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Digital euro sparks ‘sovereignty’ debate between EU governments and ECB

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A power struggle is unfolding between Europe’s most influential nations and the European Central Bank (ECB) over control of a new monetary tool that both sides fear could destabilize the continent’s banking system if mishandled.

At the heart of this dispute lies the digital euro, a virtual counterpart to euro coins and banknotes, as reported by POLITICO. The ECB has been developing this tool for years, envisioning a pan-European payment system that could rival American giants like Visa and Mastercard.

However, as the project neared implementation, controversy erupted. Certain EU governments, including France and Germany, contend that the ECB wields too much control over an issue of great importance: the amount of digital currency citizens will be permitted to hold in central bank-backed digital “wallets.”

While this may seem like a technical matter, the stakes are substantial. Policymakers and experts fear that if the cap is set too high, citizens could withdraw significant funds from traditional banks during a crisis, threatening the stability of the entire banking system.

Others argue that any restriction could infringe on personal financial freedoms and heighten fears of a “Big Brother” state, according to a diplomat who spoke with POLITICO.

This debate raises a fundamental question: Where does the ECB’s authority end, and that of EU member states begin? Thirty years after the ECB became the bloc’s chief monetary guardian, this dispute calls for a reassessment of the delicate balance between politics and central banking.

For some, it represents a necessary step back from the ECB’s excesses. In Frankfurt, however, officials perceive it as political encroachment into an area where it should not interfere. As one diplomat put it, this issue is about a “power struggle” rather than technical specifics.

Technocracy vs. democracy

Facebook’s 2019 attempt to launch the global cryptocurrency Libra shook the financial world, prompting over 100 central banks to explore the concept of a national digital currency.

While many of these initiatives have since faltered, the ECB remains committed, advocating for the digital euro as a transformative alternative to existing payment systems, aiming to lessen Europe’s dependence on dominant US and non-EU payment services, which currently handle around 70 percent of EU payments.

Yet the ECB’s progress has alarmed key member states, who view the project as overly “technocratic.” In Brussels, these nations are wielding their political influence to curb the ECB’s authority in ongoing negotiations over critical elements of the digital euro’s design.

Under the draft regulation being negotiated by lawmakers and governments, only the ECB would determine how much digital currency citizens can retain in their wallets.

Frankfurt views this as consistent with its vision of the digital euro as a reflection of Europe’s monetary sovereignty. Moreover, officials familiar with the discussions point out that the central bank is the sole authority permitted to adjust the money supply.

Germany, France, and the Netherlands oppose the initiative

At least nine countries disagree. Earlier this year, a group including Germany, France, and the Netherlands argued that Frankfurt’s exclusive monetary mandate should not be used to “limit their decision-making power,” according to meeting notes shared with POLITICO.

Diplomats also asserted “political supremacy” over the matter, emphasizing that the digital euro is not merely a monetary tool but a broader financial services issue that could reshape how Europeans make daily payments.

The EU treaty grants the ECB strong legal authority over money supply regulation, but only “qualified prerogatives” over banking supervision and payments.

The EU also explicitly allows the European Council and European Parliament to “take necessary measures for the use of the euro as the single currency” “without prejudice to the powers of the ECB.”

How will the ECB set the ‘holding cap’?

Some member states are also concerned about the affordability of a project designed by technocrats.

“You can create something in an ivory tower, but can it really be used in the market?” asked one Brussels-based executive familiar with the discussions.

Another concern is that allowing the ECB to set the cap would grant it exclusive control over a new tool with significant implications for banking stability.

The ECB argues that maintaining bank soundness is an essential part of its supervisory role, as banks are the main channel through which monetary policy is implemented.

However, many member states remain unconvinced. They argue that prudential responsibilities should be legislated and contend that protecting banks is part of their “patriotic duty.”

Concerns over ‘political pressure’ on the economy

Frankfurt, supported by the European Commission, warns that allowing governments to set the cap could subject the “independent” central bank to political pressure, according to sources familiar with the discussions.

Another European official fears that politicians could harm banks by yielding to public demands to raise the cap.

Ironically, many bankers are now siding with the ECB after it introduced several features aimed at mitigating risks to their business.

