Brussels

Brussels recommends isolating areas with a cumulative incidence of more than 500 cases, most of Spain less Asturias

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Schools closed in Lisbon.

Schools closed in Lisbon.
EFE

The European Commission (EC) on Monday urged the countries of the European Union (EU) to recommend do not travel to or from areas of high risk of expansion of the pandemic of coronavirus, given the arrival of the most contagious variants in several Member States.

Brussels calls on European governments “consistency” when applying these measures, so that it is recommended to avoid travel between countries but also within the country itself, said the European Commissioner for Justice, Didier Reynders, at a press conference.

In addition, as regards arrivals of travelers from outside the EU, the Commission asks countries to require a negative PCR test carried out before displacement and, for countries where it has been detected a more worrisome variant of the virus, measures such as self-isolation, quarantine and case tracking up to 14 days after arrival.

“The Commission proposes that all non-essential travel be strongly discouraged until the epidemiological situation has improved considerably. In doing so, member states must ensure consistency with the measures they apply to travel within their own territory, “the EC said in a statement.

Brussels points out that this recommendation is particularly aimed at European regions with a cumulative incidence of more than 500 – the case of a large part of Spain, except Asturias, the Basque Country, Navarra and Cantabria-, to which they propose to assign a dark red color on the map of the European Center for Disease Prevention and Control (ECDC) to monitor the expansion of cases.

The EC points out that people arriving from these areas should be required to present a negative test before the trip and the obligation to keep quarantine in the country of destination.

People who must cross the border frequently for work or for family reasons should be exempted from the quarantine requirement and the requirement of PCR tests it must have a “proportionate” frequency.

In any case, Reynders pointed out that Brussels supports that travel is not completely prohibited and instead measures such as quarantines or the presentation of a negative test are used, since the EU “cannot afford to disrupt essential travel, supply chains and vaccine distribution.”

Brussels continues to influence that Member States “adopt, maintain or strengthen” the measures non-pharmaceuticals, such as confinements or the temporary closure of certain establishments, to increase surveillance and sequencing of coronavirus cases, so that information on new variants can be collected.

Last Thursday, the ECDC raised the risk of contagion of the new strains from “high” to “very high”.

On the other hand, the Commission also proposed to the Member States that, with regard to travel from outside the Union to Community territory and in the event that the displacement is “essential”, Non-European nationals are required to have a negative PCR test before traveling, carried out maximum 72 hours before departure.

The Community Executive also proposes that countries may also require “additional tests as necessary for a period of up to 14 days, provided that the Member State imposes the same requirements on its own nationals. when traveling from the same non-EU country “.

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Covid, dark red regions in Italy and Europe: the map is coming

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BRUSSELS – There are four Italian regions that will probably fall into the new category of “dark red” areas launched by the European Union: these are Emilia Romagna, Veneto, Friuli Venezia Giulia e autonomous province of Bolzano. According to the recommendations proposed today by the European Commission at the request of the EU heads of state and government, those who want to leave these areas, even for essential trips, will have to undergo tests and quarantine for up to 14 days. At the moment the European map that contains these Italian territories is informal, that is, it is a projection drawn up with the available data and includes the areas with more than 500 infections per 100 thousand inhabitants in the last 14 days. The new official map will be published in the coming days after further checks by theEcdc, the European Center for Disease Prevention.

(reuters)

The rule is valid not only for leaving Italy from these areas in the direction of another EU partner, but also within the Italian territory, or rather for a move from a “dark red” region to another of another category. However, these are guidelines, or European recommendations – now being examined by governments – that each country can decide whether and to what measures to apply. The last word on regional travel rests with the Italian government.

That of the dark red areas is a novelty requested last Thursday by the heads of state and government at the end of their video summit last Thursday to try to slow down the circulation of the different variants that are causing fear of new waves of infections and victims. Today the leaders’ request has been transformed into a Commission proposal to governments at this very moment under discussion among European ambassadors.

