Italy: Cashing it in.
Also: Poland, the Amazon, Myanmar, Tunisia and the US.
ITALY. Cashing it in.
Italy announces a one-off tax on local banks.
The Italian government approved a surprise 40% windfall tax on local banks’ profits at a cabinet meeting on Monday. The decision could force banks to collectively give as much as €4.9 billion to the state.
INTELLIGENCE. Rome plans to use proceeds to support mortgage holders and cut broader taxes. The move has been criticised as a legislative afterthought to appease voters who believe Meloni’s government has not demonstrated adequate support for lower-income Italians. Bank shares have plunged since the announcement, and Italy’s main stock index, the FTSE MIB, closed for the night down 2.1%. It is a reminder that populism is not just rhetorical.
FOR BUSINESS. Although the decision seemed out of the blue, Italy’s move is not without precedent. Spain introduced a windfall tax on banks and large energy companies last year and there are concerns others may follow, with UniCredit, Deutsche Bank, Intesa, Santander, and BNP Paribas shares falling sharply. And it’s not just EU banks that should be concerned. Bank returns on equity tend to be much higher in Australia, Canada, New Zealand and the US.
POLAND. Poles apart.
A populist government seeks a third term.
Polish President Andrzej Duda said on Tuesday that elections would be held on 15 October. The ruling Law and Justice party (PiS) leads in the polls, but the outcome is expected to be close, particularly if opposition parties unite.
INTELLIGENCE. PiS, led by Prime Minister Mateusz Morawiecki, took power in 2015 and is trying for an unprecedented third term. PiS’s combination of social conservatism and fiscal largesse has appealed to voters, but it has been plagued by a series of corruption scandals. The opposition Civic Coalition, led by former EU commissioner Donald Tusk, accuses PiS of being close to Moscow. Morawiecki accuses Tusk of being close to Berlin.
FOR BUSINESS. Under PiS, Poland has seen an erosion of democracy – the government has taken over courts, tightened abortion laws, and ramped up anti-LGBT rhetoric – but the country is also enjoying faster economic growth than other EU members. Despite its growing conflicts with the EU, Poland’s international standing has also improved thanks to its support of Ukraine after last year’s invasion and one of the highest per capita defence budgets in NATO.
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SOUTH AMERICA. Greenwashing.
Amazon countries, led by Brazil, sign a rainforest pact.
On Tuesday, leaders of the eight countries that are home to the Amazon River basin agreed to work together to conserve the world’s largest rainforest. It was the first meeting of the Amazon Cooperation Treaty Organization in 14 years.
INTELLIGENCE. Brazilian President Lula da Silva repeatedly pledged to protect the Amazon during his election campaign last year. The meeting is part of those efforts. But the Belém Declaration falls short of Lula’s promises, with countries left to pursue their own individual deforestation goals. The dearth of tangible commitments in the pact reflects the broader, global difficulties at forging an agreement to combat climate change.
FOR BUSINESS. The summit marked a significant step, but it may not be enough to protect the forest (or convince the EU to agree a free trade deal). Commitments vary, as does implementation capacity, including in increasingly unstable Peru and Ecuador. And although deforestation has dropped 42% since Lula took office, Brazil still has plans for a huge offshore oil project at the Amazon’s mouth and the agribusiness lobby, which Lula is courting, looms large.
MYANMAR. Eyes wide shut.
Strong evidence of war crimes committed by Myanmar’s military.
On Tuesday, the Independent Investigative Mechanism for Myanmar (IIMM) said it found evidence that the army and militias are committing increasingly frequent and brazen war crimes, including aerial bombings and mass executions.
INTELLIGENCE. Myanmar has been in turmoil since the military seized power from civilian leader Aung San Suu Kyi in February 2021. It is estimated that security forces have killed at least 3,900 civilians and arrested 24,000 others since the takeover. The IIMM says it is building files that can be used by courts to hold individuals responsible. In the meantime, ASEAN’s efforts to mediate have not borne fruit, in large part due to the bloc’s principle of non-intervention.
FOR BUSINESS. Two years on, there appears to be no end to the conflict. Revenue generated by Myanmar’s state oil firm finances the junta’s arms. Despite sanctions imposed by the US and other Western nations, the military is still able to rely on Russia, India and China for support. Its neighbours condemn such moves but look the other way. ASEAN states are expected to participate in counter-terrorism exercises hosted by Russia and Myanmar next month.
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TUNISIA. Baguette about it.
Dozens of bakers protest a ban on subsidised flour.
Around 200 Tunisian bakers staged a sit-in on Monday after Tunis stopped subsidising flour to bakeries that produced European-style breads and pastries. The death toll from a sunken migrant ship off Tunisia's coast rose to 11 on Monday.
INTELLIGENCE. Food is a red line for Tunisians. Shortages of subsidised bread fuelled riots that left 150 dead in 1984. A self-immolating fruit seller began the Arab Spring in 2011. At the root of the problem is the government’s struggle to cover subsidies, which many Tunisians have relied on since the 1970s. Tunisia relies on Ukraine and Russia for its wheat supplies. But severe drought and the ongoing war have left the breadbasket empty.
FOR BUSINESS. Since 2011, Tunisia has faced high inflation, low job creation and political discord. Political instability has hindered the country’s ability to deal with recurring crises. Tunis has also rejected IMF requests to restructure its internal economy, which is tied to a $1.9 billion bailout offer. European countries led by Italy, concerned that an economic collapse in Tunisia could trigger a new surge of migrants, have tried to mediate and offer fiscal support.
UNITED STATES. Not so incognito.
A $5 billion consumer privacy lawsuit moves closer to trial.
On Monday, a California judge denied Google parent Alphabet's request for summary judgment in a lawsuit alleging the firm illegally invaded the privacy of millions. Last week, Google launched new privacy tools for its image search service.
INTELLIGENCE. The ruling is not entirely surprising, but it is a significant one as it moves the case closer to trial or settlement. This follows a separate ruling over the weekend, where Google was denied another summary judgement over the US Justice Department’s antitrust lawsuit, which accused Google of using its market dominance to hinder search competitors. Ahead of elections in 2024, Biden’s Federal Trade Commission is eager to score some wins.
FOR BUSINESS. Unlike the EU’s General Data Protection Regulation, the US has yet to introduce a comprehensive data privacy law. Congress periodically introduces bills to do so, such as the American Data Privacy and Protection Act in May 2022, but no progress has been made so far. State-level initiatives indicate a growing awareness of the need for robust safeguards. But they also pose compliance challenges for firms operating in multiple jurisdictions.
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