NIAS Area Studies
PAKISTAN READER
Photo : Reuters/Dado Ruvic/Ilustration
IN FOCUS
By Ashwin Dhanabalan
EU’s strategies countering rising inflation
On 22 June, according to the Daily Express, the EU’s inflation has hit 8.8 per cent, the highest since the creation of the Euro in 1999. The EU’s finance chief Mairead McGuinness has blamed the rising costs on the bloc’s heavy reliance on Russian oil and Moscow’s invasion of Ukraine. The EU relies on Russian energy supplies for up to 27 per cent, and the recent sanctions have driven up prices. Estonia is the worst-hit EU member with a 20 per cent inflation rate, while Latvia and Lithuania face a rate of 16.9 and 18.9, respectively. In contrast, non-EU members such as Switzerland and Liechtenstein have recorded their lowest interest rates of 2.9 and 2.5 percent.
The World Economic Forum said it blamed the inflation rate on the post-pandemic recovery plans and the sudden change in spending habits in the Eurozone. This comes as the EU had allocated a EUR 672.5 billion economic plan to benefit the EU’s member states. This is similar to Washington’s USD 1.9 trillion American rescue plan and stimulus checks which have been blamed for causing rapid inflation in the US. The EU speculates prices to increase by the year-end as the demand for lower cost of living and higher energy prices would increase during the winter season.
The EU’s strategies to contain the inflation
First, raising the interest rates. On 09 June, the European Central Bank (ECB) announced to increase its interest rate for the first time in 11 years. The increase in the interest rate would encourage people to deposit their money into the central banks and help curb inflation in the Eurozone. The central bank plans to increase its interest rates by July and then September saying the bank would have future increases in a “gradual but sustained path.” This comes as the ECB faces a deposit rate of minus 0.5 per cent which would gradually change once the interest rates increase.
Second, curbing the sale of bond yields in unstable economies. ECB president Christine Lagarde stated that to tackle inflation “in the bud,” they had to curb bond yields of unstable economies. This comes as Italy and Spain’s bond yields reached their highest level for eight years and asked the government to stop selling more bonds and start raising interest rates to help curb inflation in the Eurozone. The ECB is worried that a bond market panic could further push up the borrowing costs of unstable and weaker economies, which could then drag the entire Eurozone into a financial crisis.
Third, the EU’s QTQE approach to fragmentation. The EU is also trying to balance its contractionary monetary policies by applying quantitative tightening (QT) with quantitative easing (QE) in the already fragmented economic landscape. In addition, it plans on using the pandemic emergency purchase programme (PEPP) to control the market of member states where it is needed and to limit spending only where needed. The ECB said: “The pandemic has left lasting vulnerabilities in the euro area economy which are indeed contributing to the uneven transmission of the normalization of our monetary policy across jurisdictions.”
Nevertheless, policymakers are still concerned about the EU’s policies backfiring as they could cause market concerns in the Eurozone’s growth outlook. As a result, the bank stated that the Eurozone would only grow 2.8 per cent instead of the forecasted 3.7 per cent. Lagarde, in response, mentioned, “Inflation will remain undesirably elevated for some time,” as the bank forecasted growth of only 2.1 per cent in 2023 and 2024.
References
Declan Carey, “Inflation rates in Europe by country revealed as continent battles with price hikes,” Daily Express, 22 June 2022
Jorge Liboreiro, “Why do central banks raise interest rates to curb inflation?,” Euronews, 20 June 2022
John Revill and Andy Bruce, “Europe’s central banks jack up interest rates to fight inflation surge,” Reuters, 16 June 2022
Eshe Nelson, “European Central Bank says it will raise interest rates for the first time in 11 years in July,” The New York Times, 09 June 2022
“Opinion: Europe's monetary policy shift comes (too) late,” Deutsche Welle, 09 June 2022
Christine Lagarde, “Monetary policy normalisation in the euro area,” ECB, 23 May 202
War in Ukraine: Day 119
By Padmashree Anandhan
War on the Ground
Ukraine President Volodymyr Zelenskyy on the EU countries granting the candidate status to Ukraine said that it motivates the army and society to fight for its independence and expressed it will be a “positive transition.” He said: “It is a great motivator for unification, and therefore a great motivator for Ukraine's victory.”
