Daily Briefs


22 November 2022, Tuesday | NIAS Europe Daily Brief #364

UK’s new push to promote economic growth and stability: Three Takeaways | War in Ukraine: Day 271

The EU unsure of Hungary's Rule of Law status; The EU focus on Paris Agreement in COP27; Switzerland wants to lead in global digital governance at the Francophonie summit

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By Madhura S Mahesh

UK’s new push to promote economic growth and stability: Three Takeaways
On 17 November, the UK Treasury Chancellor Jeremy Hunt unveiled the highly anticipated Autumn Budget. Following the controversial UK Growth Plan, which led to the fall of the Pound to its lowest in decades and subsequently the resignation of former Prime Minister Liz Truss, this Autumn Budget was closely watched by everyone worldwide.
According to Hunt, the Autumn Statement 2022 is a reversal of the policies outlined in the UK Growth Plan. It looks to promote stability, growth, and public services of the UK economy and society. The statement outlines policies to reduce the national debt, support the Bank of England in controlling inflation and restore trust in businesses to invest more in the UK. The Autumn Statement outlines the goal of the government to achieve its debt and spending targets in five years compared to the current target of three years.
After the announcement, the market reacted positively with no major shocks or uncertainties. While there was a fluctuation where the UK government bonds weakened, and the Pound fell by 1.1 per cent against the US Dollar (around USD 1.18), investors have praised the budget. A portfolio manager at Union Bancaire Privée Mohammed Kazmi said: “The big rally in the run-up and a relatively muted reaction today suggests this government has restored UK credibility in the eyes of the market.”
This analysis trace three takeaways from the latest statement
1. Difference between the UK Growth Plan and the Autumn Statement 2022
 When the UK Growth Plan was introduced, it talked about increased spending and many unexplained tax cuts, which projected a rise in national debt and projected an uncertain future for the UK economy. Before the Statement was released, it was expected to address the fallouts of the Growth Plan and address the major concerns plaguing the UK economy. Jeremy Hunt said that if the government hopes to achieve all the targets and prioritize stability, growth, and public services, it needed to reverse the policies outlined in the Growth Plan. This was seen in the very nature of the budget, which was outlined with increasing taxes, freezing thresholds, focusing on vulnerable communities, and cutting public spending to a large extent. The Growth Plan projected an increase of USD 72 billion in borrowings, whereas the Autumn Statement proposes an additional GBP 55 billion in tax rises and spending cuts reducing the current national debt amid growing inflation rates. It looked at increasing public spending to “boost the growth of the UK economy.” On the other hand, Autumn Statement has cut public spending except for increasing the budget of the NHS by GBP 3.3 billion per year and the spending on schools by GBP 2.3 billion per year for the next two years.
2. The OBR forecasts a grime future for the UK economy
The Office of Budget Responsibility (OBR) is a fiscal watchdog which analyses the UK public finances and UK. It prepares two five-year forecasts for the economy and public finances annually which are presented alongside the November Budget Statement and Spring Statement.
The Office for Budget Responsibility (OBR) on the UK economy alongside the Autumn Statement predicted a grim future for the economy. The OBR proclaimed that the economy is in danger of recession due to the falling output in Q3 2022 by 2.1 per cent total and the increase in demand for energy and cost of living over the winter. The OBR projects the inflation rates to hit 11.1 per cent in the last quarter of 2022 compared to the 8.7 per cent projected in March 2022, which will be a 41-year high. For 2023, the OBR expects the inflation to spill over and reduce to 3.8 per cent in the last quarter of 2023 and the GDP to grow by -1.4 per cent. The OBR also predicts that in the next two years, household income will fall to its lowest seen in generations and by 2024, the unemployment rate to hit 4.9 per cent. The OBR projects that the potential recession will hit the economy in 2023-2024 after which the economy will emerge from the recession in 2025.
3. Increased burden on the public
The Autumn Statement introduces a series of policies that look at raising taxes, both individual and corporate. The budget is said to bring in GBP 55 billion in tax increases and cuts in public spending. The controversial 45 per cent additional rate of income tax paid on earnings over GBP 150,000, which was slashed in the Growth Plan, has now been revised. The income level has now reduced to GBP 125,140 from GBP 150,000, which brings in more people into the tax bracket. The Statement also proposes a freeze in income tax personal allowance, higher rate thresholds, main National Insurance, and inheritance tax thresholds for two more years till April 2028. The Autumn Statement provides the local councils in England to increase council tax up to five per cent a year from the current three per cent without a local vote. With the OBR projecting increased inflation rates and a price hike, the public, especially the middle class, will be bearing the brunt of this Autumn Budget. While the Autumn Statement proposes an increase in the minimum wage for people over 23 years to GBP 10.42 per hour from GBP 9.50 from April 2023 and also an increase in State pension and benefits to the disabled by 10.1 per cent in line with inflation for the next two years it is predicted that the public will experience a tough time with the increase in the overall cost of living. The government will be increasing the price cap on energy for a year after April 2023 but has reduced the amount from GBP 3,000 annually to GBP 2500. The Autumn Statement also includes a new 45 per cent tax on electricity generation companies and increased the windfall tax on oil profits from 25 per cent to 35 per cent till March 2028. This will lead the companies to introduce measures that will inevitably shift some of the burdens to the consumers and keep the energy prices high. The Statement also includes policies applicable from 2024 onwards, such as the new road tax to be paid by electric cars, vans, and motorcycles which will keep the pressure on household income. 
To conclude, the Autumn Statement 2022 focused on stabilizing the economy before the recession hits the UK to mitigate the extent of damage to the UK economy. With the introduction of tax rises and spending cuts, the markets have reacted positively to the statement. It remains to be seen how the government responds to public discontentment on tax increases and tackles the projected regression of the economy.

