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Issue No.8 | August 2020
Corporate DispatchPro The Journal of CI Group
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Issue No.8 | August 2020
Corporate DispatchPro The Journal of CI Group
EDITORIAL TEAM Andrew Azzopardi Isabelle Micallef Bonello Jesmond Saliba CONTRIBUTORS Aimee Donnellan Anna Szymanski Jennifer Saba Keith Zahra Peter Thal Larsen Tonio Galea PRODUCTION ASSISTANT Laura Grima Shirley Zammit DESIGN TEAM Matthew Borg Nicholas Azzopardi
CONTENTS Editorial 5 EU Budget: what’s in it for Europe and Malta
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US-Sino relations take a break
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Malta Insights
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CommuniqEU 27 The false economy of simple solutions
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UK’s online tax plan risks killing retail patient
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Ad problem shifts from newspapers to Facebook
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Garmin’s cyber-attack lesson: sprint don’t jog
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Local Perspective | Global Outlook
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SOURCES
Published By
ADDITIONAL SOURCES
Design Produced
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Corporate DispatchPro Editorial
Five days of Europe There was courtship and accusations of betrayal, there were confessions to the camera and off-mic dealings. It may sound like the latest episode of a reality show, but the dramatic scenes were coming out of the European Council during the negotiations on the EU Budget.
The heads of governments of the EU27 set up camp in Brussels for crunch talks that went on day and night before European Council President Charles Michel emerged triumphant on the fifth morning, announcing that an agreement had finally been reached. Besides stretching into the second-longest budget debate ever, this summit has also made history by introducing collective debt among member states for the very first time. French President Emmanuel Macron enthusiastically declared this step the most significant change to the bloc since the single currency, even while other leaders assured their constituents that this was only a onetime measure forced by the extraordinary circumstances. Other fault lines were created up and down the EU map, especially over the crucial elements of the coronavirus recovery fund. Disagreements about the portion of direct grants pitted governments from the southern regions against those in the north; while countries to the eastern borders of the EU felt unfairly targeted by those on the westernmost margins who advocated for rule of law guarantees. The governance of disbursement risked, at one point, to crash the entire process but the conclusive wording of the agreement gave every leader something to write home about. When the elbow-bumping euphoria dissipated, EU Commission President Ursula von der Leyen acknowledged in the EU Parliament 5
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that the final package looked less ambitious than what the executive had originally set out to achieve. Nevertheless, the concerted response to the Covid-19 by EU members was more significant and put together much quicker than what many sceptics had expected. While the squabbling, the intransigence, the impatience has been well documented in hour-by-hour coverage reports, the final agreement testifies to the leaders’ readiness to allow concessions and seek compromise. The high-stakes negotiations demonstrate that country governments can indeed come together into a Union worthy of its name to make the system work for all citizens. If a classic reality show ends with the winner standing alone, the success of the EU summit culminates in the European family standing together. 7
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Corporate DispatchPro KEITH ZAHRA
EU Budget: what’s in it for Europe and Malta European Union leaders reached a deal on a package of measures to boost their economies after the coronavirus pandemic, agreeing to borrow and spend hundreds of billions of euros in the next few years and pay them back from new taxes.
GRANTS AND CHEAP LOANS Key to the deal is a new element in EU policy making: the European Commission will borrow massively on the market and then grant much of the cash, rather than lend it, to countries most in need of economic stimulus. EU leaders agreed the Commission would cheaply borrow €750 billion using its triple-A rating. Of that, it would disburse €390 billion in grants and €360 billion in cheap loans. REPAYMENT MEASURES The grants force the bloc to generate cash to repay the borrowing by 2058. Leaders agreed that: • Germany, Sweden and the Netherlands would lose their current rebate on the amount of VAT they pass on to the EU. • EU countries will impose a tax on non-recycled plastic and pass on the proceeds to EU coffers. • From 2023 there would be a tax on goods imported into the EU from countries with lower carbon emissions standards than the bloc. • Other financing options available include a tax on financial transactions and extending the emissions trading system to maritime and aviation sectors.