Ukraine reported that its defenders fighting in the eastern Donbas are facing extreme conditions where 568 civilians are reported to be cornered in Sievierodonetsk and Lysychansk. The forces in the southern operational command claimed on launching air strikes on Zmiinyi Island, which was observed to have caused major losses for Russian forces.
A video has been released from Russia showing an explosion in one of its oil refineries. It accused Ukraine of using a UAV to strike the oil refinery in Rostov. Ukraine countered by saying it uses only drones and not UAVs at any point in the war.
Head of the Office of the President of Ukraine Andriy Yermak, appreciated Italy’s support to Ukraine in terms of defence, and politics. He said: “We are grateful for the weapons and the loud voice in support of granting Ukraine the status of a candidate for EU membership. But please understand: this is not a charity, but an investment in your own security, in our common peace, in our common free future.”
The Moscow View
Claims by Russia
On 22 June, Russia’s first deputy permanent representative to the UN, Dmitry Polyansky reported that Russia will begin collecting evidence on Ukraine’s armed forces' use of 155 millimetre “artillery system,” which is used by NATO members. He said: “Indeed, [the Ukrainian military] is using 155 mm munitions and if necessary, it won’t be a problem to collect evidence proving that shelling attacks on civilian areas involve such weapons. I think that we will do it, Russia will do it.”
Russia warned Lithuania over its ban on the transfer of goods close to 50 per cent through the railway to Kaliningrad. One of the spokespersons said: “will certainly respond to such hostile actions.” Kaliningrad being an important region for Russia’s Baltic force depends majorly on the EU’s raw materials and spare parts.
Russia’s National Defense Management Center, chief Mikhail Mizintsev reported on receiving 50 “evacuation requests” from people living in Ukraine to be evacuated into Russia. He added that in total there have been 2,758,447 similar requests mainly coming from territories under Ukraine, Kyiv, and Donbas. Apart from this, he claimed on Ukraine staging weapons and defence forces near Odesa, Avdeyevka, and Slavyansk hospital facilities. Upon which all the patients were sent out of the med facility due to weapon deployment.
The DPR mission to the Joint Center for Control and Coordination, in a report, said that Ukraine had used “42 NATO-standard 155 mm shells” to carry out attacks in the Donetsk region. In total nine attacks were observed to be launched in three rounds.
The West View
Responses from the US and Europe
Turkey’s weapon production representative said that Turkey must be cautious in sending the weapons to Ukraine as it is important for Kyiv’s defence. The military delegation of Turkey is expected to travel to Russia to talk about establishing a safe sea corridor in the Black Sea area to facilitate Ukraine's grain export.
On 22 June, the UK’s defence ministry reported that in the coming days the chances for Russia to assemble more reserves on the front lines, especially in Donbas was increasing.
The Global Fallouts
Implications of the Ukraine war
On 22 June, the IEA warned Europe that Russia will soon be stopping its gas supply to Europe. The head of IEA, Fatih Birol expressed the need for a contingency plan for Europe. He expects the reduction to cause problems in Europe’s gas storage, giving leverage to Russia in the coming winter. It is observed that the gas imports have scaled down from 40 per cent to 20 per cent. On the same many EU states from France, Germany, Poland, Bulgaria, Finland, Denmark, and the Netherlands have confirmed the stoppage of gas supply from Russia. Indonesia’s President Joko Widodo is scheduled to visit Ukraine and Russia in the coming week to discuss on finding peaceful ways to resolve the conflict.
