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Howdy there. This is Bjarke Smith-Meyer, POLITICO’s fintech correspondent, bringing you today’s Playbook. Last we spoke, I was writing about macroeconomic policymaking. Now I’m all about crypto, pretty much. But more on that later …
LEADERS TO DISCUSS NEXT STEPS IN VIDEO CALL: The escalating war in Ukraine will top the agenda for G7 leaders this afternoon after Russia launched missile attacks on the country Monday, leaving dozens dead or injured across the country. Sergei Kuznetsov has more details from on the ground in Kyiv.
The heads of state and government of the U.S., U.K., Canada, Germany, France, Italy and Japan are set for a video conference at 2 p.m. CET when Ukrainian President Volodymyr Zelenskyy will also tune in for the start of the online meeting. A spokesperson from the German government confirmed the gathering as part of its G7 presidency, which it will hold until the end of the year.
**A message from the EPP Group: The EPP Group calls to ease the burden on businesses immediately by invoking a regulatory moratorium. Also, to delay those acts that would unnecessarily increase costs for businesses already under strain (e.g. REACH). Learn more about the EPP Group proposals to fight inflation and tackle rising energy costs!**
Closer to the ground in Ukraine, the European Parliament and Commission have been securing safe passage for EU officials out of the country. The Commission’s justice chief, Didier Reynders, was among the officials who were in Kyiv when the attacks happened, forcing the Belgian to take refuge in the basement of his hotel.
The Commission is withholding Reynders’ current whereabouts for security reasons but confirmed that he and his team are safe. MEPs and Parliament officials have also been getting help from Ukraine, which has suffered waves of airborne attacks across the country. Some EU diplomats, however, are still stuck in Kyiv and have yet to see any evacuation plans.
Russian President Vladimir Putin said the long-range missiles were targeted at military, energy and communication facilities. But images out of Ukraine reveal damage to civilian bridges, buildings and streets. The attack follows Saturday’s explosion on a bridge linking Crimea to Russia that Putin blamed on Ukraine.
Harsh words: The presidents of the European Council, Commission and Parliament joined EU leaders in condemning the missile attacks, which they labeled a war crime. “Appeasement has never worked, and appeasement will never work. These are war crimes and the response has to be proportionate,” Parliament boss Roberta Metsola told Playbook. “This indiscriminate attack on children, people going by their daily lives, going to school, civilians being killed, is absolutely reprehensible.”
A spokesperson for the Commission also took aim at Belarus during Monday’s midday briefing, accusing officials there of spreading false rumors that Ukraine was planning an attack on its territory.
“These are totally unfounded and ridiculous accusations, they are utterly unacceptable,” Peter Stano, the lead spokesperson for foreign affairs and security policy, told journalists. “We also urge the regime in Minsk to immediately stop allowing the territory of Belarus to serve as a launch pad for air strikes, including the very recent missile strikes, and drone attacks against Ukraine and the targets in Ukrainian territories.” You can read more about the G7 meeting today from Hans von der Burchard here.
NOW READ THIS: Jamie Dettmer explains here how for the first time in two decades, Putin’s opponents think it more likely than not that he will depart in the near term, although they disagree about how the endgame might play out, who might replace him, and when. Much depends on the course of a war that is turning against him and undermining his air of invincibility.
Why Europe’s defense industry can’t keep up: Meanwhile, Russia’s war in Ukraine has highlighted how Europe’s defense industry is ill-equipped to supply weapons in the face of Moscow’s threats piling up nearby. Simply put, there just aren’t enough bullets, weapons and hi-tech systems in Europe to match the EU’s demands and looming dangers ahead. Ilya Gridneff has the story.
IMF, G20 MEETINGS FIRE UP: As if the news out of Ukraine wasn’t bad enough: The International Monetary Fund, dubbed the world’s lender of last resort, is today set to cut forecasts for growth amid increasing concerns that the world economy will plunge into recession. IMF chief Kristalina Georgieva last week warned of the gloomy outlook in a curtain-raiser speech for the annual meetings, which run through the week. One-third of countries will feel at least two quarters’ worth of economic contraction this year or next, the Bulgarian economist said. You can read the full economic outlook when it emerges at 3 p.m. CET — if you can stomach it!
What a difference a year makes. Last October, the IMF was predicting a boom as the global economy recovered from the pandemic. That feels like a decade ago. Nowadays, Western central bankers are willing to sacrifice the recovery by hiking interest rates to curb skyrocketing prices, as the cost-of-living crisis grows. Georgieva last week called on central banks to stay the course, even if tightening rates will hurt — especially as hiking rates more aggressively down the line will be far more painful.
Financial stability: The repercussions of the changing economic backdrop are also being felt in financial markets. The IMF will also publish its latest global financial stability report today. Decades of low-interest rates are being rapidly unwound, creating the potential for blowups in the financial system — as demonstrated by U.K. pension funds over the last two weeks, which couldn’t cope with the violent sell-off in the market for long-term government debt. You can expect the warning lights to be flashing red here as well.
Cautionary tale: Hannah Brenton explains why we should all be worried about the crisis for U.K. pension funds: The situation carries the seeds of a much wider financial reckoning, revealing major vulnerabilities in the so-called shadow banking sector that controls trillions in assets globally.
