EsadeGeo Daily Digest, 25/05/2020

Financial Times – Martin Arnold and Olaf Storbeck / European consumers stockpile savings, adding to economic drag

  • Bank deposits are surging across Europe as people respond to the economic and social upheaval of the coronavirus pandemic by saving more, fuelling fears among economists that consumers will not come to the rescue of the continent’s shrinking economy.
  • French savers put aside nearly €20bn in March, well above the long-run average monthly change in bank deposits of €3.8bn. Separate figures from the Banque de France show that by mid-May, the total had risen to more than €60bn since the country’s lockdown began — indicating that the growth of savings accelerated as the crisis deepened. 
  • Italian savers put aside €16.8bn in March, the ECB data show, compared with a long-run monthly average of €3.4bn, while Spanish households saved €10.1bn, up from an average of €2.3bn. UK household bank deposits jumped by £13.1bn in March, a record monthly rise, according to the BoE.
  • Bank deposits in Germany fell sharply, but this was a sign that households had withdrawn cash. Germans tend to prefer to hold their savings in cash during a crisis and a similar phenomenon occurred at the height of the 2008 financial crisis. The German central bank reported that cash in circulation rose by €39.7bn between late January and early May.
  • The Washington Post – Jackson Diehl / The nutrition crisis of covid-19 will be even worse than the disease

Foreign Policy – Sumit Ganguly and Manjeet S. Pardesi / Why we should worry about China and India’s border skirmishes

  • Tensions between India and China are not new. The two countries—which share the world’s longest unmarked border—fought a full-fledged war in 1962 and have since engaged in several small skirmishes. Not since 1975 has a bullet been fired across their shared border.
  • Recent events, however, suggest that escalations are highly possible. Both sides have substantial—and growing—military deployments along a mostly disputed border. And for more than a decade, the People’s Liberation Army (PLA) has been testing India’s military readiness and political resolve along several strategic areas. 
  • The most recent clashes took place earlier this month. On May 5, Indian and Chinese soldiers clashed near the Pangong Tso lake in Ladakh. Soldiers from both sides came to blows and threw stones at each other mostly in efforts to induce the Indian troops to move back from the areas they were patrolling. 
  • In 1988, India’s gross domestic product was $297 billion compared with China’s $312 billion that year, while India’s defense spending, at $10.6 billion, was also close to the Chinese allocation of $11.4 billion. At $13.6 trillion in 2018, China’s GDP is now more than five times India’s $2.7 trillion. Similarly, China spent $261.1 billion on defense expenditure in 2019, almost four times India’s total of $71.1 billion.
  • The Economist / America is determined to sink Huawei

The New York Times – Steven Lee Myers / Why China’s move to rein in Hong Kong is just the start

  • China’s move to strip away another layer of Hong Kong’s autonomy was not a rash impulse. It was a deliberate act, months in the making. It took into account the risks of international umbrage and reached the reasonable assumption that there would not be a significant geopolitical price to pay.
  • With the world distracted by the pandemic’s devastating toll, China has taken a series of aggressive actions in recent weeks to flex its economic, diplomatic and military muscle across the region. China’s Coast Guard rammed and sank a fishing boat in disputed waters off Vietnam, and its ships swarmed an offshore oil rig operated by Malaysia.
  • Beijing denounced the second inauguration of Taiwan’s president, Tsai Ing-wen, and pointedly dropped the word peaceful from its annual call for unification with the island democracy. Chinese troops squared off again last week with India’s along their contentious border in the Himalayas.
  • Mr. Xi’s move against Hong Kong has nonviolent echoes of President Vladimir V. Putin’s forceful seizure of Crimea from Ukraine in 2014, which was a violation of international law and of Russia’s previous diplomatic commitments. The annexation made Mr. Putin an international pariah for a while, but Russia still remains firmly in control of Crimea.
  • The Atlantic – Timothy McLaughlin / The end of Hong Kong

Euractiv – Jorge Valero / Member states brace for ‘great stimulus’ battle

  • The European Commission’s proposal on the next seven-year budget and the accompanying recovery fund will this Wednesday (27 May) launch one of the most difficult negotiations in the EU history, as member states disagree over the size, the goals and conditions, and primarily whether to give grants or loans. 
  • The proposal made by the ‘Frugal Four’ (Netherlands, Austria, Denmark and Sweden) over the weekend, and seen by EURACTIV, showed how divided national governments remain on how to finance the recovery from the coronavirus crisis. Despite the Franco-German attempt to narrow the differences, Northern and Southern countries are still far apart on issues including the size, the shape, the scope and the conditionality of the ‘great stimulus’ to overcome the deepest recession in the EU history.
  • Size. The consensus is around putting together a €1.5 trillion stimulus. Instrument. The big debate is whether to use grants that member states won’t have to repay, or loans that will further fuel national debt of already ailing economies. Conditionality. As money always comes with conditions in the EU, the question is how strict the requirements will be to access the new financial instrument.
  • Scope. The discussion on how to use the recovery funds will be highly complex as Eastern countries will only add to the north-south division. They have been less affected by the pandemic and do not want to divert funds from big envelopes, such as Cohesion, to finance the recovery. EU institutions and member states agree that Digital and Green agendas should be the priority of the stimulus.
  • Politico – Josef Joffe / How Merkel caved to Macron

Today’s long read:

The selected pieces do not necessarily reflect the views of Javier Solana and EsadeGeo. The summaries above may include word-for-word excerpts from their respective pieces.

Política Internacional |