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Such new taxes will be expressly allotted to the repayment of the €750 billion borrowing, but they will become part of EU reality for the next 38 years. DISBURSEMENT TIED TO GOVERNANCE The grants will be disbursed to countries that present plans that strengthen their growth potential, job creation and economic and social resilience of their economies. The plans also have to make economies greener and more digital and be in line with the Commission’s annual recommendations. The disbursement will need the approval of a qualified majority of EU governments and be linked to meeting milestones and targets. If any local government believes such targets had not been met by a particular country, it can trigger an EU debate within three months. The money will also be linked to observing the rule of law — an issue for Poland and Hungary which are under EU probes over their rule of law practice. But there will be a lot of political leeway: if the Commission decides there are “manifest generalised deficiencies in the good governance of Member State authorities as regards respect for the rule of law”, it can propose measures that would have to get the backing of a qualified majority of governments. REBATES FOR NET CONTRIBUTORS To secure their backing for the recovery plan, net contributors to the EU budget like the Netherlands, Sweden, Austria, Denmark and Germany, will receive much deeper rebates than before on what they have to contribute each year to EU coffers based on the size of their economies. MALTA TO RECEIVE €2.25BN €2.25bn is the allocation of EU funds for Malta and Gozo for the next seven years. Prime Minister Robert Abela said that “this largest ever package will translate into further investment in our economy and citizens”.
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A government statement described this allocation as exceptional, adding that this is even more significant considering Malta’s economic growth in recent years and the UK’s withdrawal from the Union leading to a loss of €75 billion to the EU budget.
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The total figure includes ₏1.923 billion from the EU’s budget (core MFF), as well as ₏327 million from the grants of the newly established Recovery Instrument, known as Next Generation EU. This amount does not include the loan element. President Michel convened a special meeting of the European Council between 17 and 21 July where he presented his second negotiating box. During the meeting and in its margins, Prime Minister Abela held discussions with the President of the European Council and other Heads of Government to explain the specific issues pertaining to Malta, explaining that despite its strong economic performance in recent years, Malta, as a small island Member State, has unique challenges that are different from those of other Member States. Heading into the negotiations which spanned over 5 days, the Prime Minister stressed that Malta should not be penalised for its efforts in recent years to keep unemployment low. 11
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Corporate DispatchPro Over and above, Malta will benefit from €327 million in grants from the Recovery Instrument to assist in the recovery effort. The deal for Malta translates into €842 million in funds under the core Cohesion Policy. This amount, that does not include a further €92 million additional funds for ReactEU (Cohesion Policy) from the Recovery Instrument. For agriculture, Malta obtained €191 million. This was possible due to a special allocation that was granted to Malta to support efforts in this area. In total, under the traditional EU policies of Cohesion Policy and Agriculture, which account for around 60% of the total EU Budget, Malta obtained €1.125 billion. The Government has decided that a minimum of 10% of the allocation under Cohesion Policy and Agriculture will be earmarked for Gozo. This will ensure that Gozo receives more funds overall than it currently has ringfenced under the 2014-2020 financing period. Recovery instrument Over and above, Malta will benefit from €327 million in grants from the Recovery Instrument to assist in the recovery effort. The Government also has the option to access the loan element if it wishes to do so. Own resources paid to the EU budget are automatically calculated on the basis of the relative economic development of Member States. Despite Malta’s strong economic performance in recent years, this excellent package means that Malta’s net balance from the EU budget will also remain significantly positive for the coming years. The Prime Minister thanked all those involved in the months of complicated and very difficult negotiations that led to Malta’s final package, emphasising that the government will do its utmost so that the outcomes are translated into programmes and projects to consolidate further investments in the economy and citizens. 13
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Corporate DispatchPro TONIO GALEA