Yet member states have not backed down. One possible compromise is to let legislators set parameters within which the ECB would operate, while leaving the final decision to the bank.

Still, this approach may not guarantee the project’s success in reducing Europe’s reliance on the “overwhelming economic dominance” of US technology.

Ultimately, this initiative could become a liability if the ECB proceeds without adequate “democratic support.”

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Commonwealth summit: Calls for reparations from former colonies intensify

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The 56 nations of the Commonwealth have agreed to initiate a formal debate on reparations for the slave trade and other colonial injustices during their summit (CHOGM) held in Samoa this Saturday.

The Commonwealth Heads of Government Meeting (CHOGM) takes place every two years, with each of the Commonwealth’s 56 member states rotating as host. This year’s summit began on Monday in Samoa’s capital, Apia, and concluded on Saturday. The previous CHOGM was hosted by Rwanda in 2022.

Representatives from all 56 countries, most of which were part of the British Empire, attended the summit. However, some leaders, including Indian Prime Minister Narendra Modi and South African President Cyril Ramaphosa, opted to attend the BRICS summit in Russia instead. India’s Minister for Parliamentary Affairs, Kiren Rijiju, attended CHOGM in Modi’s place.

Climate change on the agenda

Climate change was a central topic at this year’s summit, with leaders working on the Commonwealth Ocean Declaration aimed at protecting global water bodies. Countries also discussed commitments to meeting climate finance targets.

According to the final declaration, “most member states” share “common historical experiences” of the “abhorrent” transatlantic slave trade and slavery itself, which had “lasting effects” on the populations involved.

The document also condemned “blackbirding”—the kidnapping of indigenous people from South Pacific islands to labor under British colonial rule, as seen in places like Fiji, Samoa, and Australia.

The declaration noted that Commonwealth leaders heard “calls for restorative justice discussions” related to the slave trade and agreed it was “time for a serious, realistic, and respectful conversation” about building “a shared future based on equality.” It emphasizes that the leaders will actively support these discussions.

British government resists calls for reparations

The Commonwealth leaders’ decision went against the position of the British government, which had declared that compensation should not be included in the final declaration.

Shortly before the summit, British Prime Minister Keir Starmer had announced that compensation would be excluded from the meeting’s agenda. However, speaking after the summit, Starmer acknowledged the “need for discussions” on the topic, while clarifying that “none of the discussions are about money” and that Britain’s position was “very clear” on this issue.

A government spokesperson reiterated Britain’s stance against reparations, including “non-financial” forms of “restorative justice,” stating that the UK would not accept any form of compensation.

The Starmer government ultimately prevented a separate declaration on restorative justice, which some Commonwealth nations had advocated.

Supporters of restorative justice argue it could take various forms, including educational programs, debt relief, and other forms of economic support.

King Charles III and Starmer address the issue

King Charles III sought to soften the British stance, acknowledging Britain’s “painful history” and emphasizing that while “no one can change the past,” there is always the potential to “learn from it” to guide the future.

Prime Minister Starmer also emphasized the importance of assisting Commonwealth nations in accessing climate finance, while affirming that the summit’s priority was addressing climate resilience.

British academic Michael Banner, Principal of Trinity College, Cambridge, has estimated that Britain’s historical debt to the Caribbean due to the slave trade alone could exceed £200 billion.

Asked about the shape of post-summit discussions, outgoing Commonwealth Secretary-General Patricia Scotland remarked that the Commonwealth would address the issue with the same careful approach it uses for other sensitive matters.

Caribbean nations propose a reparations plan

Caribbean leaders proposed a 10-point reparations plan during the summit, seeking to include a separate section on restorative justice in the final communiqué. The plan, advocated by Caricom—a coalition of 21 Caribbean nations—included calls for a formal apology, debt cancellation, technology transfers, support for public health initiatives, and the eradication of illiteracy.

Bahamian Prime Minister Philip Davis voiced strong support, stating that it was time for the Commonwealth to seek “justice” for the brutal legacy of slavery.

The legacy of the British slave trade

For over three centuries, between the 15th and 19th centuries, the British Empire was heavily involved in the slave trade. At least 12.5 million Africans were kidnapped and forced onto European and American ships, transported across the Atlantic, and sold as slaves in the Americas.

