Opinion

A problem as unprecedentedly large and destructive as climate change demands bold new thinking and urgent action. Yet since the Covid-19 pandemic and Russia’s invasion of Ukraine, geopolitical tensions have dominated the global agenda, hindering collective efforts to address this existential challenge.Anticipating what lay in store for their countries, African finance ministers came together during the pandemic to call for a $100bn stimulus package to weather the shock. Four years later, however, net financial flows to developing countries have turned negative – meaning more money is being paid out to lenders in mostly rich countries than is coming in – owing to spiralling debt-service costs, higher interest rates, and the lack of additional external financing options. It is now crucial that existing pledges – such as the €150bn ($160bn) EU-Africa Global Gateway Investment Package – be implemented fully to support African countries.US President Joe Biden and Kenyan President William Ruto acknowledged these challenges in their Nairobi-Washington Vision statement last month, when they committed to ensuring that “high ambition countries don’t have to choose between servicing their debts and making necessary investments in their futures.” The Biden administration recognises that positive net financial flows are critical to supporting countries in responding to the climate crisis and building low-carbon energy systems.As UN Secretary-General Antonio Guterres recently reminded us, there is an 80% chance that the global average temperature will temporarily rise by more than 1.5C above pre-industrial levels in at least one of the next five years. The battle to keep global warming below the threshold established by the Paris climate agreement will be won or lost in the 2020s. The necessary investment and innovation needs to be happening now.Countries like Nigeria and Sierra Leone are developing green growth plans and launching investment packages focused on renewables and climate-resilient infrastructure; and Barbados has just introduced its own 2035 investment plan to achieve prosperity and resilience. But these efforts all require financing.The Bridgetown Initiative’s proposals for reforming the global financial architecture can drive the kinds of changes we need. The G20 has already responded by seeking a wealth tax that could unlock around $250bn in new finance, and we could mobilise up to a trillion dollars more in low-cost lending by leveraging multilateral development banks’ (MDBs) balance sheets. Moreover, with climate clauses added to debt contracts, developing countries can preserve the fiscal space they need to respond to major climate shocks.But we must do more. In May, the International Monetary Fund’s board approved the use of Special Drawing Rights (SDRs, the IMF’s unit of account) as hybrid capital, which will allow MDBs to expand their balance sheets. That is a good start, but G20 countries must commit the SDRs needed to capitalise on this financial innovation.We also must ensure that concessional finance (loans with accommodative terms) continues to flow to the most vulnerable and climate-afflicted countries. One-third of the countries eligible for support from the World Bank’s International Development Association are now poorer than they were on the eve of the Covid-19 pandemic.IDA countries have significant economic potential. They account for about 20% of global production of tin, copper, and gold; most are well-positioned to take advantage of solar energy (owing to abundant sunshine); and many possess deposits of minerals essential for the energy transition. But they are energy-poor and will need technical and financial support to provide electricity to 300mn people who lack it, as envisioned by a new programme launched by the World Bank and the African Development Bank. To achieve an ambitious replenishment of the IDA fund later this year and unlock $120bn in grants and loans to make this possible, World Bank shareholders must step up with new resources.Middle-income countries – especially the Vulnerable 20 (which now includes 68 countries) – also urgently need more access to grants and long-term capital. Small island developing states should not be penalised for good performance by being forced to “graduate” from the IDA. That will put them at the mercy of capital markets when they still need quick, affordable finance to build resilience and maintain insurance against persistent climate shocks. The IMF’s Resilience and Sustainability Trust has demonstrated the necessary sensitivity toward vulnerable low- and middle-income countries’ need for long-term, affordable finance. But more of these kinds of facilities – and related mechanisms, like guarantees – are needed to accelerate progress over the coming decade.We must continue to reduce the cost of capital for all countries seeking to invest in the energy transition. Our own countries face a premium when borrowing on capital markets, partly because credit rating agencies do not fully account for the conditions we face. The situation is not only unjust but also unwise. A good first step toward reducing borrowing costs and making investments commercially viable would be to reform IMF surcharges, which cost indebted borrower countries $1.9bn in 2023 alone.We also must continue to provide liquidity for developing countries through a new issuance of SDRs. This is a no-brainer, because it would stabilise currencies and help manage debt burdens without contributing to inflation. And finally, we must get carbon markets working to deter pollution and channel resources toward cleaner energy. Our collective stake in the planet’s future requires us to act both now and at scale. – Project SyndicateMia Amor Mottley is Prime Minister and Finance Minister of Barbados. Wale Edun is Finance Minister of Nigeria and Chair of the African Governors Forum at the World Bank.

A sliding yuan and extensive outflows of cash from the mainland into Hong Kong show China’s domestic investors are shelving expectations for any immediate recovery in their home markets and fleeing to the closest better-yielding assets. The yuan has dropped to seven-month lows this week, alongside a reversal in equity investment flows into China. Analysts said Hong Kong’s stockpile of yuan deposits has also grown as mainland investors use their limited offshore investment channels to seek higher yields and companies prepare to pay annual dividends, adding to the pressure on the currency. “Sentiment on China soured over the past month as the market has rallied ahead of improvement in macro data which continues to disappoint,” said Gary Tan, a Singapore-based portfolio manager at Allspring Global Investments. Tan, whose funds are underweight on Chinese stocks, said sentiment had come a long way from a time when mainland markets were considered “uninvestible”, however, and he expected that would improve further. But investor patience has worn thin after months of waiting for authorities to roll out more stimulus, mainly to support a sinking property sector. The Shanghai benchmark stock index rose 20% between early February and mid-May but is down 6% since. Foreigners who had returned to the market since February, after quitting in 2023, have turned sellers too this month, pulling out 33bn yuan ($4.54bn) via the northbound leg of the Stock Connect Scheme. Domestic investors have used the southbound leg to pump 129bn yuan into Hong Kong. Analysts say investors have several reasons to pause and reflect, not just about how far the People’s Bank of China (PBoC) will ease rates, but also on the approaching July plenum of China’s Communist Party to shape economic and fiscal policy. Chi Lo, senior market strategist for Asia-Pacific at BNP Paribas Asset Management, said foreign funds, though now positioned neutral on Chinese stocks, are turning positive. “Beijing is likely to keep the easing measures more progressive than they were in the 18 months, in my view, and the plenum will likely reiterate that policy direction,” Lo said. The PBoC’s daily guidance for the yuan, which it manages in a tight band, is stirring speculation that the authorities are allowing some depreciation to manage the pressure. The yuan is down 2.2% against the dollar so far this year. As mainland cash floods into Hong Kong, yuan deposits in the financial hub are at record levels, with latest official data for April showing they stand at 1.09tn yuan ($150bn), close to peaks last seen in January 2022. Ju Wang, head of Greater China currency and rates strategy at BNP Paribas, said mainland investors were thronging Hong Kong for better returns on offshore yuan, given low yields at home and expectations for further easing. Persistent southbound flows and the traditional June-July transfers by Chinese firms to finance their dividend payments in Hong Kong had also led to selling of the offshore yuan and demand for Hong Kong dollars, she said. Since early May, the CNH has fallen 1.9% against the Hong Kong dollar. Also drawing money into Hong Kong is the expectation of peaking US dollar rates as the Federal Reserve prepares to ease policy, which, by virtue of the Hong Kong dollar’s peg, will affect its economy too. “US rate cuts are very important for Hong Kong’s liquidity because of the currency peg, so once the Fed starts cutting rates, I think we will be flush with liquidity here, which will push up asset prices,” said BNP Asset Management’s Lo.

