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Commission puts forward declaration on digital rights and principles for everyone in the EU

Today, the Commission is proposing to the European Parliament and Council to sign up to a declaration of rights and principles that will guide the digital transformation in the EU.

The draft declaration on digital rights and principles aims to give everyone a clear reference point about the kind of digital transformation Europe promotes and defends. It will also provide a guide for policy makers and companies when dealing with new technologies. The rights and freedoms enshrined in the EU’s legal framework, and the European values expressed by the principles, should be respected online as they are offline. Once jointly endorsed, the Declaration will also define the approach to the digital transformation which the EU will promote throughout the world.

Executive Vice-President for a Europe Fit for the Digital Age, Margrethe Vestager, said: “We want safe technologies that work for people, and that respect our rights and values. Also when we are online. And we want everyone to be empowered to take an active part in our increasingly digitised societies. This declaration gives us a clear reference point to the rights and principles for the online world.”

Commissioner for the Internal Market, Thierry Breton, said: “We want Europeans to know: living, studying, working, doing business in Europe, you can count on top class connectivity, seamless access to public services, a safe and fair digital space. The declaration of digital rights and principles also establishes once and for all that what is illegal offline should also be illegal online. We also aim to promote these principles as a standard for the world.”

Rights and principles in the digital age

The draft declaration covers key rights and principles for the digital transformation, such as placing people and their rights at its centre, supporting solidarity and inclusion, ensuring the freedom of choice online, fostering participation in the digital public space, increasing safety, security and empowerment of individuals, and promoting the sustainability of the digital future.

These rights and principles should accompany people in the EU in their everyday life: affordable and high-speed digital connectivity everywhere and for everybody, well-equipped classrooms and digitally skilled teachers, seamless access to public services, a safe digital environment for children, disconnecting after working hours, obtaining easy-to-understand information on the environmental impact of our digital products, controlling how their personal data are used and with whom they are shared.

The declaration is rooted in EU law, from the Treaties to the Charter of Fundamental rights but also the case law of the Court of Justice. It builds on the experience of the European Pillar of Social Rights. Former European Parliament President David Sassoli promoted the idea of the access to the Internet as a new human right back in 2018. Promoting and implementing the principles set out in the declaration will be a shared political commitment and responsibility at both Union and Member State level within their respective competences. To make sure the declaration will have concrete effects on the ground, the Commission proposed in September to monitor progress, evaluate gaps and provide recommendations for actions through an annual report on the ‘State of the Digital Decade’.

Next Steps

The European Parliament and the Council are invited to discuss the draft declaration, and to endorse it at the highest level by this summer.


On 9 March 2021, the Commission laid out its vision for Europe’s digital transformation by 2030 in its Communication on the Digital Compass: the European way for the Digital Decade. In September 2021, the Commission introduced a robust governance framework to reach the digital targets in the form of a Path to the Digital Decade. In a speech at the ‘Leading the Digital Decade’ event in Sines, Portugal, on 1 June 2021, Commission President Ursula von der Leyen declared: “We embrace new technologies. But we stand by our values.”

The Commission also conducted an open public consultation which showed broad support for European Digital Principles – 8 EU citizens out of 10 consider it useful for the European Union to define and promote a common European vision on digital rights and principles – as well as a special Eurobarometer survey. Yearly Eurobarometer surveys will collect qualitative data, based on citizens’ perception of how the digital principles enshrined in the declaration are implemented in the EU.

The declaration also builds on previous initiatives from the Council including the Tallinn Declaration on eGovernment, the Berlin Declaration on Digital Society and Value-based Digital Government, and the Lisbon Declaration – Digital Democracy with a Purpose for a model of digital transformation that strengthens the human dimension of the digital ecosystem with the Digital Single Market as its core.


Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_22_452

Elon Musk, Nearing $300 Billion Fortune, Is The Richest Person In History

Thanks to a blowout earnings report and a big car order by Hertz, Tesla’s market cap surpassed $1 trillion on Monday—and CEO Elon Musk has emerged as the richest person in the history of the world.

Forbes estimates Musk’s net worth to be $271.3 billion as of the market’s close on Monday—up some $41.7 billion from Friday’s close. For that, he can thank a nearly 13% jump in Tesla stock plus more than 16 million new stock options, worth $16.1 billion, awarded following Tesla’s latest earnings report.

