Moldova’s new prime minister promises to clean up the country.
Good morning and welcome to Europe Express.
A rare window of opportunity has opened in EU’s eastern neighbour Moldova, long hobbled by political infighting, corruption and political stasis. But following elections this summer, both the president and the prime minister now hail from the same pro-European party, raising hopes for more concrete results in fighting graft and attracting investment. Our profile this week looks at the country’s recently-elected prime minister, Natalia Gavrilita, who spoke to Europe Express during her first trip to Brussels.
The month of September is coming to an end today, and so is the deadline for Hungary to submit a revised recovery plan for its share of the bloc’s €800bn post-pandemic fund. We look at what the outstanding issues are and why Brussels is unlikely to go for the nuclear option of withholding all the money.
We’ll also unpack the reasons behind Greece’s decision to buy three French frigates on the heels of Paris’s botched submarine deal with Australia.
And parties locked in months-long negotiations to form a new government have inched closer to an agreement . . . no, not in Germany, but in the Netherlands. Unsurprisingly, the current four-party coalition is set to stay on — and still with Prime Minister Mark Rutte at its helm, despite all the recent scandals involving him and his cabinet.
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How do you solve a problem like Moldova? New prime minister Natalia Gavrilita is finding that it is a lot easier when all the different parts of government are pulling in the same direction, writes Henry Foy in Brussels.
It has been 12 years since one party last controlled both Moldova’s parliament and its presidency, and back then that was the crusty Leninist communists. Today, after years of unstable governments and infighting administrations, Gavrilita’s liberals are in charge — backed by the first majority of the popular vote since 2001.
That’s the good news for an administration with European aspirations. The bad news is that there is a lot of cleaning up to do.
“This is a historic opportunity for Moldova,” she told Europe Express. “For the first time we actually have a stable government for four years where we have a president, a government and a parliament who all favour European integration.”
What people want are European values . . . We will have to move fast and deliver on these promises because people have been lied to for so many years
Gavrilita, a 44-year-old Harvard masters graduate who worked for a London-based global non-profit before serving as finance minister in 2019, knows rooting out endemic state corruption is her primary task.
A 2014 fraud, where $1bn — equivalent to 12 per cent of gross domestic product — was stolen from three banks by a criminal enterprise involving a pro-EU prime minister, has become emblematic of the country’s deep administrative graft, and justification for widespread distrust of politicians of all stripes. It also killed fitful western integration efforts overnight.
“We have had different governments where there were reasons for [Brussels] to have varied opinions on their positions, and them paying lip-service to European integration,” Gavrilita admitted. “In 30 years of independence, we have adopted a lot of good laws. The problem was that many of them remained only on paper. Corruption has eroded our institutions.”
She’s pledged to overhaul the judicial system and go after the beneficiaries of the 2014 fraud that are still at large. The country will market itself as a “nearshoring” location for European pharma, IT and microelectronics companies. A new programme will appoint Moldovans living abroad to the boards of state-owned companies.
During her visit to Brussels this week, the European Commission pledged cash to support the reform effort and said it was committed to deeper economic integration and political ties. Bilateral consultations for security and defence co-operation have been promised.
But officials were clear that this was a job for Chisinau, not Brussels. At a press conference with Gavrilita on Monday, EU foreign affairs chief Josep Borrell ended his remarks to his guest with a brutally honest: “Good luck with this difficult task.” He’s not wrong.
Time’s up for Hungary
It’s deadline day for Hungary’s bid to claim €7bn in much-delayed EU recovery money, write Mehreen Khan in Brussels and Marton Dunai in Budapest.
More than two months after it was initially due, time has run out for Budapest to deliver a refreshed national recovery and resilience plan to qualify for cash from Brussels’ landmark borrowing spree.
Viktor Orban’s ultranationalist government was given additional time until the end of September to table proposed reforms and investments after Brussels delayed approving a plan that is worth about 5 per cent of Hungary’s GDP.
The delay was prompted by steadily deteriorating relations between the European Commission and Budapest after a spat over Hungary’s anti-LGBT+ legislation over the summer.
With the September deadline now here, pressure is mounting on Brussels to explain its stance on Hungary’s eligibility for cash and ensure Orban’s government has signed up to robust anti-corruption measures before any money is handed out.
A group of seven NGOs including Transparency International have signed a letter calling on the commission to delay disbursing money to Budapest as it “comes with serious risks of corruption that the Hungarian state institutions have yet to address”.
