Category: Economy

  • European Regulators Step In to Address German holding FWU AG Insolvency Crisis

    Insolvency Crisis – The recent insolvency declaration by the German holding company, FWU AG, has sent ripples across Europe, impacting thousands of policyholders in Austria, Belgium, France, Germany, Italy, Luxembourg, and Spain. This move came alongside a suspension of payment filed by its Luxembourg subsidiary, FWU Life Insurance Lux S.A. (FWU Luxembourg), with the District Court of Luxembourg.

    Events Unfolded

    On July 19, 2024, FWU AG declared insolvency due to over-indebtedness to the Local Court of Munich. On the same date, FWU Luxembourg informed its national supervisory body, the Commissariat aux Assurances (CAA), of its inability to meet regulatory capital requirements. In response, the CAA decided to freeze the subsidiary’s assets and suspend outgoing payments to protect policyholders’ interests.

    Shortly after, FWU Luxembourg sought a formal suspension of payments, an application accepted by the Luxembourg court on August 2, 2024. Maître Yann Baden was appointed as an administrator to oversee the company’s asset and liability management, with the suspension limited to a six-month period.

    Meanwhile, in Austria, FWU Life Insurance Austria AG continues to operate under the Austrian Financial Market Authority (FMA) but has halted new business underwriting. Unlike its Luxembourg counterpart, FWU Austria is not in insolvency proceedings.

    What This Means for Policyholders

    European policyholders affected by FWU AG’s insolvency face significant uncertainty. To document guidance and coordinate cross-border responses, the European Insurance and Occupational Pensions Authority (EIOPA) stepped in. EIOPA, while not widely known by the general public, plays a crucial role in ensuring fair treatment and collaboration among national regulators. It provides a framework to protect policyholder interests during financial crises.

    EIOPA advises affected policyholders to thoroughly read their insurance contracts and seek professional advice from insurers, intermediaries, or consumer associations. The appointed administrator is exploring solutions for FWU Luxembourg, potentially involving restructuring or liquidation.

    Efforts in Supervision and Coordination

    National regulatory bodies across Europe are working collaboratively to manage the impact of FWU’s situation. EIOPA’s role, though non-interventionist, facilitates effective cooperation between these authorities through supervision and information exchange. Regulatory bodies involved in this effort include:

    • Austria: Finanzmarktaufsicht (FMA)
    • Belgium: L’Autorité des services et marchés financiers (FSMA)
    • France: L’Autorité de contrôle prudentiel et de résolution (ACPR)
    • Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)
    • Italy: Istituto per la vigilanza sulle assicurazioni (IVASS)
    • Luxembourg: Commissariat aux Assurances (CAA)
    • Spain: Dirección General de Seguros y Fondos de Pensiones (DGSFP)

    EIOPA serves mainly as a coordinator, supporting national efforts and fostering fairness in how the policyholders are treated across various jurisdictions.

  • Investigation Goliath: Suspected ringleaders of international crime group charged with €93 million VAT fraud

    (Luxembourg, 9 August 2024) – Three suspected ringleaders of an international criminal group were indicted yesterday at the Regional Court of Dusseldorf (Germany) for a €93 million VAT fraud, following an investigation by the European Public Prosecutor’s Office (EPPO) in Hamburg, code-named Goliath. The three were charged with criminal association and VAT fraud on a large scale. 

    Two of the defendants remain in pre-trial detention. One of the suspects was arrested during an action carried out by the EPPO on 22 November 2023, targeting the international criminal ring. Another suspect – a Danish citizen who had fled to Africa to escape detention – was arrested in Nairobi (Kenya) and deported on 5 June 2024. 

    The defendants are believed to be the ringleaders of a criminal organisation, active in the international trade of consumer electronics (mainly AirPods). They are suspected of evading tax by means of a VAT carousel fraud – a complex criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax – with estimated losses to the EU and national budgets of at least €93 million.

    According to the investigation, the suspects established companies in Germany and other EU Member States, as well as in non-EU countries, in order to trade the goods through a fraudulent chain of missing traders – who would vanish without fulfilling their tax obligations. Other companies in the fraudulent chain would subsequently claim VAT reimbursements from the national tax authorities.