Musk is in uncharted territory, headed toward $300 billion. For comparison, Amazon’s founder and former CEO Jeff Bezos became the richest person to ever appear on The Forbes 400 ranking of America’s richest people earlier this month, topping the list with an estimated $201 billion fortune. His net worth climbed as high as $212 billion when Amazon’s stock peaked in July—a full $59.3 billion less than Musk is worth now. Microsoft mogul Bill Gates briefly surpassed $100 billion in April 1999, during the dot-com bubble’s apex. Adjusted for inflation, that’s just over $165 billion today. When Forbes first began tracking billionaire wealth, in 1982, the richest person in America was shipping magnate Daniel Ludwig, worth $2 billion, or about $5.5 billion in today’s dollars.

Musk’s 23% stake in Tesla (discounted for loan obligations) constitutes the bulk of his fortune, but he also holds a minority stake in the privately held rocket company he founded in 2002, SpaceX. The business was most recently valued by investors at $74 billion, following a February funding round.

You won’t find much real estate or many other valuable assets in Musk’s portfolio. Despite his remarkable wealth, the South Africa-born billionaire has been leading a relatively austere lifestyle. In the spring of 2020, he pledged to ditch the bulk of his physical possessions, including a half-dozen California mansions. As of June, Musk’s primary residence was a “foldable, prefabricated” rental house, the size of a studio apartment, in Boca Chica, Texas, where SpaceX produces its Starships. (Musk may be settling down in Texas for good; In early October, Tesla announced plans to move its headquarters from Palo Alto to Austin.)

Musk’s net worth has soared to new heights as politicians have taken aim at billionaire wealth. On Monday, he decried the latest tax proposals that Democrats hope could help finance their spending plan, which would reportedly require billionaires and those who earn income exceeding $100 million for at least three consecutive years to pay taxes annually on the increased values of their stocks and bonds. That would be particularly onerous for Musk, who holds much of his vast fortune in Tesla’s publicly traded shares.

“Eventually, they run out of other people’s money and then they come for you,” he wrote in a tweet on Monday night, after his net worth rose more than $41 billion in a single day.


Source: www.forbes.com/sites/elizahaverstock/2021/10/26/elon-musk-nearing-300-billion-fortune-is-the-richest-person-in-history/?sh=4c27fe4d1933

U.S. Treasury deputy chief sees G7 backing for 15%-plus global minimum tax

U.S. Treasury Deputy Secretary Wally Adeyemo said he expects strong backing from G7 peers for Washington’s proposed 15%-plus global minimum corporate tax, which should help solidify support in the U.S. Congress for domestic corporate tax legislation.

“My sense is that you’re going to see a lot of unified support amongst the G7 moving forward,” Adeyemo told Reuters on Monday after France, Germany, Italy and Japan made positive comments about the Treasury’s proposal.

That support may be voiced at an in-person meeting of G7 finance ministers in London on June 4-5, Adeyemo said.

Optimism about a long-sought comprehensive deal for how to tax the largest multinationals and digital services companies has increased since the Treasury last week said it would accept a global minimum tax rate of 15% or higher.

The rate is well below the Biden administration’s proposed 21% minimum rate for U.S. companies’ overseas income and its 28% proposed domestic corporate tax rate.

The Financial Times on Thursday reported that G7 countries are close to agreement on the corporate taxation of multinational firms. While the talks are taking place among nearly 140 countries through the Organization for Economic Cooperation and Development (OECD), G7 countries — the United States, Japan, Germany, Britain, France, Italy and Canada — have a strong influence over multilateral decisions.

The reaction from G7 chair Britain, which currently has a 19% corporate tax rate, has been more guarded. Asked if Britain would support Washington’s 15% minimum proposal, Prime Minister Boris Johnson shifted the focus to taxation of large tech companies such as such as Alphabet Inc and Facebook Inc.

“Reaching an international agreement on how large digital companies are taxed is a priority, and we welcome the U.S.’s renewed commitment to reaching a solution,” Johnson said.

The U.S. global minimum tax proposal is expected to be a key topic of discussion at a preliminary virtual G7 finance leaders meeting on Friday.


Adeyemo, who is involved in the OECD tax talks, said he expects a broad international commitment of 15% or more to build support in Congress for a U.S. corporate tax increase by narrowing the gap between U.S. and overseas rates.

In 2017, the Trump administration and Republicans in Congress cut the U.S. corporate tax rate to 21% and instituted a minimum tax rate on overseas income from intangible sources of 10.5%. Business groups including the U.S. Chamber of Commerce have opposed any increases in U.S. tax rates, arguing they would put U.S. firms at a disadvantage.

