Some of it may well be Rocket Science, but ASU’s Recipe for Success is Simple

Jordanian university has built on solid foundations to reach beyond the scope of its peers

The term “pioneering” is often overused, but it’s perfectly accurate when referring to Jordan’s Applied Science Private University (ASU).

The institute of higher learning was founded in Amman 1989, and was the first private university in Jordan. Over the past three decades, it has grown to become one of the largest, too. The ASU has evolved into a hub of knowledge, innovation, and discovery that attracts scholars from around the world.

The university’s sturdy foundation, strong history and academic track record have earned it universal respect as a home of quality education — driven by a holistic vision. The ASU’s mission has always been to embrace internationalisation, sustainability, and innovation. These main pillars continue to support its continuous journey into educational excellence.

The institution has been recognised and honoured for its progress and achievements with prestigious global awards and accreditations. These tributes stand as testimony to its distinction in the field of higher education and quality of the services it provides.

And the ASU vision couldn’t have been more clearly stated: "To be renowned internationally for excellence in teaching and learning, applied scientific research, sustainable development and community services."

Its mission, likewise, is clear: “To embed creativity, entrepreneurship, and continuous development in the fields of education, scientific research, human resources, and university and community environment; in addition to preparing a qualified generation of graduates that matches national and international standards to serve their communities.”

ASU is an active member of the Erasmus+ programme in partnership with several European universities, supporting more than 180 in- and outbound students and staff mobilities. The university is an active member of the International Association of Universities, the Association of Arab Universities, and the UNIMED Mediterranean University Union. The ASU is also signatory of the United Nation’s Accord on 17 Sustainable Development Goals.

Main Awards
Description

Golden Status (University Level)
First Private university in Jordan to be awarded by the Jordanian Accreditation and Quality Assurance Commission for Higher Education Institutions (AQACHEI).

5 Star PLUS QS Ratings (University Level)
In 2023, ASU is first university in in the region and 21st at world level to obtain 5-Star PLUS in the overall ratings, and 5-Star for each category of the QS Stars Ratings System.

5 Star QS Ratings (Online Learning)
First private university in Jordan to obtain 5-Star in the online learning by QS Stars Ratings System (2022).

THE Impact Rankings (2021)
ASU shared the First place amongst the private higher education institutions in Jordan in the Times Higher Education Impact Rankings (2021).

THE Arab Universities Rankings (2021)
ASU obtained first place amongst Jordanian private institutions in the Times Higher Education for Citation, Society, and International Outlook metrics.

SCImago Institutions Rankings (2023)
ASU is classified as a Q1 university (first Quartile) among the institutes of higher education in Jordan in year 2023. The university has been boosting its investments in research and innovation thus classified as one of the top 5 institutes in Jordan.

CFI Awards
For the Fifth consecutive year, ASU is a repeat program winner, with the award for Most Innovative Community Impact Research University Middle East (2019-2023) and first-time winner of Best University Internationalization Strategy Middle East (2023).

ESQR Award
ESQR (European Society for Quality Research), ASU received the ESQR Quality Achievement Award for year 2021.

ABET Accreditation (Engineering)
All Engineering programs accredited by ABET (Accreditation Board for Engineering & Technology).

ABET Accreditation (Computer Science)
Computer Science program at the Faculty of Information Technology has also obtained full accreditation by ABET.

ACPE Accreditation (Pharmacy)
ACPE (Accreditation Council for Pharmacy Education) is recognized by the US Department of Education. The Pharmacy Program is the first among the private universities in Jordan and the middle east to be certified by the ACPE.

ACEN Accreditation
ACEN (Accreditation Commission for Education in Nursing) is specialized accreditation for all levels of nursing education and transition-to-practice programs located in the United States, U.S.  Nursing at ASU is privileged to be the first amongst the private institutions in Jordan to receive the ACEN accreditation.

IIMP Accreditation
IIMP (International Institute of Marketing Professionals). The Faculty of Business at ASU is one of the first faculties in Jordan and the middle east to obtain the IIMP certification for all its marketing programs.

AACSB Accreditation (Eligibility Status)
AACSB (Association to Advance Collegiate Schools of Business). The Faculty of Business is a member of AACSB and has also been granted Eligibility Status in preparation for the accreditation by the AACSB.

Hcéres Accreditation
Hcéres (High Council for the evaluation of Research and Higher Education). The Faculty of Law is the first faculty in Jordan and the 5th in the Middle East to obtain the French accreditation by Hcéres.

ASIC Institutional Accreditation
The Applied Science Private University received Accreditation by Accreditation Service for International Schools, Colleges & Universities (ASIC) as a premier Institution (2022).

ASIC - 2022
ASIC Awards ASU the Outstanding Achievement in the Development of International Education, as the First Private University in Jordan

CIOL-2023
All English Language and Translation programs at the undergraduate and master's levels, received The Chartered Institute of Linguists accreditation (CIOL).


It’s a Wrap! Containers Printers has the Industry Covered — but it’s just not Content to Rest on its Laurels

Driven by the conviction that sustainability is central to the future of business, CEO Amy Chung keeps her eyes on the horizon

Early in her tenure as CEO of Singapore-based packaging company Containers Printers (CP), Amy Chung identified three key trends to be addressed if the company was to remain competitive: environmental sustainability, increased standardisation, and digitalisation.

[caption id="attachment_25996" align="alignleft" width="350"] CEO Amy Chung[/caption]

The company was already at the top of its game, recognised for its established presence in the sector based on its digital footprint, size, years in operation, and overseas presence. But Chung could see that growing concerns around climate change. That, and the worldwide move towards the circular economy, were bound to change the industry, and business more broadly.

Companies would need to demonstrate commitment to improving sustainability. Adopting international standards was the new imperative, with increasingly integrated supply chains requiring compliance with end-market requirements. Chung knew it would be necessary to ensure transparency and facilitate co-ordination.

The move towards “Industry 4.0” was giving her a glimpse of how factories of the future might operate, and how fresh opportunities could be created by connecting with suppliers and customers.

Amy Chung set out to transform the company via three pillars: technology and the development of new products and services, human capital development, and client acquisition. These avenues would support transition to a more innovative, collaborative, and sustainable company. They would also require significant investments in people, processes, and equipment — and a multi-year change-management process.

Fast-forward almost a decade, and CP has transformed itself into a process- and standards-driven organisation that leverages real-time operational data from IoT devices linked to production lines across its factories.

The company has expanded its customer base to include leading brands in the nutrition and medical industries. It launched digital services, including brand protection, supply-chain intelligence, and customer engagement. All this was made possible by investing in new printing technologies to uniquely identify each product.

CP offers a full range of sustainable packaging solutions, including high performance, recyclable laminates that meet the most demanding applications. The company has also launched lifecycle assessment services, including product carbon-footprint reporting to reliably measure, report, verify, and improve the environmental impacts of all products and production systems.

Under Amy Chung's leadership, Containers Printers has made substantial efforts to achieve corporate sustainability. The company has a dedicated team working towards ongoing environmental improvements — and has been recognised many times for its achievements. In 2021 and 2022, CP was awarded the LowCarbonSG logo by the UN-backed Carbon Pricing Leadership Coalition (CPLC) — recognition of its progress in measuring, monitoring, and reducing emissions.

What began just less than 10 years ago with a few key insights and a willingness to engage with a potentially challenging future has led to a remarkable transformation — and a journey towards sustainability that is far from over.

Containers Printers, founded in 1981, is a leading packaging solutions provider specialising in a wide range of high-quality flexible laminates and metal packaging products. It serves global brands in markets around the world, including Africa, Europe, and the Middle East.

CP is an ACRA-registered entity. Online searches reveal a company that is “assessed to have a high spending power, taking into account its revenue, growth, profitability, funding, headcount, (and) technology procurement”.

This one is one of those companies that “does what it says on the tin” — and aims to retain that straightforward approach, and entrenched values.


Seventy Years of Experience, Billions in AUM and Multiple CFI.co Awards — La Trobe Financial is simply ‘Killing it’

Australian asset manager rules the Antipodes with a client-focused attitude that has attracted 93,000 retail investors

With over $17bn in assets under management, La Trobe Financial is Australia’s leading alternative credit asset manager.

With more than seven decades of experience, and a focus on a disciplined and diversified selection of granular exposures across sector, loan size, borrower type and security location, the company operates Australia’s leading retail credit fund with more than 93,000 retail investors.

[caption id="attachment_26002" align="alignright" width="350"] CIO: Chris Paton[/caption]

La Trobe Financial’s chief investment officer, Chris Paton, said the firm’s approach had enabled it to harness the best attributes of its chosen asset classes “to deliver low-volatility income products that have demonstrated their performance for many, many years”.

With $85bn in loan originations backed by retail and institutional mandates, the company has again won the CFI.co award for Best Investment Management Team (Australia) — for the fourth consecutive year. Paton said the result was pleasing. “My team is acutely aware that we are managing other people’s money,” he said, “and this drives our unwavering focus to manage portfolios that deliver consistent performance across cycles.

“This award is testament to our core investment fundamentals, and our resilience and consistency in delivering for investors during volatile times.”

About La Trobe Financial

La Trobe Financial is Australia’s leading alternative asset manager and a proven and trusted investment partner for institutional and retail investors with some A$17bn in assets under management (AUM). It also operates the country’s largest retail credit fund — A$9.5bn in AUM, and 90,000+ investors. La Trobe has the most diversified funding programme of all non-bank lenders in Australia.

Through its retail credit fund, La Trobe Financial has seven product offerings to retail and institutional investors, which are backed by pools or exposures to loans secured by registered, first-ranking mortgages over real properties in Australia.

Since 1952, La Trobe Financial has been striving to help people realise their potential with specialist financing and investment solutions.

La Trobe Financial is regulated by the Australian Securities & Investments Commission (ASIC) and holds the requisite regulatory AFSL and ACL to operate the Credit Fund, place RMBS issuances, and provide credit services.

Consider the PDS and TMDs on their website www.latrobefinancial.com before investing.


Creating More Strategic Relevance for the Investment Banking Sector

Many people think of investment banks as firms with a rolodex of fixed income and equity investors and companies that could be for sale.

Partly true, of course, but the infrastructure behind the larger banks has pushed fundraising and M&A activity to unprecedented volumes. Apart from market forces, deal velocity has become crucial to cover those overheads — as has the need to report revenue growth quarter-over-quarter.