US-Sino relations take a break Relations between the United States and Chine are at their lowest point in decades, arguably at their most fragile since Nixon’s attempts to bridge the rift in the 1970s. At the start of the Covid-19 pandemic, optimistic analysts hoped that the global crisis could spur some sort of rapprochement between the two biggest economies in the world, but the early gestures of goodwill between Beijing and Washington soon gave way to a flurry accusations flying in both directions. The exchange of rhetoric was reminiscent of the Cold War and quickly culminated into the recent closure of consulates in both countries. The US fired the first shot with the shutting down of China’s consulate in Houston over fears of espionage. It only took Beijing three days to respond, ordering the closure of the US consulate in Chengdu. Although it is not unprecedented that the US moved to close a foreign mission, it is a rare step and usually finds a difficult path back. The closure of diplomatic missions is the most significant development yet in the deterioration of relations in the past weeks, inflating quickly from smaller punitive actions such as visa restrictions and new rules on diplomatic travel, as well as the expulsion of foreign correspondents. In recent months, Washington and the US have openly traded blows, taking the fight to disagreements ranging from the origin of the coronavirus and Taiwan’s inclusion in the World Health Summit to Huawei’s 5G infrastructure and the company behind the popular TikTok app. China’s recent introduction of a national security law in Hong Kong combined with accusations of repression of the Uighur Muslim ethnic minority, triggered several rounds of new US sanctions. 15
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But the storm clouds have been gathering over years. Since assuming power in 2013, Chinese President Xi Jinping adopted a more assertive and authoritarian line than his predecessors. The US, on its part, never did much to veil its distrust of the rising competitor. Nevertheless, Beijing does not appear to be seeking further escalation of tensions and the indications are that President Trump does not want any serious confrontation, certainly not a military one. However, these are sensitive times particularly for American political cycle. With less than a hundred days to the US elections and with the GOP trailing in the polls, the Trump administration looks eager to play the hard-on-China card that served the presidency bid so well in 2016. Add to that hawkish White House advisors, chief among them Secretary of State Mike Pompeo, and China’s recent Wolf-Warrior diplomacy approach, and the world stage is set for a daring dance of brinkmanship between the two powers. 17
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JUNE RECORDS DROP IN INDUSTRIAL PRICES A decrease in intermediate goods pushed down the Industrial Producer Price Index for June by 0.27 percent from the same month last year. Data by the National Statistics Office shows a sharp drop of 2.41 percent in the flow of intermediate goods, the only industrial grouping to register a decrease. Prices rose by 1.98 percent in consumer goods and by 1.19 percent in capital goods, while they remained stable in the energy sector. The Industrial Producer Price Index was coming from a four-month rise and is the second time it decreased this year since February. Compared with the previous month, indices fell by 0.06 percent, brought down by decreases in capital goods (-0.14%), consumer goods (-0.08%) and intermediate good (-0.03%). Prices in the domestic market increased by 1.46 percent year-on-year and by 0.02 percent month-on-month. Non-domestic prices, by contrast, recorded drops of 1.35 percent from June 2019 and 0.11 percent from May 2020. REGISTERED UNEMPLOYMENT SLIGHTLY DOWN FROM MAY The number of persons registering for work in June stood at 4,270: an increase of more than 2.650 compared with the same month last year but a decrease of 139 from May 2020. Figures published by the National Statistics Office show that those who have been seeking work for less than 21 weeks decreased by 194 month-on-month whereas registered unemployed in the 21 to 52 band increased by 69. 19
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The unemployment register saw a decline across all age brackets from May to June, except for people aged 45 and over. There were 1,595 people in this category by the end of the sixth month, up from 1,583 in May. The biggest drop was observed in the 20 to 24 age group, which decreased by a tenth over the month. Women make two in every five people on the register, totalling 1,689 from 1,750 in May. The number of men also fell from 2,659 to 2,581 in June. All occupation categories recorded a decrease in job seekers, with the number of Clerical Support Workers looking for work shrinking by 52 percent compared with May – the biggest drop. Demand for this job type, however, remains the highest among all sectors, with 533 requests on the register. The smallest demand is observed in the Skilled Agricultural and Fishery Work category, sought after by 55 unemployed people. GOVERNMENT DEFICIT RISES TO 8.5 PERCENT IN FIRST QUARTER Malta registered a general government deficit-to-GDP ratio of 8.5 percent in the first quarter of 2020. Figures by Eurostat indicate that Malta recorded the biggest change from the previous quarter, dropping by more than nine percent. The average ratio stood at 2.2 percent in the euro area and 2.3 percent in the EU. All countries registered a deficit in the first three months of the year except for Luxembourg, the Netherlands, and Germany which registered a surplus of 0.1 percent, 0.8 percent, and 1.0 percent, respectively. This was the first time in the two years under review that Malta recorded a general government deficit, registering the highest surplus of 3.2 percent in the second quarter of 2018.
