2 ★ FINANCIAL TIMES Thursday 27 February 2020
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For both services phone +44 20 7873 4816,
or alternatively, email [email protected]When last week’s special EU summit on the
bloc’s next seven-year budget broke up
without an agreement, veteran watchers
of the perennial “multiannual financial
framework” arguments detected that it
was not just business as usual.
With the talks now taking part without the UK — long
one of the most stubborn member states seeking to limit
the budget’s size — it was not clear that other net contribu-
tors would adopt the same “harsh position”, said Eulalia
Rubio, senior research fellow at the Delors Institute.
Ms Rubio found it surprising that the so-called frugal
four — Finland, Sweden, the Netherlands and Austria —
“didn’t really move from their position” during the sum-
mit, even after the proposal by European Council presi-
dent Charles Michel had moved things in their favour.
Another difference, said Jorge Núñez, senior research
fellow at Ceps, the European think-tank, was that “maybe
for the first time” national leaders “question the purpose of
the budget”. He added: “Some member states discussed
not whether it should be 1 per cent [or some other share of
gross national income] but what the budget is for. That was
a revelation.”
Mr Núñez attributes this change to the new agenda
adopted by the European Commission under its president,
Ursula von der Leyen, who has made climate change and
the transition to carbon neutrality the leitmotif of Brussels
policymaking. “The green deal, setting a new direction for
the EU, is changing the dynamics of the MFF,” he said.
This could make it hard for the “frugal four” to sustain
their uncompromising
position. Austria and Fin-
land are governed by coa-
litions that include green
parties, which tend to
lo ok favourably on
strengthening the EU’s
ability to address climate
change. Denmark’s gov-
ernment relies on the
greens for domestic parliamentary support.
Also, all the main party groups in the European Parlia-
ment — including from all parties in government in the
frugal four — stand behind a report calling for a much
more ambitious EU budget worth 1.3 per cent of economic
output, far above the 1.07 per cent of the compromise
attempted by Mr Michel. The parliament could not pass
something like this without losing face, and “they are
much better organised this time”, according to Mr Núñez.
This created a “bit of a tension” with net recipient states
questioning the frugals’ position, he said. This “is the
moment to [make] clearer how [the budget] will really
support the green deal and the priorities these frugal ones
have, so that they can convincingly decide it is worth shift-
ing their position”.
That depended on whether the frugals were bluffing,
said Ms Rubio. “You need to be open to creating a real cri-
sis” if no budget was agreed. “Are they ready for that?”
Some sort of “revamp” with “enough political heat and
movement” may be needed for the frugals to change, said
an adviser to one national leader. For this to happen, Ms
Rubio said the commission could act less as “the secretar-
iat of the council” and an “honest broker” between mem-
ber states, and more as an “independent actor”.
She pointed out a radical option available to the com-
mission, which could propose legislation to automatically
extend current spending ceilings into next year in the
absence of an agreed budget. This would make the default
spending much higher than what the frugals are now
rejecting, weakening their bargaining position, and it
could not be vetoed by the four on their own. The big net
contributors, France and Germany, would need to agree.
All this put Ms von der Leyen in a key position, said Mr
Núñez. She “put the green deal on the table” and as a Ger-
man politician from the centre-right CDU, “she could say ‘I
did this, now respond to it’”. Besides, he said, “it is easier to
be generous when you have the [rotating EU] presidency”,
which Germany will hold in the autumn.[email protected]GLOBAL INSIGHT
EUROPE
Martin
Sandbu
Brussels’ green agenda
puts frugal four under
pressure on spending
‘Some member
states discussed
... what the
budget is for. That
was a revelation’I N T E R N AT I O N A L
H E N RY F OY A N D M A X S E D D O N
MOSCOW
Russia is to hold a nationwide vote on
changes to its constitution proposed by
president Vladimir Putin that could
tighten his grip on power.
Existing term limits bar Mr Putin
from running for the presidency again.
The decision to let Russians have their
say signals his eagerness to secure pub-
lic backing for reforms that could allow
him to extend his rule in a different role.
The process of rewriting the constitu-
tion has been pushed at breakneck
speed since Mr Putin’s suggestion to
overhaul it last month shocked the
country’s political elite and prompted
the resignation of his prime minister
and longtime ally, Dmitry Medvedev.
Lawmakers are wrangling over which
of nearly 1,000 proposed amendments
will be included in the draft of the bill,
which is set to go through a decisive par-
liamentary reading on March 10.
“I know that work [on the new consti-
tution] is very active,” a smiling Mr
Putin said at a televised meeting with 75
officials handpicked to sit on the draft-
ing committee. “According to the infor-
mation available to me, and I’m sure
you’ll talk more about it today, some-
where around 900 proposals have
already been received.”
Pavel Krasheninnikov, co-chair of the
committee, said after the meeting that
Mr Putin had agreed to hold the public
vote on April 22.
The rushed rewriting process hasbeen criticised by some political
experts, many of whom have pointed to
the unclear rationale for selecting mem-
bers of the drafting committee. The
group includes business leaders, an
actor and a concert pianist.