[caption id="attachment_26004" align="alignright" width="350"] CEO & Co-founder: Daniel Ibasco[/caption]

So, what has happened to the quality of deals on a post-transaction basis? Have some prospered? Was value really created years after a deal had been done?

Fortman Cline Capital Markets Ltd (FCCM), a boutique advisory firm covering South East Asia, has decided to pursue a low-volume, high-margin approach.

It has established a management consultancy to help clients prepare for sale, or assist clients with integration and strategy implementation once a deal is consummated. In other cases, it has advised clients on strategy and internal restructuring before a sale is finalised. Engaging industry professionals in key verticals such as healthcare, consumer businesses, infrastructure services has allowed FCCM to perform well in a very competitive environment. It has highlighted the firm’s strategic and commercial expertise, and taken it far beyond the role of ordinary financial advisors.

“Having meaningful dialogues with clients over a company’s lifecycle is very important,” says Daniel Ibasco, Fortman Cline Capital Markets’ CEO and co-founder. “This develops customer loyalty, and annuity like revenue streams vis-à-vis a transaction-orientated approach to business.” Taking a holistic approach to clients’ individual situations has improved the quality of deal execution. A focused strategy on these verticals also creates discipline and focus for originating business.

Ibasco says we need to understand “the ecosystem, the key players, (and) the unmet nets in the sector” when originating transactions or mandates.


Finance Expert Knows Which Questions To Ask — And Where to Find Answers

A banker, a businessman ... and a trained military interrogator? Meet Jakob Lindquist.

CORDET managing member Jakob Lindquist founded the company in 2013 — and the buck stops with him. He takes overall responsibility for management of the business.

Lindquist is a permanent member of CORDET’s Investment and Credit Committee, originating new investments and playing an active role in ongoing portfolio management. He has been an investor, investment banker and corporate financier throughout a business career spanning three decades.

[caption id="attachment_26012" align="aligncenter" width="1000"] Founder & Co-Managing Partner: Jakob Lindquist[/caption]

He worked at Morgan Stanley between 1990 and 2012, where he was a senior member of the investment banking and capital markets EMEA management teams.

Jakob Lindquist is a financial services industry specialist, serving as a trusted advisor to many of Europe’s largest banks, insurers, and asset managers. As the co-head of Morgan Stanley’s Global Financial Institutions Group EMEA, he led more than 100 EMEA professionals in corporate finance and capital markets — the firm’s largest practice area by revenue and number of professionals.

He was stationed at Morgan Stanley’s London and New York offices, and spent extended periods in Asia. He has executed projects in 25 countries and has more than 200 announced career transactions to his name. Those accounted for more than $375bn in M&A and $125bn in Capital Markets.

Jakob Lindquist studied finance and accounting at the Stockholm School of Economics, and Russian Language and Eastern European Studies at Uppsala University. He is a Lieutenant in the Royal Swedish Navy, having completed officer’s training as a Russian military interrogator at the Armed Forces Intelligence & Security Corps (TolkSkolan).


The Fine Art of Mastering the Lower Mid-Market Offering

As a leading direct lender targeting the lower mid-market in Northern Europe, CORDET provides bespoke financing solutions that target attractive, risk-adjusted returns

Since 2013, CORDET has been providing bespoke solutions to lower mid-market companies with revenues of up to €150m.

The firm’s choice of geographical target, and its deal structuring, led to the launch of two new direct-lending funds. Their success has contributed to the expansion of the CORDET network and fostered key relationships with portfolio companies and investors. To date, CORDET has invested in excess of €750m in the process.

This approach remains the cornerstone of the operation, and aims to provide institutional investors attractive, risk-adjusted returns. That perhaps explains the attractiveness of the lower mid-market. CORDET’s strategy has been to find out how superior returns can be achieved without enduring higher risk. The potential of those aims has been demonstrated, by investing in portfolio companies with low structural risk and robust documentation focused on capital preservation and downside protection.

Direct Lending Plus+

The CORDET team has a wealth of experience — some 20 years across deal execution, workout experience and credit analysis. This has allowed investors access to a market which has generated a higher return-per-turn of leverage and low structural risk — something the team refers to as Direct Lending Plus+.

Portfolio companies with a low loan-to-enterprise value-ratio (LTV), low leverage, and robust documentation demonstrate some of the characteristics that protect against risk. Lower leverage, and carefully constructed terms, have resulted in deals with higher average margins with respect to leverage. That makes these transactions more attractive to institutional investors.

CORDET’s ability to tailor terms has provided an additional avenue for investors to access a market requiring specialist experience.

Given that the Nordic market is dominated by bank lending, direct lending accounts for just five percent of the European market, with leverage on average and higher-than-market average. This makes the Nordic market particularly difficult to tap — and where specialists like CORDET come in, with deep local networks, direct relationships, and multiple sourcing channels.

The ability to tailor CORDET-sourced deals allows investors to benefit from selected lower mid-market transactions. The Direct Lending Plus+ strategy allows them to benefit from additional components, such as warrants, which provide additional upside without added risk. This is also true of capital preservation, where maintenance covenants are used to identify potential risks early in a deal’s lifecycle, enabling the team to intervene if necessary.

CORDET’s approach to bespoke financing has contributed to the development of its role as supportive partner for institutional investors and portfolio companies. Successful transactions have helped to forge a trusting relationship with investors, and those with further capacity are often afforded the opportunity to participate in new deals, as co-investors. For portfolio companies, existing borrowers can raise further capital through add-on facilities. Investing in existing borrowers contributes to consistent deployment, providing security for capital.

Differentiated Approach

Selection is crucial to the performance of CORDET portfolios, with layers of criteria to identify the credit quality of the investment pipeline. Those criteria are founded upon four pillars that speak to the CORDET strategy.

The pipeline undergoes another layer of screening, centred around the ESG framework, before being assessed through the CORDET investment process. The pillars are linked to CORDET’s key differentiators, ensuring that each fulfils the founding purpose of the direct lending strategy. The selection process filters and identifies investments which are supported by characteristics that ensure low structural risk — and adhere to the geography and sectors in which they operate.

The credibility of this process is upheld by the independent credit team, which oversees the investment process and provides an independent assessment on viability and risk. CORDET’s local network and sourcing model provides access to a deep pool of credit, which ultimately drives deal-flow and allows for a higher-level of selectivity.

Collectively these factors contribute to an offering that aims for a service and return that is more attractive than the typical strategy: Direct Lending Plus+. The service is founded on its determination to provide tailored financing at an attractive, risk-adjusted return through a differentiated investment selection process. That process is grounded in an ESG framework, acting in support of investors and portfolio companies alike.

CORDET's Founder and Co-Managing Partner is Jakob Lindquist


On Freeters and Other Exotic Creatures in a Land of Plenty

The sustainability of Japan’s society is in doubt for various reasons, writes Wim Romeijn.

China, Europe, and even the United States are all said to be at risk of “Japanification”: a protracted malaise of low growth, low inflation, low interest rates, and skewed demographics necessitating quantitative easing on a massive scale.

A lost decade, which started in 1991 with the Bank of Japan (BoJ) trying to deflate a housing bubble, became two. The economy went moribund, only to morph into a lost generation of an estimated 17 million people trapped in precarious jobs, on subsistence wages.

Some have given up on the career ladder, preferring a hermit-like existence, often at the parental home, refusing work, study, and social interaction. The Ministry of Health, Labour, and Welfare estimates the number of hikikomori at 700,000 — with double that number showing signs of reclusive behaviour.

The loners are joined, figuratively, by around 10 million “freeters”, usually fresh out of college but unable to secure employment. Most have never held a steady job and depend on the gig economy. Freeters, usually depicted as a burden on society, live in hope that changing demographics and a tightening of the labour market will bring the rungs of the career ladder within reach.

It’s Alive!

That may happen soon. After decades of lacklustre performance, the economy has sprung back to life. Q2 data show economic output growing at an annualised rate of six percent, making Japan the top performer amongst major global economies. Most analysts were caught by surprise. They had predicted robust growth — but at a rate half or less than the one reported.

The expansion was fuelled by strong exports on the back of a weakening yen. The growth spurt has pushed GDP to its pre-pandemic size in real terms, although consumer demand remains feeble.

Home to the world’s third-largest economy, and its largest (net) creditor nation, Japan suffered a Covid recession in Q2 2020, when economic activity slumped almost eight percent and wiped out the gains from “Abenomics”, the suite of pro-growth policies introduced by prime minister Shinzō Abe in the early 2010s.

Japan took longer than most to recover due, in part, to disrupted supply chains, lingering restrictions on tourism, and strained ties with China — and that country’s softening economy.

Refusing to join other central banks in their rate hikes, the BoJ announced a change to its yield-curve control policy, doubling the cap on the benchmark 10-year government bond yield to one percent. The benchmark interest rate was kept at minus 0.1 percent.

Since 2016, the BoJ buys government bonds whenever their yield approaches the stated cap. Those interventions can be costly. At the start of the year, the BoJ spent an estimated ¥13tn (£70.5bn) in a single week to defend its policy against hedge-fund short-sellers. The bank hopes that inflation will retreat so it can keep its yield-curve control policy and avoid significant interest rate adjustments.

Any rise in the interest rate spells trouble, given that the government already dedicates 7.4 percent of the Budget on servicing the national debt — more than it spends on defence or education. While Japan’s debt-to-GDP ratio hovers around a dismal 220 percent, its net international investment position (NIIP) stands at almost $3tn (£2.4tn), meaning that the country’s assets outstrip its liabilities. A consistently large current-account surplus strengthens this position, but does little to alleviate the government’s annual interest payments.

Old Country

In The Wealth of Nations, Adam Smith surmised that the “most decisive mark” of prosperity of any country is the increase of its population. Some 150 years later, in 1937, John Maynard Keynes warned of the deleterious economic effects of a declining population. David Ricardo and Thomas Malthus philosophised over the effects of trade and food supplies on population growth.

By Adam Smith’s metric, Japan is doing rather poorly. With a low fertility rate (1.33), its population is declining from a high of 128 million in 2010 to a projected 87 million in 2070.  By that time, almost 39 percent of Japanese will be 65 or over. The working-age population, 15 to 64, is expected to have shrunk to about 45 million — even taking into account a projected quadrupling of immigrants.