CRYPTO CRACKDOWN HEATS UP: Told you I’d come back to this. Because, believe it or not, cryptocurrencies are a hot topic among G20 finance ministers and central bankers meeting this week in Washington. Many of you dear readers may associate crypto with Bitcoin, digital nomads and little else. But the market’s been in turmoil since last year when it was valued at some $3 trillion. Two-thirds of that value has since vanished, taking a host of major crypto companies along with it. That crash got policymakers to sit up and take notice, especially as some mainstream banks and money managers, including Quebec’s giant pension fund, had ventured into the largely unregulated space — losing money in the process.
The concern is that crypto’s popularity will only expand and that leaving the space unregulated is inviting trouble if future crises spill over into the mainstream finance sector. The Financial Stability Board, a global standard-setter born out of the 2008 financial meltdown, isn’t willing to wait around and find out. In a few hours, you’ll see the FSB publish a list of draft recommendations to rein in the crypto market, which the global body believes should be subject to new or existing financial law.
Brussels leads the way: The EU’s ahead of the game, for once. Brussels’ legislators recently agreed on a single crypto rulebook and the Commission’s finance chief, Mairead McGuinness, will do her part in advertising the EU bill as a blueprint for success while in the U.S. this week. The Irishwoman has previously called for a common EU-U.S. rulebook for crypto markets and will be meeting with lawmakers who are busy trying to regulate the market.
Unsurprisingly, there are also a few other big topics on McGuinness’ mind for discussion, “including sanctions against Russia and energy security,” she wrote to Playbook ahead of her U.S. visit. McGuinness also will “discuss areas where Europe leads the way, such as our regulation on cryptocurrencies and legislation in the area of sustainable finance — our taxonomy, disclosure rules and green bond standards.”
PARLIAMENTARY INQUIRY CONCLUDES: Greece’s political parties on Monday submitted their conclusions from a special parliamentary inquiry investigating the spying scandal that has engulfed the government. All parties submitted their own conclusions from the inquiry, which lasted around a month, with the ruling New Democracy party’s views running completely contrary to those of the opposition.
Quick refresher: The controversy started earlier this year when the government acknowledged it had wiretapped an opposition leader’s phone — a move it called legal but wrong. It then quickly blossomed into a labyrinthine story that involved controversial spyware being planted on the phones of an ever-expanding network of politicians and journalists. But the government has claimed no connection to — or even knowledge of — these broader cases.
Top secret: Opposition groups have accused the inquiry committee of acting as a cover-up, after New Democracy, which holds a majority, blocked dozens of witnesses proposed by opposition parties, including the government’s ex-chief of staff, Grigoris Dimitriadis, who resigned over the scandal and Prime Minister Kyriakos Mitsotakis, who is in charge of the country’s secret service.
New Democracy also blocked from the list of witnesses journalists whose phones had been wiretapped or who had investigated the issue, as well as state officials from the police and Greek secret service. Those who testified didn’t offer much insight as they invoked confidentiality.
Twin scandal: “Our conclusion of the inquiry is describing that a scandal on two levels took place,” said a senior official from the main opposition party Syriza. “The first is the wiretapping scandal, as there is solid evidence that the companies that are selling [Predator] spyware and their owners are directly linked with the government through Dimitriadis.”
The official said the second scandal named in the party’s conclusions is a suspected cover-up, mentioning the fact that the government refused to call both the company owners and Dimitriadis in the inquiry, while those who testified refused to answer questions.
No scandal: New Democracy said the hearings proved there was no link between the use of Predator and the country’s spy service, while it also showed the surveillance of opposition Pasok party leader Nikos Androulakis, as well as that of journalist Thanasis Koukakis, was legal.
Calls for phone checks: Media Freedom Rapid Response, which tracks press freedom issues in Europe, on Monday called for the testing of mobile devices belonging to journalists in Greece who suspect they may have been targets of intrusive spyware or other surveillance. “The recent scandals regarding spyware attacks and wiretapping of journalists require full transparency and accountability, and have underscored deepening concerns about the erosion of media freedom under the New Democracy government,” MFRR said.
SCHOLZ PLANS TRIP TO CHINA: Olaf Scholz is planning to travel to Beijing from November 3-4, making him the first G7 leader to visit the People’s Republic since the start of the coronavirus pandemic. The trip will require the German chancellor to walk a thin line between continuing his predecessor Angela Merkel’s close economic relationship with Beijing and at the same time taking a more critical stance on issues such as human rights or China’s tacit support for Russia’s war against Ukraine. Hans von der Burchard and Stuart Lau have more.
GERMANY MULLS MORE EU LOANS: More signs are emerging out of Berlin that Scholz is warming up to the idea of helping other countries to tackle the energy crisis by issuing joint EU debt via loans, amid widespread criticism of Germany’s €200 billion gas price relief package.
Change of heart: Two officials told Hans that Scholz has signaled that a limited “borrow to lend” approach could be the right approach to support EU partners who can’t afford similarly generous energy relief measures. At the same time, Scholz has made clear that there won’t be new EU grants, which were issued (and are still available) under the coronavirus recovery fund.