When former French president Valéry Giscard d’Estaing was finance minister in the 1960s, he famously described America’s status as the issuer of the world’s reserve currency as an “exorbitant privilege”. But his label applies equally well to his own country’s position in the European monetary union. Despite persistently widening budget deficits, France has long been able to borrow almost as cheaply as fiscally prudent Germany. The bond market even shrugged off S&P’s downgrade of French sovereign debt at the end of last month, implying that France was somehow immune from the usual credit discipline. Then politics intervened.Following the surge of support for the French far-right in this month’s European Parliament election, President Emmanuel Macron’s abrupt decision to dissolve the National Assembly and call a snap election has met with a decidedly negative market reaction. But investors may now be underestimating the resilience of the French exorbitant privilege.The seeds of this privilege were sown in the 1992 Treaty of Maastricht, which created a monetary union without a fiscal union. That scheme required a “no-bailout” rule, lest profligate countries free ride on more fiscally responsible members. But the 2010-12 euro crisis exposed the fatal flaw in this design: if the ban on bailouts meant that the European Central Bank (ECB) could not serve as lender of last resort, it would threaten the monetary union and, by extension, the entire European project.The resulting compromise hinged on a fiscal rule. The ECB stood ready to buy unlimited quantities of eurozone member-state bonds, provided that their budget plans were consistent with fiscal rules set and enforced by the European Commission. Meanwhile, the fiscal police in Brussels remained very lenient toward French governments. The crises in smaller peripheral countries, and then in Italy, had been alarming enough. The last thing they wanted was a similar bust-up with France, the cornerstone of the entire European construct. So, they devised a fudge.As a penalty for its routine non-compliance with fiscal rules, France would be placed on a naughty list. In accordance with the EU’s “excessive deficit procedure,” the French government would promise to tighten up, and the Commission would declare itself satisfied. The ECB then had political cover to buy French sovereign bonds (if necessary), and this resulted in markets valuing French government debt almost as highly as German Bunds, despite the absence of any real improvement in the French fiscal position.There was no need for this charade when the eurozone fiscal rules were suspended in response to the Covid-19 pandemic. But the rules (with some modifications) have now been revived, and the French budget deficit, at 5.1% of GDP, is further than ever from the 3% threshold. Thus, even before the latest political shock, the dance between Paris and Brussels was expected to be more sensitive than usual. France was going to have to commit to reduce the deficit by perhaps half a percentage point of GDP, and even that moderate adjustment might have triggered a vote of no-confidence in Macron’s government in the lower house of parliament, where his party lost its majority in the 2022 election.Two years later, the snap election could well replace Macron’s limping centrist government with one led by parties whose campaigns have abandoned any pretense of fiscal discipline. The European Parliament election and the latest polling both show that the main challenge is coming from Marine Le Pen’s National Rally and allied right-wing parties, and financial markets are already reacting the same way they did when Le Pen first made a credible run for power in 2017.Back then, Le Pen was promising to abandon the euro and restore the French franc, which would have caused a systemic financial shock. Though she later dropped the idea of leaving the eurozone, she still rattled markets when she ran again for the presidency in 2022. It is no surprise that markets are spooked again.If National Rally and its allies do win this election, though, it will not be in Le Pen’s interest to trash the country’s exorbitant privilege within the eurozone. In fact, she will have every incentive to exploit it, to smooth her path to the presidency in 2027. That is why her prime minister-designate, the charismatic 28-year-old Jordan Bardella, has already back-pedalled on the party’s most fiscally costly campaign promise: reversing the increase in the retirement age (from 62 to 64) that Macron forced through last year in the teeth of public protest.Thus, in the event of a right-wing government (which would rule in “cohabitation” with Macron), I would expect to see the same old fiscal charade vis-à-vis Brussels, albeit with more rhetorical brinkmanship that would further unsettle markets. And the same would go for a left-wing government elected on an aggressive tax-and-spend platform, since the revenues from higher taxes would likely satisfy the European fiscal police.The outcome that would most fully justify the market’s fears is a stalemate. If the right- and left-wing alliances each win around 200 seats while Macron’s centrist bloc is reduced from 250 seats to 150 at most, it would be extremely difficult to form any kind of government, let alone a stable one. Although any future French government is likely to end up resuming the fiscal dance, it takes two to tango. A persistent political deadlock in Paris would leave Brussels with no government to engage, and the longer the political limbo lasted, the greater the financial instability and damage to the European economy would be. – Project SyndicateBrigitte Granville, Professor of International Economics and Economic Policy at Queen Mary University of London, is the author of Remembering Inflation (Princeton University Press, 2013) and What Ails France? (McGill-Queen’s University Press, 2021).

Europe has clocked a record number of hours of negative power prices this year due to a mismatch between demand and supply as solar power generation soars, potentially helping to shift investment to much needed storage solutions.Wholesale power markets in most of Europe’s key economies turned out zero or negative prices for a record number of hours in the first five months of this year at times of low demand. That means producers more frequently have to pay to offload power, or stop their plants.“One could certainly say that, at this point, success is consuming its own offspring,” Markus Hagel, energy policy expert at German utility Trianel, told Reuters.Strong hydro and nuclear power generation has played some part in the oversupply, but Europe has also seen a massive expansion of solar power.Installed solar capacity in the European Union more than doubled to 263GW between 2019 and 2023, according to SolarPower Europe data. In 2023 alone, that is equivalent to an extra 306,000 solar panels being installed every day, the group said.In the day-ahead market, this has seen more European markets experience price drops at the lowest demand point in the middle of the day.Trianel told Reuters the company has invested in 800 megawatt (MW) of photovoltaic capacity and has a project pipeline of 2,000MW but the lower prices are forcing it to reconsider how it sells the power.Solar has boomed in part because it no longer required subsidies as developers agreed power purchase agreements (PPAs) with buyers at fixed terms pegged to wholesale power market prices.This allowed for a faster and bigger build-out than previous capped volume auctions for government-backed payments.But as prices fall, developers are increasingly turning back to subsidy schemes again, Hagel said.Negative prices are nothing new for Germany, which hosts Europe’s biggest capacity of volatile solar and wind power generation, but 2024 is the first year Spain is seeing them, after several years of strong solar power growth.“It is not something that worries us at the moment. What does worry us is that it will be repeated or can be repeated over time,” José María González Moya, director-general of renewable lobby APPA Renovables, said, adding that new contracts for PPAs are already declining.“And yes, in a way, investment is slowing down. Not stopping, but slowing down,” Moya said.Germany and Spain are still leading the PPA market, Jens Hollstein, head of advisory at PPA pricing platform Pexapark, said. However, solar producers were being forced to sell their power at increasing discounts to round-the-clock generators.“The margin is getting thinner,” Hollstein said.He expected a slowdown in investments if the development continued.On the flip-side, the power market is now seeing a bigger gap between low and high-priced hours, increasing the incentive to invest in storage, he added.The International Energy Agency (IEA) highlighted the urgent need for energy storage in an annual report.“Developers who choose not to co-locate their wind and solar PV power parks alongside battery storage or other sources of flexibility may see a drop in potential revenues during peak generation — hampering profits and discouraging investment,” the IEA wrote.The EU estimated that energy storage in the bloc will need to rise more than three-fold from 2022-2030, to match projections of a 69% share of renewable energy in its electricity system by then.Norwegian renewable energy producer Statkraft, which operates across Europe, has said it could divest some wind and solar projects, but would likely hold onto its battery assets.“For batteries it will be positive to have greater volatility and also negative prices,” CEO Birgitte Ringstad Vartdal said, as batteries can be charged when prices are low while output can be sold when prices are high.“That is one of the reasons why flexible projects will be attractive,” Ringstad Vartdal added.Besides storing energy in batteries to deal with periods of excess supply, other options like AI-powered smart grids and meters could also help consumers optimise their electricity use.Domestic end users, plagued by the surge in energy costs in the wake of the Ukraine war, have yet to enjoy lower bills because often they are locked into long term contracts.Only those consumers that have invested in a heat pump, a charger for their electric car, or a storage system, are able to benefit from negative prices, spokesperson for Germany’s association of local utilities VKU said.Those on fixed priced contracts will only feel a positive impact from negative power prices once they have pulled down average market prices over the long term. — Reuters