References
Jonah Fisher, “Europe told to prepare for Russia turning off gas,” BBC, 22 June 2022
“Kaliningrad: Russia warns Lithuania of consequences over rail transit blockade,” BBC, 22 June 2022
“55 evacuation requests received from Ukraine in past day — defense ministry,” TASS, 22 June 2022
“Ukrainian troops fire 42 NATO-standard shells at Donetsk in one hour,” TASS, 22 June 2022
“Ukrainian military deploys weapons to medical facilities in Odessa, Avdeyevka, Slavyansk,” TASS, 22 June 2022
“Russia to collect evidence of Ukraine’s use of 155 mm weapons — deputy envoy to UN,” TASS, 22 June 2022
“Russia-Ukraine war: what we know on day 119 of the invasion,” The Guardian, 22 June 2022
“EU candidate status will be a new page in the history of Ukraine and a great motivation for the army and society - President during communication with students,” President of Ukraine, 22 June 2022
“Italy's defense and political support for Ukraine is an investment in our common free future - Andriy Yermak,” President of Ukraine, 22 June 202
IN BRIEF
By Emmanuel Royan and Sai Pranav
FRANCE
Macron rejects prime minister Borne’s resignation
On 21 June, president Emmanuel Macron of France rejected prime minister Elisabeth Borne's resignation offer. Borne, who was appointed by Macron, was said to stay on task and act with the existing cabinet that they had. Macron's ensemble coalition had fallen short of a majority by 44 seats in the national assembly election that was held last week. While the left coalition called NUPES has scored around 131 seats making it the second-largest party in the assembly. Macron is at an impasse as both the left and the right refuse to join hands with Macron. This can threaten the agendas that he had planned for his second five years term in the office. He is ready to have talks with other parties to make a deal but is being refused especially by Jean-Luc Mélenchon of the left coalition and the right-wing republican, Christian Jacob. Marine Le Pen may work with him if her proposal for the cost of living crisis is adopted. (”France elections: Macron rejects prime minister's offer to resign,” BBC News, 20 June 2022)
BULGARIA
Kiril Petkov’s administration falls after losing a no-confidence vote
On 22 June, the Kiril Petkov’s government lost the no-confidence vote in the parliament, making the country politically unstable amid surging inflation and the war in Ukraine. The opposition party overthrew the Petkov administration, who came into power only six months ago. If Petkov is unable to put together a majority for a new cabinet and if two other parties in parliament are unable to form a government, President Rumen Radev is obligated to call early elections within two months and install a caretaker administration. Its aspirations to join the euro in 2024 and millions of euros in EU recovery assistance are now in jeopardy as the country prepares for what might be its fourth general election since April 2021. (“Bulgaria’s pro-western government collapses after just six months,” the Guardian, 22 June 2022)
ITALY
Di Maio leaves five-star movement due to a difference of opinion with its president
On 21 June, Italy's foreign minister, Luigi Di Maio withdrew from the 5-star movement following disagreements with the party's leader Giuseppe Conte. Di Maio said that Conte had been undermining Italy's decision to help Ukraine with weapons and supplies. He also said that he would create a new parliamentary group supporting the government of the Italian prime minister Mario Draghi. This incident could bring forth instability in Draghi's multiparty coalition. As a result of the split in the party, it could trigger a collapse of Draghi's government. Conte is considering pulling the movement out of the government. Political sources say that Di Maio's new parliamentary group would likely be named 'Together for the Future'. (“Italy: foreign minister leaves 5-Star to form new group backing PM,” The Guardian, 21 June 2022)
THE UK
Maritime ministry funds projects for seafarer’s mental health
On 23 June, the maritime minister Robert Courts announced the allocation of EUR 2.75 million for projects to support seafarers’ mental wellbeing and the maritime sector at the Mersey maritime exchange in Liverpool. The funding is intended to help the marine industry develop a workforce that individuals from all backgrounds will want to join because it is highly trained and well supported. Furthermore, the sector has developed mental health awareness training that is provided to all new seafarers as a requirement of their training. This financing intends to promote seafarer rights by enhancing the execution of successful programmes. Courts also launched the Maritime recovery route map on the same day to assist the industry in recovering from the pandemic's impact. (“£2.4 million funding to support seafarers’ mental wellbeing,” The UK Government, 23 June 2022)