Yelena Isinbayeva, a retired Olympic
pole-vault champion, told Mr Putin at a
previous meeting that she had only read
the constitution when she was
appointed to the committee.
“There was no reason or need to do
this earlier,” she said. “I understand now
that this is a very important book.”
Political analysts are divided over
what role Mr Putin could take after his
fourth and final term ends in 2024 and
how he will seek to extend his reign in
practice. Some have suggested he could
head the State Council, a ceremonial
body to which Mr Putin wants to give
increased powers over the executive.Vladislav Surkov, an adviser to Mr
Putin who resigned this month, said
that the new constitution could allow
Mr Putin to remain as president, given
the updated document would reset the
clock on the maximum two consecutive
terms enshrined in law currently.
“If presidential powers are refined [in
the new constitution], then legal logic
will dictate the need to start counting
presidential terms again,” Mr Surkov
said. “We have, in fact, naturally devel-
oped not just a presidential but a hyper-
presidential form of government... In
my opinion, it should be solidified for-
mally and legally.”
Mr Putin has remained evasive about
when he decided to overhaul the consti-
tution and why, leaving even most of his
closest aides in the dark. “I knew,” he
told state newswire Tass in an interview
last week. “Isn’t that enough?”Presidential move
Russia to vote on constitution rewrite
Changes proposed by
Putin set to extend his
rule via a different role
Members of
the draftingcommittee
includebusiness
leaders, anactor and a
concertpianist
B E N H A L L— LONDONUkraine is at risk of capital flight and a
plummeting currency unless President
Volodymyr Zelensky stands behind the
clean-up of the country’s biggest
lender, the bank’s chief executive has
warned.PrivatBankwas nationalised in 2016
when regulators found a vast hole in its
accounts after its oligarch former own-
ers funnelled deposits to their own busi-
nesses and those of associates. It was
deemed too big to fail and an emergency
recapitalisation cost the state 6 per cent
of Ukraine’s gross domestic product,
making it one of the biggest European
financial scandals of modern times.
Igor Kolomoisky, who owned the
bank with an associate and made his
fortune in metals, banking and the
media, is a big supporter of Mr Zelensky,
who became famous as a comedian and
actor on one of his television channels.
The billionaire oligarch is seeking to
have the nationalisation overturned in
Ukraine’s Supreme Court. The bank’s
current management and former offi-
cials who nationalised it have faced
months of harassment and intimidationsince Mr Zelensky's election in April.
Ukraine’s central bank in November
directly accused Mr Kolomoisky of
orchestrating a campaign of intimida-
tion against its officials and Privat-
Bank’s current management.
Petr Krumphanzl, who took over as
PrivatBank chief executive in 2018, said
there was a “real risk” it could be
returned to its former owners by the
courts or that they could win the right to
generous compensation under draft leg-
islation before parliament.
For Ukraine’s multilateral lenders
and foreign investors, the PrivatBank
case has become a test of Mr Zelensky’s
commitment to tackling corruption and
reforming the economy. The IMF
agreed a $5.5bn loan programme for
Ukraine in December but made it con-
tingent on Kyiv’s safeguarding the 2016
bank clean-up and recovery of assets.
“In case the situation goes wrong,
then there is a very high probability
Ukraine would not receive the [IMF]
money,” Mr Krumphanzl said. More
important than the financial hit would
be the erosion of trust in Ukraine’s gov-
ernment, he added.
“If the rhetoric changes and the IMF’sposition becomes negative, then many
of these investors will actually start to
withdraw the money that they already
put in the country. We can talk about a
potentially dramatic change in the
exchange rate.”
Mr Krumphanzl said Mr Kolomoisky
had launched 800 litigation cases chal-
lenging the nationalisation of Privat-
Bank and bail-in of some of its largest
depositors. The PrivatBank chief said he
was especially concerned about the fate
of proposed laws on banking resolution.
A 400-page draft bill presented by the
cabinet last year would have made itillegal to return an insolvent bank to its
previous owners. It would have permit-
ted compensation for former bank own-
ers, but only subject to international
independent evaluation.
That bill was mysteriously replaced
with an eight-page version that was
more favourable to Mr Kolomoisky, said
Mr Krumphanzl. Neither version of the
bill has been published. A key figure on
the banking committee, Oleksandr
Dubinsky, is a former journalist on one
of Mr Kolomoisky’s TV channels.
Under pressure from western donors,
Mr Zelensky has said he supports the
nationalisation of PrivatBank, but he
has been less than categorical on ensur-
ing it cannot be reversed. Until last
month, Mr Zelensky’s chief of staff was
one of Mr Kolomoisky’s former lawyers.