According to the British Parliament website, Britain’s involvement began in 1562, and by the 1730s, it was the largest slave-trading nation. British ships carried over three million Africans, primarily to Britain’s North American and Caribbean colonies.

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Nationwide strikes rock Greece: Ferry and public sector workers demand change

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Workers in Greece have gone on strike across multiple sectors, particularly among teachers and ferry workers.

Public school teachers held a protest march in central Athens yesterday (23 October), demanding improvements in working conditions.

Island ferry crews have also decided to extend their strike, which has kept ships in port since Tuesday, for an additional two days. Their demands include a 12% pay increase.

The 24-hour teachers’ strike was organized by the Greek civil servants’ union ADEDY, after the government attempted to block the action in court. ADEDY took over leadership from the teachers’ unions when the strike was challenged legally.

The unions are pressing for the restoration of workers’ rights that were severely restricted during the international bailouts between 2010 and 2018. As part of the bailout conditions, austerity measures were imposed, which included drastic cuts in public spending, tax increases, and labor reforms that weakened collective bargaining rights.

The teachers’ unions are specifically demanding pay raises and more permanent positions for temporary staff.

The government argued that the initial strike did not comply with recent labor reforms, while ADEDY accused the government of attempting to undermine workers’ constitutional right to strike.

On Wednesday, the Panhellenic Seamen’s Federation of Greece decided to extend their two-day strike, which began on Tuesday, for another two days. The union also warned that they may consider extending the strike even further.

This ongoing action could disrupt the travel plans of thousands of Greeks preparing for a long weekend on the islands ahead of Monday’s national holiday.

Other sectors involved in the strike include dockworkers, metalworkers, hotel and tourism employees, and catering and distribution workers. These groups are demanding better wages, stronger collective bargaining agreements, and improved health and safety regulations in the workplace.

Maritime workers from shipyards, dockers, and metalworkers staged a large-scale protest against the Ministry of Maritime Affairs. After the Ministry refused to meet their demands, the unions decided to occupy the Ministry and continue their strike on 24 October.

Maritime workers have extended their strike for 48 hours, covering 24 and 25 October.

Electricity distribution workers plan to strike on 1–2 November, followed by construction workers on 6 November.

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German companies in the US elections: Donations flow to Trump and Harris

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As the US presidential election on November 5 draws closer, German companies are making their political preferences known through donations.

According to an analysis by German Foreign Policy, most German companies are backing Donald Trump and other Republican candidates in the US election campaign.

DAX-listed companies Covestro and Heidelberg Materials are among the most vocal in their support, directing more than 80% of their campaign budgets toward Republican candidates. Only Allianz and SAP have leaned more towards Democrats than Republicans.

T-Mobile has spent the most, with over $800,000 allocated to political lobbying. BASF followed with $328,000, Fresenius with $204,000, Siemens with $203,000, and Bayer with $195,000.

German politicians are also engaging with Republicans, particularly those seen as having a “moderating influence” on the protectionist measures Trump is expected to push if re-elected.

While Germany’s Ministry of Economics is reassessing US-German supply chains and exploring alternative suppliers, companies are preparing for the potential need to increase local production in the US.

Millions in lobbying dollars

A majority of German companies are now backing Donald Trump in the 2024 election. While many supported Joe Biden in 2020, as of September 22, donations from these companies—totaling around $2.3 million—are now largely directed towards Republican candidates.

Based on Federal Election Commission figures analyzed by the Center for Responsive Politics, 84.7% of Covestro’s campaign contributions have gone to Republican candidates, up from 78% in 2020. Covestro produces polyurethane and polycarbonate raw materials and has most of its US facilities located in Republican-controlled regions.

Heidelberg Materials followed closely, contributing 83.5% of its donations to Republicans. Bayer (60.3%), Fresenius (60.2%), and BASF (58.9%) also leaned Republican. By contrast, Allianz and SAP supported Democratic candidates with 58% and 54.6% of their contributions, respectively.

Big spender: T-Mobile

As in the 2020 election, T-Mobile has been the biggest spender among German companies.

By October 14, T-Mobile had donated $379,000 to Democratic candidates and $422,000 to Republicans. BASF was the second-largest contributor, giving $135,000 to Democrats and $193,000 to Republicans.