Is Berlin ‘SURE’? The new position means that a new debt scheme like SURE, as EU Commissioners Paolo Gentiloni and Thierry Breton called for last week, seems now more palpable for Berlin. Bloomberg reports a similar shift of position. However, there are still uncertainties within Berlin’s three-party coalition government: Finance Minister Christian Lindner, for example, is under immense pressure after his fiscally conservative Free Democratic Party faced yet another humiliating election defeat in the region of Lower Saxony on Sunday, raising questions about whether he will throw his weight behind such a move.
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WANTED — 1 MILLION PEOPLE TO LEARN TECH TRICKS: A Budapest-based EU innovation agency today will unveil plans for schools, universities and companies across the bloc to bridge the tech skills gap that’s holding back Europe’s digital economy.
The skills gap: The European Institute of Innovation and Technology (EIT) was summoned earlier this year to come up with a plan to teach “deep tech skills” to 1 million people by 2025. “The EU appears to be losing the global race for talent,” the EU Commission said in its July Innovation Agenda — observing “a noticeable gap” especially in the field of AI and cybersecurity compared with the U.S.
Today, the EIT will launch a pledge that invites signatories like universities, research institutes and companies to contribute to its already existing educational programs in nine fields (known as “knowledge and innovation communities,” or KICs) like food health, digital and climate action.
Ahead of the launch, my colleagues at Morning Tech caught up with EIT Director Martin Kern, who said deep tech skills are not just digital skills: “The fields we cover are not just the digital ones — like AI and machine learning, advanced materials, biotech … blockchain, robotics, aerospace, electronics, quantum computing, clean tech. Often, it’s the linkages that will create new innovations … So, even ‘digital skills’ is, for us, too narrow when we talk about deep tech. It is not just bringing the digital dimension, but really going more into research and other fields.”
— G7 leaders’ meeting on Russia’s invasion of Ukraine, 2 p.m. CET.
— IMF economic outlook report, 3 p.m.
— EU Ambassadors Conference in Brussels continues, with speeches by European Parliament President Roberta Metsola and the Commission’s Executive Vice-President Margrethe Vestager.
— Commission Vice-President Margaritis Schinas meets Qatar’s Minister of Labour Ali bin Samikh Al Marri, and separately Pedro Vargas David, CEO of Alpac Capital.
— Commissioner Mairead McGuinness attends an event on “The EU-U.S. Cooperation on Digital & Sustainable Finance,” organized by the European American Chamber of Commerce, in New York. She will also meet the CEOs of the U.S. branches of the main European banks.
— Commissioner Vĕra Jourová is in Dublin to meet Ireland’s PM Micheál Martin as well as representatives of the Ireland Hub of the European Digital Media Observatory.
— Commissioner Mariya Gabriel participates in the EIT Summit in Brussels.
— Commissioner Thierry Breton delivers a keynote speech at the 2nd European Defence Security Conference.
BELGIAN STATE OF THE UNION: Belgian Prime Minister Alexander De Croo will address the parliament this afternoon for his own “State of the Union” speech. After fraught negotiations among the seven parties forming the ruling coalition, the government will present Belgium’s budget for the next two years, 2023 and 2024 — a move designed to avoid prickly discussions ahead of the 2024 elections.
On the table: Energy is at the center of the negotiations, with talk of extending support measures for lower-income households until the end of the winter and introducing taxes on surplus profits of energy companies. Other measures are likely to include new taxes on e-cigarettes, second homes and copyrights.
ASSANGE’S WIFE JOINS PRESS FREEDOM DEBATE: Stella Assange, the wife and lawyer of WikiLeaks founder Julian Assange, will be in the European Parliament this morning to take part in an event on press freedom. You can see her speak in the conference room ASP1G2 in the Parliament building at 10 a.m.
BIRTHDAYS: MEPs François-Xavier Bellamy and Gilles Lebreton; Former MEP Mady Delvaux; Portugal’s former Minister of Maritime Affairs Ricardo Serrão Santos; French Interior Minister Gérald Darmanin; Prince Constantijn of the Netherlands; Anna Hill from Open Doors International.
THANKS to Hans von der Burchard, Laurens Cerulus, Jakob Hanke Vela, Hannah Brenton, Nektaria Stamouli and our producer Grace Stranger.
**A message from the EPP Group: "We need to call a spade a spade: the winter that lies before us will not be easy. In these circumstances, we must decrease the regulatory burden in Member States, which restricts energy production. Cutting red tape is important for the private sector and would also motivate households to manage energy efficiency. We call on the European Commission to immediately cease the burden on businesses by invoking a so-called ‘regulatory moratorium’ and delay those acts that would unnecessarily increase costs for businesses already under strain", says EPP Group MEP Christian Ehler. We also call on the Commission to provide a sector-by-sector analysis of the cumulative effect of higher energy and raw material prices, new legislation, and the impact of the war. The EPP Group wants to see a comprehensive, cross-sectoral impact assessment on revisions of existing legislation and new legislation on energy. Learn more about the EPP Group proposals.**
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