Adeyemo said a higher U.S. minimum tax would provide incentives for other countries to move toward the U.S. rate.

“If we can get the world to say that they’re willing to do at least 15%, it gives us the ability to come back to the international conversation once we’ve finished the domestic piece.”

Senate Finance Committee Chairman Ron Wyden said he was encouraged by Treasury’s progress in the negotiations.

“A global agreement could support necessary reforms to U.S. tax laws, ensuring our multinational corporations are incentivized to invest in the United States and pay their fair share,” Wyden said.

Negotiators in the OECD tax talks have been aiming for an agreement in principal this summer.

By the time of a G20 finance leaders meeting in Venice in July, there should be a good sense of unity around a global minimum tax structure, Adeyemo said. He added that there would be many technical details to work out, so a final agreement may have to wait until G20 leaders meet in Rome at the end of October.

Source: https://www.reuters.com/business/finance/g7-is-close-agreement-taxation-worlds-largest-companies-ft-2021-05-24/

Amazon had sales income of €44bn in Europe in 2020 but paid no corporation tax

Despite lockdown surge the firm’s Luxembourg unit made a €1.2bn loss and therefore paid zero corporation tax.

Fresh questions have been raised over Amazon’s tax planning after its latest corporate filings in Luxembourg revealed that the company collected record sales income of €44bn (£38bn) in Europe last year but did not have to pay any corporation tax to the Grand Duchy.

Accounts for Amazon EU Sarl, through which it sells products to hundreds of millions of households in the UK and across Europe, show that despite collecting record income, the Luxembourg unit made a €1.2bn loss and therefore paid no tax.

In fact the unit was granted €56m in tax credits it can use to offset any future tax bills should it turn a profit. The company has €2.7bn worth of carried forward losses stored up, which can be used against any tax payable on future profits.

The Luxembourg unit – which handles sales for the UK, France, Germany, Italy, the Netherlands, Poland, Spain and Sweden – employs just 5,262 staff meaning that the income per employ amounts to €8.4m.

Margaret Hodge, a Labour MP who has long campaigned against tax avoidance, said: “It seems that Amazon’s relentless campaign of appalling tax avoidance continues.

“Amazon’s revenues have soared under the pandemic while our high streets struggle, yet it continues to shift its profits to tax havens like Luxembourg to avoid paying its fair share of tax. These big digital companies all rely on our public services, our infrastructure, and our educated and healthy workforce. But unlike smaller businesses and hard-working taxpayers, the tech giants fail to pay fairly into the common pot for the common good.

“President Biden has proposed a new, fairer system for taxing large corporations and digital companies but the UK has not come out in support of the reforms. The silence is deafening. The government must act and help to grasp this once-in-a-generation opportunity to banish corporate tax avoidance to a thing of the past.”

Paul Monaghan, the chief executive of the Fair Tax Foundation, said: “These figures are mind-blowing, even for Amazon. We are seeing exponentially accelerated market domination across the globe on the back of income that continues to be largely untaxed – allowing it to unfairly undercut local businesses that take a more responsible approach.

“The bulk of Amazon’s UK income is booked offshore, in the enormously loss-making Luxembourg subsidiary, which means that not only are they not making a meaningful tax contribution now, but are unlikely to do so for years to come given the enormous carried forward losses they have now built up there.”

The Amazon EU Sarl accounts filed in Luxembourg show 2020 sales rose by €12bn from €32bn in 2019. The accounts, that extend to just 23 pages (compared with hundreds of pages for large UK companies), do not break down how much money Amazon made from sales in each European country.

However, Amazon’s US accounts show that its UK income soared by 51% last year to a record $26.5bn (£19.4bn) as people at home during the coronavirus pandemic lockdowns turned to it for online shopping as high street stores remained closed for most of the year, while homeworking drove increased use of its cloud software, Amazon Web Services.

While Amazon celebrated the rise in revenue collected from UK customers, it did not state how much corporation tax it paid in the UK in total last year. The company, which has made its founder and outgoing chief executive Jeff Bezos a $200bn fortune, paid just £293m in tax in 2019 despite the company collecting UK sales of $17.5bn that year.

The £19.5bn that UK customers spent at Amazon in 2020 is approximately double the takings at Marks & Spencer, the 137-year-old retailer, and underlines how the Covid-19 pandemic is revolutionising the way we shop and threatening the future of the high street. Last week Amazon reported its largest ever quarterly profit of $8.1bn on sales of $109bn.