Vladimir Putin, on his first visit to North Korea in 24 years, signed a mutual defence pledge with Kim Jong-un on Wednesday, underscoring just how far Russia has recast its relations with the only country to test a nuclear weapon this century.Putin, who is locked into a major confrontation with the West over Ukraine, cemented his pivot to North Korea after nearly two decades of supporting UN sanctions against Pyongyang.Depending on the exact wording of the pact, which was not immediately released, it could be a dramatic shift in the entire strategic situation in Northeast Asia, said Artyom Lukin, at Russia’s Far Eastern Federal University.“If Russia provides security guarantees to North Korea, then the DPRK becomes an analogue of Belarus, Russia’s main ally in Eastern Europe,” Lukin said, using the initials for North Korea’s official name. “It will be an open challenge to the system of US-centric alliances in Northeast Asia. And, of course, it will be a huge problem for Seoul and Tokyo.” While North Korea has a defence treaty with China, it does not have active military collaboration with Beijing like it has developed with Russia over the past year.China, by far North Korea’s largest trading partner and an increasingly important ally for Russia, has reacted cautiously to their burgeoning ties, avoiding any trilateral arrangement that might complicate its relations elsewhere.The courting of Kim, which includes gifts of limousines, a tour of Russia’s new space launch centre and a “strategic partnership” pact including a mutual defence clause, has alarmed the US and its Asian allies.Their spy agencies are trying to work out just how far the 71-year-old Kremlin chief will go — and what missile or even nuclear technology Russia might pass to North Korea in exchange for munitions to fight in Ukraine.“The first visit by Putin in 24 years shows this is about what Russia can get from North Korea — and that is driven by the war in Ukraine,” said Ramon Pacheco Pardo, professor of international relations at King’s College in London.Pacheco Pardo, who has written books about both Koreas, said that he expected Russia to share some knowledge and expertise for the development of North Korea’s missile and nuclear programmes, though not Moscow’s most advanced technology.“I think this is a big change in relation to North Korea,” he said. “Without the invasion of Ukraine, I don’t think Russia would have felt compelled to share such technology.” Four diplomats who spoke to Reuters on condition of anonymity said they expected deeper ties with North Korea but said that Russia, as the world’s biggest nuclear power, would be highly selective about what technology it shared with Kim.Another Western diplomat, based in Seoul, said the extent of Russia’s co-operation with North Korea was injecting a sense of urgency in Europe’s engagement with countries such as South Korea and Japan and may lead to more shifts in global alliances.Russia says its relations with Pyongyang will accord to international agreements and that it will not be told how to conduct its relations by any other power, least of all the US.Both Russia and North Korea have denied accusations by US and allied officials, and UN sanctions monitors, that Pyongyang is sharing weapons for use in Ukraine.Putin said on Wednesday that Russia did “not exclude developing military-technical co-operation” with North Korea due to Western support for Ukraine.“The deepening co-operation between Russia and the DPRK is something that should be of concern, especially to anyone that’s interested in maintaining peace and stability on the Korean Peninsula,” Major General Patrick Ryder, a Pentagon spokesperson, told reporters.Putin’s move towards North Korea is seen by diplomats as a major turning point in the international sanctions regime against North Korea, which was formed in 1948 with the backing of the then-Soviet Union.In March, Russia vetoed the annual renewal of a panel of experts monitoring enforcement of longstanding UN sanctions against North Korea over its nuclear weapons and ballistic missile programmes. China had abstained.The next day, Russia said that major powers needed a new approach to North Korea, accusing the US and its allies of ratcheting up military tensions in Asia.“The North Korea-Russia relationship started out as a marriage of convenience focusing on arms and tech transfers, so very transactional, but is now moving into payment systems, research collaboration and exchanges of different types,” said Niklas Swanstrom, Director of the Institute for Security and Development Policy in Sweden. “It seems to have a depth that we have underestimated.” There are, though, limits to the relationship, say analysts.Russia, the world’s biggest nuclear power, is not interested in major nuclear proliferation, especially by a neighbour.Nor is China, which despite growing clashes with Washington on foreign policy and trade issues is far from the international pariah that Russia and North Korea have become.Both Moscow and Beijing, while ready to needle the US and its Asian allies with public support for North Korea, have in the past criticised Pyongyang in public for its displays of missile or nuclear might.Russia is due to outproduce all of the Nato military alliance on ammunition this year, so Putin’s reliance on Kim is limited.And while the Soviet Union helped North Korea build a research reactor at Yongbyon, the Soviet-era Kremlin was always wary of the nuclear ambitions of Kim Il-sung — the state founder and Kim Jong-un’s grandfather — and found Pyongyang a provocative difficult partner, especially when it tried to nudge Moscow by deepening ties with China.Russia has also historically balanced its approach to the North with its relations with South Korea, a US ally but economic powerhouse, said Anthony Rinna, a specialist in Korea-Russia relations at Sino-NK, a website that analyses the region.“By sidling up to North Korea, especially by upgrading their relationship to a comprehensive strategic partnership, Russia risks undermining its policy of diplomatic equidistance,” he said. — Reuters

From Germany and France to Poland and Spain, the far-right made inroads into the youth vote in key states in this EU election — as a generation that has grown up amid constant crises seeks new answers and follows politicians fluent in TikTok and YouTube. Young voters, traditionally perceived to be more left-wing, drove the wave of support for environmental parties at the last EU election in 2019, earning the nickname “Generation Greta” after the young Swedish climate activist Greta Thunberg. But following the pandemic, the Ukraine war and cost of living crisis, many shifted their support this year towards far-right populist parties that tapped into their concerns, fuelling their overall rise in the June 6-9 EU parliament poll. With the leaders of Europe’s often upstart ethno-nationalist, anti-establishment movements mastering new social media better than their mainstream counterparts, they are earning cachet as a subversive counterculture among some young people. They appeal in particular to young men who feel left behind and censored by an increasingly “woke” mainstream, analysts say. “Germany is not going in a good direction and they were the only party with a really clear message, on migration,” said Christoph, 17, a trade school student in Berlin who declined to give his full name, who voted for the far-right Alternative for Germany. Support for the AfD, which wants to curb migration and warns against what it calls the Islamisation of Germany, was up 11 percentage points to 16% among under-25 year olds, according to an exit poll by Infratest dimap — more than double the 5-point rise among the broader population. The shift, which helped the AfD achieve a historic second place nationwide, was notable in that Germany’s decision to allow 16-18 year-olds to vote for the first time had been expected to favour left-leaning parties. Though the far-right did not do well everywhere among young voters — and they are a relatively small category in a continent with an ageing population — the trend will still worry mainstream parties, who face a snap election later this month in France, and federal elections next year in Germany. Economic concerns up, climate down A recent survey of Germany’s youth showed that young people were increasingly worried about inflation, expensive housing and social divisions, and less about climate change. The Greens won just 11% of the youth vote, down 23 percentage points. “There is no longer a sense that if they just work hard then the future will be better, and they are disappointed by the parties in power,” said study lead author Simon Schnetzer, noting that economic gloom was making them more receptive to the AfD’s anti-migration rhetoric. Christoph said his experiences led him to believe Germany’s more recent immigrants were more prone to violence and unwilling to integrate. In France, the far-right National Rally (RN) took a 25% share of the vote among 18-24 year olds, according to pollster Ipsos, up 10 percentage points compared with an around 8-point gain overall to 31.4%. To be sure, most of the youth in the EU’s two top powers still back leftist parties, and many worry about the latest trend. “It worries me because I saw the far-right wants to deport people even if they have German citizenship like me,” said Ensar Adanur, 17, a German of Turkish origin. “But Germany is home for me.” In Poland, however, support for the far-right Confederation among 18-29 years old voters increased from 18.5% to 30.1%, making them the leading choice for that demographic. Mainstream parties “no longer have any credibility for me, the previous government and the current one show it clearly”, said Paweł Rurkowski, 30, an IT specialist who voted for the Confederation. Slick on socials Far-right parties’ relative proficiency in young voters’ preferred channels of communication — video apps such as TikTok and YouTube and messaging app Telegram — is a big factor behind their increasing success with that generation, analysts said. The recent German youth study showed that 57% of young people get their news and politics through social media. But German Chancellor Olaf Scholz, like many mainstream politicians, only joined TikTok a few months ago. “If you are not on young peoples’ channels, you simply do not exist,” said Schnetzer. Meanwhile social media platforms algorithms favour controversial messages that generate engagement over serious content, said Ruediger Maas, founder of the Institute for Generational Research in Augsburg. The AfD’s lead candidate for the EU elections, Maximilian Krah, went viral on TikTok, for example, with dating tips for young men: “Don’t watch porn, don’t vote for the Greens, go out into the fresh air ... Real men are right-wing.” He has some 53,300 followers on TikTok, compared with just 11,000 and 2,652 respectively for the lead candidates for the centre-left Social Democrats and the Greens. “My generation doesn’t really know about politics but we hear about the AfD all the time,” said AfD voter Christoph. In Spain, social media influencer Alvise Perez clinched 6.7% of the youth vote, compared with 4.6% of the overall vote, after conducting his anti-immigration and anti-corruption maverick campaign almost exclusively on Instagram and Telegram. Far-right party Vox, meanwhile, which was strong on TikTok, garnered 12.4% of the vote among those under 25, compared with 9.6% overall. “It seems to be the only party that really opposes the government when it comes to taboo subjects such as immigration or gender discourse,” said Xavier, a 22-year-old university student who cast his vote for Vox. — Reuters

As Europe braces for summer wildfires, it is putting some 550 firefighters and 32 aircraft on standby and plans to spend €600mn ($644mn) on water-bombing planes, but experts warn the money could be better spent on prevention. Last year’s wildfire season in Europe was among the worst this century, the European Commission said. Fires burnt through more than half a million hectares, led to mass evacuations and killed at least 20 people in Greece. But fighting fires is only part of the answer. “If we only invest in the response capacity, we will have to keep investing more and more and more, and will either run out of money or we will be overwhelmed because of the increase in disasters,” EU Commissioner for Crisis Management Janez Lenarcic told the Thomson Reuters Foundation. As climate change brings more heatwaves and drought worldwide, the number of extreme wildfires is expected to increase by up to 30% by 2050, with bigger fires becoming tougher to put out, a 2022 United Nations report showed. Climate change is already costing Europe tens of billions of euros per year, Lenarcic said, and the cost will rise if nothing is done to reduce emissions and invest in prevention. But the potential costs of curbing the EU’s CO2 emissions have already sparked a backlash from many farmers and other voters in a key electoral year and that risks undermining the EU’s green transition plans. “If we do it, it won’t be easy and it won’t be cheap,” said Lenarcic. “If we don’t do it, it will be much more expensive.” Europe saw a sharp increase in burnt areas last summer, producing some 20 megatonnes of CO2, the European Forest Fire Information System said, equivalent to nearly a third of all international aviation emissions in the EU in a year. The fires also caused an estimated €4.8bn in damage according to Distrelec, a power sector firm which supplies early warning sensors for wildfires. Last year, dry soil, low humidity and high winds combined to ignite mega fires that burn so intensely that traditional aerial firefighting techniques cannot cope, forestry experts said. “Airplanes can help immensely to protect ground forces and properties,” Joao Carlos Verde, an adviser at Portugal’s integrated fire agency (AGIF), told the Thomson Reuters Foundation. But, he said, “there will come a point when you can have all the fleets you want of airplanes and that will still not solve your problem.” Perhaps, Verde said, the biggest obstacle to prevention was an image problem. “The response is sexy. You see the lights, you hear the helicopters. Prevention isn’t sexy. Nobody sees it. It’s slow, but it bears fruit.” Wildfire experts have warned for years against the “firefighting trap”, which privileges suppression, such as with water-bombing planes, over long-term prevention involving the protection and restoration of forests and peatlands. Research from the World Bank and the European Commission estimates that €1 invested in wildfire prevention saves between €4 and €7 in damage but spending leans heavily towards detection and response. Spending by EU countries on fire protection — both suppression and prevention — has remained more or less stable since 2001 at 0.5% of total government spending, but research from WWF Greece showed that more than 80% of Greece’s fire protection budget went towards suppression in 2022. This sparked a spending review, and although the non-profit said the balance was now better, it said most spending still went towards suppression. Portugal, which experienced devastating wildfires in 2017, had achieved a 50:50 split in spending between prevention and suppression measures by 2019, AGIF said. The agency streamlined its firefighting and conservation efforts to address the causes of fires, something Verde recommended for the EU. Bringing communities, particularly in rural areas, on board is key to successful prevention methods, said Verde. “Make people feel they have an incentive to manage the land ... you will have less fires,” he said. This could prove challenging as EU climate policies, including nature restoration efforts to make forests more fire-resilient, have been criticised by farmers angry over the cost. “Nature restoration has to be done,” said Lenarcic, but he added that farmers should be supported financially. “But the green transition is vital, of existential importance, also for them.