All countries registered a deficit in the first three months of the year except for Luxembourg, the Netherlands, and Germany which registered a surplus of 0.1 percent, 0.8 percent, and 1.0 percent, respectively. 20
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DEBT TO GDP RATIO REACHES 44% IN THE FIRST QUARTER Government debt rose to 1.6 percent of Gross Domestic Product in the first quarter of 2020, up from 1.5 percent in the previous quarter. Data by Eurostat show that the percentage of debt matches that in the EU average but is lower than the average in the euro area (1.9%). The general gross debt in Malta stood at 44.4 percent of GDP in the quarter under review, up from Q4 2019 (42.9%) but down from Q1 2019 (46.1%). The EU average stood at 79.5 percent between at the end of March this year, and Malta recorded the tenth lowest debtto-GDP ratio among member states, ahead of Poland and behind Romania. The highest ratios of government debt to GDP were recorded in Greece (176.7%), Italy (137.6%), and Portugal (120.0%), while Estonia (8.9%), Bulgaria (20.3%) and Luxembourg (22.3%) registered the lowest ratios. All EU27 countries except for Lithuania, Denmark, and Bulgaria saw an increase in their debt to GDP ratio from the last quarter of 2019. Compared with the first quarter of 2019, only ten member states registered an increase in their debt to GDP ratio; Malta was not among them. In fact, debt-to-GDP decreased by 1.7 percent yearon-year. 21
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Corporate DispatchPro INCREASE IN ANNUAL INFLATION RATE The annual rate of inflation in June rose 0.72 percent compared with the same month the year before. Figures by the National Statistics Office show that inflation as measured by the Retail Price Index, increased from 0.66 percent in May. The 12-month moving average rate was 1.20 percent, the lowest rate in the first six months this year. The highest rate in 2020 was recorded in January, when it stood at 1.63 percent. Food prices were the highest contributors to the increase in inflation in June, increasing by 0.58 percentage points. The second-highest increase was registered in Housing, rising by 0.17 points. On the other hand, the biggest downward turn was observed in Recreation and Culture, which slid by 0.23 percentage points followed by Clothing and Footwear with a decrease of 0.12 points. DECREASE IN LICENSED VEHICLES FOR FIRST TIME IN FOUR YEARS The were 395,413 licensed vehicles in Malta at the end of the second quarter this year, around 2,000 less than were registered in the previous quarter. Data by the National Statistics Office shows that this is the first time that the stock of motor vehicles did not increase quarter-on-quarter since 2017. Nevertheless, 3,798 new vehicles were licensed between April and June, with an average of 40 every day. Six in ten of newly licensed vehicles were passenger cars while a fifth of them were motorcycles or e-bikes. Used vehicles amounted to 56 percent of the new vehicles, with the rest being brand new models. Slightly over three-fourths of all licensed vehicles in Malta are passenger cars, 14 percent are commercial vehicles while 8 percent are motorcycles or quads. Buses and minibuses make up less than one percent of all vehicles. 23
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KEITH ZAHRA
SME Financing The EIF and the European Commission have launched new COVID-19 support measures under the EaSI Guarantee Instrument (EaSI) to enhance access to finance for micro-borrowers, micro- and social enterprises. The European Commission explained how the new measures will support micro- and social enterprises as well as individual microborrowers hit by the socio-economic consequences of the coronavirus pandemic. The objective of the new COVID-19 measures is to further incentivise financial intermediaries to lend money to small businesses, mitigating the sudden increase in perceived risk triggered by the coronavirus pandemic, and alleviating working capital and liquidity constraints of final beneficiaries targeted by the EaSI programme. Key features of these new measures include higher risk coverage, broadening of certain parameters, such as an increase of the maximum exposure for micro and social enterprises, and more flexible terms. The new features will be accessible to financial intermediaries, that can potentially serve thousands of companies benefitting from guarantees under the EaSI Guarantee Instrument. To date, the guarantees provided by EIF to financial intermediaries operating in the micro and social finance space have unlocked around EUR 1.4bn of debt financing, allowing more than 85,000 micro and social enterprises across Europe to access financing.