Monitoring, towards the new colors of the Regions: the white area remains a mirage, only one Region hopes for it

by Michele Bocci

In addition to the Italian regions, also the Iberian Peninsula, with the exception of the northern part (from Galicia to the Basque Country), some southern and central areas of France, the whole Ireland, part of the Germany, the Czech Republic, some areas ofCentral-Eastern Europe, i Baltics, part of the Sweden e Cipro. Finland, Norway and Greece remain orange, which also has a portion that is still green, with even lower infections.

In addition to the restrictions for “deep red” areas, Europe strongly advises against non-essential travel within individual countries and between EU countries. Not only that, new and more stringent restrictions are proposed for those who enter the continent from the external borders of the Union: tests and quarantine for everyone, even for those who have travel documents (such as residents) to enter Europe despite its external borders have been closed since March.

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Brussels will demand detailed reforms from Spain to access the post-covid fund

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The European Commission (EC) will demand concrete reforms from Spain and details on the objectives and the timetable to undertake them to access the more than 140,000 million euros that correspond to the European post-pandemic recovery fund of COVID-19.

Brussels, which is already negotiating with Spain and other countries the drafts of its recovery plans, has warned this week that governments have to be more precise on how they will comply with the economic recommendations made in recent years and on the timing of the measures they plan to implement.

“The commitment of the European Commission is increase the ambition of reforms in the national plans to guarantee that the reforms and investments have the necessary details about the timetable, objectives and goals, “explained the Commissioner for the Economy, Paolo Gentiloni.

The Spanish Government was one of the first to send the draft to Brussels of the approximately 170 measures it plans to undertake, including pension and labor reform, and will now have to fine-tune them with the Commission to draw up a definitive plan that can be approved by this institution and, later, by the Council (the countries members).

The discussions are “on the right track”But there are still “days and weeks” of work to go, according to Gentiloni, who has already met with several Spanish ministers in recent weeks.

Compliance with the agreement will depend on the disbursement of the 69,528 million euros in non-refundable transfers that correspond to Spain, which may also request about 85,000 million in loans.

Aid with conditions

The regulation of the fund, agreed in December by the States and the European Parliament, requires that recovery plans include reforms and investments that boost growth and job creation and focus on European priorities, in particular the ecological and digital transition, to those that must allocate 37% and 20% of the money, respectively.

The measures should serve to address “all or a significant set” of the economic recommendations that the European Commission made in 2019 and 2020 to the countries, including those related to deficit and debt control.

The latter will only begin to be monitored once the European rules on fiscal discipline are reactivated, at the earliest in 2022, but If a country skips them, it could see up to 25% of the money committed frozen.

For Spain, the guidelines of the last two years ask, in addition to fighting the pandemic, preserving the sustainability of the pension system, improving employment support systems, family aid and regional minimum income regimes, investing in innovation and energy efficiency, improve coordination between administrations or apply the market unity law, among others.

With the recovery fund, Brussels has a tool for the first time, in the form of billions of euros, to enforce recommendations that countries tend to put off. Brussels will not dictate how to implement them, but will negotiate the fine print to ensure that the proposals pass the filter.

Trading margin

“More than if there are reforms to be made, that everyone agrees that yes, it is what reforms and with what objectives,” Socialist MEP Eider Gardiazábal told Efe, who led the negotiation of the regulation of the fund by the Eurocamara.

The rules, he explained, dThey leave “room” for negotiation with governments since they set “general criteria” – stricter in climate and digitization by requiring a percentage of spending-, but “it does not go into what projects they are, but how they have to be evaluated.”

“We must be aware that governments have their political color and their proposals to solve problems and we must be reasonable in that sense with the governments’ proposals. The Commission cannot impose anything,” he added.

The regulation, he considered, leaves “enough flexibility” on whether to comply with all or only part of the recommendations, with which the Commission “will see the set and coherence of the plans, taking into account the situation of the countries.” The Spanish draft, in his opinion, is “very complete.”

The Citizens MEP Luis Garicano, however, sees it difficult for the Commission and the Council to give the green light to the Spanish plan without a “serious proposal” on pensions.