It is safe to say that Ukraine’s reconstruction will be the most significant and expensive undertaking in Europe since the post-World War II Marshall Plan. The World Bank estimates that rebuilding the country will require nearly $500bn over the next decade, dwarfing the costs of the most destructive natural disasters in recent years, including the 2004 tsunami in Indonesia’s Aceh province and the 2023 earthquake in Turkiye and Syria.Moreover, unlike natural disasters, the ongoing war in Ukraine has taken a greater toll on the country’s finances, necessitating massive military and economic aid. Consider that in 2022-23, Ukraine relied on $74bn in budgetary assistance from its international partners to keep the government functioning. This suggests that almost all reconstruction funds will come from foreign donors.Managing an undertaking as costly and complex as Ukraine’s postwar reconstruction will require a comprehensive, systems-oriented approach. Digital tools, in particular, should be used to streamline the process, increase transparency, and provide accountability.To that end, the Ukrainian government has already established the Digital Restoration Ecosystem for Accountable Management (DREAM), while a coalition of NGOs has developed the Big Recovery Portal, to collect, organise, and publish open data on recovery projects at all stages. This helps create an environment where citizens and organisations can actively participate in the oversight process.These systems are a step in the right direction. But when it comes to implementing them, it is instructive to consider recent large-scale reconstruction programmes. Specifically, the rebuilding of Aceh after the 2004 Indian Ocean tsunami, an effort led by the Indonesian government and supported by the World Bank, holds important lessons for how to use digital tools effectively and efficiently.First, it is important to remember that, even with the latest technology, people need to track money. Data collection and analysis remain labour-intensive, as automated information systems are invariably susceptible to errors that only humans can detect. In Aceh, in the early phase, data on reconstruction projects were not always consolidated or analysed, resulting in double-counting. Moreover, the people entering data were overwhelmed by the level of detail required for tracking outcomes, meaning that even easy-to-obtain financial information was initially not available.Second, excessive planning has delayed many reconstruction efforts. Instead of creating a master plan, as Indonesia did for Aceh, Ukraine should establish a framework with core principles such as minimum requirements for building design and construction in order to focus on speed. Some projects – interim housing, for example – will necessarily be temporary. Platforms like DREAM and the Big Recovery Portal should thus capture reconstruction data in real time to ensure continuous analysis and eventual course correction.Third, Ukraine should track financial commitments and disbursements separately. The Kiel Institute for the World Economy is already listing and quantifying the support that governments have committed to Ukraine. But monitoring disbursements will be just as important because they better reflect on-the-ground activities. This can be challenging, as funding often flows through many channels and is recorded at various stages before it reaches beneficiaries, and careful tracking will be required to prevent double- and triple-counting.In Aceh, the Reconstruction Expenditure Tracking Analysis Methodology captured individual projects at the level of the executing agencies to avoid this problem. DREAM should do the same in Ukraine.Moreover, aid must be distributed equitably. After the tsunami, government monitoring in Aceh found that the majority of recovery funds were initially allocated to health and education projects, rather than essential infrastructure, owing to donors’ priorities. To avoid this outcome, DREAM should separate funding types, which would allow it to exclude emergency assistance and focus instead on investments aimed at replacing damaged or destroyed assets such as schools, bridges, and roads. Such an approach, coupled with a strategy that considers the needs of all sectors and regions, would highlight the practical aspects of fund utilisation, especially where aid is allocated, and promote the reconstruction of critical infrastructure.But effective aid delivery depends as much on local capacity as it does on financing streams. Thorough and realistic needs assessments are thus an important part of reconstruction efforts, as they can improve alignment with available resources.In Aceh, the cost of rebuilding was initially estimated at $6.2bn (including inflation). But while the total amount of financial resources for reconstruction exceeded $7bn, allocation gaps in the environmental, energy, food, and irrigation sectors have limited recovery to pre-tsunami levels.Lastly, while a wide range of donors and implementing agencies are contributing to Ukraine’s reconstruction, strategic management of the most important players – the institutions accounting for roughly 85% of the total portfolio – is crucial. This will ensure that the bulk of investments are used as efficiently as possible and adhere to the highest standards of transparency and accountability. Establishing a centralised co-ordination body and data-management system could help achieve this. It would also foster a unified approach to rebuilding the country, whereby the largest donors are aligned with the government’s goals and with each other.When reconstructing Aceh, the World Bank team worked closely with the top ten donors and carefully analysed the government’s reconstruction budget, leading to a more co-ordinated effort. But that is not to say that only the largest projects are relevant to strategic planning and resource allocation. On the contrary, projects of all sizes should be meticulously tracked to develop a comprehensive strategy. Ukraine’s reconstruction needs will be vast. Given this, and because the Ukrainian population has suffered enormously from Russia’s war of aggression, the international community must draw the right lessons from recent catastrophes to help the country rebuild quickly and to the highest standards. As Ukraine prepares to embark on tens of thousands of critical infrastructure projects, it will need the right digital tools and human capacity to monitor its progress. — Project SyndicateWolfgang Fengler, a former lead economist at the World Bank, is CEO of World Data Lab.Vladyslav Rashkovan is an alternate executive director at the International Monetary Fund.

Just as Slovakia entered a moratorium on public speeches and campaigning ahead of this month’s European Parliament elections, Prime Minister Robert Fico delivered his first public remarks since he was seriously injured in an assassination attempt in May.On May 15, Fico was shot four times at close range in the former mining town of Handlová in central Slovakia after chairing an offsite cabinet meeting. He was transported to the hospital in critical condition, underwent several surgeries, and is now recuperating at his home in Bratislava.In a recorded video address, Fico said he “forgives” the man who tried to kill him. But he swiftly blamed the “politically unsuccessful and frustrated” opposition for the circumstances that led to the shooting, calling the assailant the opposition’s “messenger of evil and political hatred,” adding that he has “no reason to believe this was an attack by a lone madman.”The shooter, Juraj Cintula – a 71-year-old poet and former security guard – reportedly opposed Fico’s media policies and his government’s stance on Ukraine. But as an anti-minority, anti-immigrant activist with ties to an ultra-nationalist group that has acted as a pro-Russia propaganda tool, Cintula could hardly be described as a supporter of the progressive liberal opposition, let alone its “messenger.”Nevertheless, the attempted assassination is indicative of Slovakia’s toxic political climate and deepening polarisation (among the highest in Europe), which reflects three main factors. First, an intense intergenerational conflict is playing out across Slovakia’s political spectrum as older, rural, and often disillusioned voters find themselves at odds with the opposition’s younger, urban, and more pro-Western voter base.These groups increasingly struggle to find common ground, causing rifts within households and local communities. For example, while the current government’s supporters are preoccupied with pensions, social benefits, and “preserving peace” – having been convinced by Fico that aiding Ukraine would drag Slovakia into a military conflict with Russia – younger voters view the country’s Nato and EU memberships as crucial security guarantees.Meanwhile, social conservatives, viewing “progressive” or “liberal” politics a threat to traditional family and religious values, assume a defensive stance that stifles constructive political dialogue.Second, Slovakian voters have been inundated with incendiary rhetoric, misinformation, and hate speech, all amplified by social media. Fico himself has repeatedly – and falsely – accused former president Zuzana Čaputová of being a “foreign agent” serving “American interests,” possibly contributing to death threats against her and her loved ones. His cabinet members similarly mischaracterised pro-Western presidential candidate Ivan Korčok as a “warmonger” to stoke fears among supporters of the ruling party, Smer-Social Democracy.Lastly, Fico’s return to power has exacerbated the problem. Fico, Slovakia’s longest-serving prime minister, staged an unlikely political comeback in 2023, five years after he was forced to step down to quell a political crisis sparked by the murder of a journalist investigating allegations of high-level corruption. Over the past few years, several members of Fico’s former cabinet have been suspected of, and in some cases charged with, serious criminal offences.Consequently, the government dismantled the Special Prosecutor’s Office – responsible for investigating such crimes – and tried to overhaul the penal code immediately after assuming office, triggering widespread protests. The government has also sought to restructure public media to tighten control over news content, thereby undermining press freedom and the European Union’s rule-of-law standards.The outcome of April’s presidential election could further undermine democratic checks and balances, as the government-aligned president, Peter Pellegrini, is unlikely to challenge the executive branch, as Čaputová has done. Notably, the president is responsible for appointing constitutional court judges and has the authority to pardon convicted criminals. With Pellegrini’s victory, the administration’s control of the legislative and executive branches may extend to the presidency.Any hope that Fico’s shooting would serve as a wake-up call and unite Slovaks in support of their fledgling democracy has been dashed. Shortly after the assassination attempt, several senior government officials suggested that the media played a role in radicalising the prime minister’s shooter, telling journalists to “look in the mirror.” Fico’s address has made it abundantly clear that the government intends to use this tragedy to suppress the opposition and independent media, enabling it to pass controversial laws with little pushback.Fico’s shooting could also fuel political violence across Europe and beyond, as populists around the world push for peace in Ukraine at the expense of Ukraine’s territorial integrity. In the days following the assassination attempt, Michal Šimečka, the leader of Slovakia’s main pro-democracy opposition party, and Polish Prime Minister Donald Tusk both received death threats.But while Fico appears emboldened, the government might be overestimating how long it can maintain its current policy course, given Slovakia’s heavy reliance on its trading partners, allies, and international investors. The looming threat of losing crucial EU funds could constrain the government’s illiberal reforms, especially as Slovakia faces increased pressure from soaring energy prices and the EU’s reformed Stability and Growth Pact, with its rigid debt-reduction targets.Even if Fico’s shooting bolsters his political support, the opposition and the media must continue to scrutinise and challenge the ruling coalition.— Project SyndicateSoňa Muzikárová, a non-resident senior fellow at the Atlantic Council and a research fellow at the European University Institute, is a former economist at the European Central Bank, a former diplomat at the OECD, and a former senior adviser to the Deputy Minister of Foreign Affairs of the Slovak Republic.