Bill of Rights proposed as a response to ECHR’s intervention
On 21 June, courts in the UK decided to ignore the European Court of Human Rights interim measures and proceeded with their new draft law, the Bill of Rights. This decision came as a result of ECHR meddled in the process of deportation of refugees to Rwanda. The ECHR stopped London's deportation flight to Rwanda. The new Bill of Rights would replace the existing Human Rights Act passed by the previous government. The UK's ministry of justice drafted a law on 22 June stating that the UK's courts are free from ECHR bind when it comes to human rights issues as the UK's supreme court would be the ultimate arbiter of it. The ECHR had intervened because of Rule 39 which applies to situations where there is an imminent threat of irreparable harm. This displeased the UK government and in response to that passed the new Bill of Rights. (Cristina Gallardo, “UK courts could ignore interim ECHR decisions under new human rights plan,” POLITICO, 21 June 2022)
TURKEY
Prince Salman visits Ankara to normalize relations
On 22 June, the prince of Saudi Arabia, Mohammed bin Salman visited Ankara to meet Turkey’s president Recep Tayyip Erdogan to normalization of relations and trade deals. As the most recent attempts to reintegrate Saudi Arabia into the international community following threats to isolate the country due to journalist Jamal Khashoggi's murder, Prince Mohammed's visit to Ankara also signals a significant shift in Middle Eastern affairs. Erdogan stated: “God willing, we will have the opportunity to assess to what a much higher level we can take Turkey-Saudi Arabia relations.” (Ruth Michaelson, “Saudi crown prince visits Turkey as relations thaw after Khashoggi murder,” the Guardian, 22 June 2022)
REGIONAL
EU to introduce legally binding wildlife conservation targets to its members
On 22 June, a proposal to address the catastrophic loss of wildlife was introduced for the first time after 30 years in the EU. The bill would legally enforce objectives for all member states to restore wildlife on land, rivers, and the sea. Targets set forward by the European Commission include reversing the decrease of pollinator populations and restoring 20 per cent of land and sea by 2030, with the goal of restoring all ecosystems by 2050. The commission also suggested eliminating the use of chemical pesticides in the vicinity of playgrounds, hospitals, and schools by 2030. The commission's executive vice-president, Frans Timmermans stated that the measures are in the right direction in addressing the "looming ecocide" threatening the world. There will be about EUR 100 billion available for biodiversity-related projects, including ecosystem restoration. (Phoebe Weston and Patrick Greenfield, “EU plan to halve use of pesticides in ‘milestone’ legislation to restore ecosystems,” the Guardian, 22 June 2022)
Western Balkan states decide to attend the Brussels summit
On 22 June, the head of states of Serbia, Albania, and North Macedonia decided to attend the EU-Western Balkans summit after threatening to boycott the same. Serbia and Albania were considering skipping the summit as a show of support for North Macedonia after Bulgaria vetoed the next stage in its road to EU membership. On Thursday morning, EU leaders are set to address the accession paths of Western Balkans countries at the summit, ahead of the European Council meeting which kicks off in the afternoon. Before the European Council meeting begins in the afternoon on 23 June, EU leaders are scheduled to discuss the accession pathways of the countries in the Western Balkans at the summit in the morning. (Camille Gijs, “Western Balkans leaders will attend EU summit, dropping boycott threats,” POLITICO, 22 June 2022)
ECJ restricts the usage of passenger data of flights
On 21 June, the European Court of Justice (ECJ) established boundaries for passenger data collection and when it can be used by authorities of the law. This court ruled against the use of artificial intelligence(AI), making it the first court to ban machine learning systems. According to the court, the usage of AI may cause direct or indirect discrimination. The ruling also focused on the highly scrutinized passenger data that is collected from those travelling to the bloc. It restricted the time limit of the passenger data that should be stored for less than six months and the handling of passenger data by the law enforcement of the EU member states. The court said that the authority's control over passenger data may come off as discriminatory to people who are travelling to or from Europe. The storage of passenger data should be done only if the person has fled a crime scene or is foreseen to commit a crime. (“EU court sets limits for use of passenger flight data,” Deutsche Welle, 21 June 2022