Our editors give us a breakdown of this week’s biggest news stories
United Kingdom: Ross Alexander Hutton
Following last week’s fiscal update from the Chancellor, the Office for Budget Responsibility (OBR) warned of “explosive” debt levels if the crevasse between government spending and taxation revenue continues to deepen. The fiscal watchdog’s report based its analysis on the assumption of a slower recovery than previously forecasted as it now estimates the economy will not return to its pre-crisis size until the end of 2022. In order for the public finances to be returned to a sustainable path, the tough decisions of raising taxes and/or re-imposing austerity measures are becoming more imperative by the day.
With the prevalence of coronavirus remaining “stable and low” in the UK, PM Boris Johnson set out new guidelines for employers in England to have more discretion over bringing employees back into the workplace. This decision was inconsistent with the Chief Scientific Adviser’s view that there is “absolutely no reason” to change the guidance on working from home. Johnson also outlined his intention for Britain to “return to normality from November at the earliest”.
Cabinet Office Minister Michael Gove confirmed the government’s plans for new post-Brexit customs and border arrangements which will commence after the transition period – regardless of the outcome of negotiations with the EU. Detailed in the 206-page document published this week are the new requirements, complicated procedures and onerous instructions defining the future customs environment in which UK businesses will need to navigate. So far, the response from business has been focused on the significant expense of new red-tape and paperwork during an already testing time for companies adapting to survive in the economy post-Covid.
In a consequential decision, the UK government caved into pressure from Washington by reversing its previous decision over the involvement of Chinese tech-giant Huawei in Britain’s 5G network. Mobile providers operating in the UK have been ordered to remove all Huawei equipment from the UK’s 5G networks by 2027 and are banned from buying new Huawei 5G equipment from 2021. Notwithstanding the cost to telecommunication providers of up to £2 billion and the productivity losses, the future of already strained UK-China relations remains in the balance.
Europe: Peter Hourston
At a European Summit in Brussels, leaders of the 27 member states are in fraught negotiations over a €750bn Covid-19 emergency response package. As has often been the case in economic crises the EU has been split between more ‘frugal’ (i.e. richer) countries in the north, such as the Netherlands, Austria, Sweden, and Denmark, and Mediterranean countries who stand to gain most, such as Spain and Italy, on the magnitude of the spending – and, crucially, who has to pay for it. Talks broke up on Friday 13 hours of discussions and could drag into Sunday.
Poland’s incumbent president, Andrzej Duda, was narrowly re-elected in last Sunday’s election run-off with 51% of the vote. Formerly of the conservative Law and Justice (PiS) party, Duda ran a controversial campaign attacking LGBT+ rights and the media. The main opposition party has officially challenged the result, claiming that it “did not meet democratic standards.”
The European Commission has lost a court case against Apple with regard to its tax arrangements in Ireland. Although Competition Commissioner Margrethe Vestager had wanted Apple to repay €14.3bn in taxes to Ireland, Brussels has declared that it will still take a tough approach with American tech giants and their tax affairs.
Asia Pacific: Satyajit Mohanan
China becomes the first major economy to bounce back into growth. Figures released on Wednesday showed that China’s GDP grew by 3.2% in the second quarter. This came as a surprise to many, as the country witnessed a steep 6.8% slump in the first quarter of the year. Experts believe that this reflects that China is heading towards a V-shaped recovery thereby avoiding a technical recession.
Thai demonstrators on Saturday called for the resignation of their government and the dissolution of the parliament. Student-led protestors called for a new constitution, new elections and an end to the state’s repressive laws enacted by the year-old civilian government.
A benighted Indian government is clueless as India’s Covid-19 cases surge past one million. It now has the world’s third-largest case load, following the United States and Brazil. Experts say that the country wasted the opportunity given by the lockdown and failed to come up with an effective plan to tackle the spread of the virus. This comes as a blow to the country which is already struggling with a grave health and economic crisis.
Africa & Middle East: Camille Capelle
Protests are mounting against the Israeli Prime Minister due to widespread discontent over COVID-19 policies as well as Netanyahu’s reputation for corruption. Israel is once again being hit hard by the virus, exacerbating the already rampant unemployment which now stands at 21%. Ongoing demonstrations are fueled by public anger and distrust in the current Israeli administration.
French energy company Total closed the biggest African debt financing project ever with Mozambique. Amounting to almost $15 billion, the project will focus on development of natural gas fields on the shores of Mozambique and shows enormous confidence in the potential of its liquefied natural gas (LNG) facility.
Resuming oil production in South Sudan shows new hope for its economic recovery. Since its independence, which marked its 9-year anniversary this month, the country has experienced turmoil and repeated challenges to its peace and stability. South Sudan is known for its extreme diversity after its creation which ended Africa’s longest civil war. Oil production is a significant source of income for the country and new exploration of potential oil reserves are attracting more investors.
North America: Amelia Brown
The Treasury Department announced on Monday that the U.S. budget deficit hit a record high of $864 billion in June. Coronavirus aid packages, including unemployment benefits, stimulus checks, and small business loans, contribute heavily to the deficit. The total 2020 deficit is currently at $2.7 trillion, with a push from the White House to get another $1 trillion maximum relief bill in action before the congressional summer recess in a few weeks.
All eyes have turned to Portland, Oregon the past few days as videos and accounts of unidentified federal agents arresting protesters have gone viral. The Department of Homeland Security (DHS) and Custom and Border Protection (CBP) are two agencies involved. Mark Morgan, the CBP Commissioner, claims the protesters are “violent criminals,” and the agency is there to “restore law & order.” The U.S. Attorney for Oregon has requested an investigation into the actions of the federal agents, while the Oregon governor, Portland mayor, and an Oregon U.S. senator have all condemned the feds and called for their immediate removal.
