Ghost of Trump stalks Nato HQ as defence ministers meet

US leader’s plan to pull troops out of Germany is latest decision to trouble European allies

Donald Trump won’t be at the high-level Nato meeting that starts on Wednesday in Brussels — but he will loom over it as he has many others.

The 30-strong military alliance’s defence ministers will hold talks on an agenda that includes the changing nature of warfare, Russia’s new generation of missiles — and the US leader’s decision this week to pull more than 9,000 troops from Germany.

Mr Trump’s drawdown announcement just two days before the gathering is of a piece with a disruptive style felt acutely at Nato headquarters over the past few years. His latest sudden security policy shift grates hard against last week’s launch of a review to shore up 71-year old Nato’s unity after various internal spats.

Mr Trump said on Monday that he would cut the almost 35,000 US troops in Germany to 25,000 unless Berlin responded to his longstanding pressure to raise its military spending. Many analysts said such a withdrawal had the potential to hurt Washington as well as Europe, since international operations such as the US Africa command are based in Germany.

The confirmation of the troop reduction story that first surfaced earlier this month has sent both Nato and US officials scrambling to calm nerves and suggest the change will not be immediate.

Nato secretary-general Jens Stoltenberg told reporters on Tuesday that the US troop presence in Germany “matters for the whole of Nato”, adding that no final decision had been made on “how and when” the drawdown would be done. US ambassador to the alliance Kay Bailey Hutchison said the withdrawal plans would take time to develop and that nothing was “set in concrete” yet.

It was just the latest in a series of dramatic interventions by a president who on the campaign trail branded Nato “obsolete”. He has dismayed European allies with policies including allowing Turkey to invade Syria last year and announcing last month that the US would withdraw from the Open Skies treaty that allows observation of Russian military deployments.

The positive case for Mr Trump put by some diplomats privately is that he asks tough questions bluntly and brings to a head longstanding problems with freeriding by European countries on US military might. The negative case heard more often is that his approach is so mercurial that it makes managed strategic reform impossible and creates an atmosphere of damage limitation.

The defence ministers will grapple over the next two days with how to deal with threats ranging from the disinformation “infodemic” to Russian hypersonic weapons. But, as always, Mr Trump and his potential to spring unwelcome surprises will never be far from the negotiating table.

The move by many companies in Europe to stop hiring during the pandemic has left the career hopes of millions of youth in tatters. Italy has seen a drastic decline in the number of people who are not working or even looking for a job. Spain, Greece and France are also seeing similar trends. And the latest data seem to show that younger Europeans appear to be disproportionately affected by the crisis.

Towards a level-playing field

Brussels wants state-backed companies seeking to acquire European rivals to play by the same rules others in the EU have to adhere to as it looks to prevent distortions to competition, writes Javier Espinoza.

To rein in unfair advantages enjoyed by companies from places like the US, China and the Middle East, EU policymakers on Wednesday will publish a white paper with proposals seeking to tackle unfair competition, including new EU-wide powers to scrutinise the activities of state-owned and -supported companies operating in the bloc or looking to Europe. 

“In recent years, foreign subsidies appear to have had an increasingly distortive impact on EU’s internal market,” says a draft of the white paper seen by the Financial Times. “There is an increasing number of incidences in which foreign subsidies appear to have facilitated the acquisition of EU undertakings, influenced other investment decisions or have distorted the market behaviour of their beneficiaries.” 

The document highlights sectors like aluminium, steel, semiconductors, shipbuilding and automotive as being particularly exposed to foreign subsidies. Among those the EU considers examples of subsidies are zero-interest loans, unlimited state guarantees, zero-tax agreements or dedicated state funding. “Many of such foreign subsidies would be problematic if they were granted by EU member states and assessed under EU state aid rules,” the white paper adds.

The proposals set out a twin-track approach to unfair subsidies: one will focus on general distortions to the bloc, like the launch of products or investment in infrastructure or other crucial projects, and the other one will zoom in on takeovers. 

Brussels will set out fines and even forced divestments of certain assets as potential remedies for unfair subsidies. The white paper on foreign subsidies goes out to wide public consultation until the start of September and trade and state aid experts have already outlined three main concerns the commission needs to address. 

How will Brussels know who’s getting an unfair advantage? Regulators will rely on companies disclosing whether they are in receipt of government help. “You are heavily dependent on companies giving you information on foreign subsidies,” said a state aid expert. However, if companies don't provide information, the commission can gather its own and rely on that to block a transaction. Still, say industry experts, this represents a challenge of time and resources for the EU. 

How to rally the troops? The proposals are divided into two modules depending on the type of intervention. Under the first module, aimed at general distortions to competition, responsibility over who looks into alleged foreign subsidies could be split between the commission and member states. In cases requiring in-depth probes, Brussels wants to have control. Under the second module, when it comes to scrutinising acquisitions, Brussels wants to have control straight away. Expect awkward discussions between the EU and member states pushing to have the last word.

Are thresholds low enough to capture start-ups? Some member states worry that the setting a threshold of exceeding €100m in turnover to have the power to scrutinise takeovers is too low. This, they fear, would mean missing the acquisitions of start-ups, which typically have no turnover until further down in their development. “The EU still needs to strike a right balance,” said another state aid lawyer, “because some of these small players could become of strategic importance.”

Under scrutiny

You wait for ages for one antitrust probe and two come at once. The European Commission has opened two formal antitrust investigations into Apple’s App Store and Apple Pay payment system. The EU said that, following a preliminary investigation, “the commission has concerns that Apple’s restrictions may distort competition for music streaming services on Apple’s devices”. Brussels is also launching an investigation into Apple Pay and whether it undermines competition by limiting access to near-field communication for contactless payment in stores. The EU could theoretically impose a maximum penalty of 10 per cent of Apple’s global revenues for breaching competition rules, but rivals suggested they were more interested in other remedies. (FT)

Big Phil falters EU trade commissioner Phil Hogan’s pitch to lead the World Trade Organization has prompted Brussels to apply conflict of interest rules limiting his public appearances just as the bloc launches a strategic review of EU commercial policy. Jim Brunsden has more.

They’re back Europe’s Frugal overlords are ready for this Friday’s European Council summit and are laying out their stall on the debate over the recovery fund in this FT op-ed. In short: more loans over grants, and everything needs to be repaid back.

Corona app
Germany has launched its own version of a tracing app to help fight the pandemic but it has drawn instant criticism from the country’s data protection commissioner. (FT)

Coming up The EU’s executive vice-president Margrethe Vestager and France’s EU commissioner Thierry Breton unveil on Wednesday a white paper on levelling the playing field when it comes to foreign subsidies.