Over the past two decades, the productivity gap between Europe and the United States has steadily widened, with labour productivity in the US growing at more than twice the pace of the eurozone’s. The European “competitiveness crisis” can be attributed to several factors, including insufficient public and private investment, a shortage of tech firms and venture-capital funds, and the continent’s demographic decline. Another possible explanation that is often overlooked is the decline in foreign direct investment (FDI).FDI is a crucial driver of productivity growth, introducing recipient countries to new technologies, knowledge, and management skills. After falling by 4% in 2023, Europe’s FDI inflows are now 14% below their 2017 peak. Germany experienced a sharp 12% drop in foreign investment last year, undermining its post-pandemic recovery. In the United Kingdom, inward FDI declined by nearly 30% since 2016-17, as Brexit prompted foreign firms to redirect investments to other European countries. French policymakers seem determined to benefit from this shift, with President Emmanuel Macron actively marketing his country to foreign investors.Attracting FDI is crucial for the European Union as it grapples with two emerging challenges: de-risking its supply chains and preventing member states’ economies from experiencing a China shock similar to the one the US experienced after China joined the World Trade Organisation in 2001.FDI flows may play a key role in addressing both of these challenges. Climate change and heightened geopolitical tensions have made global supply chains increasingly vulnerable, especially since most inputs for green industries, such as semiconductors and battery cells for electric vehicles (EVs), come from Taiwan, South Korea, and China. A 2012 paper by MIT economist Daron Acemoglu and co-authors suggests that such geographic concentrations of input suppliers increase the risk of economic shocks. As supply disruptions reverberate across the global economy, they create multiplier effects that compound the initial disruption.Moreover, firms cannot protect themselves against such disruptions by diversifying their suppliers, since no alternative sources are available outside Asia. This vulnerability was underscored in 2021 when the Taiwan Semiconductor Manufacturing Company (TSMC) had to shut down some of its factories due to the Covid-19 pandemic and a severe drought, halting automobile production worldwide.To foster diversification, the EU has begun subsidising foreign investments in battery cells and semiconductors through the European Chips Act and the European Battery Alliance. Much like the Inflation Reduction Act and the CHIPS and Science Act in the US, these measures aim to ensure that enough alternative suppliers are available in the event of a climate disaster or geopolitical conflict.Despite these efforts, however, there are signs that Europe has begun to experience its own China shock. In 2022, for the first time ever, Germany imported more cars and machinery from China than it exported. A recent study by Allianz Research finds that China has surpassed Germany in key sectors of the global export market. For example, China’s share of machinery and equipment exports increased to 29% in 2022, compared to Germany’s 15%. While Germany still leads in exports of automobiles and transport equipment, with a 17% share compared to China’s 9%, its lead is diminishing.This should alarm policymakers for two reasons. First, losing its lead in critical high-tech sectors poses a major threat to Germany’s economic model. Second, a European China shock could fuel the rise of far-right parties like the German Alternative für Deutschland (AfD).The US should serve as a cautionary tale. The China shock of the early 2000s had a devastating impact on manufacturing regions, as workers displaced by Chinese competition struggled to find new jobs and often had to settle for significantly lower wages. The decline in manufacturing employment contributed to an epidemic of “deaths of despair” – from suicide, drug overdoses, and alcoholism-related liver disease – and set the stage for Donald Trump’s victory in the 2016 presidential election.With this in mind, EU policymakers are considering imposing import tariffs on Chinese EVs. In a recent speech, European Commission President Ursula von der Leyen said that the Commission has launched an anti-subsidy investigation into the Chinese EV industry and accused China of violating fair competition rules in an effort to “flood our market with massively subsidised electric cars.”US President Joe Biden’s decision to impose a 100% tariff on Chinese-made EVs is likely to redirect Chinese EV exports from the US to Europe, which leaves European policymakers with no choice but to impose their own import tariffs.Such a move could have the added benefit of boosting Chinese FDI flows to the EU, as Chinese carmakers might try to bypass import tariffs by building new factories in Europe and selling EVs directly to European consumers.But more must be done. By forming partnerships with companies in technologically advanced economies like China, Taiwan, South Korea, and Israel, European firms could bridge the EV and digital knowledge gap and increase FDI flows to the EU. For decades, China has used this strategy to become a world leader in green technologies, forcing Western companies to form joint ventures with domestic manufacturers to access the vast Chinese market.Today, the roles are reversed: China is now a technologically advanced economy seeking access to the large EU market for its EVs, and European countries lack the necessary technical expertise to remain competitive. To boost FDI flows and improve its competitiveness, the EU should reverse engineer China’s industrial policy and require Chinese EV manufacturers to establish joint ventures with domestic companies in exchange for market access. — Project SyndicateDalia Marin, Professor of International Economics at the School of Management of the Technical University of Munich, is a research fellow at the Centre for Economic Policy Research and a non-resident fellow at Bruegel.