To pass the Brussels exam, he stresses, plans have to receive the highest mark (A) in compliance with economic recommendations.

“I believe that an assessment cannot be made that Spain is significantly making the recommendations of the European Semester if it skips the most important one, which is to make pensions sustainable,” the MEP, who also participated in the negotiation, told Efe.

Although now there is consensus on spending what is necessary and control of the deficit and the debt are suspended, the recommendations call for fiscal sustainability in the medium term and there “the only real solvency doubt in Spain has to do with pensions,” he says.

As long as the fiscal rules are not reactivated, the “effort” that Brussels will ask will be in labor and pension matters since the rest would be “relatively easy” to comply with, he anticipates.

Pay only after fulfilling

In addition to the content, the Commission will agree with the countries the quantitative and qualitative objectives pursued by its measures and the planned timetable for achieving them, so that the money will only be paid if it is proven that they have been met. Hence, Brussels asks for details to avoid problems when it comes to disbursement.

Though the Commission will “continuously monitor” After the implementation of the plans, payments will only be made twice a year so that governments do not have to continuously send invoices, but every six months everything they have certified is reimbursed, explained Gardiazábal.

The regulation foresees that, once Brussels certifies that they comply, governments have to send this justified payment request biannually.

“The system of only giving money when it is fulfilledInstead of giving it and then demanding that it be returned, it changes everything, “says Garicano, for whom this will be key when it comes to ensuring that the States use the aid for the intended purpose.

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EU is not naive and wants new rules with China later this year, says European commissioner

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“Chinese investors have great ease of access to the single market and European companies, unfortunately, do not have the same facility in China at all. I hope that, at least on this issue, we can review and create a more balanced position for companies Europeans, “says the official, in an interview with Lusa and other European media in Brussels.

Asked by Lusa about the principle investment agreement reached between Brussels and Beijing at the end of last year, which has yet to be ratified, Thierry Breton admits: “We are not naive and we know that this is something that needs to be safeguarded”.

For the official, who has already led French technology and telecommunications companies, some of which have a strong presence in that Asian country, “it is important that some barriers to investment in certain sectors are abolished and that it is much easier to establish a company in China” by European investors.

“I founded several companies in China during my life, I was part of the biggest European employers in China. When I was chairman of the board of Thomson I had almost 20,000 employees in China, so I know it is difficult to open a business in China, “insists Thierry Breton.

Stressing that he is “someone who has always been very active in China”, the European commissioner tells Lusa and other European media that “everything that is done to create balance will be good”.

“And we also have to impose some values, namely for workers. Issues such as forced labor are important for us”, he adds.

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Change of course: Why Erdogan suddenly flatters the EU

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Et were words that hissed like arrows across the Atlantic towards Ankara: “I think we have to take a look at the effects of the existing sanctions and then decide if more needs to be done,” said Antony Blinken, the US favorite President Joe Biden for Secretary of State on Wednesday night in front of MPs in Washington.

Then Blinken also called the NATO country Turkey a “so-called strategic partner”. That was an affront to ruler Recep Tayyip Erdogan, over whom the former US President Donald Trump had held his protective hand for years.

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So it should be fitting that the Turkish Foreign Minister Mevlüt Cavusoglu is flying to Brussels this Thursday to meet the chief diplomat of the European Union (EU), Josep Borrell, and one day later NATO Secretary General Jens Stoltenberg. In the coming weeks, even the heads of the EU, Ursula von der Leyen (head of the Commission) and Charles Michel (Council President), will visit Turkey.

The new visit diplomacy has a history. About ten weeks ago Erdogan performed a pirouette: “We won’t see each other anywhere else, but in Europe, and we imagine building our future together with Europe,” he purred. Erdogan has been talking about the “European friends” ever since and recently declared: “We are ready to get our relations with the EU back on track.”

Suddenly “friends”

The same man had previously defamed leading EU politicians as “links in a Nazi chain”. In the fall, the Turkish President even recommended his French colleague Emmanuel Macron to seek “psychiatric treatment”. Lately the two gentlemen have been writing each other letters calling themselves “friends”.