War in Ukraine: Day 271
By Sandeep Ganesh

War on the Ground
On 21 November, The Operational information of the Ukraine’s General Staff of the Armed Forces reported on deterring the Russian attacks in Bakhmut, Bilogorivka, Kurdyumivka, Maryinka, Novomykhailivka, Pervomaiske, Pidhorodne, Spirne, Stelmakhivka and Yakovlivka settlements of the Donetsk region. Two missile strikes were launched in more than 60 attacks from rocket salvo systems. The Ukraine defence forces had struck Russia six times, three in the areas where the occupiers are concentrated and three in the positions of his anti-aircraft missile systems, units of missile troops and artillery of the defence forces hit two control points, an ammunition warehouse, five areas of concentration of personnel, weapons and military equipment and two other important Russia’s objects. 

On 21 November, The Ministry of Reintegration stated that the flow of humanitarian goods to the Kherson region continues. Kherson region has received hygiene kits, blankets, drinking water, sets of children’s clothes and generators, and more than 80 tons of aid till now from the international. Ukrainian police and prosecutors identified four places in Kherson where they suspect Russian forces tortured people before the troops abandoned the city. The findings are based on documents signed by the Russian forces that occupied Kherson soon after invading Ukraine in February till pulling out this month. 

The Moscow View
Claims by Russia

On 21 November, Russian Aerospace Forces received a batch of Su-30SM2 and Yak-130 combat training aircraft. According to the Cabinet Ministers, another batch will be handed over before the end of 2022. The Irkutsk Aviation Plant of the United Aircraft Corporation has been manufactured and handed over to the Russian Ministry of Defence. In February it was reported that Su-30MS2 fighters would be able to control guided unmanned aerial vehicles, in January it became known that the Baltic Fleet’s mixed naval aviation regiment received four Su-30SM2 fighters. 

The West View
Responses from the US and Europe 

On 21 November, in the NATO Parliamentary assembly held in Madrid, Spain’s Prime Minister Pedro Sanchez announced the deployment of Spanish police in Ukraine to help in the investigation of war crimes. The two countries have established the terms and of cooperation and specified the areas of deployment. In the investigation Spanish officers will work along Ukrainian investigators to collect evidence to prove Russia’s involvement in war crimes.

On 21 November, in an interview Italy’s Defence Minister Guido Crosetto stated government’s request to the parliament to approve a new law on military and civilian supplies to Ukraine throughout 2023. Through the new law the government can send aid without the parliament’s authorisation. The defence minister proposed to renew till the end of 2023.

On 21 November, Belarusian President Aleksandr Lukashenko, in a meet with the Udmurt Republic, Head Aleksandr Brechalov in Minsk flagged the missile strike in Poland as a false. He said that Belarus and Russia will hold strong against the pressure from the ‘West,’ military and economically.

On 21 November, TRTWorld reported that Europe had stockpiled diesel ahead of February 2023 ban. Russia is still Europe's largest supplier despite the EU reducing its reliance on Russian fuel by 50 per cent following the Ukraine war. The EU will ban Russian oil product imports on 05 February, followed by a ban on Russian crude taking effect in December. Although Europe's reliance on the Russian fuel has fallen from to 50 per cent before invasion, Russia is still the continent's largest diesel supplier. 