An Amazon spokesperson said: “Amazon pays all the taxes required in every country where we operate. Corporate tax is based on profits, not revenues, and our profits have remained low given our heavy investments and the fact that retail is a highly competitive, low margin business.

“We’ve invested well over €78bn in Europe since 2010, and much of that investment is in infrastructure that creates many thousands of new jobs, generates significant local tax revenue, and supports small European firms.”

Doug Gurr, the recently-departed managing director of Amazon.co.uk, has explained that: “The Amazon.co.uk website is operated by Amazon EU Sarl, a Luxembourg-based entity, which is a European headquarters of Amazon.”

Just over 600,000 people live in Luxembourg but many of the world’s biggest companies have headquarters in the low-tax country.

Amazon arrived in Luxembourg in 2003, and within a few months secured a confidential agreement with the country’s tax authorities.

Bob Comfort, Amazon’s head of tax until 2011, told a Luxembourg newspaper that Jean-Claude Juncker – then the country’s prime minister and a former president of the European Commission – had personally offered to help Amazon.

“His message was simply: ‘If you encounter problems which you don’t seem to be able to resolve, please come back and tell me. I’ll try to help.’” Comfort was later appointed Luxembourg’s honorary consul to Seattle, the location of Amazon’s US headquarters.

Last month Joe Biden tabled plans at the Organisation for Economic Co-operation and Development, a club of mostly rich countries, for sweeping changes to the global tax system, including a minimum corporation tax rate in an attempt to stop multinational companies exploiting loopholes in the system. Germany and France have backed the plans but the UK has remained silent.

Washington had long resisted calls for the global treaties that reformers argued were needed to ensure that powerful multinational companies pay their fair share of taxes.

Under the US president’s proposals, large technology companies and corporations would be forced to pay taxes to national governments based on the sales they generate in each country, irrespective of where they are based.

A global tax floor would also be agreed. The US has suggested a rate of 21%, although this is higher than in several jurisdictions – including Ireland, Hungary and the Caribbean – and could be a stumbling block.

Bezos, the world’s richest person, welcomed Biden’s proposals and said Amazon was “supportive of a rise in the corporate tax rate”.

Amazon is not alone in creating complex corporate structures to avoid tax. The big six US tech firms – Amazon, Facebook, Google, Netflix, Apple and Microsoft – have been accused of avoiding $100bn of global tax over the past decade, according to a report by the campaign group the Fair Tax Foundation. All have said that they pay the correct amounts of tax.

The report singles out Amazon as the worst offender. It said the group paid just $3.4bn (£2.6bn) in tax on its income so far this decade, despite achieving revenues of $961bn and profits of $26.8bn.

The Fair Tax Foundation said this meant Amazon’s effective tax rate was 12.7% over the decade when the headline tax rate in the US had been 35% for most of that period.

Amazon said the report’s “suggestions are wrong” and the company had “a 24% effective tax rate on profits from 2010-18”.

Source: https://www.theguardian.com/technology/2021/may/04/amazon-sales-income-europe-corporation-tax-luxembourg

Fintech offers UK a way out of the Brexit bind

Britain’s departure from the EU has so far thrown up more challenges than opportunities for the country’s finance industry. Boris Johnson’s government failed to ensure that financial services were an integral part of Brexit talks and the ensuing trade deal. The result has been a trickle of business away from the City of London, with the fear that it will become a steady stream. With hopes fading for a free-trade deal in financial services with Brussels, the Square Mile urgently needs to think of new ways to retain its pre-eminence as a financial centre.

One obvious avenue is Britain’s thriving financial technology, or fintech, sector. The UK has a strong record in spawning and fostering these companies — fintech contributes £11bn to the economy — but it could do much more. Brexit gives the UK a chance to change its financial regulation to make itself even more attractive to fintech entrepreneurs and enterprise capital. In doing so it would be fighting the battles of tomorrow, rather than battling to preserve a former glory.

A government-commissioned report by Ron Kalifa, a former chief executive of Worldpay, has set out a range of proposals with the aim of sparking a “digital big bang”. The five-point plan covers areas such as regulation, investment and skills. Some of the recommendations are both common sense as well as overdue. Among these is the creation of a tech visa to allow access to global talent. One of the industry’s concerns since the 2016 Brexit vote has been that Britain’s departure from the EU would end the free movement of workers. The chancellor said on Friday the government is ready to launch a fast-track scheme but it should go further and ensure it also offers a pathway to citizenship to those deemed to be eligible. The review also identified 10 fintech “clusters” around the UK that, it says, need to be fostered, with a three-year strategy to support growth. The approach is the right one and would help to underpin the broader “levelling up” agenda from Birmingham to Belfast.