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Why is Erdogan suddenly flattering the EU? He is not an ideologist, but a well-rounded pragmatist and a flawless power politician. After the change of power in the White House, the country on the Bosporus is increasingly isolated internationally, and the government is facing massive domestic political problems. “Turkey has never lost so much trust as in previous years,” says Hüseyin Bagci, professor for international relations at the renowned ODTÜ University in Ankara.

That is why Ankara wants to move closer to the EU again – with giant strides. Erdogan’s most important advocate is Chancellor Angela Merkel. With Cavusoglu’s visit to Brussels, the turnaround initiated by Erdogan and Merkel is now to be officially initiated. “Let’s hope that my meeting with Minister Cavusoglu will last longer than our last meeting in Malta in August, which took no more than an hour,” Borrell quipped two days ago in the EU Parliament.

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Control by German soldiers

In the final declaration of their summit meeting in December, the EU heads of state and government not only threatened Turkey with further sanctions because of unauthorized gas explorations off Cyprus, but also – under pressure from Merkel – offered the country a “positive agenda” and a better neighborhood . “But like tango, you need both sides to be good neighbors,” said Borrell. The Spaniard will report to the 27 EU foreign ministers about his meeting with Cavusoglu on Monday. The Turkish policy of “rapprochement” (rapprochement) should then have finally arrived in the Brussels engine room.

Should Europe get involved?

But why should the Europeans get involved in Erdogan’s cuddle course after years of tension? As a neighbor of the EU, the country is of great geostrategic importance. Ankara is also an important player in violent conflicts on the Europeans’ doorstep – such as in Libya, Syria and Nagorno-Karabakh. In addition, by securing the border in his own country and through his role in Libya, Erdogan can play a key role in controlling the migration movements towards Greece and Italy.

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From the EU’s point of view, Turkey has recently made an advance payment: On January 25, the Turks and Greeks want to resume the “exploratory talks” in order to find a diplomatic solution to their disputes over gas, sea borders and the airspace in the Mediterranean. The talks have been going on since 2002 and were suspended a good four years ago. What the government in Athens announced this week should also come up: the expansion of the Greek territorial waters in the Ionian Sea to twelve nautical miles.

Actually a provocation for Ankara. What is more important, however, is that these “exploratory talks” clarify the long-standing disputes over gas deposits in the eastern Mediterranean. The EU members Greece and Cyprus lay claim to these sea areas. Last autumn, the dispute almost escalated when NATO partners Ankara and Athens sent warships.

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Now he is threatened with punitive measures from two sides: Recep Tayyip Erdogan

Erdogan is under pressure. He needs allies. In 2017, the new US President Joe Biden called him an “autocrat” who “has to pay a price” for his policies. Washington also wants to expand military cooperation with Greece and establish a naval base on the border with Turkey. Biden also threatens further sanctions that Congress has already decided because Turkey – contrary to NATO rules – bought the Russian S-400 Mitte air defense system in mid-2019.

That could hit the Turkish arms industry and economy hard. On the other hand, Erdogan can no longer rely on the unpredictable Russian President Putin, for whom the Turkish President seems to be nothing more than a pawn – but who, as in Libya, is becoming increasingly unruly.

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FILE - A file photo dated 22 February 2011 showing a man in a restaurant in Istanbul, Turkey, drinking a glass of the Turkish national drink Yeni Raki. Foto EPA/TOLGA BOZOGLU (zu dpa 0460 vom 09.09.2013) +++(c) dpa - Bildfunk+++ |

At the same time, the Turkish economy urgently needs investments that can only come from the EU. The unofficial inflation rate is 37 percent and almost one in four people of work age in Turkey is unemployed. Ankara is now pushing to further expand the customs union with the EU that has existed for decades so that the economy can grow better.