    If convicted, the defendants face up to 10 years of imprisonment.

    This investigation, which counted on the support of Europol, German tax agencies and several national police forces, has stretched across Denmark, France, Germany, Hungary, Lithuania, the Netherlands, Sweden and Switzerland. 

    Earlier in this investigation, the EPPO seized 1 800 AirPods, as well as cash, two luxury cars, worth a combined €550 000, and a high-end watch, worth €907 000.

    All persons concerned are presumed to be innocent until proven guilty in the competent German courts of law.

    The EPPO is the independent public prosecution office of the European Union. It is responsible for investigating, prosecuting and bringing to judgment crimes against the financial interests of the EU.

  • Serbia is preparing a great economic coup in the EU

    Serbia plans to take one of the leading places in the supply of lithium to the markets of European countries. The country’s president, Aleksandar Vucic, noted the possibility of producing about 58,000 tons of lithium per year in local enterprises.

    If all this metal were sent to the European Union (EU), it could be used to make batteries for 1.1 million electric vehicles. Thus, Serbia will be able to capture about 17% of the lithium market in the EU during the energy transition.

    The Serbian leader noted that Belgrade is conducting negotiations on this matter with a number of European companies, including Mercedes, Volkswagen and Stellantis.

    At the same time, Vucic considers it necessary to use most of this metal for the production of batteries and catalysts in the country.

     German Chancellor Olaf  Scholz attended on July 19a “critical raw materials summit” in the Serbian capital where a memorandum of understanding between the EU and Serbia’s government on a “strategic partnership” on sustainable raw materials, battery supply chains and electric vehicles was signed Germany is also interested in the use of this material in the production of equipment.

    The decision to stop lithium development jointly with the Australian-British company Rio Tinto was made in 2022.

    This was preceded by environmental protests, whose participants opposed the mining of the lithium-bearing mineral jadarite in the area of the city of Loznica. But a Serbian court overturned this decision recently.

    Illustrative photo by Pixabay: https://www.pexels.com/photo/round-brown-and-grey-metal-heavy-equipment-on-sand-33192/

  • EIOPA’s Risk Dashboard: A Stable Yet Cautionary Outlook for Occupational Pension Funds

    The European Insurance and Occupational Pensions Authority (EIOPA) released its latest Risk Dashboard, providing insights into the health of Europe’s occupational pension funds, officially known as Institutions for Occupational Retirement Provision (IORPs). The findings indicate an overall stable risk landscape; however, significant concerns regarding market risks persist amid ongoing volatility and real estate market vulnerabilities.

    The report reveals that the exposure of IORPs to market and asset return risks remains high due to persistent market fluctuations. The macroeconomic landscape is displaying medium-level risks, with projected GDP growth across major geographical areas showing some positive trends but still falling short of historical averages. This tempered outlook reflects the complexities and uncertainties facing the European economies as they navigate recovery pathways.

    Credit risks are meanwhile stable at a medium level; however, there has been an increase in credit default swaps (CDS) spreads for corporate bonds noted by the end of June 2024. In contrast, government bond spreads have remained largely consistent, suggesting a differentiated risk environment between corporate and sovereign borrowing.

    High levels of volatility have been observed in both fixed income and equity markets, as the report highlights a noticeable decline in real estate prices across the Euro Area. This decline is primarily attributed to challenges in the commercial real estate sector, which remains a critical area of concern for pension funds reliant on steady asset performance. However, there is a silver lining; recent annual data shows a rebound in IORPs’ portfolio performance for 2023, mainly driven by positive market returns.

    Reserve and funding risks for defined benefit IORPs are assessed as unchanged at a medium level. The financial robustness of these funds continues to be supported by rising interest rates as of the first quarter of 2024. Additionally, concentration risks have decreased compared to the previous quarter, reflecting a more diverse investment portfolio among IORPs. Notably, the median exposure of IORPs to banks and non-banking financial activities has seen a slight uptick.

    Furthermore, all other risk categories currently assess at medium levels, but there is a growing concern related to digitalization and cyber risks. The report indicates a potential increase in these risks over the next 12 months, underscoring the need for IORPs to bolster their cybersecurity measures as they adapt to an increasingly digital landscape.