Other more radical proposals will require careful implementation but deserve support. Loosening London’s listing rules to allow dual-class share structures is one. The city’s global leadership as a fintech hub has not fed through to the stock market. The London Stock Exchange lacks the technology stars that dominate the US public markets — which embraced dual-class shares during the 1980s. Founders naturally want to retain a stake in their business in the early years after going public. It is sensible, therefore, for London to go down this path, although safeguards such as imposing time limits or restrictions on what the shares can vote on will be vital.

In a similar vein, it makes sense to loosen rules to allow pension funds and insurers to invest in more risky assets. Even before Brexit, the argument for less stringent rules to allow a larger investment in a broader range of asset classes was strong. Danish pension funds, for example, have benefited from their early support for offshore wind projects which were deemed too risky by many others. Any changes, however, should be carefully calibrated to ensure appropriate transparency and safeguards are in place. Ministers will need to strike a shrewd balance in order to maintain the competitive strengths that flow from good governance while fostering an environment that attracts entrepreneurs. Implementing Kalifa’s reforms will also only go so far; New York still benefits from higher valuations and a deeper pool of liquidity. London and the rest of the UK will need to keep fighting to gain any competitive edge they can.

Source: https://www.ft.com/content/0c59befd-0f4f-4c55-9d12-b15f74497121

Cyprus to suspend ‘EU golden passports’ scheme

Cyprus is suspending a scheme that grants citizenship and guarantees visa-free travel throughout the EU for those who invest a minimum of €2m (£1.8m).

It comes after Al Jazeera reporters filmed Cypriot officials using the scheme to assist a fictional Chinese businessman with a criminal record.

One of those filmed was Cyprus’s parliamentary speaker, Demetris Syllouris, who said he would step down until an investigation was completed.

The move comes into force next month.

Mr Syllouris, who is Cyprus’s second-highest ranking state official, said he would withdraw from his duties from 19 October.

In the video footage captured by undercover Al Jazeera journalists and released on Monday, Mr Syllouris appears to offer his influence to assist in obtaining citizenship for the fictitious businessman.

On Tuesday, Mr Syllouris released a statement apologising for “this unpleasant image conveyed to the Cypriot public… and any upset it may have caused”.

His announcement came shortly after the government said it had approved a proposal to suspend the scheme – the citizenship for investment programme – following an emergency session on Tuesday.

In a statement posted on Twitter, the office of Cypriot President Nicos Anastasiades said the proposal was put forward in response to “weaknesses” in the scheme that could be “exploited”.

Cyprus, which joined the EU in 2004, currently provides passports to non-EU nationals who make sufficient investments in the country.

Last November, it emerged that fugitive financier Jho Low – a central figure in the global scandal which saw billions of dollars go missing from the Malaysian state fund 1MDB – had obtained Cypriot citizenship in September 2015 and reportedly bought a €5m property in the Cypriot resort of Ayia Napa.

Mr Low is wanted in the US, where prosecutors say he laundered billions through its financial system.

Mr Low has denied any wrongdoing, and his current whereabouts are unknown, although there have been reports of him in various locations.

Cyprus later revoked his “golden passport” and those bought by 25 foreign investors, including nine Russians, eight Cambodians and five Chinese.

Last year, the EU Commission told EU states to tighten checks on non-EU nationals who acquired citizenship through investments. Malta and Bulgaria operate similar schemes to that of Cyprus.

The commission said the programme could be abused and used for tax evasion and money-laundering.

It added that applicants could acquire citizenship of Cyprus, Malta and Bulgaria – and hence EU citizenship – “without ever having resided in practice in the member state”.

EU citizens can move easily throughout the bloc, as well as live and work in another member state without the bureaucratic hurdles that non-EU nationals face.

Some other EU states and the UK offer “golden” residence visas in exchange for large investments.

Source: https://www.bbc.com/news/world-europe-54522299

EU’s Barnier Rejects U.K. Plans for Banking After Brexit

The European Union’s chief Brexit negotiator rejected the U.K.’s latest proposals for financial firms to do business with the 27-nation bloc after Brexit, accusing Britain of trying to keep as many of the benefits of the single market as it can.

Michel Barnier dismissed Britain’s desires, which he said would let firms keep operating from the City of London, with employees flying in and out of the EU for short business trips. The proposals could even “create a significant risk” of avoiding regulation altogether.

