How ready is the EU for more sanctions on Russia?

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The much-anticipated Biden-Putin call yesterday yielded few signs that a de-escalation on Ukraine’s border was imminent, but a few hours beforehand, the head of the European Commission signalled full preparedness on the EU side to go for tougher sanctions on Russia. We’ll unpack what is actually feasible — amid demands from Washington for Brussels and Berlin to be prepared to take major steps against Moscow.

Meanwhile, eyeing the other geopolitical rival, China, the commission today is set to unveil a brand-new trade sanctions mechanism aimed at deterring any foreign power from strong-arming European governments for political gains. The FT has an explainer of what to expect and why some countries are sceptical.

Over in Berlin, the new government is finally being sworn in today and the new finance minister, Christian Lindner, has signalled some openness to more investments and possibly more flexible deficit and debt rules in Europe.

And in more bad news for ride-hailing apps including Uber, the commission tomorrow will put forward a legislative proposal shifting the burden of proof on the companies whenever workers take them to court.

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Missing: the EU’s Russia deterrents

Ursula von der Leyen’s vow to expand existing punitive measures against Russia in the event of an invasion of Ukraine comes against a confused approach to dealing with Moscow in the EU, write Henry Foy and Sam Fleming in Brussels.

Back in June, EU leaders tasked the commission and its diplomatic wing to come up with “options for additional restrictive measures, including economic sanctions” against Moscow. This was twinned with a willingness to consider “selective engagement” with Russia on topics such as the climate and health (after Germany and France failed to convince the rest of the bloc to hold a summit with Vladimir Putin).

The idea was to tee up a menu of measures for the EU that could, in part, serve as a deterrent to aggressive action by Moscow. The resulting draft paper became stuck in internal wrangling between EU institutions, before being seized by senior Berlaymont officials this autumn and finalised within a very small team.

But since commissioning it in June, leaders have chosen not to discuss it, meaning it has sat gathering dust, its contents ignored, as Russia’s troops and tanks assembled on the Ukrainian border over the past month.

As a result, instead of having the set of potential sanctions trigger-ready, the EU has appeared to have been caught flat-footed in recent days as the US takes the lead in demanding extreme and punitive measures aimed at deterring Putin from contemplating an invasion.

Washington wants a block on Nord Stream 2 to be part of the package, alongside financial and economic measures that could restrict the ability to convert roubles into dollars, making purchases of Russian energy products complex. Both measures could be hard for many states — Berlin most prominently — to swallow.

The topic will feature prominently in next week’s EU summit. Draft summit conclusions seen by Europe Express stress the “urgent need” for Russia to de-escalate tensions on the border.

But they do not, at this stage, set out any indication of how the EU would respond, given this remains the topic of debate and planning in European capitals.

In any case, the secretive options paper will most likely be overtaken by events (and by US demands for much harsher measures) by the time leaders will seek to agree on a common response.

Chart du jour: Negative rates

European Central Bank president Christine Lagarde last week said the bank was “very unlikely” to raise its deposit rate from minus 0.5 per cent next year, because it still expected inflation to fall below its target by 2023. Despite Lagarde’s comments, markets are still pricing in a 0.1 percentage-point ECB rate increase at the end of next year, though a month earlier investors were betting on two rate rises in 2022. (More here)

What’s a gig worker

Gig economy companies such as Uber, Just Eat and Deliveroo will be forced to prove that their workforces are self-employed contractors, not employees, under new draft EU legislation set to be published tomorrow, write Javier Espinoza and Sam Fleming in Brussels.

The proposals are an attempt by the European Commission to rebalance a market where digital platforms have operated at low fixed costs thanks to the flexibility of hiring self-employed people. Courts have been flooded with cases where gig workers seek to prove they should be entitled to the rights enjoyed by those in full employment.

The proposals, reported yesterday by the FT, follow months of discussions with unions and the private sector. They state that the burden of proof of workers’ status will lie with the platforms, which will have to demonstrate that they do not “control the performance of work”.

Gig economy workers are generally considered self-employed, and therefore not entitled to minimum wage, sick pay or holiday leave. If they are unhappy with their rights, they have to take companies to court.

Under the proposed EU law, companies will have to prove that workers are able to choose their own schedule and able to work for others, among the key criteria used to challenge an employment status claim.

EU regulators said the overhaul will mean up to 4.1m individuals are expected to be reclassified as workers, a move that would grant them access to “rights and protections” in line with those in more secure forms of employment.

Brussels estimates that by reclassifying workers, people who earn below the minimum wage would see a collective increase of up to €484m in earnings a year.

The draft regulation says: “Those who, as a result of correct determination of their employment status, will be recognised as workers will enjoy improved working conditions . . . genuine self-employed people working through the platforms will indirectly benefit from more autonomy and independence.”

Industry lobbyists are expected to push back. A study commissioned by MoveEU, whose members include Bolt, Free Now and Uber, concluded most drivers prefer the current “flexible” working arrangements and that a change in their employment status could lead to job losses.

EU officials are likely to point at the myriad of court cases to show that not everyone is happy.

The draft legislation comes after landmark decisions on the employment status of gig economy workers in countries across Europe, including the UK, Spain, Italy, Greece and the Netherlands.

This summer, Spain reclassified gig workers as employees after the introduction of new laws. French authorities approved plans for workers to elect representatives to iron out collective agreements but gig workers were not granted employee status.

Last February, the UK’s top court ruled Uber drivers are workers entitled to rights such as the minimum wage, which caused the company to voluntarily reclassify its UK workforce as workers.

What to watch today

  1. Germany’s new government is sworn in

  2. European Commission puts forward the so-called anti-coercion mechanism of potential trade sanctions

Notable, Quotable

  • Recovery freeze: The EU is unlikely to approve Poland and Hungary’s applications for tens of billions of euros in pandemic-recovery financing before the end of the year, the commission’s executive VP Valdis Dombrovskis said yesterday. The delay would mean Warsaw fails to secure 13 per cent of the amount — worth €4.7bn — in an initial disbursement of pre-financing, as many other EU members have already received.

  • Gone west: The US had overtaken the EU as the leading destination for UK financial services exports after trade with the bloc dropped last year after Brexit. Financial services exports to the EU fell 6.6 per cent to £24.7bn in 2020, according to a report from the sector’s lobby group.

  • French ed: Top business schools in France offer the strongest range of business education courses, compared to peers from other countries, according to this FT ranking. Schools in the UK, Spain, Italy, Switzerland and Germany also made the top tier.

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Today’s Europe Express team: sam.fleming@ft.com, henry.foy@ft.com, javier.espinoza@ft.com, valentina.pop@ft.com. Follow us on Twitter: @Sam1Fleming, @henryjfoy, @javierespFT, @valentinapop.




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