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KEITH ZAHRA
Health European regulators could be in a position to approve the first vaccine against Covid-19 this year, after a flurry of trials by pharma companies leading the race showed promising results. The portal quotes Marco Cavaleri, head of vaccines at the European Medicines Agency: “We are preparing ourselves for that possibility so that we as regulators will be ready. It will be a matter of seeing whether this data could be sufficient for allowing any kind of approval by the end of 2020.� The Agency will be working with these companies on trial data, manufacturing and clinical decisions. The approach should allow any successful vaccine to be officially approved within a matter of days once submitted, Cavaleri noted. Optimism over prospects for Covid-19 vaccines has grown after both the University of Oxford and AstraZeneca Plc published promising results from early human tests. Vaccine partners Pfizer Inc. and BioNTech SE, as well as China-based CanSino Biologics Inc., also announced early positive data from their vaccine trials. AstraZeneca Chief Executive Officer Pascal Soriot said the company hopes to be able to start delivering a vaccine by end 2020.
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KEITH ZAHRA
Brexit / Financial Services Regulators in Britain and the European Union reach an agreement to avoid disruption in cross-border asset management even in case of a No-deal Brexit. Britain left the EU in January, but full access to the European market has continued under a transition agreement that ends in December.
Negotiations of a new UK-EU trade pact have stumbled, and Britain’s requests for direct financial market access are being looked into separately by Brussels. The European Securities and Markets Authority (ESMA) and Britain’s Financial Conduct Authority (FCA) said that memoranda of understanding (MOUs) drawn up in February 2019 in case Britain left the bloc without a transition deal “remain appropriate”. They will now come into effect after the end of December, when the transition period expires, ESMA and the FCA said in separate statements.
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KEITH ZAHRA
Banking The European Central Bank has told banks not to pay any dividend payments until at least January and urged them to be “extremely moderate” when setting staff bonuses during the coronavirus pandemic.
The recommendations from the central bank seek to help banks absorb losses and support lending throughout the crisis, which has left practically all eurozone countries in negative territory. Andrea Enria, chair of the ECB’s supervisory board, said: “The buildup of strong capital and liquidity buffers since the last financial crisis has enabled banks during this crisis to continue lending to households and businesses, and thereby to help stabilise the real economy. Therefore, it is all the more important to encourage banks to use their capital and liquidity buffers now to continue focusing on this overarching task: lending, whilst of course maintaining sound underwriting standards.”
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Corporate DispatchPro PETER THAL LARSEN VIA REUTERS BREAKINGVIEWS
The false economy of simple solutions What went wrong? Many books have attempted to tackle that question since 2016, when the Brexit referendum and Donald Trump’s U.S. presidential victory threatened to upend the global economic order. Replies tend to fall into two broad categories. One is hand-wringing by anxious liberals, who lament the unravelling of a system that has brought so much peace and prosperity. The other is hand-waving by more conservative writers, who welcome electoral revolts as an overdue reassertion of national sovereignty.
Two new books take a more forensic approach. Martin Sandbu’s “The Economics of Belonging” and “Angrynomics”, by Eric Lonergan and Mark Blyth, offer a clear-eyed analysis of the origins of the malaise. As the titles suggest, the focus is on the economic roots of the upheaval. But the authors are alert to the dismal science’s limitations in explaining why advanced societies left so many people behind. Both books offer detailed and practical ideas for fixing the problem. They are also mercifully short, cramming a wealth of analysis and insight into a few hundred pages each. Most of “Angrynomics” consists of a dialogue between Lonergan, a macro hedge fund manager, and Blyth, a professor of international political economy at Brown University. The conceit keeps the reader’s attention as the authors race through decades of economic history. The main objective of “The Economics of Belonging” is to defend globalisation, which even many liberals now blame for the political backlash. In a style that will be familiar to readers of his Financial Times columns, Sandbu dismantles the conventional view, arguing that the hollowing out of manufacturing jobs owes more to 35
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automation than trade with China, and that immigration did little to suppress wages. In this narrative, globalisation is a bogeyman constructed by the true villains of the story: the politicians and bureaucrats who made a series of catastrophic errors. They neglected workers whose jobs became redundant and failed to prevent banks from inflating a catastrophic credit bubble. After the 2008 financial crisis, they compounded the error by embarking on austerity policies that led to a lost decade in many Western countries. The damage need not be fatal. Sandbu thinks bad policies can be remedied with better ones, and offers a lengthy list of the latter.