The ratio of workers to pensioners is set to decrease from the current 2:1 to 1:3 over the next 50 years. The sustainability of Japan’s society is in doubt.

In his last New Year’s address to the nation, Prime Minister Fumio Kishida warned that the birthrate had fallen “to the brink of not being able to maintain a functioning society”. The government is expected to announce a set of measures to boost the birth rate, including financial support of up to ¥600,000[1] (£3,250) to defray expenses and postnatal costs.

Japan in 50 Years

2020
2070 (estimates)

Total population
126.2 million
87.0 million

Seniors (>65)
36.0 million (28.6%)
33.7 million (38.7%)

Working-age (15-64)
75.1 million (59.5%)
45.4 million (52.1%)

Children (<14)
15.0 million (11.9%)
8.0 million (9.2%)

Immigrants
2.8 million
9.4 million

Fertility rate
1.33
1.36

Life expectancy (f)
87.7
91.9

Life expectancy (m)
81.6
85.9

Data from the National Institute of Population and Social Security Research

Former BoJ governor Shirakawa Masaaki is afraid that standard textbooks on macro-economics need addenda to cover Japan’s problems. In his book Tumultuous Times: Central Banking in an Era of Crisis, Masaaki argues that the impact of demographic change on growth is “under-appreciated”.

What sets Japan apart from most of its peers is the fiscal space available to government. With low marginal tax rates, there is room to raise revenues. The country also borrows in its own currency, and its debt, while high, has failed to produce a crisis. Japan essentially faces no fiscal limits to spending. Late last year, the Kishida cabinet again unveiled a stimulus package worth ¥55.7tn (£301bn) to stave off deflation.

Old vs New

Some economists fret that the stimulus cash is being wasted on companies in the old economy, struggling with change and slow to innovate. Japanese car manufacturers, once first movers in electric mobility, have become laggards.

Of the 10.5 million cars Toyota sold last year, just 24,000 were EVs; Tesla sold 1.3 million. The company’s much-touted but improbably named bZ4X all-electric SUV suffered an embarrassing glitch: the wheels literally fell off some owners’ cars.

The episode, addressed with a recall and quick fix, illustrates the possible predicament of the entire industry — and a repeat of how corporate Japan lost its edge in semi-conductors and consumer electronics. No Japanese car manufacturer features in the top 20 for global EV sales. Industry analysts blame two bets Toyota made: that hybrid vehicles would win out, and hydrogen fuel cells would provide the primary EV power source.

Too Much, Too Late

Toyota’s CEO Koji Sato, formerly chief engineer at luxury brand arm Lexus, seems determined to play catch-up. He has vowed to release no less than 10 new EV models over the next three years, and boost sales to 1.5 million units by 2026. Honda, meanwhile, has teamed up with Sony and plans to knock out 30 models by 2030.

The push may come too late, with newcomers surging into the vacuum left by Japan’s industrial behemoths. Electrification has also significantly lowered the car industry’s formerly formidable barriers to entry, last successfully breached by Kia of South Korea.

BYD (Build Your Dreams) of Shenzhen, China, is hot on the rear bumper of Tesla in the race to become the world’s largest EV manufacturer. The company, founded in 1995 and in the vehicle business since 2003, could already claim that title if hybrid vehicle sales were included.

Complacency lurks as Prime Minister Kishida talks about a “new model of capitalism” — but seems in no hurry to detail his ideas. Japan — well organised, prosperous, harmonious, and largely content — feels no urgent need to define a vision, preferring instead to drift towards the future.

It helps that the nation does not suffer political polarisation and has little time for populists. But its cohesion and well-established pragmatism warrant, and facilitate, a more proactive approach to the issues at hand — lest Japanification is to gain a whole new meaning.

[1] $4,080 / €3,800


The American Economy is Holding Strong — and Getting Greater Still

Wim Romeijn's recent analysis indicates that shopping addiction is a primary driver of the American economy. However, other factors contribute significantly.

Each spring, the tradition of garage sales sees American households showcasing their impulse purchases. Neighbors engage in a cycle of buying and selling, transforming their garages into repositories of whimsical buys. This trend contributes to the growth of major retailers like Walmart and Home Depot.

Post-pandemic, US consumers were fueled by government relief checks. The federal government disbursed $931bn (£740bn) through 476 million checks. This economic stimulus combined with wage increases and credit card use led to robust consumer spending.

Goldman Sachs analysts predict a 3% growth in real incomes in the coming year. Still, economic disparities persist, implying that not everyone will benefit equally.

American Economic Resilience Despite Global Vibes

Despite challenges like Hollywood strikes and job cuts by major firms like Yellow Corp, the US job market remains stable. In fact, the Bureau of Labor Statistics reports a positive change in non-farm payroll and a drop in unemployment rates.

Federal Reserve Chair Jerome Powell remains optimistic about the US economic outlook. Recent downturns, referred to as the "vibecession," are diminishing. Current indicators suggest the US economy remains unmatched globally.

The US maintains its global economic position with a consistent share of the global GDP. Its work ethic, investments in R&D, and contributions to global patents showcase its dominance.

Challenges and Federal Initiatives

However, challenges like homelessness, which has seen a 6% increase since 2017, persist. Social issues, including gun violence and the opioid crisis, remain pressing concerns. Drugs like "tranq," a deadly blend of fentanyl and xylazine, are emerging threats.

The US government's spending patterns have changed, with a focus on welfare, healthcare, business support, and defense. The fiscal response to the pandemic, including relief packages worth approximately $5tn (£4tn), has enabled rapid economic recovery.

The Biden Administration's Inflation Reduction Act, targeting climate change interventions, further showcases the federal government's evolving priorities.

Dollar's Dominance in the Global Economy

The dynamics of the US dollar as the world's reserve currency play a significant role in the country's economic trajectory. The Griffin Dilemma highlights the interplay between domestic and international monetary objectives. The dollar's status offers the US various advantages, including seigniorage.

In contrast, the euro struggles with certain structural limitations, preventing it from becoming a viable global reserve alternative.

Conclusion

Warren Buffett's advice, "Never bet against America," resonates. The strength and resilience of the US economy remain unchallenged, and it continues to adapt and thrive amidst global challenges.


A Coup Remembered: 50 Years Later, Chile Still Split Over Pinochet Legacy

On this day fifty years ago, a pleasant pre-spring Tuesday, democracy fell to armed force in Chile. Absconded in La Moneda, probably one of the least gracious buildings erected by the Spanish in colonial times, the constitutional president of the country, Salvador Allende, fought a desperate fight against putschist generals.

Plumes of smoke rose ominously from downtown Santiago as Hawker Hunter jets fired missile barrages at the palace. Inside, chaos reigned after it became clear that all army units in and around the capital had joined the uprising and the government had no supporters left.

President Allende took to the airwaves: “Soon,” he said, “the calm metal of my voice will no longer reach you. It does not matter. You will continue to hear me. I will always be beside you.” Hours later, troops assaulting the palace found the president dead in his private chambers alongside a loaded Kalashnikov - a gift from his Cuban friend Fidel Castro.

That same night, the bustling city went into quiet mourning wondering what horrors daylight would bring. A curfew kept everybody locked inside including throngs of partygoers, the fine fleur of Chilean high society, who had assembled at the majestic Hotel Carrera to celebrate the downfall and death of their president with champagne, hors d’oeuvres, and dance.

The hotel, now home to the ministry of Foreign Affairs, overlooked the smouldering rubble of La Moneda and was not a hundred meters distant from the place where President Allende met his death and/or executioner only hours before - the circumstances surrounding his demise have never been clarified.

Days and weeks of terror followed. In the aftermath of the coup, an estimated 80,000 people - including civil servants, union leaders, intellectuals, and artists - were arrested and interned at the National Stadium where some 1,200 summary executions took place and many more suffered torture. A plundering of libraries, accompanied by book burnings reminiscent of those taking place on the eve of Kristallnacht, sought to rigorously rid the country of leftist thought and influences.

The Reluctant Putschist

The military takeover was carried out, but not orchestrated, by army commander Augusto Pinochet (1943-2006) who went on to govern the country for seventeen years. Before his power grab, the general was considered a staunch constitutionalist and enjoyed the trust of the president.

Only after considerable prodding by Admiral José Merino (1915-1996), commander of the navy, did General Pinochet join the plotters. That happened just a single day before the admiral had promised to move - alone if necessary - against the president.

Whilst still a surprise, the putsch came not entirely unexpected. After President Allende set the country on a “peaceful road to socialism,” political unrest was never far away. The conservative newspaper El Mercurio delighted in stoking the fires of civil unrest and was duly helped along by the machinations of the Nixon Administration.

At the time, US Secretary of State Henry Kissinger was determined not to allow another Cuba to emerge in America’s backyard. Mr Kissinger was apparently instructed by his boss to make the Chilean economy “scream” in agony. Due to the ideologically inspired but thoroughly impractical policies pursued by the Allende government, it ultimately required little to no effort to derail the local economy.

Wrecked by near-continuous strikes, armed factory takeovers, roaring inflation, and mounting debts, Chile had clearly embarked on a path to self-destruction. Alarmed at the breakdown of government and the apparent outbreak of anarchy, large swaths of society called on the army intervene and reestablish order. Soldiers out on leave reported passersby sprinkling corn kernels in their path to imply cowardice. The polarisation of Chilean politics and society came to a head on 11 September with a violent event that scars and polarises the nation to this day.

Although the Pinochet regime rebuilt the economy and transformed Chile into a regional economic powerhouse, he did so over the dead bodies of more than 3,200 of his countrymen. Untold thousands of Chileans only narrowly escaped a similar fate by fleeing into exile. General Pinochet ended the Chilean dream - a peaceful transition to socialism and an empowering of the masses - and turned it into a nightmare.

Enduring Split

Some thirty-odd years after the return of democracy (1990), and seventeen years after the general’s passing, more than a third of Chileans still express approval of the dictatorship. However, the vast majority of people condemn and deplore the violent excesses of the regime. Still, General Pinochet remains a saviour of the nation to many, including those born after his rule.

President Gabriel Boric (37), an admirer of Mr Allende, failed in his attempt to have all political parties represented in parliament agree on a joint statement of remembrance to declare that a military takeover can never be justified. Two mainstream conservative parties refused to sign and were absent from the formal presentation of the Commitment to Democracy. Javier Macay, president of the Independent Democratic Union, explained that his party doesn’t wish to be present anywhere the memory of Salvador Allende may be celebrated.