The PrivatBank chief said he was fac-
ing six spurious criminal investigations,
including for espionage. When armed
police raided the bank’s headquarters in
September they tried to obtain docu-
ments from law firm Hogan Lovells. It is
representing PrivatBank in a case
before England’s High Court to recover
$2bn of assets the bank says were stolen
by its former owners.Legal battle
Ukraine’s president urged to back PrivatBank clean-up
Petr Krumphanzl warned of a risk
Kyiv would not receive an IMF loanJI M B R U N S D E N A N D A L A N B E AT T I E
BRUSSELS
The EU’s chief trade negotiator hopes
to broker a “mini deal” with the US as
he seeks to curb transatlantic tensions
before Washington follows through
with an increase in punitive tariffs on
Europe’s aircraft sector.
Phil Hogan told the Financial Times
that he was optimistic of progress in
trade talks, after Washington this
month limited its retaliation against
Brussels in a long-running dispute over
aircraft subsidies. The US said it would
increase tariffs on EU-made aircraft but
delayed their introduction until March
18, while holding back on extra duties
on a range of other goods.
The fact that Washington had stayed
its hand for now was “sending a signal
that the US [is] willing to give this win-
dow of opportunity a chance”, Mr
Hogan said.
“They have given us 30 days of sus-
pension of those tariffs on Airbus prod-
ucts which will give us that chance hope-
fully to make some sort of an agree-
ment,” he said. “We’re in a better place
than we were some weeks ago... With
political goodwill on both sides we can
do a lot in a short period of time.”
Donald Trump, US president, is focus-
ing more attention on trade relations
with the EU after striking a “phase one”
agreement with Beijing in December
that stopped further escalation of eco-
nomic hostilities between the two pow-
ers. Brussels has warned that Chinese
pledges under the deal may violate
World Trade Organization rules.
Mr Trump has repeatedly threatened
to hit EU car exports with punitive tar-
iffs in order to pressure the bloc into
doing a deal on his terms.
The EU has sought instead to find
common ground on an alternative
agenda and is hopeful the president will
be reluctant to stoke tensions that could
upset the US economy in an election
year. Mr Trump met Ursula von der
Leyen, European Commission president,
in Davos in January and said the two sides
would “talk about a big trade deal”.
Mr Hogan has been to the US twice
since taking over as trade commissioner
in December, in a sign of the attempts to
reach an agreement. He said an EU-US
deal could entail reactivating efforts to
reduce tariffs on industrial goods, clear-
ing bureaucratic obstacles to trade in
food products and working together to
develop international standards for new
technologies.
But he said the EU would prioritise
“substance over speed” and stressed
that the bloc would not water down its
standards on food safety or other regu-
latory norms.
“We're not going to open our regula-
tions in order to allow any reduction of
standards,” Mr Hogan said. “I want to
say very, very straightforwardly that the
European Union is not going to compro-
mise on our food standards, our envi-
ronment standards or our workplace
standards. I’ve said this from day one
and we continue to repeat it.”
The EU trade chief said Brussels
wanted to explore possibilities for each
side to reduce administrative obstacles
to agricultural trade.
The EU has a longstanding grievance
that only a handful of its member states
can export beef to the US — a legacy of
concerns over the spread of BSE, or mad
cow disease. Both EU and US authorities
have expressed frustration over the
other sides’ reluctance to grant regula-
tory permissions for trade in shellfish,
while eight EU countries are waiting for
US authorities to allow imports of their
apples and pears.
Mr Hogan is also playing a big role in
EU talks with the UK over a post-Brexit
trade relationship, and with Beijing
on an investment treaty that would
open up China’s market to European
companies.
The Irish commissioner said he was
concerned that Britain seemed to be
moving away from the political declara-
tion on future relations that Boris John-
son agreed with the EU last year.
Additional reporting by Sam Fleming in
BrusselsNegotiations
EU trade chief optimistic
over ‘mini deal’ with US
Mourners in Cairo yesterday paid their
respects to former Egyptian president
Hosni Mubarak at his state funeral,
which was accompanied by an array of
cannon fire and horse-drawn carriages.
Mubarak, who spent 30 years in
power before being ousted in 2011 in a
popular revolt, was afforded full
military honours, prompting a
backlash on social media from some
Egyptians who pointed to his
corruption conviction following his
overthrow.
President Abdul Fattah al-Sisi sent
his condolences to Mubarak’s two sons
and his wife, as part of a government
effort to solidify his legacy as a militaryleader. The coffin, wrapped in an
Egyptian flag, was pulled by a horse-
drawn carriage after prayers at noon.
The funeral march was attended by
political figures from Mubarak’s years
in power, some of whom had been
scarcely seen in public since he was
removed from office. State television
covered the event live and lauded the
former leader for his role as
commander of the air force during the
1973 war with Israel.
Mubarak died on Tuesday in
intensive care, weeks after undergoing
surgery. He was 91. His body was
placed in a tomb at his family’s
cemetery plot.Jack FrancklinEgyptMubarak given state funeral
Supporters
hold photos
of Hosni
Mubarak
outside the
cemetery in
Cairo where
the former
president
was buried
Mohamed el
Bendary/EPA-
Efe/Shutterstock‘With political goodwill on
both sides we can do a lot
in a short period of time’
Phil Hogan
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