    EIOPA’s Risk Dashboard provides a comprehensive overview of the vulnerabilities within the IORP sector of the European Economic Area (EEA), drawing from regulatory reporting from 625 IORPs. It encompasses both defined contribution (DC) and defined benefit (DB) schemes, offering a nuanced look at the financial health and risks facing these pension plans.

    As Europe grapples with the dual pressures of economic recovery and market volatility, EIOPA’s insights serve as a timely reminder of the complexities influencing occupational retirement provision. While the current risk assessment leans towards stability, the identified risks highlight the necessity for vigilance and proactive management within the IORP sector to safeguard the retirement savings of millions across Europe.

  • Poland’s Railway Transformation: A €230 Million Investment in Green Energy

    On July 29, 2024, a significant step forward for Poland’s railway system was announced with the European Investment Bank (EIB) extending a loan of PLN 1 billion (over €230 million) to Polska Grupa Energetyczna (PGE), the country’s largest utility provider. This funding aims to modernize the power systems of Poland’s railway network, paving the way for greener and faster services in the coming years. The ambitious project, slated for completion by 2028, marks the EIB’s sixth contract with PGE, reflecting a strong relationship between the two entities. Currently, PGE has credit lines with the EIB totaling €1.3 billion.

    EIB Vice-President Teresa Czerwińska emphasized the importance of the project, stating, “We are a proven partner for large infrastructure investments in Poland. The modernization of railway lines enhances the quality of life for residents and is beneficial for business. It is also conducive to sustainable development, which is a key priority for the European Union.”

    The essence of this project lies in its capacity to reshape the energy landscape of rail transport in Poland. The financing will cover the construction of 43 new electrical substations and the modernization of an additional 24. These substations are crucial for converting alternating current (AC) to direct current (DC), an essential process for powering trains efficiently. Furthermore, the investment will support the development of high-voltage and medium-voltage power lines, enhancing the overall electrical infrastructure needed to support the railway network.

    Przemysław Jastrzębski, PGE Group Management Board Vice-President, pointed out that the advancement of railway power systems is imperative to meet the specific requirements of the sector. He stated, “Cooperation with the EIB gives us the tools we need to carry out those tasks. Thanks to the obtained funds, we will be able to invest in modern power infrastructure and develop innovative renewable energy projects.” One such project includes recuperating and storing energy generated from braking trains, a significant innovation towards achieving Poland’s greener energy goals.

    The Modernisation of Power Systems (MUZa) investment project primarily focuses on enhancing railway safety, increasing rail line capacity, and improving train speeds, ultimately reducing journey times for passengers. This alignment with the European Union’s sustainable transport goals will facilitate regional integration, alleviate road traffic congestion, and reduce energy consumption, air pollution, and noise across Poland.

    The EIB, being the long-term lending institution of the European Union, plays a pivotal role in financing projects aligned with EU policy objectives. With a commitment to supporting €1 trillion in climate and environmental sustainability investments by 2030, the loan to PGE is a beacon of the EU’s ambition for a more sustainable future.

    PGE is not just leading the charge with this project; it is also a crucial player in the broader context of energy transition within the EU. The company’s strategic goal is to achieve climate neutrality by 2050, and initiatives like the Green Rail program aim to provide the rail transport sector with fully clean energy from renewable sources. With a target of 85% of energy consumption from renewable sources by 2030, PGE is actively working towards innovative solutions, including energy storage technologies.

    In conclusion, Poland’s railway modernization initiative represents a critical investment in the country’s green infrastructure, one that aligns with the broader objectives of the European Union. This project not only aims to improve transportation efficiency and safety but also contributes to the EU’s sustainability goals, showcasing how regional infrastructure projects can foster economic growth while steering towards a greener planet.

  • Ukraine will need nearly nine billion US dollars to restore its cultural sites and tourism, according to UNESCO

    Ukraine will need almost nine billion US dollars over the next decade to rebuild its cultural sites and tourism industry after the Russian invasion and war, UNESCO has announced, the Associated Press reported, cited by BTA.

