by gig economy companies.Tag Christof for The New York TimesLast year, gig economy companies staged a successful referendum campaign in California to keep drivers classified as independent contractors while giving them limited benefits. Although a judge ruled in August that the result violated California’s Constitution, his decision is being appealed, and the companies are pursuing similar legislation in Massachusetts.The Biden administration has suggested that gig workers should be treated as employees, but it has not taken significant steps to change employment laws. In May, the Labor Department reversed a Trump-era rule that would have made it more difficult to reclassify gig workers in the country as employees.In Europe, Spain offers a preview of the potential effects of the E.U. proposal. The country’s so-called Riders Law, enacted in August, required food delivery services such as Uber and Deliveroo to reclassify workers as employees, covering an estimated 30,000 workers.Uber responded by hiring several staffing agencies to hire a fleet of drivers for Uber Eats, a strategy to comply with the law but avoid responsibility for managing thousands of people directly. Deliveroo, which is partly owned by Amazon, abandoned the Spanish market.The companies prefer policies like those in France, where the government has proposed allowing workers to elect union representation that could negotiate with companies on issues like wages and benefits. Uber also pointed to Italy, where a major union and food delivery companies struck a deal that guarantees a minimum wage, insurance and safety equipment, but does not classify the workers as employees.Kim van Sparrentak, a Green lawmaker in the European Parliament who helped draft a report on platform workers that was published this year, praised the commission’s proposal as “quite radical.”“It can set a new standard for workers’ rights,” Ms. Van Sparrentak said.Adam Satariano More

  • 100 Shares169 Views

    in Economy

    E.U. Delays Digital Levy as Tax Talks Proceed

    by

    The postponement came as Treasury Secretary Janet Yellen arrived in Brussels to continue pushing for a global minimum tax.BRUSSELS — The United States secured a diplomatic victory in Europe on Monday when European Union officials agreed to postpone their proposal for a digital levy that threatened to derail a global effort to crack down on tax havens.The delay removes another potential obstacle to the broader tax agreement, which gained momentum over the weekend after finance ministers from the Group of 20 countries formally backed a new framework. That deal, which officials hope to make final by October, would usher in a global minimum tax of at least 15 percent and allow countries to tax large, profitable companies based on where their goods and services are sold. If enacted, the changes would entail the biggest overhaul of the international tax system in a century.With those negotiations in their final stretch, the European Union was planning to propose a 0.3 percent tax on the goods and services sold online by all companies operating in the European Union with annual sales of at least 50 million euros. That was intended to help fortify a fiscal recovery fund and had been in development since last year, when the international talks taking place at the Organization for Economic Cooperation and Development appeared to be on life support.But that new levy had been unacceptable to U.S. officials, who viewed it as disproportionately hitting American firms. As Treasury Secretary Janet L. Yellen arrived in Brussels to pressure the European Union to drop or delay the plan, officials announced on Monday that it would be shelved.“I think we will work together to reach this global agreement,” Paolo Gentiloni, European commissioner for economy, told reporters after a meeting with Ms. Yellen. “In this framework I informed Secretary Yellen of our decision to put on hold the proposal of the commission of a digital levy to allow to us to concentrate, working hand in hand to achieve the last mile of this historic agreement.”A European Commission spokesman suggested that the delay would remain in place until October, a time frame that is in line with the deadline set by the O.E.C.D. to complete a global tax agreement.Ahead of a meeting with the Eurogroup, a club of euro-area finance ministers, Ms. Yellen had waved off questions about the significance of the digital levy delay. A Treasury Department spokeswoman said she had no comment.At a news conference in Venice on Sunday, Ms. Yellen made clear that she believed that the new E.U. proposal ran counter to the broader talks over a minimum tax and the elimination of digital services taxes in Europe and other countries.“It’s really up to the European Commission and the members of the European Union to decide how to proceed, but those countries have agreed to avoid putting in place in the future and to dismantle taxes that are discriminatory against U.S. firms,” Ms. Yellen said.Other finance ministers indicated that the delay was another sign of progress.“It’s very, very good that we are now going to the next step, discussing how we will implement this at the European Union and that the European Union is deciding not to go with its own proposal to the public today,” Olaf Scholz, Germany’s finance minister, said as he entered the meeting.The E.U. digital levy proposal faced a difficult path to becoming law in Europe, but the prospect of a new proposal that could be construed as a tax that targets American companies would have been another distraction for the fragile negotiations.The United States has already been angered by other digital taxes that countries like France, Italy and Britain have enacted, which are separate from the new proposal. More than a dozen countries have enacted or announced plans in recent years to move forward with their own digital taxes.The Biden administration has asked countries to immediately drop their digital taxes and has prepared retaliatory tariffs on a wide swath of European goods, including cheese, wine and clothing. As part of the global tax negotiations, countries have said they are willing to do so in exchange for additional tax on the largest and most profitable multinational enterprises, those with profit margins of at least 10 percent, that would be based on where their goods or services were sold, even if they had no physical presence there.France, Europe’s biggest proponent of a digital tax, had no comment Monday. Its finance minister, Bruno Le Maire, had said during the weekend that France would legally commit to withdrawing its digital services tax only after an agreement was in effect, which is unlikely to happen before 2023.In remarks at the meeting on Monday, Ms. Yellen emphasized the importance of a close relationship between the United States and the European Union and underscored the importance of the global tax agreement that she has been helping to broker. She argued that a deal over a global minimum tax would help European nations make important investments in their economies and reduce inequality.“Long-run fiscal sustainability is critically important, which is one of the reasons why we need to continue working collectively to implement a global minimum tax of at least 15 percent, in line with the commitment the G20 made just days ago,” Ms. Yellen said. “We hope all E.U. member states will join the consensus and the European Union will move forward on this issue at E.U. level.”Ms. Yellen made the case that fiscal sustainability should be achieved by taxing multinational companies, adding: “We need sustainable sources of revenue that do not rely on further taxing workers’ wages and exacerbating the economic disparities that we are all committed to reducing.”The meeting also offered Ms. Yellen an opportunity to persuade Ireland to join the global agreement. Ireland, Estonia and Hungary have yet to sign on to the deal, which is now backed by 132 countries. Because support must be unanimous within the European Union, their resistance could scuttle the entire agreement.The United States has been trying to make the case to Ireland that the proposed tax changes in the United States that aim to curb profit shifting would nullify many of the benefits Ireland had gained from having a tax rate of just 12.5 percent. They are also trying to convince Ireland that its status as a corporate hub would be secure even if it raised its tax rate, hoping to alleviate Irish concerns that joining the agreement would upend its economic model.O.E.C.D. officials believe that Ireland is withholding its support for the agreement until the Biden administration demonstrates that it can pass tax legislation in the United States. Ms. Yellen will return to Washington on Tuesday and work with members of Congress to win support for the deal.After a meeting with Ms. Yellen, Paschal Donohoe, Ireland’s finance minister and president of the Eurogroup, offered an optimistic tone but made no commitments. He said that he had a “very good engagement” with the Treasury secretary and that there was “further work ahead.”“I affirmed to Secretary Yellen that Ireland remains very committed to the process,” Mr. Donohoe said, promising that he would remain “constructively engaged.”Liz Alderman More