Tensions over the Pinochet Era again peaked late last month after General Hernán Chacón (86) was handed a prison sentence of 25 years for the aggravated murder and abduction of Víctor Jara, a theatre director, singer, writer, university professor, and communist activist. In the days following the coup, Mr Jara was kidnapped, tortured, and shot 44 times by a platoon of soldiers under the command of Mr Chacón. The general committed suicide moments before police arrived at his home to escort him to prison.

On Sunday, President Boris joined thousands of Chileans in a commemorative march organised by victim associations and ending at Morandé 80, the ornate entrance of La Moneda Palace through which the lifeless body of Salvador Allende was carried out, on a stretcher and wrapped in a poncho, half a century ago.


Forging an Enviable Reputation in the Investment Sphere — via Consistency, Teamwork, and Risk-Modelling Genius

This UK asset management firm stands out — and here's why...

In the investment world, success hinges on a combination of factors, from meticulous analysis to a strong ethical foundation. At Murdoch Asset Management, these elements have seamlessly converged under the guidance of investment director Austen Robilliard. His journey with the company began in 2007, and since then, he and his team have played a pivotal role in its success.

[caption id="attachment_26038" align="alignright" width="350"] Investment Director: Austen Robilliard[/caption]

Robilliard started out in a research role, and identified a crucial gap in the market: the absence of risk models that encapsulate the reasons behind fund failures. He developed a proprietary risk modelling system that has proven to be a game-changer.

This is the sort of development that doesn’t go unnoticed. Robilliard staked his claim to a coveted spot in financial publishing group Citywire's Top 30 under 30 list, an annual recognition of the emerging stars in wealth management. Over the next seven years, more honours followed: European Fund Selector of the Year — twice — and a spot in a 12-strong group of finalists chosen by RankiaPro, a Spanish-based investment fund information service.

The Murdoch investment team consists of four experts led by CEO Chris Birch. Their combined talents have been instrumental in achieving these accolades. Their collaborative efforts are a testament to a company philosophy in which each member plays a vital role in providing top-notch service.

The Murdoch Ethos

Another arrow in the quiver of Murdoch Asset Management is that of a close-knit staff. Recognising diverse contributions by each individual, the company operates on the principle of “Treat others how you would like to be treated”. This ethos is not limited to client interactions. It starts at senior level and permeates throughout the organisation. Seasoned staff uphold tradition by ensuring that new team members become standard bearers for excellence.

Rigorous Investment Selection

Another factor distinguishing the Murdoch investment team is the meticulous analysis conducted before investment funds are selected. The company firmly believes that success is largely determined by the management team and its investment processes and inputs — so significant attention goes into scrutiny at this level.

Each team member boasts high-level academic and industry qualifications, with expertise that spans all of the company's services. This collective knowledge enables the delivery of competitive outcomes for clients via actively managed funds — despite challenges that passive investors do not face.

A Cautious Approach

Robilliard expresses cautious enthusiasm about ESG funds and their potential for positive impact. He notes the relatively small pool of ESG-integrated funds, which underscores the importance of thorough research and the credibility of credentials.

Murdoch Asset Management applies the same stringent selection criteria to these funds as it does to its unconstrained portfolios. Managers display robust, committed, and repeatable processes, along with impressive track records. Their aim is to strike a balance between performance and societal responsibility.

Impressive Growth Trajectory

Murdoch Asset Management's in-depth knowledge and analysis across major asset classes, portfolio construction and fund selection provided impressive growth. From managing just £30.3m in 1991, it now oversees £650m in AUM.

In a rapidly evolving financial landscape, Murdoch Asset Management’s values, tactics, strategies and values stand as a testament to the power of meticulous analysis, a strong ethical foundation, and a strong, client-centric team. Austen Robilliard's leadership — and the firm’s collaborative investment efforts — have won recognition and resulted in real impacts.

As it navigates the unfolding world of ESG investing, Murdoch Asset Management continues to apply its skill sets to the goal of providing resilient performance to create a better society.


The Week That Was... 38

Argentina: The $50-bn-Man

Axel Kicillof, 51, is justifiably proud of his reign as finance tsar in the two successive administrations (2007-2015) of Peronist president Christina Fernández de Kirchner. He managed to slash the Argentina’s debt-to-GDP ratio from 166 percent to just 73 — while implementing numerous social assistance programmes.

But the golden boy of Peronism has lost some of his shine after a New York judge ruled that the country owes $16 bn (£12.8 bn) in compensation to two shareholders of YPF (Yacimientos Petrolíferos Fiscales), the oil company expropriated and nationalised by Kicillof in 2012.

The plaintiffs argued that the Argentine government had failed its obligation, under the company’s bylaws, to make a tender offer to other investors after it acquired a majority of YPF shares from Spanish oil company Repsol in 2014, for $5bn (£4bn). This, the plaintiffs said, forced them to serve as Argentina’s creditors for over a decade.

Eying upcoming elections, and Kicillof’s role as kingmaker, a few economists set out to evaluate his impact on Argentina’s finances. It transpired that Kicillof’s decisions cost the country an estimated $51bn (£41bn). After years of ignoring bondholders in the restructuring of Argentina’s debt, the “ostrich policy” collapsed in April 2016, when Argentina succumbed to reality and paid $16.7bn (£13.4bn) to its creditors.

On the campaign trail, Kicillof shows no regrets, and quips that “only someone stupid” would have followed YPF bylaws. The former minister also said that that he is searching for 16 “big ones” to pay off the overlooked YPF shareholders. The New York District Court ruling comes at an inconvenient moment: Argentina’s net forex reserves have dipped into the red, with short-term bridge loans and credits exceeding cash-on-hand by an estimated $7bn (£5.6bn).

Spain: A Call from Riyadh

The cabinet of Spanish caretaker prime minister Pedro Sánchez is up in arms over the acquisition by a Saudi company of a sizeable stake in the country’s flagship Telefónica telecom provider.

Saudi Telecom Company (STC), listed on the Riyadh Tadawul exchange, but with the kingdom retaining a 70 percent of its share capital, reportedly splashed €2.1bn (£1.8bn) on a 9.9 percent stake in the Spanish company, divided between shares (4.9 percent) and financial instruments that may be swapped for shares.

Several politicians came out in opposition to the Saudi “assault” on Spain’s corporate crown jewel. Among them was the number two in the Sánchez cabinet and Minister of Labour and Social Economy, Yolanda Díaz. She swore to move heaven and earth to stop the Saudi bid. “A company that manages our data — the oil of the 21st Century — cannot be allowed to fall into foreign hands,” she said. “We need better protection for corporates that represent strategic value.”

STC is seeking government approval to swap the Telefónica bonds it holds for shares. Because it provides services to the defence establishment, non-EU investors are limited to a five percent stake. The management of Telefónica has no objection to the Saudi plan.

Sánchez, who has three months to decide the fate of the company, doesn’t want rule out Saudi participation or offend Riyadh. Spanish construction companies and defence contractors have secured orders in Saudi Arabia worth billions of euros.

STC embarked on an international shopping spree in 2020 when it bought a 55 percent stake in Vodafone Egypt. Earlier this year, the company’s infrastructure subsidiary, Tawal, paid $1.34bn (£1.15bn) for 4,800 towers in Bulgaria, Slovenia, and Croatia operated by United Group, a telecom provider and media company. Domestically, STC claims a market share of 80 percent. The company maintains subsidiaries in Kuwait and Bahrain.

‘Naked Protectionist Act’?

Beijing is upset at European Commission president Ursula von der Leyen after she announced a probe into Chinese subsidies for electric vehicle (EV) manufacturers which are “distorting” EU markets.

Von der Leyen dropped the bombshell in her State of the Union address. She said that European companies are too often excluded from foreign markets and undercut by competitors benefiting from state subsidies.

During the recent G20 summit in New Delhi, Von der Leyen expressed the EU’s concerns to Chinese premier Li Qiang. Beijing has vowed to protect the “legitimate rights” of its car manufacturers. In a statement, the Chinese commerce ministry called the investigation a “naked protectionist act” that could disrupt automotive supply chains. It said the probe would have a negative impact on trade relations between China and the bloc.

Commission president Von der Leyen was under pressure from French, Italian and German vehicle manufacturers to “do something” about the flood of Chinese EVs reaching European shores: 20 brands are now found there.

The European Commission suspects that the EU has become a dumping ground for cars that Chinese manufacturers are unable to sell domestically due to oversupply. It wants to avoid a repeat of the 2012 solar panel debacle, in which the EU slapped only punitive tariffs on the state-subsidised Chinese photovoltaic cells — even after most domestic producers had folded. The tariffs failed to revive the industry and were soon scrapped.

UAW Strikes Big Three

For the first time in its 88-year history, the United Auto Workers union (UAW) has called for strike action against the big three Detroit automakers.

UAW members walked out at three assembly plants in Wentzville, Missouri (General Motors), Toledo, Ohio (Stellantis), and Wayne, Michigan (Ford). Almost 13,000 workers downed tools.

Union president Shawn Fain said the strike could spread to other locations. The International Brotherhood of Teamsters, representing truck drivers, instructed its members not to cross UAW picket lines, a move likely to disrupt supply chains and deliveries. Kevin Moore, president of Teamsters Local 299 — former roost of union boss-cum-mobster Jimmy Hoffa, who disappeared in 1975 — warned that all Detroit locals are ready to back the auto workers.

The four-year contract negotiated by the UAW in 2019 recently expired, opening the door for industrial action. Talks broke down over the union’s demand for a 36 percent pay rise, spread over four years, and an end to the two-tier wage system separating newer and longtime workers. The union argues that the demanded increase in hourly pay is roughly equal to the compensation packages of the three companies’ CEOs.

While the big main manufacturers are raking in record profits, management argues the cash is needed for the transition to electric vehicles. According to UAW numbers, profits jumped 92 percent between 2013 and 2022 to total some $250bn (£201bn). This year, another $32bn (£25.7bn) has been added to that. Over the past decade, the big three spent $60bn (£48bn) on share buybacks and dividends.

The union points out that the concessions made in the wake of the 2008 industry-wide crisis were never reinstated. Since then, average hourly earnings, when adjusted for inflation, have dropped by 19.3 percent.