    According to UNESCO estimates, the country’s related cultural and tourism sectors have lost more than US$19 billion in revenue since the war began two years ago. The UN agency said the fighting damaged 341 cultural sites across Ukraine and caused $3.5 billion in damage, including in the capital Kyiv and the cities of Lviv in the west and Odesa in the south.

    “Odessa Cathedral is an example of such a site that has been seriously damaged,” said Chiara Deci Bardeschi, who heads UNESCO’s office in Ukraine. “It is a symbol of the whole community…with deep spiritual and historical significance”.

    In July 2023, UNESCO strongly condemned the “brazen attack by Russian forces” on historic buildings in the center of Odessa, designated last year by the UN agency as an endangered world heritage site. The attack killed at least two people and damaged several sites, including the late 18th-century Savior and Transfiguration Cathedral, which is the city’s main Orthodox church.

    Its original construction was destroyed in 1936, the temple was rebuilt in 1999-2003.

    UNESCO said the deliberate destruction of cultural heritage sites, including religious buildings and artefacts, could be considered a war crime.

    The International Criminal Court brought charges of war crimes, including targeted attacks on historic religious monuments and buildings, in a case involving Mali in 2015.

    In Ukraine, 1,711 objects of cultural infrastructure were damaged or destroyed as a result of Russian aggression, Ukrinform reported in November 2023.

    The cultural infrastructure suffered the greatest losses and damages in Donetsk, Kharkiv, Kherson, Kyiv, Mykolaiv, Luhansk, Zaporozhye regions and the city of Kyiv, reports the Ministry of Culture and Information Policy of Ukraine.

    The largest group of cultural objects that suffered damage or were destroyed were club facilities, which made up 49% of the total number of cultural infrastructure objects that suffered damage.

    A total of 844 clubs, 603 libraries, 133 art schools, 100 museums and galleries, 31 theater buildings, cinemas and philharmonic halls were damaged or destroyed.

    Objects of cultural infrastructure are affected in 262 territorial communities (17.8% of the total number of territorial communities), in particular in the regions of Donetsk (83%), Sumy (53%), Kharkiv (52%), Chernihiv (46% ), Kherson (43%), Luhansk (42%), Mykolaiv (42%), Zaporizhia (36%), Kyiv (26%), Dnipropetrovsk (19%), Zhytomyr (12%), Odessa (8%), Khmelnytskyi (8%), Cherkasy (5%), Lviv (4%), Vinnytsia (3%), Zakarpattia (2%), Poltava (2%) and in the capital Kyiv itself.

    The Ministry notes that as of the end of October 2023, almost the entire territory of Luhansk Oblast and significant parts of the territories of Kherson, Zaporozhye, and Donetsk Oblasts remain temporarily occupied by the Russians. This makes it impossible to calculate the exact number of cultural infrastructure objects affected.

    Illustrative Photo: Old Odessa, postcard

  • The “Kalashnikov” Group increases the production for the first half of the year by 50%

    The “Kalashnikov” Group has increased its military and civilian production by 50% in the first half of the year compared to the same period last year, it said in a press release onc.

    It is in all directions – from the implementation of the volume of military production to the ongoing production of metal burning machines and instruments,” he says in summary by “Kalashnikov”.

    From there, they note that the distribution for the production of rope enters the second half of the year with new additional contracts. And the division for the production of metal burning machines – the largest volume of orders from external customers is 13%.

    In addition to the price, there is also a stable intepec to the metal burning machines 250ITBM. “Compared to the same period last year, during the first half of this year almost twice as many metal burning machines 250 and TBM were fined.

    The division for the special technique fulfilled the requirements of the government’s administrative order to 100%.”

    Currently, there is active exploitation of new production lines, where “from the beginning of the year, several children’s units of new equipment have been produced”.

    Photo: Mikhail Kalashnikov in Army Museum, Moscow, Russia (2007),

    Mikhail Kalashnikov

  • The Scale-up gap: EIB Urges More Investment for Tech Innovators

    European technology companies are encountering a hurdle, according to a report, from the European Investment Bank (EIB). The report underscores the need for financing to drive innovation and expansion. Maintaining its global technology leadership position is a focus for Europe, and the report stresses that overcoming investment obstacles and enhancing support are vital for nurturing a thriving tech sector.

