U.S.-EU Relations, Cuba Currency, EU “Togetherness”, France “Failure” and The Week in Review

Blog / Weekly Review

U.S.-EU Relations, Cuba Currency, EU “Togetherness”, France “Failure” and The Week in Review

Putting the band back together. The U.S. and the EU reached an agreement to end a 17-year trade dispute over civil aircraft and agreed to suspend the application of harmful tariffs worth USD 11.5 billion for a period of five years. The two sides also agreed to “confront” the threat posed by “China’s ambitions” by establishing a working group to counter investments in the EU and U.S. by “non-market actors.”

What it means: This is a confirmation of our forecast that Biden would seek to improve U.S.-EU relations by quickly resolving outstanding trade disputes. Next up…the Trans-Pacific Partnership (CPTPP)? Our take on the EU-U.S. was contrarian and our expectation that Biden will try to steer the U.S. back toward the CPTPP is even more so, but it is an obvious next step and has bipartisan support in Congress.

Dolla dolla bill…no?The Banco Central de Cuba (BCC) announced it will “temporarily” suspend cash deposits in U.S. dollars in Cuba’s banks. BCC officials said they had no choice but to suspend cash USD deposits because foreign banks and financial institutions were making it extremely difficult for Cuba to find international institutions willing to convert U.S. currency in cash.

What it means: Just last July, Cuba was encouraging consumers to use U.S. dollars by eliminating a 10 percent tax on it. ¡Ahora, no más! The spike in the black market price of the dollar – which is now more than twice the official exchange rate – may also have something to do with Havana’s decision. Might Cuba think about embracing cryptocurrency, as another dollar-dependent country in the region announced last week? If you want the answer, you’ll have to cruise over to LatamPolitik

The EU takes a big step. The European Commission raised €20 billion via a ten-year bond due on 4 July 2031, the first tranche of funds raised for the €800 billion EU’s Next Generation COVID-19 recovery package. The EU also approved recovery plans for Spain, Portugal, Denmark, and Greece. Italy, which will be the biggest beneficiary of the funds at €191.5 billion, expects to receive EC approval within a week.

What it means: This is the culmination of over a year of bureaucratic infighting and red-tape…but it’s finally here! The European Commission is borrowing funds on behalf of the EU as a bloc. Now, however, comes the truly hard part: can these funds be allocated to help EU member states recover from the pandemic? Or will they be misused and legitimize the fears of frugal skeptics like the Netherlands and Austria? Time will tell. 

Mission not accomplished. French President Emmanuel Macron said France’s military operations in Africa’s Sahel region would undergo a “profound transformation” and that France was planning to “reduce our multiple military deployments” in the region because France’s presence “is not adapted anymore to the reality of the fight.”

What it means: At least part of this decision is political – French opinion polling has turned against France’s ongoing intervention in the Sahel. It is also an admission that Operation Barkhane, which began in 2014, has failed in its task, as the region has only become more unstable and more susceptible to Islamist attacks. The military approach has its limits – the only effective way to fight Islamists is to remove the socioeconomic conditions that cause young men and women to become attracted to its message.

Honorable mention

Spiders are invading Australia. 

NBA superstar Nikola Jokić likes to ride in a casual horse chariot during his spare time. 

U.S. President Joe Biden and Russian President Vladimir Putin met in Geneva. Afterward, the U.S. and Russia released a joint statement underscoring the recent extension of the New START Treaty and committing to nuclear arms control.

President Andrés Manuel López Obrador announced his intention to pursue constitutional reforms over the next three years: to strengthen the Federal Electricity Commission, to reform the National Electoral Institute, and to strengthen the National Guard. Notably not on the list: a second term!

According to CNN, the U.S. received a report of an “imminent radiological threat” at Taishan Nuclear Power Plant in Guangdong province in southern China.

The Arab League – a group of 17 Arab states – passed a unanimous resolution calling for the UN Security Council to intervene in the ongoing spat between Ethiopia, Sudan, and Egypt over the Grand Ethiopian Renaissance Dam.

Turkey’s central bank agreed with China to increase an existing currency swap facility to $6 billion from $2.4 billion.

Peru has finished counting votes in its presidential election and Pedro Castillo appears to have won the presidency – but it could be weeks before the results are considered official.

Italian Prime Minister Mario Draghi told reporters at the G7 leaders’ summit that his government would review Italy’s participation in China’s Belt and Road Initiative (BRI) “carefully.”