Ford CEO Jim Farley said that his company would go bankrupt if it accepted the UAW proposal. While General Motors and Stellantis refuse to comment, GM chief of manufacturing Gerald Johnson has said that the pay and benefits demands would cost the company $100bn (£80bn) —more than twice its market capitalisation.

ECB on a High

The European Central Bank (ECB) upped its deposit rate for the 10th consecutive time to a record high of four percent. The move had been anticipated in a bid to cool inflation. ECB president Christine Lagarde said that the benchmark deposit rate may stay at the current level for a “sufficiently long” duration — which markets interpreted as a sign that the bank is done with hikes.

After a hitting a spike of 10 percent in Q3 2022, Eurozone inflation descended to 5.3 percent in August, still some way from the two percent target. Lagarde noted that the contribution of rising labour costs to eurozone inflation has increased over the second quarter.

Governor Klaas Knot of the Dutch central bank, Nederlandsche, alerted his colleagues in Frankfurt to the pay rises of 10 percent or more won by unions in his country. Lagarde said she had spotted early signs of companies absorbing higher labour costs by squeezing profit margins instead of raising prices.

Analysts expecting the rate hike questioned the wisdom of the decision considering the weak outlook for the eurozone economy. Germany is on the brink of recession, and retail sales and industrial production are down across the bloc. Italian Prime Minister Giorgia Meloni expressed dismay over ECB policy. Her coalition partner of the combative Lega Nord, Matteo Salvini, was less diplomatic. “Lagarde lives on Mars,” he sneered. Raising the cost of money was “uneconomic, antisocial, and anti-historical” in his view.

Anticipating an end to the cycle of rate hikes, investors pushed global stock markets higher. The US Federal Reserve is expected to leave borrowing costs unchanged, while the Bank of England may yet decide on a last hurrah. The ECB forecasts inflation to drop to 3.2 percent next year, and 2.1 percent in 2025. The bank expects eurozone GDP growth to slow to 0.9 percent this year before a rebound to 1.5 percent in 2024, and 1.6 percent in 2025.


Accenture on Generative AI: Surfing the Next Wave of Digital Transformation

Artificial intelligence is here to stay, and, with suitable caution that should be a good thing, argues Bashar Kilani.

Generative AI will define the next wave of digital transformation.

[caption id="attachment_26094" align="aligncenter" width="1000"] Workshop on GenAI[/caption]

Over recent decades, we have witnessed the "webification" of applications, followed by the dominance of smartphone apps. Generative AI offers another revolutionary shift — allowing users to engage with applications in any language.

It could boost individual and organisational productivity, but there are ethical implications — and potential risks — to discuss.

User Engagement

In the first instance, Generative AI is likely to affect banking, government services, and airlines. Previously, customers had to physically visit bank branches or government offices. The introduction of call centres brought some convenience, but they too relied heavily on human assistance. Internet banking and e-government services emerged, enabling users to perform transactions online, enhancing accessibility and efficiency. Mobile apps further streamlined the user experience.

Now generative AI introduces natural language interfaces that will, its proponents say, revolutionise user interactions, and provide unprecedented convenience and satisfaction for humans.

Natural Language Interface

Powered by deep-learning algorithms and neural networks, AI has made significant progress in understanding and generating human-like text. This enables applications to interpret and respond to user queries in a conversational manner.

In the banking sector, customers can use “natural language” to check balances, transfer funds, or receive personalised financial advice. Government service platforms can process complex requests, provide information, and offer guidance. Airlines can offer automated ticket bookings, travel recommendations, and real-time flight updates.

Multilingual and Topic Diversity

Generative AI can expand the range of topics for user engagement. By processing and generating text in multiple languages, applications become more inclusive and accessible to a global audience.
In banking, customers can interact with applications in their preferred language, wherever they are. Government service platforms can communicate with people from diverse linguistic backgrounds, and so can airlines.

Boosting Productivity

The new technology has the power to enhance productivity; studies project that average productivity will increase by 30 percent by 2025, with varying impacts across sectors. Blue-collar jobs are expected to see a 10 percent productivity boost, while creative jobs could get a 60 percent surge. Programmers, for example, are set to benefit from generative AI tools like GitHub, which streamline coding processes and automate repetitive tasks. By taking on mundane or time-consuming activities, generative AI empowers individuals to focus on higher-value tasks.

Ethics and Potential Risks

While all this holds tremendous promise, it also raises ethical considerations. The potential misuse of AI-generated content — spreading misinformation, creating fake identities, or manipulating data — is a significant concern. Robust security measures, stringent data privacy regulations, and continuous monitoring are crucial.

Also essential for fair and ethical outcomes are transparency, responsible data use, and accountability for decision-making.

Generative AI represents a transformative force that will redefine user interactions and enable convenient engagement across sectors. Its multilingual capabilities foster inclusivity. It has the potential to boost productivity.

But it is crucial to navigate the ethical implications and potential risks, ensuring responsible deployment and building trust. By addressing these considerations, we can pave the way for a productive future with improved user experiences, and ethical tech advances.

About the Author

Bashar Kilani is Managing Director at Accenture based in Dubai and a member of the Growth Markets leadership team focusing on Digital Economy market making trends that accelerate growth, transform operations, and enable organisations to build their digital core.


The Week That Was... 39

Wim Romeijn looks at the financial talking and turning points of the world over the past seven days.

Carbon Emission Costs and Damages

Pricing carbon emissions is not for the faint of heart, as a working paper released by the National Bureau of Economic Research shows.

The non-partisan collective of over 1,700 economists — among them 43 Nobel laureates — is based in Cambridge, Massachusetts, and churns out over 1,200 papers each year.

This one is catchily entitled Quantifying Climate Change Loss and Damage Consistent with a Social Cost of Greenhouse Gases. Its four authors set out to devise a tool to compute responsibilities and link the social costs of carbon to loss and damage over longer time spans. Instead of using annual emissions as a baseline, the economists use the carbon “stock” — the total up there in the atmosphere — to calculate how much damage is caused by its growth.

The premise is that most carbon, once emitted, lingers for centuries. A lump of coal burned 200 years ago in, say, Bengal, causes the same amount of damage as one burned a century later — or, indeed, yesterday — in Glasgow or Pittsburgh. China, the world’s largest emitter, has historically contributed only half as much carbon stock as the US.

In a thought experiment, the paper’s authors include the impact of a unit of carbon over time. A tonne released in 1990 would have caused only about $4 in damage during its first decade. But as time progresses, the harms and environmental impacts increase.

The working paper contains some eye-popping numbers. A transcontinental flight taken in the US today would have caused $5,500 (£4,470) in damage by 2100. That keeps growing for at least two centuries, easily reaching into the millions. Tabulating country-specific emissions and their damage over time would present America with a $100tn (£81tn) bill by the end of the century. China would owe the world not much less.

Steady as She Goes: Fed Holds the Line

The US Federal Reserve has held its benchmark fund rates between 5.25 and 5.5 percent.

After a two-day meeting, the central bank’s Open Market Committee said it remained “highly attentive to inflation risks”, with the economy expanding at a “solid pace” and a strong job market.

The Fed delivered more good news with projections indicating stronger-than-expected growth for the year and a benign inflation outlook. In its so-called “dot plot”, an exercise in futurology, the bank suggested a fund rate rise of 5.5 to 5.75 percent, pointing to just a quarter-point hike. Few rate cuts are pencilled in for 2024 and 2025, implying a gradual softening of monetary policy.

Fed chair Jerome Powell said the pause in hikes didn’t mean that the bank considered its policy sufficiently restrictive to check inflation. Analysts were surprised by Powell’s moderately hawkish attitude, but concluded that the Fed is simply not ready to declare victory over inflation.

While volatile energy prices are kept out of core calculations, their steady increase may yet undermine the Fed’s crusade against the erosion of purchasing power. Powell acknowledged as much, calling higher energy prices a “significant thing” that over time could affect consumer spending.

Oil prices have crept up because of production cuts by Saudi Arabia and Russia, maintenance work at four California refineries, strong demand from China, and the steady drain on the US Strategic Petroleum Reserve. The Biden Administration had tapped the reserve to push down prices at the pump — but failed to replenish it due to the high price of oil. The US benchmark for crude, West Texas Intermediate, has jumped by 30 percent to reach over $91 a barrel, the highest since November 2022.

Sunak Angers Carmakers

UK car manufacturers are upset with Prime Minister Rishi Sunak’s reversal of some critical climate-change targets.

Those goals included a 2030 ban on the sale of new petrol and diesel vehicles: that was pushed back by five years. The PM also tinkered with the rules on the phase-out of new domestic gas boilers, introducing a series of exemptions for less well-off households — which may now never switch at all.

Labour, enjoying a surge in the polls, immediately said that it would reverse Sunak’s decision should it regain power. Former prime minister Boris Johnson also weighed in, saying that businesses needed certainty, and that Sunak lacked ambition.

Ford UK chair Lisa Brankin was unhappy with Sunak’s announcement. “We need ambition, commitment, and consistency from the government,” she said. “A relaxation of 2030 would undermine all three.” Industrial trade body Make UK added that the watering-down of net-zero targets represented a setback for manufacturers, who need “stability and confidence” to invest.

Japanese carmakers with assembly plants in the UK appear more sanguine. Toyota, heavily invested in hybrid technology, welcomed the recognition that “all affordable low-emission technologies” have a role to play in a pragmatic transition process.

Sunak said the UK remains on-track to reach net zero by 2050. Observers suspect that he may aim to portray Labour leader Keith Starmer as an eco-zealot cruelly imposing a green agenda on struggling families.

Grain Dispute Stalks EC

Just when the European Commission thought that Poland had nestled back into the EU fold, Warsaw sprang a nasty surprise: it would no longer supply arms to Ukraine.

The announcement followed a trade spat that escalated when Kyiv, perhaps unwisely, filed lawsuits at the World Trade Organisation (WTO) against Poland, Hungary and Slovakia after they banned Ukrainian wheat imports. The bans violate EU trade rules.

The commission is in a bind: it must determine which side to back. Ukraine is fighting for survival, and supported by the bloc. In a written note, the EC told Poland, Hungary, and Slovakia that “as a matter of EU law” it would act in the WTO proceedings and co-ordinate legal rebuttals.