    The scale up gap

    The study titled “The scale up gap; financial market constraints holding back firms in the European Union” sheds light on Europe’s struggle to attract domestic funding for local innovations despite being appealing to foreign venture capital investors. The report highlights that European venture capital investments are significantly lower compared to those in the United States, limiting capital accumulation, for emerging companies poised to lead the wave of advancements.

    They possess the potential, for growth and job creation yet encounter obstacles in securing the necessary funding for expansion. According to the report, European scale ups receive 50% capital than their Silicon Valley counterparts after a decade of operation, often turning to investors for financial support.

    EIB President says the play a role in supporting innovation

    Nadia Calviño, President of the EIB, stressed the institution’s dedication to fostering innovation in Europe. “The EIB Group plays a role in supporting Europe’s innovation ecosystem,” she remarked. Nonetheless, the report underscores the need, for efforts to strengthen Europe‘s capital markets by boosting venture capital activities.

    blue and yellow building under blue sky during daytime, EIB
    Photo by Mika Baumeister on Unsplash

    The report also highlights the importance of government efforts, in encouraging investment offering stage financial support and enhancing cooperation between EU and national policies to create a conducive environment for innovative businesses.

    Looking ahead, Ursula von der Leyen, the President of the European Commission who recently secured a term, has stressed the urgency of implementing measures to ease funding for expanding companies. By targeting pension funds and insurance companies, which constitute the EU’s largest market sector, there is an opportunity to utilize substantial national savings for investing in innovative enterprises.

    European Tech Champions Initiative

    The insights and suggestions outlined in this EIB report come at a juncture. The European Tech Champions Initiative (ETCI) introduced earlier in 2023 aims to offer late-stage growth funding to innovators within the EU. With a fund of €3.85 billion, this initiative has already attracted a €10 billion, in investments strengthening the venture capital markets.

    As European businesses navigate through an evolving global technology landscape, focusing on enhancing financing strategies becomes increasingly crucial.
    The EIB’s findings shed light on a way to strengthen and enhance Europe‘s tech industry, highlighting the need, for collaboration between private entities to address funding challenges and drive innovation. This initiative not aims to ensure Europe’s advancement but also to promote the creation of jobs and sustainable development, throughout the region.

  • European Commission Probes Delivery Hero and Glovo for Potential Anticompetitive Practices

    In a bold move to safeguard competition in the burgeoning online food delivery market, the European Commission has launched a formal antitrust investigation into two of Europe’s largest food delivery companies, Delivery Hero and Glovo. This investigation could have significant implications for consumers and workers across the European Economic Area (EEA).

    What’s happening?

    The European Commission is scrutinizing whether Delivery Hero and Glovo have engaged in cartel-like behavior, which includes potentially dividing up geographic markets and sharing sensitive commercial information such as pricing strategies and operational capacities. Additionally, there are concerns that the two companies may have agreed not to poach each other’s employees, a practice that could stifle job opportunities and wage growth for workers in the sector.

    The Companies in Question

    • Delivery Hero: Headquartered in Germany, this company operates in over 70 countries and partners with more than 500,000 restaurants. It is listed on the Frankfurt Stock Exchange.
    • Glovo: Based in Spain, Glovo is active in more than 1,300 cities across 25 countries. In July 2022, Delivery Hero acquired a majority stake in Glovo, making it a subsidiary.

    Why It Matters

    The online food delivery market is rapidly growing, and ensuring fair competition is crucial for maintaining reasonable prices and diverse choices for consumers. Margrethe Vestager, the European Commission’s Executive Vice-President in charge of competition policy, emphasized the importance of this investigation:

    “Online food delivery is a fast-growing sector, where we must protect competition. This is why we are investigating whether Delivery Hero and Glovo agreed to share markets and not to poach each other’s employees. If confirmed, such conduct may amount to a breach of EU competition rules, with potential negative effects on prices and choice for consumers and on opportunities for workers.”