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Corporate DispatchPro He proposes higher minimum wages to encourage productivityenhancing investment, breaking up monopolies, regulating finance, taxing wealth, and offering citizens a basic income, possibly funded by a carbon tax. While these may offend orthodox economists, Sandbu insists they are market-friendly. “Protective policies can be pro-competitive, and vice versa.” Lonergan and Blyth are only slightly less ambitious. They argue that smart policy ideas have to be big enough to make a difference, easy to explain, and appeal to both sides of the political divide. In this spirit, they want governments to take advantage of negative real interest rates to borrow, say, 20% of gross domestic product and set up something akin to a sovereign wealth fund to finance payments to citizens. “The existence of negative real interest rates for the government is like discovering oil,” they write. “It is a source of wealth.” Many of these ideas merit a wider airing. However, largely absent from the discussion is an analysis of why policymakers made terrible errors, and why they have not embraced better solutions. Bad ideas are partly to blame. It took a global financial meltdown in 2008 to undermine the widespread belief in efficient markets. But multinationals have been good at shaping political decisions, through lobbying, revolving-door hiring, and increasingly savvy media strategies. This manipulation has often occurred across borders, as this week’s long-awaited parliamentary report into Russian influence in the United Kingdom confirmed. The biggest obstacle to improving capitalism, however, may be the lack of credible alternatives. “The Economics of Belonging” begins with a paean to Franklin Delano Roosevelt, whose radical policies saved U.S. democratic capitalism when communism and fascism appeared to many to be better alternatives. The implication is that today’s politicians require a similar vision. Yet contemporary capitalists don’t fear a communist-style overthrow of the system. The global climate crisis may provide the impetus to push through radical changes. But the failings of the past three decades make it hard to be optimistic. 37
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Both “Angrynomics” and “The Economics of Belonging” were written before the pandemic and published in the middle of it. Covid-19 has only made the questions they explore more urgent. In a postscript Lonergan and Blyth approvingly note that the health crisis has hastened the adoption of some of their ideas, like central banks offering dual interest rates. However, the pandemic has also exposed vast shortcomings in basic administrative management. Perhaps this will underscore the importance of competent, rational government. Right now, however, the gap between the ambitious policy solutions laid out in these two books, and the ability of politicians to implement them, seems as wide as ever.
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Corporate DispatchPro AIMEE DONNELLAN VIA REUTERS BREAKINGVIEWS
UK’s online tax plan risks killing retail patient Rishi Sunak should remember that bad cures sometimes worsen diseases. The UK chancellor is eyeing a 2 billion pound tax on internet sales. But the government, like landlords, may have to sacrifice some tax income to keep high streets alive.
British retailers have many challenges. Competition from the 200 billion pound online retail market is pretty high on the list, because it reduces the revenue potential of bricks-and-mortar retail locations. That makes fixed expenses such as rents and rates, taxes based on property values, particularly burdensome. Well-established brands like Oasis, Warehouse and Laura Ashley have all fallen into administration. The idea of an online sales tax was first floated last year, in response to public anger over internet giant Amazon.com’s puny tax bills. On Monday, the Times newspaper reported that the government was considering a special tax on online transactions. Last week, the government also said it would review business rates. Rate relief is more urgent. Business rates are typically set at around half of what the government assumes the premises can collect in rental income. However, the government has ignored the deteriorating economics of high streets and shopping centres. Rates have risen while rents have come down. Retailers’ business rates provided the Treasury with about 8 billion pounds last year, according to the British Retail Consortium. It is obviously tempting to try to make online retailers pay more, rather than to give traditional rivals a break. 41
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Corporate DispatchPro The problem with that thinking is that most big merchants are increasingly trying to sell both online and in-shop. For example, Zara’s owner Inditex is shuttering smaller stores with the idea of creating landmark showrooms for its stock that be bought via the internet. The Covid-19 lockdown has clearly given retailers the upper hand over landlords like Unibail-Rodamco-Westfield, Hammerson and British Land. Even profitable chains such as Primark, owned by Associated British Foods , have gone on rent strike. Looking ahead, more lease payments are likely to be tied to revenue. Governments are harder to push around than landlords. But if politicians think strong shopping areas are good for the nation, they should not squeeze retailers too hard.