The commission also warned that individual member states are not allowed to take unilateral measures on trade. It has promised to assess the complex situation.

By week’s end, the EU had lifted its own temporary embargo on grain from Ukraine. It deemed that supplies would not negatively affect farmers in the five member states bordering the war-torn country. A bilateral deal was put in place to ensure that remained the case.

Ever combative, Ukrainian president Volodymyr Zelensky said in a speech at the UN General Assembly that some of his country’s European friends “play out solidarity in a political theatre”. The message seemed to be directed at Poland — which promptly summoned the Ukrainian ambassador in Warsaw.

Poland has been a staunch ally in Ukraine’s fight. Its response to the WTO lawsuit is described in Brussels as “over the top”, and unhelpful to EU cohesion in the support of Ukraine. The Slovak government hurriedly lifted its ban, while Ukrainian agriculture minister Mykola Solskyi said that the Polish government had agreed to find a mutually acceptable solution.

Media Mogul Steps Down

In a real-life replay of the HBO series Succession, 92-year-old Rupert Murdoch has at long last announced that he is stepping down as chair of Fox Corp (mass media) and News Corp (print media).

In November, he will hand the reins of both companies to his son and heir presumptive Lachlan, 52. The move concludes a psychodrama that has spanned three decades. No change in the Fox News tone of reporting and commenting is expected. Lachlan has been chair and CEO of Fox Corporation since 2019.

Murdoch-watchers (yes, it’s a job) doubt that the nonagenarian will slip quietly into retirement — and may well continue his meddling. The notorious micromanager told his staff that he would remain as chair emeritus and “be involved every day in the contest of ideas”.

As he prepared to relinquish control, the billionaire press baron fired a salvo at his critics. “Elites have open contempt for those who are not members of their rarefied class,” he said. “Most of the media (are) in cahoots with those elites, peddling political narratives, rather than pursuing the truth.”

Earlier this year, Murdoch disbursed $785m (£738m) to settle a lawsuit brought by US voting-machine manufacturer Dominion. Fox News had reported that the devices had been reprogrammed to rig the 2020 election outcome and deny Donald Trump victory. Fox Corp still faces a $2.7bn (£2.5bn) damages claim from Smartmatic, another voting machine manufacturer that was accused of tampering.

Murdoch is reported to have paid Prince William, heir to the British throne, a “very large sum of money” in 2020 to settle a phone-hacking claim. News Corp is also being sued by Prince Harry in a case before a London High Court.

The change of guard at the Murdoch Empire comes after a chaotic year. Fox News viewership fell by more than half after the dismissal of its revered Right-wing anchor, Tucker Carlson.

The network irked the Trump fanbase after it moved away from blind support for the former president. A recent poll found that Americans don’t trust Fox News, the self-proclaimed “most trusted news network” in the nation. It placed far below CNN, and even One America News, a far-Right pro-Trump network.


Behind Schedule and Running Out of Ideas: Germany is On-Track for a Homegrown Infrastructure Crisis

A once-immaculate transport system is now underfunded and overstretched, reports Wim Romeijn.

The trains in Germany no longer run on time. This is a big issue for a country that derives its national identity from punctuality, order, and Gründlichkeit — thoroughness, usually ruthlessly applied.

The neighbouring Swiss now refuse to grant late-running German trains access to their network for fear of upsetting passengers, who expect clockwork precision.

Underfunded and overstretched, the fate of Deutsche Bahn (DB) epitomises the decay of Germany’s infrastructure and the loss of trust in the state’s ability to manage national affairs. Polls show 69 percent of Germans think the government lacks the ability to properly run their country.

DB needs about €45bn to update and upgrade the 33,200km rail network. In May, the federal parliament, or Bundestag, agreed to redirect some proceeds from HGV road tolls to modernisation. But that’s only half the amount needed.

Foreign affairs minister Annalena Baerbock met the downside of frugality in mid-August. The government plane she was travelling in left her stranded in Abu Dhabi during a refuelling stop. Shortly after take-off, the Airbus’s wing flaps malfunctioned, forcing the pilot to dump 80 tons of fuel over the Persian Gulf before returning to Abu Dhabi.

Baerbock had to cancel her official visit to Australia, New Zealand, and Fiji — and return home on a commercial flight.

A Lemon

The same aircraft — the Airbus 340-300, a lemon of 1990s vintage — had to make an emergency landing during a flight to Buenos Aires in 2018, where Chancellor Angela Merkel was to attend a G20 summit. The plane’s avionics suddenly quit. Two years before, it left then-defence minister Ursula von der Leyen stuck in Mali after a computer glitch.

The German government has now decommissioned the trouble-prone aircraft, and ordered three Airbus A350-900s in an overhaul of the Luftwaffe’s “White Fleet”.

Such anecdotal incidents point to years of neglect. In 2009, the Bundestag curtailed federal overspending by imposing a hard ceiling for budget deficits and national debt. The Schuldenbremse (debt brake) limits the debt-to-GDP ratio to 60 percent, and the budget deficit to a maximum of 0.35 percent. The twin locks ensured fiscal stability and sustainability, but forced the government to rein-in the infrastructure spend.

Since 2006, Germany has tumbled from third place in the WEF’s Global Competitiveness Report to 11th for the overall quality of its transport infrastructure. A bridge over the Rhine connects Leverkusen — founded in 1930 by chemical giant Bayer to house its workers, and now a city of 160,000 — to Cologne. Since 2012, the 1,061-metre Rheinbrücke Leverkusen has been closed to trucks after large cracks appeared in its support structure.

A Bridge Too Old

Emergency work failed to fix the cable-stayed bridge, which opened in 1965. A 10-lane replacement under construction is due to open next year. Until then, the crawl towards the congested bridges upstream remains a daily ritual for thousands of truckdrivers.

A national inspection report released last year concluded that more than 4,000 autobahn bridges need replacement before 2030. Of those, 1,001 have deteriorated to the point that weight and speed restrictions have had to be imposed. The €1bn earmarked by the federal government for annual bridge maintenance and replacement is nowhere near enough.

Infrastructure spending also runs foul of NIMBY (not-in-my-backyard) attitudes, and leads to time-consuming consultations with stakeholders. Even the IMF urged Germany to remove administrative and regulatory constraints.

Germany’s much-touted Energiewende — the shift to renewable energy — is also suffering. Autobahn GmbH, the state-owned highway management company, struggles with a backlog of over 20,000 applications for oversized cargo transports. According to the German Wind Energy Association, BWE, 150 permits are needed to move turbine parts such as rotor blades and tower elements by road. From planning to inauguration, the construction of a wind farm takes about 10 years. The pace must triple if the country is to meet its own energy goal of 80 percent derived from renewables by 2030.

Venting his frustration in an open letter, BWE chief Wolfram Axthelm likened German bureaucrats to the inhabitants of The Place That Sends You Mad, featured in the cartoon film The Twelve Tasks of Asterix.

The insistence of Germany’s burghers on fiscal prudence, and their aversion to grand infrastructure projects, grew stronger in the wake of the Brandenburg Airport debacle. Designed to replace the three smaller airports of Schönefeld, Tempelhof, and Tegel, Flughafen Berlin Brandenburg was delivered 14 years late — and four times over budget. Including the planning phase, it took almost 30 years to complete.

Sputtering Model

Germany is forecast to be the only G7 member with a shrinking economy this year. Its export-led model suffers from exposure to China, where a crisis is brewing. German industry, meanwhile, is battling high energy prices after its access to cheap Siberian gas was cut.

But the government has ruled out additional subsidies, including a flat rate of €0.06/kWh for industrial users proposed by Economy Minister Robert Habeck in a bid to maintain competitiveness. The spot market price for net-day electricity currently hovers around €0.09/kWh. Habeck’s plan carried an expected cost of about €30bn. Instead, the cabinet of Chancellor Scholz approved a €7bn corporate tax relief package.

Scholz presides over a fractious three-party coalition of social-democrats, Greens, and liberals. Ideological divisions have largely paralysed his government. The country needed almost a year to decide to support Ukraine (apart from the now-famous 5,000 helmets initially dispatched). Since then, to be fair, German support has been unwavering, with €5.5bn in annual military aid pledged to 2027. An estimated €30bn has been disbursed in military, economic, and humanitarian support.

In a sanguine mood, the Bundestag agreed to lift the debt brake for extra defence outlays. Scholz promised to free up €100bn to re-equip the Bundeswehr — so starved of funds that its soldiers were sometimes issued broomsticks instead of rifles for training.

All Cash, No Carry

The problem is not a shortage of cash, but a governance model that has become stuck. Lofty ambitions — such as the attainment a net-zero society by 2045 — clash with geopolitical and demographic realities. Over the next decade, an estimated two million Baby Boomers will retire from the workforce. The average age of German blue-collar workers stands at 45; it’s 39 in the US.

Though recent changes have made immigration laws slightly more welcoming to non-EU workers, CEOs want more. Business confidence reached a new low in May, when machinery manufacturers reported a 20 percent year-on-year drop in orders. Higher energy costs and record wage rises are putting a squeeze on corporate profits, although a rebound in consumer spending may bring solace.

Even a spate of good news last month failed to boost German spirits. Factory orders defied expectations by increasing seven percent from May to June, the biggest monthly jump in three years. Economists dismissed the news as an anomaly caused by a momentary surge in orders at the Airbus factory in Hamburg.

A poll conducted by the Federation of German Industry (BDI) found that a third of its members were unhappy with the direction Germany has taken. According to ZEW Mannheim, an economic research institute, the country now ranks 18th of 21 industrialised nations for family-owned companies to do business. This is considered a direct threat to the Mittelstand (mid-sized) firms that have long formed the backbone of German industry.

SMEs are a crucial component of a decentralised banking system comprising small regional banks — mostly co-operatives and savings banks — that extend fixed-rate loans. They have been put on the back foot by the rise in interest rates, and are less well equipped for riskier undertakings such as financing start-ups.

Pulling-Up Sticks

Frustration with bureaucracy drove BASF, the world’s largest chemical producer, to China — where it is building a €10bn petrochemical complex. There have been a few victories; Tesla chose Berlin for its European mega-factory, set to become the largest in Germany. Chip manufacturers Intel and TSMC were lured by an estimated €15bn in subsidies and tax breaks.