The Washington N.F.L team announced that they will be changing their name after the current movement for racial equality has re-sparked outrage over the offensive nature of the name and logo to Native Americans. Potential new names include the Washington: Redwolves, Redhawks, Redhogs, Warriors, or Redtails.
South America: Annie Smith
Suriname has elected a new president on Monday, a move which ends the dictatorial rule of former president Desi Bouterse. Bouterse is currently facing murder charges and has been convicted of smuggling drugs abroad. Meanwhile, President Chan Santokhi, a former police chief, won the election in a landslide victory and is a member of the Progressive Reform Party (PRP). He said in an address to citizens, “We’re on the brink of a financial abyss. There is concern. The treasury is virtually empty. This crisis surpasses any worst-case scenario we’ve considered. We will have to face the crisis together. We have no time to lose.”
Mexico is set to see its ‘bloodiest’ year so far, seeing its most violent day of the year on 7 June with 117 murders in 24 hours, and an increasing number of mass killings throughout the year. While Guanajuato used to be one of the most peaceful states in Mexico, it is now among the most dangerous as the Jalisco New Generation Cartel (CJNG) extends its influence there. President López Obrador has been criticised for not tackling impunity and state involvement in criminal activity, or developing a coherent security policy.
In coronavirus news, the Latin America pandemic death toll topped 150,000 on Thursday 16 July, and the World Health Organization has warned that the region will likely not see its peak until next month. In Chile, police are training dogs to sniff out COVID-19 in people; while the virus itself does not have a smell, it causes the sweat of those infected to smell differently. And in Brazil, many hospitals across the country are struggling to cope with the increasing number of COVID-19 patients, with one video of a public hospital northwest of Sao Paolo showing that there were no ICU beds available. The Director of the Municipal Health Vigilance Department, Andrea von Zuben, told Al Jazeera that they have had many days where ICU beds have been at 100 per cent capacity.
Science & Technology: Paula Plechschmidt
On Wednesday, 15th July over 130 official twitter accounts were hacked. Accounts include Apple, Uber, Joe Biden, Elon Musk and Kim Kardashian and many more prominent public figures. Hackers initiated a password reset, logged into the account and sent tweets to promote their cryptocurrency scam. The FBI has now launched an investigation, acknowledging the serious security concerns this poses, especially in light of the upcoming presidential election. In a fascinating inside account, the Times has confirmed that these hacks surprisingly were not orchestrated by a single country or hacker group, but rather by a group of young people that connected over Discord, a platform popular with gamers and hackers.
On the 16th of July the European Court of Justice (ECJ) ruled to strike down the EU-US Privacy Shield. This agreement facilitated the legal framework for the flow of information between the EU and the US and was the main mechanism to safely handle EU citizen’s data. However, the EU’s top court has decided that the Privacy Shield does not sufficiently limit the US’ data access “in a way that satisfies requirements that are essentially equivalent to those required under EU law“. This is not only a significant challenge for US based companies but is also an issue for post-Brexit Britain who is already struggling to secure a deal to allow data to move freely from the EU to the UK. The ECJ promises to be a further hurdle for this goal, with the EU-US ruling setting a precedent for the handling of the UK.
Shares of SMIC, a company which is at the center of Beijing’s hope to become self-sufficient in chipmaking, have surged by 245% on the first day of trading in Shanghai. SMIC issued 1,685,620,000 shares at 27.46 yuan per share, raising 46.28 billion yuan ($6.62 billion). The confidence in the company, causing the company to raise almost double its initial target, originates from the policy support the Beijing government is providing in hopes of moving towards self-sufficiency due to US-China tensions.
Business: Tom Woods
President of Microsoft Brad Smith estimated that the COVID-19 pandemic would lead to over a quarter of a billion people losing their jobs in a recent interview with the BBC. He expressed that learning new skills will now be essential for people to survive in an increasingly tough job market. A number of firms including Microsoft itself have responded to this new demand and launched platforms to train and develop individuals in critical skills for the post-COVID economy. Microsoft’s initiative plans to provide courses in areas such as graphic design and Computer Science to over 25 million people. The public are buying into these schemes, and platforms such as Coursera and Udemy have seen their valuations balloon in recent months.
As a telling sign that lockdowns are gradually being lifted, Netflix has warned of a future slowdown in subscription figures. The firm saw a boom in its number of subscribers over lockdown and has already attracted 26 million new users to its platform this year (compared to 28 million over the whole of 2019). Profits are also far higher, up to $720 million this quarter-gone-by, compared to $271 million a year ago. The streaming industry has been one of the “winners” from the coronavirus lockdown, with stock prices and revenues climbing for most of the major players.
Theory: Cassi Ainsworth-Grace
A new paper published in the journal of Environmental and Resource Economics by economists Rohan Best, Paul J. Burke and Frank Jotzo reveals that countries that attach a charge to the emissions from fuel combustion have lower annual carbon dioxide emission growth rates. This growth rate is two percentage points lower than countries without a carbon price. Over time, this will amount to significant divergence in total emissions between the countries that do adopt carbon pricing and those that do not.
These findings will offer key evidence to international economics organisations like the Organisation for Economic Co-operation and Development, the International Monetary Fund and the World Bank who maintain their demand for increased use of carbon pricing.