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Corporate DispatchPro JENNIFER SABA VIA REUTERS BREAKINGVIEWS
Ad problem shifts from newspapers to Facebook Facebook is a new media company staring down a very old advertising problem. For a long time newspapers grew fat and happy on the largess of advertisers. Those days are gone as brands and local businesses moved to digital platforms like the around $660 billion social network.
But newspapers could potentially gain their first upper hand in a long time – thanks to a new law working its way through Washington – flipping media’s advertising woes on its head. A bipartisan bill co-sponsored by Senate Majority Leader Mitch McConnell will, if passed, allow newspaper publishers to collectively negotiate with the likes of Facebook. That could cause problems for the social network. Facebook benefits from journalism – more than 40% of American adults get their news from Facebook, according to the Pew Research Center – but mostly doesn’t pay for it. This law would enable newspapers to say en masse that Facebook needs to cough up for the content rather than deal individually as did News Corp’s Wall Street Journal. It will especially help local news outlets. Though antitrust concerns could still get in the way, newspapers have a pretty strong hand to play. The entire U.S. newspaper industry is expected to reap a bit more than $8 billion in advertising revenue this year, according to Group M, the media arm of ad giant WPP. That’s less than half of the ad revenue analysts are expecting Facebook to report in the second quarter alone, due out Thursday, according to Refinitiv. Allowing publishers to deal directly with digital distributors as a group won’t save the industry, but every little bit helps. Like Spotify 45
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Technology, which pays music labels like Warner Music, or Comcast, which pays ViacomCBS, news organizations could finally find another bucket to collect some cash from as advertising goes away. Meanwhile Facebook gets nearly all of its revenue from advertisers, and the newspaper business is a reminder that can be fleeting. At its peak in 2006, the industry pulled in almost $50 billion in advertising, according the Pew Research Center. An advertiser boycott of big brands such as Walt Disney stings, and a the near-collapse of small businesses, which account for roughly half of Facebook’s ad haul, could inflict lasting damage. If the newspaper business turns up the heat in a way that gets Facebook’s users to be less engaged, advertising may find its next victim. 47
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Corporate DispatchPro ANNA SZYMANSKI VIA REUTERS BREAKINGVIEWS
Garmin’s cyber-attack lesson: sprint don’t jog Athletes have little patience for slowness, especially when syncing their smartwatches. Garmin, the $19 billion wearables and GPS device maker, fell prey to a cyberattack just days before releasing second quarter earnings on Wednesday. It’s not the first or the biggest, but it leaves some useful lessons for future victims. Garmin says perpetrators encrypted its systems, interfering with services like Garmin Connect, which uploads data, and an aviation product. But it said this on Monday – four days after acknowledging there was a glitch in its service. The company says it had “no indication” that data were accessed. Services have started limping back to life. Meanwhile, investors were little troubled. Garmin’s revenue for the second quarter fell only 9% year-on-year, far better than the 31% decline analysts were expecting, according to Refinitiv. Legally speaking, there’s not much pressure to disclose during these attacks. Securities and contract law normally require the release of information, but not immediately. If sensitive data are compromised, then companies will have to contend with multiple privacy regimes, especially if there is a global user base, but, again, not until after a forensic analysis. Yet what companies ought to do is a different question – and much depends on the kind of attack. Equifax, the credit-scoring firm that suffered a massive hack in 2017, was able to wait six weeks before revealing the incursion, since consumers were none the wiser. A user who can’t upload data on their 10-mile run knows something is up right away. Similarly, when high-profile users of Twitter including former Vice President Joe Biden were hacked this month, the social network had no time to ponder. 49
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Corporate DispatchPro Popular blowback is a problem, and even more for Garmin than Twitter. Fitness-focused watches may be must-haves for competitive athletes, but the company’s share in the larger smartwatch game was a mere 8% in the first quarter versus Apple’s 56%. It can’t take its base for granted. Such firms end up in the unenviable position of scrambling to respond before knowing the extent of the damage. Companies will learn by doing. Cyberattacks had already increased fivefold during the Covid-19 crisis through April, according to the World Health Organization; remote working creates more vulnerable entry points. There’s no winning this battle – but victims can at least try to be fleet of foot.