Chancellor Scholz has the unenviable job of keeping his coalition partners happy while lifting a nation out of its gloom. The Greens demand priority for the environment, and insisted that the country mothball its three remaining nuclear power plants in the midst of an energy crisis. It did so last April. The liberal Free Democrats are worried about deindustrialisation, while Scholz’s Social Democratic Party remains wed to fiscal rectitude.

The “German Speed” for business and economic matters promised by the coalition seems to have slowed to a crawl.


Coal, Ja Bitte, Nuke, Nein Danke: Germany’s Other Sort of Nuclear ‘Disaster’ is Unfolding

Coal is a dirty source of fuel, and brown coal is the worst of the lot — yet, as Wim Romeijn reports, that’s what nuclear-shy Germans have opted for...

Around the time Germany shuttered its last three nuclear power plants, five lignite-burning ones were recommissioned. In North-Rhine Westphalia, energy producer RWE Power began dismantling a wind farm — to make way for the expansion of an open-pit lignite mine.

The company wants to excavate an additional 20 million tonnes of brown coal at its Garzweiler II mine. In the Rhenish mining area, comprising three lignite-rich seams west of Cologne, six villages are slated for demolition to get access to the low-grade coal that lies beneath them. The razing of Lützerath, a bucolic village which in its 900-year history never boasted more than 105 inhabitants, sparked pitched battles between climate protesters and riot police. Environment champion Greta Thunberg showed up — only to be arrested.

The other five villages due for demolition had a last-minute reprieve under a tentative plan to limit the Garzweiler II expansion. Morschenich was one of those spared, and it now houses refugees from Ukraine and Syria. The original inhabitants had already been resettled, but the “revived” town has no shops — although a bus service was re-established, and utilities reconnected.

Dirtiest Coal

Lignite is the most polluting form of coal. It is crumbly and has a high moisture content. That means inefficient combustion and carbon emissions of up to 1,250 grammes per generated kilowatt-hour.

Germany chooses it because it is cheap, and mined near to powerplants. The ruling coalition of Social-Democrats, Greens, and Liberals had promised to phase-out lignite by 2030; that goal was sacrificed to the economy.

Germany’s second-largest electricity producer, Leag, operates four open-pit lignite mines to feed its four power plants. But it has offered some good news: it intends to morph its vast landholdings in Lower Lusatia, Brandenburg, into Europe’s biggest wind and solar farm.

So far, the ambitious plan has mostly generated scepticism. The company is owned by Czech business tycoon Daniel Křetínský, who made his fortune by backing a hunch that Europe’s stated targets for the fossil-fuel phase-out were over-ambitious. It snapped up cheap coal assets in Slovakia and Italy.

Křetínský’s contrarian streak — he delights in running counter to market sentiment — may be at play here. The entrepreneur has begun construction of a combined wind and solar park covering 11,500 hectares. It is slated to put out 7GW of clean energy — and double that by 2040.

But Germany’s Energiewende (energy transition) is in trouble. Passed into law in 2010, the bold attempt to build the world’s first major renewable energy economy has struggled to find alternatives to coal (dirty) and natural gas (unsavoury).

The German people, nominally climate-conscious, seem at a loss. They are long on perceived problems but short on realistic solutions. Even wind power suffers from NIMBY (not-in-my-backyard) opposition.

The Energiewende was expected to slash carbon emissions by as much as 90 percent and up the share of renewables to 60 percent. And then, a year later ... the Fukushima disaster. That caused then-chancellor Angela Merkel to lose her cool. In a moment of panic, disguised as decisiveness, she ordered the shutdown of the country’s 17 nuclear powerplants. Eight reactors were taken offline, with the remainder ordered to shut by 2022. The last facility was pulled offline in March this year.

In fairness, Merkel was only rekindling a policy initiative first framed her predecessor, Gerhard Schröder. His Social Democrat-Green coalition decided in 2009 decided to wean the country off nuclear.

So Germany turned to lignite and hard coal, which together generate 31 percent of national output, up from 23.4 percent in 2020. While renewables — wind, solar, geothermal, and biomass — represent an impressive 44 percent of the 571 billion kWh produced in 2022, the share of clean energy has remained fairly constant over the past five years.

Nuclear Phobia

The Germans’ fear of all things nuclear has proven expensive. Households face the second-highest energy prices in Europe (after Ireland). At almost 56 eurocents per kWh, consumers in Germany pay twice the EU average. Industrial users pay considerably more.

In France, a kWh, including taxes, averages about 20 eurocents — for residential and industrial users. The country is peppered with nuclear powerplants: 56 at last count, although a number are offline for maintenance. Still, the country derives 70 percent of its electricity needs from nuclear. President Emmanuel Macron recently announced plans for six new high-power reactors, with an option for eight more.

France embraced nuclear power in the 1970s, after OPEC quadrupled the price of oil. In 1974, then-prime minister Pierre Messmer appeared on national television to unveil his “all nuclear, all electric” plan. Over the next 15 years, 48 reactors were built at 12 plants.

The plan worked too well. It had called for the construction of 170 reactors, but by 1990 — with only 50 in operation — nuclear was already providing 75 percent of the country’s needs. France simply had too much power, with its plants operating at just 61 percent of capacity. Carbon emissions from power generation have dropped by two-thirds since 1974.

For all its dedication to climate neutrality, Germany generates just 44 percent of its electricity via clean sources — against 93 percent for France. While Germany has earmarked close to €550bn (£478bn) for the Energiewende up to 2026, France retook top spot as the European Union’s largest electricity exporter in January. It had been temporarily displaced by Sweden, as older French reactors suffered outages.

Scandi Pivot

Sweden was one of the first countries to have a stab at eliminating nuclear power. In the 1980s, it had planned to phase out nuclear by 2010. The government banned nuclear research, outlawed the recommissioning of closed reactors, and slapped a SEK3.30/kWh (£0.24/€0.28) tax on nuclear energy; that doubled in 2006. The tariff forced the closure of two of the four Ringhals reactors in 2020, and the surcharge was largely scrapped in 2017.

In 2021, state-owned energy company Vattenfall found that abolishing the remaining nuclear tax would deflate its generating cost to just SEK221/MWh (£16.40/€18.8), or about two-thirds of the current wholesale price. After taxing nuclear power into a coma, the Swedish government reversed course to grant the industry SEK443bn (£33bn/€38 bn) for the development of new reactors. It has proposed the resurrection of the mothballed Ringhals plants, and shortened the permit process for new ones.

Growth Market

France is determined to cash-in on the renewed interest in nuclear with its European Pressurised Reactor (EPR), a third-generation reactor being redesigned for improved performance, lower construction costs, and improved safety.

Outside China — which built the first EPR, Taishan I — the design has suffered from budget blowouts and commissioning delays. Initially estimated to cost around €3.7bn (£3.2bn), the French-designed Olkiluoto 3 reactor in Finland came in three times over budget and 14 years late. With the EPR2 and the smaller EPR1200 under development, France expects to retake the lead in design, and claim its share of the 300 or so new nuclear power plants planned globally.

Infuriating King Coal

“People continue to plan and build and burn unmitigated, unabated fossil fuel,” US climate envoy and former secretary of state John Kerry has said. He’s upset over the scale of coal-power expansion in Asia.

China and India burn 70 percent of the world’s coal, according to data from the International Energy Agency (IEA). In 2020, President Xi Jinping of China promised that his country’s carbon emissions would peak in 2030 before reaching net zero by 2060. Indian PM Narendra Modi pledged net zero by 2070, without going into specifics.

Trying in vain to hammer out preliminary agreements for the upcoming COP28 climate summit in Dubai, Kerry vented his frustration that global energy-related CO2 emissions grew by 0.9 percent last year to set a new record at 36.8 Gt. In a post-pandemic rebound, emissions ballooned by six percent in 2021. The silver lining noted by the IEA is that the pace of emissions growth was slower than expected.

Kerry says the commissioning of new coal-fired plants in Asia negates the carbon reductions achieved in Europe and North America. Globally, more than 200 coal-burning powerplants are under construction, with another 350 in the pre-construction and planning stages.

“Despite all the consequences, we are not yet doing what we said we would do,” said Kerry, ascribing the disparity to “fundamental, basic greed”.


Binance Teeters as Regulators Close-in on Troubled Exchange

Crypto is having another ‘moment’. Wim Romeijn takes a look for CFI.co...

Binance, the largest exchange for trading digital currency and its derivatives, is in distress. A dozen senior executives have left, and the company has fired 1,500 staff as trading volumes plummet.

US government agencies, from the Department of Justice to the Securities and Exchange Commission, are investigating possible dealings between Binance and black-listed Russian banks. The company is also being sued for allegedly operating an illegal exchange, compliance failures, money laundering, misuse of customer funds, and misleading regulators.

Binance denies the allegations, but has admitted “compliance missteps” — which it said had been addressed by a corporate restructure aimed at giving regulators clarity. The company doesn’t have a head office and its staff and offices are spread around the world. There are some 300 firms where founder Changpeng Zhao acts as majority shareholder, director, or officer.

In its mapping of Zhao’s business empire, crypto analytics company Inca Digital found no boundaries or distinction between Binance, its multiple subsidiaries, and their founder. Zhao is famous for micromanaging operations, down to personally signing-off on minor expenses for office supplies.

Zhao founded Binance in 2017, when the crypto universe was seen as a marginal domain inhabited mostly by geeks, and uninteresting to regulators. But as US customers flocked to Binance trading hubs in China and Japan, regulators began to take note. Almost in sync, prosecutors started preparing a crackdown on offshore platforms operating outside their jurisdiction — and at that time beyond regulation.

Cunning Plan

Binance devised a strategy to avoid lawsuits. It set up Binance.US, a bare-bones exchange granted nominal independence and a licence to use the relevant technology. Regulators have since concluded that Binance and Binance.US were more intertwined than had been reported, sharing staff, funds, and a stake in an affiliated crypto-trading entity.

That last issue alarmed investigators. Prosecutors say the collapse of the FTX exchange last November was caused by its “improper relationship” with allied trading firm Alameda Research.

The Binance bid to keep US regulators off its back seems to have backfired. If it can be shown — it’s a big “if” — that the company exercises control over Binance.US, the SEC could police the company’s entire business. That would put founder Changpeng Zhao in the crosshairs.

Before stepping down as the firm’s chief strategy officer in early July, Patrick Hillmann said he expected regulatory and law-enforcement issues to be settled out of court with “monetary penalties”.