Contrary to expectations, the European elections this month did not bring major political changes to the continent. The political balance within the European Parliament remains more or less stable, notwithstanding a slight increase in seats held by the far right and, above all, by independents.While fears of a far-right wave were overblown, the big exception is France, where President Emmanuel Macron’s Renaissance party won only 14.6% of the vote, compared to 31.4% for Marine Le Pen’s right-wing National Rally. Macron immediately responded with the shocking announcement that he is dissolving the National Assembly and calling a snap election.Although the French constitution permits Macron to dissolve parliament if he determines that he no longer has a political mandate, French presidents have rarely taken this step. The only comparable precedent is Jacques Chirac’s 1997 decision to dissolve parliament, and that backfired spectacularly. Thus, Macron’s gambit is highly significant. Why did he do it? From one point of view, his decision was perfectly logical, given that he has struggled to secure a stable parliamentary majority ever since the 2022 election. For two years, he has tried to create a coalition at the National Assembly by reaching an arrangement with the traditional right. But these efforts have been unsuccessful.Coalitions are the rule in many European countries, but not in France. This is largely owing to the two-round voting system, which tends toward bipolarity, even though the broader political realm is tri-polar or even quadrupolar (extreme right, right, centre, and left). To come to power in the French system, you need to broaden your base to win at the second round. As long as National Rally was perceived as an extremist party, this was easily done. That is how Macron secured his victories in the 2017 and 2022 elections.But over the past 20 years, National Rally (previously the National Front) has gradually grown at the expense of the traditional right, breaking through the ceiling that once limited its influence. And in the European elections, it came out on top in almost every voting district, with support in the 30-40% range in many cases. No longer can the party simply be bypassed by appealing to the centre left and right.Moreover, Macron’s own support has fallen in recent years, partly because of his policy positions, but largely because of his authoritarian personality, arrogance, and apparent inability to listen even to his own camp. He is brilliant, but unbearably so, especially in the eyes of the working class.By surprising everyone with a snap election, Macron is hoping to shock the electorate out of its complacency about the far right and catch his opponents off guard. National Rally certainly did not expect such a quick decision, and nor did the conservative Republicans. Le Pen’s party will need to win 201 additional seats to secure an absolute majority.To avert that outcome, Macron must attract some share of voters from the traditional right and left. But this is going to be an uphill battle. Renaissance is not terribly attractive to these constituencies.Moreover, there is a huge risk that, in the second round, it will be squeezed between National Rally and the left, both of which decided to present one unique candidate in each district. To reach the second round, a candidate needs to secure at least 12.5% of registered voters, which means at least 20% of the votes (after accounting for abstentions). Given that Macron’s party secured only 14.6% of the votes on Sunday, it is easy to see how it could be toppled as the primary political force in the country.Indeed, it is already looking like Macron’s own party, which was never consulted, will lose at least 100 seats to either the Republicans or to the left. A rebellion within the ranks of Renaissance thus cannot be ruled out. Former prime minister Édouard Philippe, who aspires to succeed Macron, and who is upset by his decision to call an election, will try to take the lead. He is now in open conflict with Macron, and refuses to let the president run the show. Philippe does not want to pay the political price for Macron’s mistakes.The elections most likely will result in a victory for National Rally, reaffirming the results from the European elections. Even if Le Pen cannot secure an absolute majority, she may form an alliance with some segment of the traditional right or various independents. The traditional right is already on the verge of an explosion. The right-wing faction of the Republicans is calling for an alliance with National Rally, while the rest of the party is upset by that choice. The French political scene is on the verge of chaos, and apart from National Rally, all forces are in serious trouble.Macron has been unable to govern the country for two years, and his legitimacy has been considerably eroded. Feeling like he has nothing to lose, he is going “all in” with his current hand, as they say in poker. As in the past, he is confident that his personal involvement will allow him to regain lost ground. He has always had a very personalised vision of French politics, which he sees as organised wholly around himself.Moreover, Macron is betting that if National Rally does come to power, voters will get a taste of what it truly represents before the 2027 French presidential elections. Burdened with the actual responsibilities of governance, the party will no longer enjoy the benefits of political virginity. Macron wants to do to National Rally what François Mitterrand did to the right in 1986. If Le Pen’s bid for the presidency in 2027 fails, Macron can leave power with no regrets, claiming that he has done France a service. If he fails, his already damaged legacy will suffer another massive blow. — Project SyndicateZaki Laïdi is a professor at Sciences Po.

A new set of laws governing the use of artificial intelligence (AI) in the European Union will force companies to be more transparent about the data used to train their systems, prying open one of the industry’s most closely guarded secrets.In the 18 months since Microsoft-backed OpenAI unveiled ChatGPT to the public, there has been a surge of public engagement and investment in generative AI, a set of applications that can be used to rapidly produce text, images, and audio content.But as the industry booms, questions have been raised over how AI companies obtain the data used to train their models, and whether feeding them bestselling books and Hollywood movies without their creators’ permission amounts to a breach of copyright.The EU’s recently-passed AI Act is being rolled out in phases over the next two years, giving regulators time to implement the new laws while businesses grapple with a new set of obligations. But how exactly some of these rules will work in practice is still unknown.One of the more contentious sections of the Act states that organisations deploying general-purpose AI models, such as ChatGPT, will have to provide “detailed summaries” of the content used to train them. The newly established AI Office said it plans to release a template for organisations to follow in early 2025, following a consultation with stakeholders.While the details have yet to be hammered out, AI companies are highly resistant to revealing what their models have been trained on, describing the information as a trade secret that would give competitors an unfair advantage were it made public.“It would be a dream come true to see my competitors’ datasets, and likewise for them to see ours,” said Matthieu Riouf, CEO of AI-powered image-editing firm Photoroom.How granular these transparency reports end up being will have big implications for smaller AI startups and big tech companies like Google and Meta, which have put the technology at the centre of their future operations.Over the past year, a number of prominent tech companies, including Google, OpenAI, and Stability AI have faced lawsuits from creators claiming their content was improperly used to train their models. While US President Joe Biden has passed a number of executive orders focused on the security risks of AI, questions over copyright have not been fully tested. Calls for tech companies to pay rights holders for data have received bipartisan support in Congress.Amid growing scrutiny, tech companies have signed a flurry of content-licencing deals with media outlets and websites. Among others, OpenAI signed deals with the Financial Times and The Atlantic, while Google struck deals with NewsCorp social media site Reddit. Despite such moves, OpenAI drew criticism in March when CTO Mira Murati declined to answer a question from the Wall Street Journal on whether YouTube videos had been used to train its video-generating tool Sora, which the company said would breach its terms and conditions.Last month, OpenAI faced further backlash for featuring an AI-generated voice described as “eerily similar” to her own by actress Scarlett Johansson in a public demonstration of the newest version of ChatGPT. Thomas Wolf, co-founder of leading AI startup Hugging Face, said he supported greater transparency, but that sentiment was not shared across the industry. “It’s hard to know how it will work out. There is still a lot to be decided,” he said.Senior lawmakers across the continent remain divided.Dragos Tudorache, one of the lawmakers who oversaw the drafting of the AI Act in the European parliament, said that AI companies should be compelled to make their datasets public.“They have to be detailed enough for Scarlett Johansson, Beyonce, or for whoever to know if their work, their songs, their voice, their art, or their science were used in training the algorithm,” he said.A Commission official said: “The AI Act acknowledges the need to ensure an appropriate balance between the legitimate need to protect trade secrets and, on the other hand, the need to facilitate the ability of parties with legitimate interests, including copyright holders, to exercise their rights under Union law.”Under President Emmanuel Macron, the French government has privately opposed introducing rules that could hinder European AI startups’ competitiveness. Speaking at the Viva Technology conference in Paris in May, French finance minister Bruno Le Maire said he wanted Europe to be a world leader in AI, and not only a consumer of American and Chinese products.

The surprise in this month’s European Parliament elections was that the outcome everyone expected really did come to pass. To paraphrase a classic scene from the Marx Brothers: Europe may be talking and acting like it is moving to the radical right, but don’t let that fool you; Europe really is moving to the radical right.Why should we insist on this interpretation? Because most of the mainstream media has sought to downplay it. The message we keep hearing is: “Sure, Marine Le Pen, Giorgia Meloni, and Alternative für Deutschland (AfD) occasionally flirt with fascist motifs, but there is no reason to panic, because they still respect democratic rules and institutions once in power.”Yet this domestication of the radical right should trouble us all, because it signals a readiness by traditional conservative parties to go along with the new movement. The axiom of post-World War II European democracy, “No collaboration with fascists,” has been quietly abandoned.The message of this election is clear. The political divide in most EU countries is no longer between the moderate right and the moderate left, but between the conventional right, embodied by the big winner, the European People’s Party (comprising Christian democrats, liberal-conservatives, and traditional conservatives) and the neo-fascist right represented by Le Pen, Meloni, AfD, and others.The question now is whether the EPP will collaborate with neo-fascists. European Commission President Ursula von der Leyen is spinning the outcome as a triumph of the EPP against both “extremes,” yet the new parliament will include no left-wing parties whose extremism is even distantly comparable to that of the far right. Such a “balanced” view from the EU’s top official sends an ominous signal.When we talk about fascism today, we should not confine ourselves to the developed West. A similar kind of politics has been ascendant in much of the Global South as well. In his study of China’s development, the Italian Marxist historian Domenico Losurdo (also known for his rehabilitation of Stalin) stresses the distinction between economic and political power.In pursuing his “reforms”, Deng Xiaoping knew that elements of capitalism are necessary to unleash a society’s productive forces; but he insisted that political power should remain firmly in the hands of the Communist Party of China (as the self-proclaimed representative of the workers and farmers).This approach has deep historical roots. For over a century, China has embraced the “pan-Asianism” that emerged toward the end of the nineteenth century as a reaction against Western imperialist domination and exploitation.As historian Viren Murthy explains, this project has always been driven by a rejection not of Western capitalism, but of Western liberal individualism and imperialism. By drawing on pre-modern traditions and institutions, pan-Asianists argued, Asian societies could organize their own modernisation to achieve even greater dynamism than the West.While Hegel himself saw Asia as a domain of rigid order that does not allow for individualism (free subjectivity), pan-Asianists proposed a new Hegelian conceptual framework. Since the freedom offered by Western individualism ultimately negates order and leads to social disintegration, they argued, the only way to preserve freedom is to channel it into a new collective agency. One early example of this model can be found in Japan’s militarisation and colonialist expansion before WWII. But historical lessons are soon forgotten. In the search for solutions to big problems, many in the West could be newly attracted to the Asian model of subsuming individualistic drives and the longing for meaning in a collective project.Pan-Asianism tended to oscillate between its socialist and fascist versions (with the line between the two not always clear), reminding us that “anti-imperialism” is not as innocent as it may appear. In the first half of the twentieth century, Japanese and German fascists regularly presented themselves as defenders against American, British, and French imperialism, and one now finds far-right nationalist politicians taking similar positions vis-à-vis the European Union.The same tendency is discernible in post-Deng China, which political scientist A. James Gregor classifies as “a variant of contemporary fascism”: a capitalist economy controlled and regulated by an authoritarian state whose legitimacy is framed in the terms of ethnic tradition and national heritage. That is why Chinese President Xi Jinping makes a point of referring to China’s long, continuous history stretching back to antiquity. Harnessing economic impulses for the sake of nationalistic projects is the very definition of fascism, and similar political dynamics can also be found in India, Russia, Turkiye, and other countries.It is not hard to see why this model has gained traction. While the Soviet Union suffered a chaotic disintegration, the CPC pursued economic liberalisation but still maintained tight control. Thus, leftists who are sympathetic toward China praise it for keeping capital subordinated, in contrast to the US and European systems, where capital reigns supreme.But the new fascism is also supported by more recent trends. Beyond Le Pen, another big winner of the European elections is Fidias Panayiotou, a Cypriot YouTube personality who previously gained attention for his efforts to hug Elon Musk. While waiting outside Twitter’s headquarters for his target, he encouraged his followers to “spam” Musk’s mother with his request. Eventually, Musk did meet and hug Panayiotou, who went on to announce his candidacy to the European Parliament. Running on an anti-partisan platform, he won 19.4% of the popular vote and secured himself a seat.Similar figures have also cropped up in France, the United Kingdom, Slovenia, and elsewhere, all justifying their candidacies with the “leftist” argument that since democratic politics has become a joke, clowns might as well run for office. This is a dangerous game. If enough people despair of emancipatory politics and accept the withdrawal into buffoonery, the political space for neo-fascism widens.Reclaiming that space requires serious, authentic action. For all my disagreements with French President Emmanuel Macron, I think he was correct to respond to the French far-right’s victory by dissolving the National Assembly and calling for new legislative elections. His announcement caught almost everyone off guard, and it is certainly risky. But it is a risk worth taking. Even if Le Pen wins and decides who will be the next prime minister, Macron, as president, will retain the ability to mobilize a new majority against the government. We must take the fight to the new fascism as forcefully and as fast as possible. — Project SyndicateSlavoj Žižek, Professor of Philosophy at the European Graduate School, is International Director of the Birkbeck Institute for the Humanities at the University of London and the author, most recently, of Christian Atheism: How to Be a Real Materialist.