At the same time, Erdogan is demanding new billions from Brussels to supply the nearly four million refugees in the country. Finally, Turkey is pushing for visa-free travel to the EU for its citizens. That would be a tremendous success for Erdogan. To do this, however, he would have to change his so-called anti-terror laws. That is no longer impossible.

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London dreams of new Singapore

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Boris Johnson brought together the big bosses to build his plan.

The ink of the trade agreement between London and the EU barely dry, we hear again of a “Singapore-on-Thames”. Boris Johnson has not forgotten the dream of the Brexiters to make the United Kingdom a liberal and deregulated state at the gates of the European Union. This Monday, he brought together great business leaders to discuss the possibilities offered by the new post-Brexit “freedom”. At the risk of playing dangerously with the rules of fairness on which he agreed with the Europeans.

Read also :European Union distributes compensation for Brexit

To scaffold these plans, Boris Johnson called on around thirty senior executives, including the bosses of BT, BP, Tesco, Unilever and Jaguar Land Rover. This opening of the “suggestion box” is the mark of the thawing of relations between “BoJo” and the economic sphere. The Minister of Finance, Rishi Sunak, is also responsible for leading an interministerial “Project Speed” committee which is to study the reform of the rules so far in force. “The hour has come”

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Wirecard scandal: now the auditors are getting pressure from Brussels

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economy Wirecard case

“Unlimited liability” – Now the auditors are getting pressure from Brussels

| Reading time: 3 minutes

Tobias Kaiser

ARCHIVE - 07/20/2020, Bavaria, Aschheim: The Wirecard logo can be seen at the company headquarters of the payment service provider in Aschbeim near Munich. (to dpa «Wirecard scandal will deal with the judiciary for years») Photo: Peter Kneffel / dpa +++ dpa-Bildfunk +++ ARCHIVE - 07/20/2020, Bavaria, Aschheim: The Wirecard logo can be seen at the company headquarters of the payment service provider in Aschbeim near Munich. (to dpa «Wirecard scandal will deal with the judiciary for years») Photo: Peter Kneffel / dpa +++ dpa-Bildfunk +++

The Wirecard case is now also reaching Brussels

Source: dpa

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The Wirecard scandal also alarmed EU supervision. The failure of the auditor EY could now have far-reaching consequences and mean that auditors will have to be more liable in the future. That, in turn, reinforces another questionable trend.

Dhe Wirecard scandal is still a long way from being resolved, and the billions in fraud also have consequences at the European level. Valdis Dombrovskis, the Vice President of the EU Commission responsible for economic issues, announced in an interview with WELT last September that his authority would draw conclusions from the case.

The EU Commission has now made initial proposals. WELT has an unofficial working paper, a so-called non-paper, which outlines possible measures at European level. The eleven-page long paper is not particularly extensive, and many of the proposals aim to adapt existing supervisory rules or to clarify European requirements.

However, there are some ideas that are tough: the Commission officials propose, for example, that the liability limits for external auditors should be increased or even eliminated entirely in the case of grossly negligent errors or deliberate misconduct, so that auditors, for example, would have unlimited liability. “Sufficiently high or even unlimited liability of the auditor can provide incentives to prevent compromises being made in final audits that result in lower-quality audits,” the paper says. The audit group EY had checked the financial statements of Wirecard.

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Wirecard manipulated the balance sheet in the Makati District in Manila

The commission experts warn, however, that such a step could also have negative consequences. Higher liability limits could mean that smaller accounting firms can no longer afford the more expensive professional liability insurance. That could increase the already high concentration in the auditing business. “Careful consideration is important here,” says the paper, which was written for representatives of the EU member states.

In this draftsmen propose stricter reporting requirements for auditors. In addition, information should in future be automatically exchanged between the responsible supervisory authorities – both within the member states and across borders. The European Securities Regulatory Authority ESMA had already submitted a first report on Wirecard in November and found significant deficiencies in the German financial regulator.