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ROBOT KEEPS AN EYE OUT FOR MASKAS IN SOUTH KOREA An artificial intelligence robot checks the body temperature of passengers at a bus terminal in Gwangju, South Korea, 30 July 2020.
VIETNAM READY TO USE ‘FULL FORCE’ TO STOP NEW CORONAVIRUS WAVE Vietnam told tens of thousands of people who visited a central city to report to disease control centres on Thursday, as nine new coronavirus cases were confirmed and the country scrambled to contain its first outbreak in over three months.
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Corporate DispatchPro GERMAN ARMY TRAINS DOGS TO DETECT CORONAVIRUS An explosives detection dog poses with his trainer at School for Service Dogs of the Bundeswehr in Ulmen near Koblenz, Germany.
PUTIN SAYS RUSSIAN NAVY TO GET HYPERSONIC NUCLEAR STRIKE WEAPONS Russian President Vladimir Putin said on Sunday the Russian Navy would be armed with hypersonic nuclear strike weapons and underwater nuclear drones, which the defence ministry said were in their final phase of testing.
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ANTI-POLICE BRUTALITY PROTESTS CONTINUE IN PORTLAND, USA US federal agents and local Police during clashes with Black Lives Matter protesters in downtown Portland, Oregon, USA
BLACK LIVES MATTER AND ANTI FASCIST DEMONSTRATORS CLASH WITH POLICE IN LOS ANGELES Police officers clashed with protesters as they protected the Federal Court House during a Black Lives Matter and AntiFascist protest in Los Angeles, California, USA.
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Corporate DispatchPro ANTI-POLICE BRUTALITY PROTESTS CONTINUE IN PORTLAND, USA US federal agents and local Police during clashes with Black Lives Matter protesters in downtown Portland, Oregon, USA, 26 July 2020.
WHAT IS KNOWN ABOUT NORTH KOREA’S POSSIBLE CORONAVIRUS ‘PATIENT ZERO’ After North Korea announced what could be its first publicly confirmed case of coronavirus on Sunday, officials in Seoul believe they may have identified the man suspected of crossing into the North, but said so far there is no sign he was infected.
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AIRPLANE CINEMA IN POLAND People sit in parked airplanes at the start of the airplane cinema in Pila, northwestern Poland.
NAPLES REGION HITS BUSINESSES WITH €1,000 FINES FOR NOT WEARING MASKS Three businesses in the southern Italian city of Salerno, south of Naples, are the first to fall foul of tough new anti-coronavirus regulations imposed by regional authorities, local media reported Sunday.
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Corporate DispatchPro SPAIN COMBATS FOREST FIRES IN OURENSE A firefighter works in the forest fire originated in Cualedro, Ourense, northern Spain.
FRENCH LUXURY GROUP HERMES SALES TUMBLE DUE TO THE FALLOUT OF THE CORONAVIRUS PANDEMIC French luxury group Hermes said on Thursday comparable sales in the second quarter fell by 42% due to the fallout of the coronavirus pandemic and that the impact of the health crisis for the whole year was too difficult to assess at this stage.
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SELF-ISOLATION PERIOD IN ENGLAND ‘TO BE EXTENDED TO 10 DAYS’, CONCERN OVER SECOND WAVE OF CORONAVIRUS INFECTIONS IN EUROPE People with coronavirus symptoms in England will be told to selfisolate for 10 days instead of seven, according to reports.
PORTUGAL’S TAP TO RESUME 40% OF PRE-COVID FLIGHTS IN SEPTEMBER Portuguese airline TAP said on Monday it would resume 40% of its pre-coronavirus crisis operations in September, gradually restoring flights after travel demand collapsed in the pandemic.
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