When the Nigerian government announced plans in April to develop a multilingual AI tool to boost digital inclusion across the West African nation, 28-year-old computer science student Lwasinam Lenham Dilli was thrilled.Dilli had struggled to scrape datasets from the Internet to build a large language model (LLM), used to power AI chatbots, in his native Hausa language as part of his final-year project at university.“I needed texts in English and their corresponding translation in Hausa but I couldn’t get anything online, (there was) no clean data,” Dilli told the Thomson Reuters Foundation.“(Creating local language LLMs) is a way to ensure that our local dialects and languages will not be forgotten or left out of the AI ecosystem,” he added. The world has been swept up in a whirlwind of AI mania, with tools such as OpenAI’s ChatGPT, Meta’s Llama 2, and Mistral AI captivating millions globally with their ability to generate human-like text. But for many tech-savvy Africans, the excitement has been tempered by a frustrating reality: when languages like Hausa, Amharic, or Kinyarwanda are entered into the chat, many of these advanced systems falter, often producing nonsensical responses.Technology experts warn the lack of LLMs in African languages will lead to the exclusion of millions of people on the continent, increasing both the digital and economic divide.The Nigerian government-led initiative to develop a multilingual LLM aims to level the playing field.“The LLM will be trained on five low-resource languages and accented English to ensure stronger language representation...for development of artificial intelligence solutions,” said Nigeria’s Digital Economy Minister Bosun Tijani in April. The government will partner with Nigerian AI startups, and local data will be collected by volunteers who are fluent in any of five Nigerian languages: Yoruba, Hausa, Igbo, Ibibio, and West African lingua franca-Pidgin.To build the model, the project will also draw on the expertise of more than 7,000 fellows from Nigeria’s tech talent programme — a government scheme to train three million people in skills such as coding and programming.Silas Adekunle, co-founder of Awarri, an AI startup that is part of the initiative, said building a nuanced AI tool that understood Nigeria’s unique language and cultural landscape presented many challenges.“We have so many different accents and languages, and this (LLM) will enable many people and developers to build products that leverage AI but are for the Nigerian market,” said Adekunle.“The scale of the project, especially with limited resources, has required us to be creative in how we train the model, gather the data, compute and label what we have.”Closing the AI language gapAfrica is home to more than 2,000 languages spoken across 54 countries, according to the United Nations Educational, Scientific and Cultural Organisation (Unesco).However, the majority of African languages remain underrepresented on the Internet. English dominates the digital space, accounting for around 50% of all websites, followed by Spanish, German, Japanese, and French.Along with the Nigerian government initiative, there are also a small but growing number of African startups rising to the challenge of developing AI tools in languages like Swahili, Amharic, Zulu and Sesotho. In Kenya, for instance, health tech firm Jacaranda Health has pioneered the first LLM operating in Swahili to improve maternal healthcare in East Africa.Built on Meta’s Llama 3 system, UlizaLlama (AskLlama) aims to refine Jacaranda Health’s SMS service for low-income Swahili-speaking expectant mothers who have queries ranging from dietary concerns and fetal movement to exercise during pregnancy.The platform currently provides pre-written automated responses, but once UlizaLlama is integrated by the end of June, it will tailor responses to individual needs, offering more detailed pregnancy guidance and emergency support.“A lot of these expectant moms can’t just do a Google search. UlizaLlama’s goal is to make sure that we get them the accurate answers in the fastest possible time,” Jay Patel, Jacaranda Health’s director of technology, told the Thomson Reuters Foundation.“We’re shooting for about 85% accuracy to start with and a faster response time. At the moment, it takes a few minutes to respond, but we are hoping to get that down to less than a minute in the future.”In South Africa, the Masakhane initiative is using open-source machine learning to translate African languages. Lelapa AI, a South African AI research lab, has pioneered VulaVula — a for-profit language processing tool that translates, transcribes and analyses languages in English, Afrikaans, Zulu and Sesotho.Data scarcity, ethical concernsBut AI experts say building LLMs in African languages poses significant challenges, ranging from availability of data to ethical concerns over consent, compensation and copyright.Many African languages are low-resource languages, meaning there is a scarcity of data to train these models effectively — unlike high-resource languages such as English or French.Michael Michie, co-founder of Everse Technology Africa, an AI startup building intelligence into data protection and privacy, said collecting the data needed to train LLMs also raised ethical questions.In many African communities, oral tradition predominates, and certain communities may not be interested in sharing their language to train LLMs and this should be respected.“There are currently no regulations or laws in African countries that address issues related to consent, privacy and compensation to communities when collecting data to train AI tools — this needs to be addressed,” said Michie.“There are questions of who owns the language and who benefits. There needs to be guidelines to prevent exploitation and ensure the development of these LLMs benefits the people they are meant to serve,” he added. Open-source initiatives like Creative Commons, which allow creators to legally share their work with specified conditions like ensuring attribution and non-commercial use, are also not a perfect solution, said some AI experts.“At the moment there’s this push of saying everything should just be under Creative Commons,” said Vukosi Marivate, associate professor of computer science at the University of Pretoria and co-founder of Lelapa AI. But if everything is open source, it may be harder to properly reimburse and acknowledge the original contributors to these language models, he said.“A lot of people are working on LLMs now because of the prestige, that’s where the money is, but we need to make sure that our languages are actually being taken care of.” — Thomson Reuters Foundation

During a visit to Australia this week, Chinese Premier Li Qiang made a classic goodwill gesture that boded well for relations between the two countries: he offered to send pandas.The offer comes as ties between Australia and its largest trading partner improve after a diplomatic dispute that lead to China imposing a raft of restrictions on Australian agricultural and mineral exports in 2020.Native to China, pandas have through the years become “envoys of friendship”, earning China’s outreach to countries it gifts the animals to the name of panda diplomacy. They have also been used to show Chinese anger.So what is panda diplomacy and how does it work?When did panda diplomacy start?Since its founding in 1949, the People’s Republic of China has used panda diplomacy to boost its international image, either by gifting or lending panda to foreign zoos as goodwill animal ambassadors.Former Chinese leader Mao Zedong in 1957 gifted a panda, Ping Ping, to the former Soviet Union to celebrate the 40th anniversary of the October Revolution that ushered in the Soviet regime.To further cement ties with its socialist allies, China dispatched another panda to the Soviet Union in 1959 and five more to North Korea between 1965 and 1980.In 1972, Beijing gifted two pandas, Ling Ling and Hsing Hsing, to the United States after then President Richard Nixon’s historic visit, in a sign of normalised China-US relations and marking a pivotal moment for China’s foreign policy.Since then, other countries including Japan, France, Britain and Spain have also been given panda.What’s the panda diplomacy policy?Since 1984, China stopped gifting pandas due to their dwindling numbers and began loaning them to overseas zoos instead, often in pairs for 10 years, with an annual fee of up to about $1mn.While keeping pandas can be costly for zoos, they are seen as drawcards for visitors and help generate income.The pandas typically return home to southwest China after the loan agreement ends. Panda cubs born overseas are no exception, and would be sent home between the age of two and four to join a Chinese breeding programme.How does it work?China has a history of using pandas to reward its trading partners. A 2013 Oxford University study said the timing of China’s lease of pandas to Canada, France and Australia “coincided with” uranium deals and contracts with these countries.The panda agreements with other countries, including Singapore, Malaysia and Thailand, also coincided with the signing of free-trade agreements.Sometimes, pandas are also used to express China’s displeasure with a nation.In 2010, China recalled two US-born pandas, Tai Shan and Mei Lan, after Beijing warned Washington against a scheduled meeting between then-President Barack Obama and the Dalai Lama, which Beijing views as a dangerous separatist. In a recent downturn in bilateral ties, Ya Ya, on loan to the US for 20 years, was returned in April 2023.Concerns over her health had also fanned nationalist sentiment on China’s social media, with animal advocates accusing the Memphis Zoo in Tennessee of providing inadequate care to the animal. In November last year, three other pandas left, leaving only four giant pandas on US soil.That month, Chinese President Xi Jinping then hinted that he was open to sending more pandas to the US after meeting with President Joe Biden in California, a gesture seen as Chinese willingness to improve ties.Are pandas still endangered?China’s domestic conservation programmes have seen the status of pandas improve from endangered to vulnerable.The population of giant pandas in the wild has grown from around 1,100 in the 1980s to 1,900 in 2023.There are currently 728 pandas in zoos and breeding centres around the world.