“There is no way member states or the European Parliament would accept this!” Barnier said on Tuesday in the speech to the Eurofi financial conference. The U.K. “would like to make it easy to continue to run EU businesses from London, with minimal operations and staff on the continent.”

The U.K. and EU have made next to no progress in negotiations over their future relationship — which includes an accord on financial services — despite talking since March. A fresh round of discussions started on Monday, with both sides vowing to move forward in an attempt to get a deal before October, two months before Britain’s final parting with the bloc.

Barnier warned the industry to prepare for Jan. 1, saying there will be “big changes” when U.K. financial firms lose their passports to offer their services across the EU.

Market Access

Wall Street banks and the finance industry have pressed hard for the ability to continue using their London hubs for investment banking and trading business with European clients. As the year-end draws closer, banks are re-activating plans to move staff and business if the two sides can’t reach a new market access arrangement.

Meantime, the so-called equivalence process through which the EU can open access to London firms has run into trouble, Barnier said. Under the EU’s equivalence rules, foreign firms can be given access to the bloc only if officials in Brussels think the rules are tough enough in the companies’ home state.

“I know that many hope our equivalence decisions will provide continuity,” Barnier said. “Many believe that ‘responsible politicians’ on both side of the Channel should make this happen — but things have to change. The U.K. and the EU will be two separate markets, two jurisdictions. And the EU must ensure that important risks to our financial stability are managed within the framework of our single market”.

While the two sides committed to make progress in their equivalence assessments by this month, Barnier said the U.K. has answered only 4 of 28 EU questionnaires on regulations. “These assessments are particularly challenging,” Barnier said.

Britain has consistently argued that the regulations start at the same place in both jurisdictions, which should make the equivalence process simpler. “The U.K. has been able to complete our own assessments on time and we are now ready to reach comprehensive findings of equivalence as soon as the EU is able to clarify its own position,” a U.K. Treasury spokesperson said.

Source: https://www.bloomberg.com/news/articles/2020-06-30/eu-finance-negotiator-rejects-u-k-plans-for-post-brexit-banking

ECB Steps Up Crisis Aid as Lagarde Warns Governments to Act

The European Central Bank intensified its response to the coronavirus crisis by cutting the cost of funding for banks, while urging politicians to provide more fiscal support.

Hours after data showed the worst three-month contraction in a quarter-century of statistics, President Christine Lagarde warned that the euro-area economy could shrink as much as 12% this year.

“Continued and ambitious efforts are needed, notably through joint and coordinated policy action, to guard against downside risks and underpin the recovery,” she said in a virtual press conference on Thursday. “An ambitious and coordinated fiscal stance is critical, in view of the sharp contraction.”

She spoke after policy makers reduced the cost of their emergency loan program for banks, and unveiled a further facility to inject liquidity into the outbreak-stricken economy.

The ECB said the lowest interest rate on a program that gives banks incentives to lend to companies and households will fall to 50 basis points below the deposit rate, currently at -0.5%. Interest on the new, non-targeted facility will be 0.25% below the main refinancing rate that presently is zero.

Officials kept their pandemic purchase program at 750 billion euros ($815 billion), which together with earlier programs, means it will buy more than 1 trillion euros of debt through the end of this year.

Most economists predict the ECB will bump that up later this year. Lagarde said the central bank is “fully prepared” to increase or extend the program if needed.

Bond investors largely signaled satisfaction with the move, with Italian yields falling after initially briefly jumping.

“For today, it’s enough,” said Carsten Brzeski, an economist at ING in Frankfurt. “So much has been announced in the past six weeks.”

Lockdowns to curb the spread of the coronavirus have sent unemployment soaring across the region and burdened the currency area’s economies with massive costs.

Figures earlier Thursday showed European output shrank the most on record during the first quarter, a period only partially blighted by coronavirus lockdowns. Countries such as Italy, Spain and France, with limited room to spend their way out of the crisis, saw contractions of around 5%.

With more pain to come, demands by the euro area’s most vulnerable nations for a joint fiscal response will only grow louder. So far, most government action has been at the national level.

Squabbling Leaders

Leaders have asked the European Commission to come up with a broader proposal by May 6, though its unclear how to resolve disagreements on whether aid should take the form of grants or loans. Likewise, Germany and the Netherlands have led opposition to joint debt over fears they’ll end up with much of the bill.

The squabbling has unnerved investors, who fret that heavily indebted nations such as Italy will be tipped into a deeper crisis. The country’s credit rating was unexpectedly cut by Fitch this week.