    Background and Next Steps

    The Commission’s concerns stem from Delivery Hero’s minority shareholding in Glovo from July 2018 until its full acquisition in July 2022. During this period, the companies might have engaged in practices that violate EU competition rules, specifically Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement.

    The investigation follows unannounced inspections at the companies’ premises in June 2022 and November 2023. These inspections were part of a broader inquiry into potential collusion in the food delivery sector.

    Implications for the Market

    This investigation is particularly significant as it marks the Commission’s first formal probe into no-poach agreements and anticompetitive practices involving minority shareholdings. If the allegations are proven, it could lead to substantial changes in how companies operate within the online food delivery market, ensuring a more competitive environment that benefits both consumers and workers.

    What’s Next?

    The Commission will conduct an in-depth investigation, which will be prioritized but has no set deadline. The duration will depend on various factors, including the complexity of the case and the level of cooperation from the companies involved.

    For those interested in the nitty-gritty details of the Commission’s actions against cartels and how to report suspicious behavior, more information is available on the Commission’s dedicated cartels website. Updates on this investigation will be posted on the Commission’s competition website under case number AT.40795.

    As this investigation unfolds, it will be crucial to monitor its impact on the online food delivery market and the broader implications for competition policy in Europe. This case could set a precedent for how similar issues are handled in the future, ensuring a fair and competitive market for all.

  • EU Intensifies Pressure: Six-Month Extension of Russia Sanctions

    Brussels, [Current Date] – The European Council has chosen to extend its ranging sanctions, against Russia, for an additional six months due to the ongoing aggression and destabilizing actions by Russia in Ukraine. These measures, which were initiated in 2014 and amplified after Russia’s aggression in February 2022, will remain effective until January 31, 2025.

    These sanctions are among the responses ever crafted by the EU. They cover sectors such as trade, finance, technology, dual use goods, industry, transport and luxury items. A key measure involves prohibiting the import or transfer of oil and specific petroleum products from Russia to the EU. This significantly impacts the revenue for funding military activities.

    Financial Isolation and Media Restrictions

    An aspect of the sanctions is isolating the economy financially. Several major Russian banks have been disconnected from the SWIFT payment system to disrupt transactions and economic stability, in Russia.
    In addition, the European Union has taken action, against media outlets supported by the Kremlin that play a role in spreading information, suspending their broadcast licenses to limit the circulation of misleading narratives across Europe.

    Moreover, the sanctions are crafted to be flexible and resilient against any attempts to evade them. Specific strategies have been implemented to detect and prevent any endeavors to work around the imposed limitations, ensuring that the sanctions remain effective over a period.

    Continued Violations and International Law

    The European Council has stressed that it is justifiable to uphold these sanctions as Russia persists in actions that violate international law, particularly regarding the prohibition on using force. These actions represent a breach of standards and responsibilities warranting an ongoing and possibly escalated response from the global community.

    Historical. Broadening Measures

    The initial set of sanctions began with Decision 2014/512/CFSP approved on July 31, 2014 in response to Russia’s actions in Ukraine, such as the annexation of Crimea. Over time, these measures have expanded to encompass a range. In addition to sector sanctions, the EU has imposed controls on economic dealings with Crimea, Sevastopol and areas in Ukraine’s Donetsk, Kherson, Luhansk and Zaporizhzhia regions not, under government control.

    Sanctions, like freezing assets and imposing travel restrictions, have been enforced on various individuals and organizations connected to the actions.

    Since February 24, 2022, the EU has implemented 14 sets of sanctions in response to Russia’s full-scale invasion of Ukraine. These actions are notably extensive and intense, reflecting the seriousness of the situation and the EU’s dedication to countering aggression.

    EU’s Support for Ukraine

    In its conclusions from June 27, 2024, the European Council reaffirmed its backing for Ukraine‘s independence, sovereignty and territorial integrity within recognized boundaries. The EU’s support encompasses financial, economic, humanitarian aid along with diplomatic assistance. The Council strongly condemned Russia’s escalated attacks targeting civilians and critical infrastructure like energy facilities.

    The European Union’s choice to extend sanctions highlights its position against activities that threaten global peace and security. By prolonging these measures, the EU aims to maintain pressure on Russia while advocating for a resolution in line, with law.