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ARCHIVE - 07/20/2020, Bavaria, Aschheim: The Wirecard logo can be seen at the company headquarters of the payment service provider in Aschbeim near Munich. (to dpa «Wirecard scandal will deal with the judiciary for years») Photo: Peter Kneffel / dpa +++ dpa-Bildfunk +++

The EU auditors diagnosed deficiencies, omissions and confusion of competencies in connection with the Wirecard fraud. Among other things, they found that confidentiality obligations had prevented the competent supervisory authorities from effectively coordinating.

The European Parliament had asked the Commission to provide an assessment of the consequences that would be necessary at the EU level in the Wirecard case. Markus Ferber, the spokesman for the conservative EPP Group in the Economic and Monetary Affairs Committee of the European Parliament, feels confirmed by the content of the Commission paper.

“The European Commission’s thin list of proposals shows that we have no systemic deficits in European financial supervision,” says the CSU politician. “In the Wirecard case, the Bafin failed, not the European level. The Bafin management and the Federal Ministry of Finance are responsible for the Wirecard disaster, not the European level. “

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The scandals surrounding Markus Braun and Wirecard and Wolfgang Grenke and his company are linked by numerous similarities

The payment service provider Wirecard was considered the German answer to the American Silicon Valley. Many private investors also had high hopes for the company – many of them large parts of their savings.

But the group, which was finally even listed in the Dax, turned out to be a gigantic construct of lies and probably the biggest economic scandal in German post-war history.

According to the public prosecutor’s office, the managers are said to have inflated the balance sheet with air bookings in Asia and thus concealed losses in their core business. Banks and investors alone have been cheated by more than three billion euros.

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China is increasingly decoupling from the global economy

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Beijing, Berlin, Düsseldorf Mostly once a year, China’s head of state and party leader Xi Jinping gives a speech to high-ranking ministry and provincial leaders at the Central University of the Communist Party, which sets the course for the year. But this time it had a special meaning. Because the five-year plan is currently being finalized, which should set the course for the economy in the People’s Republic from March to 2025.

Foreign company representatives may not have liked what Xi said behind closed doors earlier this week. “The most essential feature of building a new development pattern is to achieve a high level of self-sufficiency and self-improvement,” says Xi. ”

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Over 100 arrests in a riot at the Brussels police station

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Brussels on Thursday night: demonstrators in front of a police office after a demonstration. The protesters asked the authorities to investigate the circumstances surrounding the death of a 23-year-old man who was arrested by police in Brussels last week and died shortly afterwards.
Image: dpa

After the death of a 23-year-old man, violent protests broke out in front of a police station in Brussels. The man died after a corona check by the police.

NAfter rioting at a police station in Brussels, more than 100 people have been provisionally arrested. Justice Minister Vincent Van Quickenborne announced on Thursday night, as the Belga news agency reported. On Wednesday, around 500 people near the guard protested the death of a 23-year-old man who had died after a corona check by the police. In the evening, according to the police, demonstrators set trash cans on fire, smashed windows and damaged six police cars. One protester and four police officers were injured.

At times, King Philippe was stuck in his car during the demonstration, as several media reported. The king was on the way from the palace in downtown Brussels to Laken Castle in the north of the city, wrote “De Standaard”. But his car was not attacked. Trams temporarily blocked the journey. After a short time, the king and a car with bodyguards were able to drive on, as was shown on a video.

According to initial findings, the young man’s death is due to heart failure, as Belga further reported. The public prosecutor’s office described the case as follows on Monday: The police checked a group in Brussels on Saturday evening that had gathered despite the current Corona restrictions. The man then fled, but was quickly caught and taken to the police station for interrogation. There he lost consciousness and died a little later in the hospital.

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China versus USA: Europe is the loser in this tech war

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IIn these days, things are quickly becoming political when it comes to technology, and not just when Twitter bans Donald Trump’s user account. The same thing happened to the EU officials who negotiated the EU-China investment agreement at the end of last year. They were only able to end the negotiations shortly before the turn of the year – and in the process had to clear a politically extremely delicate hurdle.