The response contrasts with other major economies where fiscal support has been stronger. Federal Reserve Chairman Jerome Powell warned on Wednesday, after maintaining his institution’s own emergency settings, that this is “not the time” to worry about the U.S. debt burden.

Michael Pyle, global chief investment strategist at BlackRock, finds the contrast telling. He says the ECB’s move on Thursday only amount to “incremental steps in the right direction.”

“When we compare what we’re seeing out of the Fed and U.S. policy makers more broadly, the scale in response is much different,” he told Bloomberg Television. “We’re going to need to see quite a bit more, looking ahead.”

The ECB already eased the terms of its bank-lending program at its March policy meeting. It also recently loosened standards on the collateral it’ll accept for refinancing.

Source: https://www.bloomberg.com/news/articles/2020-04-30/ecb-intensifies-crisis-response-with-new-loans-after-gdp-crash

Wall Street slumps, government bonds hammered as stimulus high fades

Wall Street resumed a steep slide on Wednesday while bond markets rushed to price in the sheer scale of government support programs and handouts announced over the past 24 hours, all aimed at softening the economic shock of coronavirus.

Dire trading conditions continued to make two-way trading difficult and exaggerated the moves as investors piled into cash with the selloff in government bonds in particular drawing European Central Bank support for the Italian debt market.

U.S. dollar funding stresses remain evident, even if slightly easier since the U.S. Federal Reserve’s latest support for commercial paper and securities repurchase markets Tuesday.

Even the usual safe-haven assets, such as gold, got caught in the rout as battered investors looked to unwind their damaged positions while oil prices tanked to a 18-year low below $30.

“Another remarkable day in what is clearly fin-de-regime,” Rabobank’s global strategist Michael Every wrote in a note.

“Things have already irrevocably changed and whipsaw market action reflects that this is the case. The only issue is how much further they change from here, and hence where markets settle.”

Wall Street’s main indexes slumped at the open as growing signs of coronavirus damage to corporate America saw Tuesday’s sugar high over sweeping official moves to protect the economy fade fast.

The Dow Jones Industrial Average fell 1,048.69 points or nearly 5% at the open to 20,188.69, while the S&P 500 opened lower by 92.69 points, or 3.7% at 2,436.50. The Nasdaq Composite dropped 432.47 points or nearly 6%.

The declines follow sharp tumbles in Europe where equity indexes in London, Frankfurt and Paris plunged around 5% and Milan slipping around 2%. MSCI’s global stocks index dropped nearly 4% .

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 4% to lows last seen in summer 2016, led by a 6.4% fall in Australia. Japan’s Nikkei dipped 1.7%.

Bond markets joined the selling as liquidity vanished from European fixed income.

Italy’s debt found itself at the center of the sell-off with borrowing costs soaring, on track for their biggest daily jump since the 2011 euro zone debt crisis. The rout quickly spread to Spanish, Portuguese and Greek yields. Safe-haven German 10-year debt yields jumped to two month highs at -0.2%. [GVD/EUR]

In Europe, speculation grew around the issuance of joint euro zone “coronavirus” bonds or a European guarantee fund to help member states finance urgent health and economic policies.

“The liquidity situation is horrendous. What we see if liquidity is completely drying up when one-way selling starts and no one wants to take the other side,” Salman Ahmed, investment strategist at Lombard Odier.

“In the pre-crisis era, banks would step in and buffer the shock. Now there are no banks, only mutual funds which are having a run on their funds — it’s all impatient money.”

Big price swings have saddled market participants with losses, making them reluctant to get back into the market and thereby reducing trading volume.

Benchmark U.S. 10-year Treasury yield touched a three-week high of 1.2260 after the Federal Reserve eased some market jitters. U.S. 30-year bond yields climbed as high as 1.8440%.

“We are in the midst of the mayhem really, and I think there is still a risk that the increasing number of infections will keep markets on their toes,” said Hans Peterson global head of asset allocation at SEB investment management.

“It is hard to know how deep the recession will be, and as long as we have that situation it is hard to lift sentiment.”

Source: https://www.reuters.com/article/us-global-markets/wall-street-slumps-government-bonds-hammered-as-stimulus-high-fades-idUSKBN21504C

Passport applicants may need to spend more on property in Malta

A new cash-for-passports scheme is likely to be launched later this year and applicants may be forced to spend more on the property they must buy or rent. Parliamentary secretary for citizenship and communities Alex Muscat outlined the government’s plans for the controversial Individual Investor Programme in an interview with The Sunday Times of Malta.