On 21 November, Norway signed an agreement to assist Ukraine with gas procurement. Norwegian Finance Minister Trygve Slagsvold Vedum as signed an agreement to provide funding of NOK two billion to enable Ukraine to purchase natural gas during the coming winter. The funding will be channelled through the European Bank for Reconstruction and Development (EBRD). This is in bid to stop Russia’s leverage of energy which it has been using on the rest of Europe. This allocation of NOK 2 billion earmarked for gas procurement is part of the NOK 10 billion aid announced by the Prime Minister Jonas Gahr Store in July. 

The Global Fallouts
Implications of the Ukraine war

On 20 November, RT reported that China’s General Administration of Customs reported that Russian shipments of gas and oil grew drastically over January-October of this year compared to the same period in 2021. Liquefied natural gas (LNG) deliveries jumped by 32 per cent in annual terms, to 4.98 million tons. The increase was 157 per cent and exceeded USD 5.3 billion. Russia is currently China’s fourth-largest LNG supplier after Australia, Qatar, and Malaysia. The value of pipeline gas flow from Russia in January-October 2022 soared by 182 per cent compared to the same period in 2021, to USD 3.1 billion. Oil imports from Russia over this period, rising by also surged about 9.5 per cent to 71.97 million tons.

Operational information of the General Staff of the Armed Forces of Ukraine as of 06:00 on 11/21/2022 regarding the Russian invasion,” kmu.gov.ua, 21 November 
Ministry of Reintegration: The flow of humanitarian goods to the liberated Kherson region continues,” kmu.gov.ua, 21 November 2022
#GrainFromUkraine: the US provides up to 20 million dollars for the purchase of Ukrainian food to fight hunger in Africa and Asiakmu.gov.ua, 21 November 2022 ” 
This year, the world saw how important the contribution of Ukrainians is to global food security - address of the President of Ukraine,” kmu.gov.ua, 20 November 2022 
Ukraine prosecutor says four suspected Russian torture sites found in Kherson,” abc.net , 21 November 2022  
Spain to deploy police in Ukraine to assist war crime investigations,” Reuters, 21 November 2022 
Italy to extend Ukraine arms supply law for 2023,” Reuters, 21 November 2022 
 “"Zelensky is an unusually strong man." Interview with the President of Lithuania about the war between Russia and Ukraine and the role of Belarus in it,” Currenttime, 21 November
“Lukashenko describes missile strike in Poland as false flag,” Belta, 21 Novemeber 2022)
Norway signs agreement to assit Ukraine with gas procurement, regjeringen.no, 21 Novemeber 2022
Russia boosts fuel exports to China,” RT, 21 Novemeber 2022 
“Europe hoarding Russian diesel ahead of February 2023 ban,” Trtworld , 21 November 2022

By Sai Pranav and Madhura S Mahesh

Proposes to replace Russian with Official EU languages in Latvian schools
On 21 November, BNN reported that Latvia’s Ministry of Education and Science plans to replace the Russian language with an EU language in schools starting from 2026-27 school years. Russian is not an EU language, and Latvia has no interstate agreements to have the language at schools. The Ministry said that Latvia could integrate the European education system and promote teaching official EU languages, resulting in the students having wider employment opportunities in the EU and outside its borders. The demand for the EU languages reduced the use of Russian falls. The opinions of the people changed due to Russia’s invasion of Ukraine. The Ministry will develop amendments to the primary education system to promote EU languages. (“Latvian Ministry of Education proposes replacing Russian language with EU languages in schools,” bnn-news.com, 21 November 2022)

New Northern Ireland Bill to provide time for executive formations and revise MLA salaries
On 21 November, the UK introduced the Northern Ireland (Executive Formation etc) Bill to extend the period of Executive formation and to delegate the authorisation of MLA salaries to the Secretary of the State. The bill extends the formation by six weeks of 08 December to allow the Northern Ireland (NI) parties to come together to form a government along with an additional provision to extend for a further six weeks up to 19 December. It also proposed to amend MLA salaries, who have been observed to drawing salaries without performing the duties creating public dissatisfaction. Through the bill the Secretary of the State will be able to reduce the salary and held in maintaining the public service delivery. The bill was aimed to provide time for Executive formation to avoid another election. (“
Northern Ireland (Executive Formation etc) Bill Introduced in Parliament,” gov.uk, 21 November 2022)
Bank of England highlights the need to regulate crypto amid the FTX collapse
On 21 November, the Bank of England emphasised the need to regulate cryptocurrency. Amid the FTX collapse, the Bank of England’s Deputy Governor Jon Cunliffe reiterated the need for it to be brought into a regulatory framework and added that tighter controls need to be introduced to prevent future consequences if it depreciates and creates a “crypto shock.” Cunliffe said that the Bank of England and the Treasury Ministry are looking into new financial services and market laws to regulate cryptocurrency and added that they are looking to introduce a digital pound sometime in the future. (“FTX collapse shows need to regulate crypto, says Bank of England,” Reuters, 21 November 2022)