MEPs are also getting restive over the fate of the Recovery and Resilience Facility cash given the number of open questions over Hungary’s respect for the rule of law. The parliament’s centrist Renew Europe has requested that EU commissioners Paolo Gentiloni and Valdis Dombrovskis testify before MEPs today about Brussels’ pending decision. The request was rejected but senior commission official Céline Gauer will appear instead at 11.30am CET.
As for Budapest, the government’s chief of staff Gergely Gulyas said yesterday that the RRF cash could be released “within weeks” because “that’s what we originally agreed upon”. Gulyas said talks were ongoing with the commission and Hungary considered it unfair that some countries received their money before others.
Rejecting a country’s national plan outright would be an unprecedented step for the commission which has hailed the recovery plan as an essential plank in the bloc’s Covid-19 recovery effort.
Officials privately speculate that rather than taking the nuclear option, Brussels may well approve the plan but use upcoming “milestones” — administrative reforms and investment targets — that have to be met for the disbursement of future tranches to put the squeeze on Orban’s government down the road.
The timing of those decisions is likely to be even more incendiary. The bulk of Hungary’s RRF billions are due to be disbursed next year, coinciding with the Fidesz leader’s bid for re-election next April.
Chart du jour: Near-compliant banks
Europe’s banks have closed the gap on reaching global capital requirements that come fully into force in 2028, with their balance sheets boosted by pandemic restrictions on dividend payouts. According to an analysis published by the European Banking Authority yesterday, a group of 99 EU banks would need to increase their highest quality capital by just €3.1bn to comply with the new standards. (More here)
The Franco-Greek defence deal announced earlier this week may have come as a small consolation prize for President Emmanuel Macron, who is still disgruntled over the way Washington cut him out of a €30bn submarine deal with Australia. (The value of the Greek contract is only a tenth of that). But for Greece, the agreement is of significant importance because it includes a security guarantee, writes Eleni Varvitsioti in Athens.
In return for the €3bn it is expected to pay, Athens will not only get three frigates but also the immediate military assistance of France in the event of an attack by another country — even if that country is within current alliances. Though not named, that third country is, of course, Turkey, a Nato ally of both France and Greece.
“This agreement is of tremendous importance for Greece,” said Emmanuel Karagiannis, Reader in International Security, at King’s College London. “The country has suffered from increased insecurity in recent years due to Turkey’s assertive moves in the Aegean Sea.”
The clause on mutual defence assistance would give much-needed reassurance to Athens while the new French-built frigates would allow the Greek navy to conduct long-range operations far from the country’s shores, he added.
Greece and France have a longstanding relationship and most Greeks perceive Paris as a reliable and trustworthy ally. Last summer, France came to Greece’s rescue sending naval vessels to the east Mediterranean when Turkey was claiming offshore oil and gas reserves in disputed waters off Cyprus.
The purchase of three high-tech frigates with the option of an additional one would increase Greece’s defence capability in the Eastern Mediterranean, Karagiannis said. “The French-Greek defence pact is clearly designed to have a deterrent effect on Erdogan’s Turkey.”
What to watch today
European parliament group leaders meet Brexit commissioner Maros Sefcovic
Commission official Céline Gauer fields questions from MEPs on Hungary’s recovery plan
The biggest challenge to reaching an agreement? I can tell you in one word — taxes
German pre-talks: The leaders of the German Greens and the pro-business Free Democrats have started preliminary talks on joining forces in the next government coalition. Their positions are quite far apart, especially on taxes and subsidies, but both parties are committed to greening the economy and to challenging the political status quo.
Le Pen challenger: Eric Zemmour, an anti-immigration television commentator, has surged in polls ahead of next year’s French presidential election, threatening to displace far-right leader Marine Le Pen as the main candidate to challenge the incumbent Emmanuel Macron.
Swedish first: Finance minister Magdalena Andersson was nominated for the leadership of the ruling Social Democrats, putting her on course to become the country’s first female prime minister after elections next year.
Visa ban: The European Commission said yesterday it would partially suspend a visa issuance agreement with Belarus, a move that would make it harder for state officials to enter the EU, but not affect ordinary citizens.
Post-election Germany, unpacked
Join the Europe Express team on October 4 for a subscriber-only webinar on the outcome of Germany’s election and its implications for the country and the rest of the world. Register free at ft.com/germanwebinar.
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