Launched in 2014, the IIP had been capped at 1,800 main applicants. According to Mr Muscat, more than 70 per cent of this allocation has been reached. “At this rate, the programme will have been exhausted within months,” he said, pointing out that Prime Minister Robert Abela had already committed himself to retaining it.The Chamber of Commerce, he noted, recently pronounced itself for the programme to be extended or a new one to be rolled out. “Given that the scheme has raised over €1.3 billion in revenue, how long can the country afford to wait for the second programme to start?” he questioned. “Personally, I am in favour of launching it straight away to avoid having a gap in revenue. We are looking at a scenario in which the new programme will be rolled out later this year.”But is a €350,000 property or an expenditure on annual rent of €16,000 – the minimum requirements for IIP applicants – such a big deal nowadays?

Mr Muscat conceded that these thresholds might have made sense when the programme was drafted in 2013 but, in the context of the property boom, which has seen prices soar, there was a case for an upward revision.

As for the reason why most successful applicants were opting to rent rather than buy, he said it was probably due to the fact that it did not require as much red tape and was a more expedient process.It was pointed out that his urgency over starting a new programme seemed to contradict the finance minister’s repeated assurances that the budget was not dependent on IIP revenue. There was no such contradiction, he said. “Without the programme, public finances would still be very strong and Malta’s economy is not dependent on the sale of passports. But it would be presumptuous to say the country should refuse this additional stream of revenue.”

In the last financial year, the IIP accounted for over €270 million in revenue and this, he said, was contributing to various infrastructural projects in areas like roads and education. Only 30 per cent of the revenue was going towards the annual budget while the remaining 70 per cent was put into the National Development and Social Fund, which had reached nearly €600 million. However, the government’s decision to finance a €50 million social housing programme from this fund has prompted criticism that government’s expenditure is dependent on the IIP.

Again, Mr Muscat insisted this was not the case.“Social housing is not dependent on the sale of passports but is being aided by it,” he said. “The IIP means that certain capital expenditures can be made sooner rather than later.” One of the most controversial aspects of the individual investor programme has always been the residency clause, whereby applicants need to show some sort of genuine link with Malta in order to allay concerns of having ulterior motives for buying a passport.

Main applicants are meant to be in Malta physically for the entirety of 12 months before taking the Oath of Allegiance, and questions are frequently raised on how this provision is being enforced.

Asked if controls would be tightened, Mr Muscat insisted Malta was one of the few countries that “enforced” the residency aspect. “Applicants are required to submit boarding passes as proof of having entered or left Malta.”

Further enforcement was “tricky” in the wake of the fact that European laws did not impose restrictions on free movement. “Having no such impediment imposed on us as a member state, we cannot introduce such restrictions either,” he said. Other changes in the pipeline to “strengthen” the programme are a legal obligation to have a register of accredited agents and clearer provisions on how to suspend or revoke a licenced operator. “We are also looking at further due diligence obligations on agents, and even to have certain checks and balances in place for a fixed period of time on successful applicants,” he said. “Should an agent became aware of certain issues, why should they not be obliged to flag the matter?” He pointed out that the authorities had started proceedings to revoke citizenship for three successful IIP applicants. “This action was taken on the strength of information which emerged later.”

Last October, Opposition MP Karol Aquilina had denounced what he had described as “fake due diligence”. He listed five names of foreigners who, shortly after obtaining a Maltese passport, made headlines for the wrong reasons.Yet, Mr Muscat said the bottom line was that Malta’s “rigid” due diligence regime meant that it had the lowest acceptance level in Europe at around 76 per cent of applicants, in contrast to the UK at 91 per cent, Latvia 98 per cent and Hungary at 99 per cent. “There were cases in which applicants who were rejected for Maltese citizenship on the strength of our due diligence regime were accepted in other member states.” And there were no applicants who were accepted under the IIP after having been rejected elsewhere.

Noting that neither the Venice Commission nor MoneyVal had expressed themselves against the IIP, he said Malta was the only country which had an independent regulator as watchdog. Asked why the government was publishing the names of successful IIP applicants only together with thousands of others who acquired Maltese citizenship through other means, Mr Muscat insisted that only Malta and Austria ‘published’ the names.

“There are data protection issues as one would be making distinctions between IIP applicants, naturalisations and those who got married,” he said. “I don’t agree we should make such a distinction.”

Source: https://timesofmalta.com/articles/view/passport-applicants-may-need-to-spend-more-on-property.771167


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