Other notable contributors include Fresenius ($81,000 to Democrats, $123,000 to Republicans), Siemens ($95,000 to Democrats, $108,000 to Republicans), and Bayer ($73,000 to Democrats, $122,000 to Republicans).

Meanwhile, German automakers such as BMW, Mercedes, and Volkswagen, along with Infineon, Munich Re, and Deutsche Bank, made more modest contributions ranging from $0 to $20,000.

German companies set up political action committees for donations

In the US, corporations are not allowed to directly sponsor political parties or candidates; such contributions are only permitted at the local or regional level. As a result, many companies establish Political Action Committees (PACs) to raise funds from their executives and managers.

Bayer, for example, stated: “The Bayer PAC allows employees to collectively donate to candidates who share our interests. Eligible candidates must be familiar with issues affecting the company, chair relevant committees or hold key positions, or represent states where the multinational has subsidiaries.”

Big Pharma vs. Harris

Bayer has expressed dissatisfaction with the Democrats’ healthcare policies, which aim to reduce living costs for Americans. Conservative German media outlets, such as FAZ, have criticized these policies—particularly those targeting high food prices—as “economic populism.” Under the Inflation Reduction Act (IRA), the Biden administration empowered Medicare to negotiate drug discounts with pharmaceutical companies.

In August, President Biden and Vice President Kamala Harris announced significant price reductions for ten commonly used drugs, including Bayer’s blood thinner Xarelto, which dropped from $517 to $197 per month. At a campaign rally in Maryland, Biden declared, “We beat Big Pharma.”

Cooperation with Trump on glyphosate cases

Bayer is also hopeful that a Republican win could aid its efforts to fend off further lawsuits related to glyphosate. The Trump administration had previously intervened in a compensation case in Bayer’s favor during his first term.

The company also expects to benefit from Trump’s plans for deregulating environmental protections. One of Trump’s first acts in office in 2017 was to replace the head of the US Environmental Protection Agency (EPA).

In addition, large corporations such as BASF and Fresenius support the Republicans’ plan to cut corporate taxes from 21% to 15%, in contrast to the Democrats’ proposal to raise the rate to 28%.

The German government’s targeted support for US Democrats

German companies are not exclusively supporting Republicans. Some are backing conservative-leaning factions of the Democratic Party, such as the Blue Dog Coalition and Moderate Democrats.

For example, BASF made one of its largest donations—$8,000—to Democrat Debbie Dingell, who has fought against groundwater contamination caused by BASF’s Wyandotte plant in Michigan.

German companies are also selectively funding Republicans in states where they have operations. This approach aligns with the strategy of Michael Link, the German government’s coordinator for transatlantic cooperation. Link has spent the past two years engaging with Republican governors and senators representing states where major German firms are based. While many of these governors support Trump, they are primarily focused on their own states’ interests and do not want a trade war with Europe, Link explains.

Berlin’s outreach to ‘moderate’ republicans

The German government is working hard to establish connections with Republicans who might temper Trump’s isolationist agenda, writes the Financial Times (FT).

According to the FT, a crisis management group involving Link, officials from the Foreign Office, and staff at the German Embassy in Washington is preparing for a possible change in US leadership.

The German Institute for Economic Research (IW) estimates that Trump’s proposed 60% import tariffs on Chinese goods and 10% tariffs on imports from all other countries could cause Germany’s GDP to shrink by more than 1% by 2028. If China retaliates, the economic impact would be even greater.

Ministry of Economics analyzes supply chains

In response to Trump’s proposed tariffs, Germany’s Federal Ministry of Economics and Technology is reviewing transatlantic supply chains and exploring alternative suppliers for raw materials and high-tech products currently sourced from the US.

German companies in sectors like engineering are also investigating the potential need to shift production to the US. “The trend toward localized production will only intensify,” predicts Christoph Schemionek, a representative of the German Chamber of Industry and Commerce (DIHK) and the Federation of German Industries (BDI) in Washington.

Meanwhile, the EU is preparing its own responses. While seeking a negotiated agreement, the EU stands ready to defend itself if necessary, sources say. The IW foresees “aggressive bilateral negotiations with short-term benefits” as a likely outcome.

The EU has also started compiling a list of US products that could face retaliatory tariffs if negotiations break down.

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