In one of the last drafts of the contract text, which Beijing sent to Brussels at the beginning of December, there was apparently a passage that the negotiators of the EU Commission were not prepared for. He intended to punish those EU countries that block their latest generation of 5G cellular networks for equipment from the Chinese provider Huawei, wrote the “South China Morning Post”, which has this draft contract.

For the EU states concerned, which block Huawei and other Chinese telecom equipment suppliers from accessing the 5G market, some of the Chinese contract commitments would have been blocked. The EU negotiators apparently did not agree to this. However, the episode illustrates how increasing tech nationalism is changing world politics.

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Europe wants to be at the forefront. In December, EU Industry Commissioner Thierry Breton and Vice-Commission President Margrethe Vestager presented their plans for comprehensive digital regulation. Brussels’s claim: The new rules for digital companies and markets should become a blueprint for tech regulation around the globe. No more and no less.

The reality is currently different. The episode from the EU-China negotiations clearly shows that China and the USA in particular are in the process of negotiating the digital sphere among themselves. As in the case of Huawei, the EU must be careful not to be ripped apart between the two tech great powers.

China and the USA are increasingly pursuing a tech nationalism that could harm European companies in the long term. The Chamber of Commerce of the European Union in China, which represents European companies that do business locally, is now warning of this.

Technologies are shared between China and the US

Together with the renowned China research institute Merics, she analyzed what the increasing economic unbundling of China and the rest of the world means for European companies. The result: In the digital industries in particular, there is a threat of considerable upheaval.

“The technologies that will shape our societies and economies and that are playing an increasingly important role in all areas of the economy will be divided between two of the three largest economic areas in the world,” write the authors of the report. China and the USA largely agreed on the development of future technologies and their application.

In fact, the technology world is rapidly deglobalizing. China and the USA are disentangling their technology sectors, increasingly isolating them from each other. The USA, for example, is banning Huawei and other Chinese suppliers from the latest generation of cellular networks and is looking for allies around the world to exclude Chinese suppliers from other networks and technologies.

Source: WORLD infographic

China has been relying on domestic tech companies for a long time. The internet there is largely independent of the rest of the world. Chinese consumers, for example, hardly or not at all use the services of the major US providers Google or Facebook.

“The US is moving into a world in which Chinese technology is to be wiped out of the supply chains, while China is creating state-sponsored national champions that dominate a largely independent ecosystem of domestic technology,” the analysts write.

This is becoming a dilemma for European companies. Their value chains are global and require inputs from both the US and China. But in a world where these two big markets lock out each other’s technology, companies doing business with both sides get a problem.

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In this world of increasing tech isolation, European companies have only two options if they want to continue doing business in both markets. On the one hand, you can offer products that specifically target the two markets. However, this is far more complex in the digital sector than in conventional industries.

If you wanted to sell cars in Great Britain, you had to build the cockpit upside down. Compared to the digital, this is still simple. Research and development and the logistics chains must be set up for each of the two markets. Thats expensive.

A second possibility would be to build hardware and software modularly: All those parts that can be used in both markets, for example because they come from Europe, could be developed and built for all customers, and only those parts that are critical could built specifically for the respective markets and exchanged depending on the customer. From the company’s point of view, this is also expensive.

European companies could be the losers

In digital globalization, European companies are in danger of becoming the big losers. “Every step towards more economic decoupling causes further damage to companies,” write the authors of the report. And they warn that affected companies must think this development through to the end.

“Techno-nationalism is increasing worldwide, and therefore one has to analyze what the possibility of a complete separation of the digital spheres would mean,” they write. In a survey by the Chamber of Commerce, some companies – especially those for whom China only accounts for a small part of international sales – stated that the digital unbundling would ultimately endanger their business in China.

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Because economies of scale would not apply if they had to develop and produce separately for their Chinese customers, the China business would no longer be profitable, so they would have to give it up completely. Others with higher market share in China said they needed to restructure their businesses.

In both cases, this means less investment, fewer jobs and, for the end customer, higher costs and less choice, according to the report. Apparently, even the experts do not see any other way out of the dilemma.

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