The multimillionaire tech investor Balaji Srinivasan made his name as an anti-government crusader in 2013, when he gave a talk about Silicon Valley’s “ultimate exit” from the United States – what he called the “Microsoft of nations”. Perhaps most memorably, Srinivasan described America’s “Paper Belt” – Washington with laws and regulation, Boston with higher education, Los Angeles with entertainment, and New York City with ads and publishing – as the modern-day Rust Belt.In his view, Silicon Valley was usurping all four cities, previously the centres of power in postwar America, by outpacing regulation, scorning academic prestige, introducing streaming services, and reinventing direct-to-consumer marketing. In the years that followed, Srinivasan doubled down on his techno-libertarian message. He gave prolix speeches about his contempt for government and was combative with his foes, often waxing lyrical about a “network state” or a new kind of polity where all decisions were made through ownership, consent, and contract.Then, in early 2017, Srinivasan deleted his Twitter history. Where had he gone? It turns out that the federal government had come knocking at his door, seeking his expertise. The newly elected president, Donald Trump, had tapped Srinivasan’s friend and fellow libertarian, tech investor Peter Thiel, to help assemble his cabinet, and Srinivasan was under consideration to lead the Food and Drug Administration. Years’ worth of strident anti-government pronouncements vanished the moment Srinivasan had a shot at old-fashioned political power.This was far from an isolated incident. In fact, such hypocrisy is the new norm. In recent years, techno-libertarians have been queuing to attach themselves, remora-like, to the US government. What’s happening? Is it simply disingenuousness, or does it reflect some deeper rationale?The answer has become increasingly clear: leading Silicon Valley techno-libertarians are against the state only insofar as it is not enriching them personally. When faced with the prospect of the government becoming a major client, once-principled opposition to state power dissipates.One can see this transformation in Thiel himself. In 2009, he declared that “the great task for libertarians is to find an escape from politics in all its forms.” But by 2016, Thiel was fully engaged in partisan politics, speaking at the Republican National Convention. In the intervening years, Palantir, the data-analytics firm that he co-founded, has grown into a behemoth, benefiting from huge government contracts. It now draws nearly half its revenue from the public purse.Another example is Marc Andreessen, a founder of the leading Silicon Valley venture-capital firm Andreessen Horowitz (known as a16z), where Srinivasan was briefly a partner. In October 2023, Andreessen wrote The Techno-Optimist Manifesto, a much-discussed screed praising the Promethean power of free markets and entrepreneurial technologists. “Government” did not appear once in the 5,000-word text, while the only two mentions of the “state” positioned it as the enemy.But the state is Andreessen’s bread and butter. It paid for the land-grant university where he helped develop the first internet browser. And, as Bloomberg reports, a16z is a familiar face in Washington these days and spends significantly more on lobbying than other venture funds to push its “American Dynamism” initiative, which consists of backing firms that chase government defence, energy, and logistics contracts.The internal logic of this shift can be explained by one of Thiel’s pieces of public writing, which are now few and far between. In 2020, he wrote a new preface to James Dale Davidson and William Rees-Mogg’s 1999 book, The Sovereign Individual: Mastering the Transition to the Information Age, which envisions the possibility of escape from the state, complete with cyber-currencies and the abandonment of conventional citizenship. Thiel identified two developments that the authors failed to account for: the rise of China and advances in artificial intelligence.In the Silicon Valley of the 1990s, it was possible to suppress the fact that government funding was behind the biggest breakthroughs, and instead to cultivate the myth of the self-made genius. But the meteoric rise of China in the new millennium suggested that another ingredient was necessary for tech supremacy: a state that was willing to deliver reams of personal information about its citizens. Tesla CEO Elon Musk, like Thiel, was supposedly once opposed to forms of mass surveillance – a position he has since reversed, given his recent trip to China to secure precisely that sort of data.While Tesla’s stock valuation has been sliding, Musk can still rely on the more robust elements of his portfolio: SpaceX, now the primary launcher of US satellites, and Starlink, its satellite internet service that is currently underpinning Ukraine’s war effort. These ventures, though, are more a reflection of the traditional military-industrial complex than a radical rethink of the relationship between a gifted cognitive elite and the state, as imagined in The Sovereign Individual.Talk of Silicon Valley’s exit from the US was always free-riding by another name, and now it is beginning to reach its ultimate, unvarnished form. Maybe techno-libertarians need a more accurate, if less glamorous, label. After all, they’re not forging a mysterious world beyond politics on the far edge of the continent or in the world’s oceans, let alone on distant planets, nor are they necessarily accelerating a descent into techno-feudalism. In fact, they’re nothing more than techno-contractors, submitting the next invoice to the Paper Belt. — Project SyndicateQuinn Slobodian, Professor of International History at the Frederick S. Pardee School of Global Studies at Boston University, is the author, most recently, of Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy.

The US Federal Reserve sets monetary policy by adjusting the interest rate big banks pay each other for overnight loans: the Fed funds rate.Changes in that rate ripple through the economy, affecting employment, output and the price of goods and services.The Fed and its vast global audience thought 2024 would be a rate-cut bonanza. But with inflation proving stickier than almost anyone predicted, those expectations are fading fast.Fed Chair Jerome Powell confirmed as much on June 12, when he and his fellow policymakers signalled there would be just one cut in 2024 and forecast more for 2025, reinforcing policymakers’ calls to keep borrowing costs higher for longer to suppress inflation.Traders now see just one or two rate cuts happening this year. That’s a big letdown from the roughly six they expected at the start of the year and the three that Fed officials pencilled in as recently as March.Some investors and economists say there’s a chance of no cuts at all this year.When inflation peaked above 7% in 2022, it reflected a broad-based increase in the price of goods and services. But now, with a key inflation measure back below 3%, price increases are being driven mainly by a persistent shortage of housing. Commodity prices and car insurance premiums are also contributing to the stickiness, keeping inflation above the Fed’s 2% target.Some also point to Powell himself for prematurely telegraphing interest-rate cuts, which ignited optimism in financial markets and fuelled economic activity.The Fed’s benchmark rate affects borrowing costs across the rate spectrum. Powell’s signalling that the Fed might hold the rate at the current level of 5.25-5.5% for longer means that loans for home and car purchases will continue to be much more expensive than they were before the Fed started raising rates in 2022.In fact, average mortgage rates in the US have stayed above 7% for the past two months. The cost of financing has hindered recent momentum in the housing market as prospective buyers move to the sidelines until financing costs ease.Despite the Fed’s stance to stay on hold, some of its global peers are moving forward with rate cuts anyway.Last week, the Bank of Canada led the Group of Seven in lowering borrowing costs, and the European Central Bank (ECB) followed suit. If those institutions, along with the Bank of England (BoE) and Reserve Bank of Australia move ahead with their own easing cycles, that risks driving down their currencies — raising import prices and undermining progress in getting inflation down.The ECB, for its part, all but ruled out a second interest-rate cut in July, and some also question if such a move would be wise at the following meeting in September.The BoE pivot to rate cuts is likely to take longer, with traders pricing the first reduction in the fall.Higher for longer keeps the dollar strong against other currencies, because the prospect of persistently lofty US rates makes investment in US securities more appealing on a relative-value basis, causing the greenback to appreciate.So with every tick higher in the dollar, things gets tougher for developing economies — especially for those that have dollar-denominated debt that becomes more expensive to pay back as their home currency weakens.The Fed’s move to signal fewer interest-rate cuts this year deepens its divergence from peers who have already begun to ease.For the world economy, divergence from the Fed matters. Higher US interest rates stoke dollar strength and will continue to lure foreign capital away from rival economies, especially emerging ones.The Fed’s policy direction impacts the whole financial world, especially emerging markets and economies where local currencies are pegged to the dollar.