That ship seems to have sailed. Regulators tightened the noose by tracing ownership of Binance.US to Zhao via various entities incorporated in the Cayman Islands, the British Virgin Islands, and Delaware.

Investigators have found Telegram chats of Binance.US CEO Catherine Coley, in which she instructs senior staff members to forward her progress reports on “what we think CZ [Changpeng Zhao] and Wei Zhou [Binance CFO] should know, so we can be in their good graces.” Coley left the company in early 2021.

Comatose Exchange

Largely as a result of the ongoing investigations, lawsuits, and pending enforcement actions, trading at Binance.US has mostly stopped. Before leaving the company in early September, CEO Brian Shroder reported that the exchange’s revenue had fallen by 70 percent this year.

During an online meeting, Shroder told staff that Changpeng Zhao would need to sort out regulatory matters — and either sell his shares or put them in a blind trust if Binance.US were to “resume its growth trajectory”. Otherwise, he said, the exchange would not be able to get the licences and banking relationships required for its survival.

Binance co-founder Yi He wrote to staff: “Every battle is a do-or-die situation, and the only thing that can defeat us is ourselves. We have won countless times, and we need to win this time as well.

Zhao, meanwhile, has hired a new legal team to handle the DoJ case. He promised to wind-down Binance’s indirect dealings with sanctioned entities in Russia. After the company downsized its business there — and Russia was one its most lucrative markets — the exchange continued to handle “considerable” ruble trading volumes through intermediaries.

This allows account-holders at sanctioned banks to turn their rubles into crypto. The tokens can then be swapped for hard currency at brokerages.

According to the Bank of Russia, the average monthly volume of peer-to-peer trades reaches $428m (£352m) at the official exchange rate. The US Treasury Department considers these transactions a potential means to evade sanctions. Though the deals take place outside the Binance exchange, they are facilitated by the platform, which charges a processing fee.

King Uncrowned

Perhaps feeling the increasing heat, Zhao has kept an unusually low profile, apparently reluctant to leave the United Arab Emirates, where he lives. Crypto world observers noted that the UAE doesn’t have a mutual extradition treaty with the US.

The US investigations and lawsuits may have torpedoed Zhao’s chance to be crowned the king of crypto. He reportedly declined a plea for help from a previous holder of the “title”: Sam Bankman-Fried, CEO of collapsed rival exchange FTX, who is currently awaiting trial in the US.

The prices of major cryptocurrencies stabilised after the folding of FTX, and Binance has struggled as its size and near-hegemony have drawn regulatory attention. Lawmakers in the US and Europe are determined to get a grip on the industry and stop its volatility from contaminating broader financial markets.

Crypto devotees worry that the sheer size and heft of Binance run counter to the philosophies of transparency and decentralised finance. In a meeting with employees, Zhao said he was “driven by freedom” and didn’t like “a lot of rules”.

Those values may yet prove his undoing.


Money, Munitions, Military Outlay, and EU’s Plight in War of ‘Catch-up’

There is no more enduring truth than that expressed by Roman statesman and philosopher Marcus Tullius Cicero: ‘The sinews of war are infinite money.’

The peace dividend, now exhausted, delivered European countries €4.2tn (£3.6tn) over the past 30 years — roughly equivalent to a quarter of EU GDP.

The figures come from Bruegel, a non-partisan policy think-tank in Brussels. The institute notes that over the next 30 or so years, a similar amount will be needed to make the EU climate-neutral. At the same time, Europe wants to boost defence spending to re-equip its long-neglected armed forces in the face of Russian expansionism.

Bruegel economists estimate that member states will add around €140bn (£120.5bn) to their defence budgets — about one percentage point of GDP. Sweden has announced a 30 percent increase in defence spending to meet the NATO target of two percent of GDP. Over the past four years, the Netherlands nearly doubled its annual military outlays — to €14bn — and did so almost stealthily, drawing closer to its alliance commitments.

Last year, the Stockholm International Peace Research Institute recorded the steepest year-on-year rise in European military expenditure for 30 years: 13 percent. Finland (36 percent) and Lithuania (27 percent) spearheaded the trend. While defence is not part of its remit, the EU got caught up in the excitement, providing €500m (£431m) to upgrade and expand weapons production.

Panzers

Rheinmetall, the German tank and munitions manufacturer that has seen its stock value triple since the start of the Ukraine war, is leveraging EU cash to take the annual production volume of heavy artillery shells from 450,000 to 700,000. In July, Rheinmetall acquired Spanish defence contractor Expal Systems for €1.2bn (£1.03bn) to boost that output.

Rheinmetall is in talks with the Ukrainian government to build a factory there to produce up to 400 of its Panther KF51 tanks, the successor to the third-generation Leopard 2. Poland has committed to spend four percent of GDP on its military, and Germany earmarked €100bn (£86bn) to modernise the dilapidated Bundeswehr (federal defence) and improve its readiness.

So far, the true costs and effects of these outlays have not yet trickled down to households pinched by a spike in energy prices. How the military build-up will be funded is anyone’s guess. Tax increases seem out of the question, while running up the national debt is an option not available to many — and discouraged by the European Commission.

Harvard economist (and chess grandmaster) Ken Rogoff, a professor of Public Policy, warns of a reality yet to dawn. “Most Europeans have not absorbed how big the long-term effects of a fading peace dividend will be,” he said. “Government are going to have to figure out how to rebalance things.”

German Defence Minister Boris Pistorius, barely nine months into his role, expressed concern that voters may balk at heavy spending on the military. “It requires a totally changed mindset,” he said. Pistorius also called for “an honest discussion” with voters about the real costs of security.

Defence spending is competing for funds with climate change and the greening of the economy. War is raging, but most Europeans cling to a peacetime dream. Opinion polls unfailingly put defence towards the bottom of the list of voter priorities. The economy, healthcare, crime, housing, and immigration claim the top spots.

Slumber, Interrupted

Danes were roused from their slumber when their government permanently removed the popular Great Prayer Day from its public holiday calendar. The aim was to cover some of the 22 billion kronor (£2.5bn) added to the defence budget. In an ironic twist, Great Prayer Day, the fourth Friday after Easter, was conceived as a day to contemplate world peace. Attempts in Germany to scrap public holidays to compensate for additional military spending foundered on voter sentiments.

One way for Europe to shoulder the burden is to follow the US, where the $860bn (£690bn) defence budget is essentially financed through debt. That represents 3.5 percent of GDP, while the fiscal deficit hovers around the six percent mark. While the comparison is perhaps not entirely fair — Europe fares no better, arguably worse — it does illustrate the point that funds can be found if electorates and governments are willing to allow for a wider fiscal gap.

With far smaller fiscal shortfalls, Europe should have room for manoeuvre. Apart from the need to rebalance budgets, European defence spending is plagued by conflicting national priorities, often stemming from the need to maintain a military presence in overseas territories not covered by NATO, or in former colonies that are only nominally independent.

So it comes to pass that the EU, France, and the Netherlands are preserving, and even expanding, the maritime expeditionary elements of their armed forces that project power overseas. Germany, Poland, and the Nordics lack such capability.

Disjointed

Hardware interoperability and compatibility are often lacking. The armed forces of Europe deploy 17 main battle tank types. as opposed to the single one — the M1 Abrams — fielded by the US Army. The same holds true for the 20 armoured fighting vehicles and 27 assorted howitzers in use throughout Europe; America has two of each. The US manages with about 30 major weapon platforms, compared with 178 in Europe. Even platforms shared between allies, such as F35 fighter jets, are hampered by different encryption systems.

The Permanent Structured Co-operation (PESCO) initiative aims to change all that. PESCO is a 2017 agreement between 26 EU member states (only Malta is missing due to a neutrality clause in its constitution). They are united in the pursuit of structural military integration. Washington is not a fan of PESCO, considering it the antechamber of an EU army, which could undermine NATO. An unspoken concern, but no less a factor, is the possible effect on US defence contractors.

PESCO has initiated 68 projects, and a fifth tranche was released in May. It includes the development of a medium-sized helicopter that can operate in high-intensity conflict zones. It is used to protect seabed infrastructure such as pipelines, data cables, and wind-farm connectors.

In a dash to replenish arsenals after decades of neglect, Europe has sparked concerns that its build-up is disjointed, leading to waste, delays, and duplication. A recent report by the Centre for Strategic and International Studies (CSIS), a Washington-based think-tank, stated that “Europeans have not addressed the deeply fragmented and disorganised” generation of forces. Investing more in an inefficient system, it says, will “only marginally improve a dysfunctional status quo”.

The report concludes that the unification of Europe’s defence forces will probably be a “laborious process and a generational effort”.

By Wim Romeijn

Feeding Caesar and Suzana

The European Defence Agency (EDA), which facilitates military co-operation and capabilities between EU member states, has signed-off on eight joint procurement contracts.

They include the provision of 155mm shells to replenish Ukraine’s dwindling supply. Five contracts went to European suppliers. The 155mm ammo is used by French Caesar, Polish Krab, Slovenian Zuzana, and German Panzerhaubitze 2000 howitzers.

An EDA spokesperson said more contracts would be awarded for similar systems. In March, the EDA established a two-year fast-track programme to acquire 155mm artillery rounds with the participation of 26 EU member states, plus Norway. The programme allows for a simplified tendering process and assigns contracts at short notice.

NATO, meanwhile, has pledged to spend $1bn (£801m) on joint procurement of the rounds. US and allied stocks are running low, with the Pentagon vowing to ramp-up production from 24,000 to 80,000 a month by early next year. The US has supplied Ukraine with two million shells of various types, with European countries sending half as many. About 7,700 are fired each day.

The 155mm artillery round was developed in France after its defeat in the 1870-1871 Franco-Prussian War. The French Army was in need of new fortress, and new siege artillery. A committee settled on the calibre first used in the aptly named De Bange long cannon; 1,400 of these guns were manufactured and installed at forts along the Séré de Rivières defence line. About 200 were earmarked as siege artillery for offensive operations.

Drawn by 10 horses, the cannon saw extensive action in the first years of WWI, when it was pressed into service as a counter-battery piece. Early versions included gas-filled shells.

Post-war, the US Army adopted 155mm as the standard calibre for its field artillery; since the early 2000s, NATO forces have followed suit.