France, Germany and Romania gather to aid Moldova’s economic crisis.
On 21 November, France hosted a conference to assist Moldova with international aid amidst the refugee crisis, power blackouts, and security threats from the neighbouring Ukraine war. France, Germany, and Romania created the “International Support Platform for Moldova” initiative, which raised millions of euros at Berlin and Bucharest conferences. Russia lowering Moldova’s gas supply, its lack of a gas storage facility and the halt in electricity imports from Ukraine due to damage to Ukrainian infrastructure have resulted in Moldova’s economic woes. Moldova, an EU candidate, has the support of the bloc’s member states in reforming its economy. Around 45 delegates representing the US, the EU and other international organizations will be at France’s conference. (“International aid conference aims to help Moldova weather energy crisis and neighbouring war,” euronews, 21 November 2022)
EU still hesitant on the state of the Rule of Law in Hungary
On 21 November, the EU Justice Commissioner Didier Reynders said that the EU is still unsure about the state of the Rule of Law in Hungary. According to Reynders, the European Commission is open to talks with Hungary and added that these talks will help Hungary implement proposed reform measures effectively. The EU has expressed concerns with regard to the independence of the Hungarian judiciary from political influence and had given Hungary time till 19 November to adopt 17 measures to ensure the same. According to Hungary’s Justice Minister Judit Varga: “Hungary has done its utmost to reach an agreement with the European Commission in order to meet the seventeen commitments previously negotiated to allow the release of EU funds by the deadline”. (“The EU Still Has Rule of Law Concerns about Hungary, Commissioner Says,” Hungary Today, 21 November 2022) 

The Commission signs partnership with Kazakhastan, Namibia and Egypt in COP27
On 20 November, the European Commission set out various goals and plans to fulfil at the end of the COP27 UN Climate Change Conference in Sharm el-Sheikh in Egypt. The Commission adjusted its goal to limit global warming to 1.5 degrees Celcius. The EU wanted to reduce greenhouse gas emissions by 43 per cent before 2030 and align the Glasgow Climate Pact’s goal for Nationally Determined Contribution with the Paris Agreement temperature goal by 2023 as a solution to limit global warming to 1.5 per cent. The EU also promised funds for loss and damage to aid developing countries vulnerable to climate change impacts. The EU also signed partnerships with Kazakhstan, Namibia and Egypt on renewable hydrogen and raw materials. The EU pledged to provide Africa with EUR 1 billion as a climate change adaptation fund. The main focus was to make the Paris Agreement prominent again. (“EU agrees to COP27 compromise to keep Paris Agreement alive and protect those most vulnerable to climate change*,” ec.europa.eu, 21 November 2022)

Switzerland takes the lead in promoting digitization in the Francophonie summit
On 20 November, 30 countries attended the 18th Francophonie Summit in Djerba, Tunisia. The main themes of the summit were digital technology and diversity. Switzerland’s President, Ignazio Cassis, promoted Switzerland’s role in global digital governance and showed his support for the re-election of Louise Mushikiwabo as the Secretary-General of the International Organization of La Francophonie (OIF). Cassis said that the role of new technologies in improving public services and the most disadvantaged’s lives are important for the future. Switzerland has focused on digitalization as one of the main themes of its foreign policy. The summit had panel discussions on “Connectivity in diversity: digital technology as a vector of development and solidarity in the Francophone space” and “Digital technology, a priority instrument for La Francophonie”. Cassis highlighted Switzerland’s digital capabilities in Geneva and how they can play a vital role in digitization among French-speaking countries. The summit also discussed strengthening efforts to have more women and young people as agents of peace and development. (“Francophonie summit: President of the Swiss Confederation promotes Geneva's role in global digital governance,” admin.ch, 20 November 2022)  

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