Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Stuck in a Rutte

Written by Maria Julia Pieraccioni, associate
Edited by Tom Gillingham, associate partner
28 June 2021

Good morning,

Over the end of last week, Hungary passed draconian legislation that bans the dissemination of content in schools deemed to promote homosexuality and gender change.

Victor Madrigal-Borloz, the independent expert on protection against violence and discrimination based on sexual orientation and gender identity, challenged that Hungarian legislation was opposed to the “values based” of the European Union. Dutch prime minister Mark Rutte echoed this sentiment on Thursday, saying that Hungary has “no place in the EU” anymore.

In 1993, the European Council convened in Copenhagen to establish what is now known as the “Copenhagen criteria” for membership. The conditions were set to ensure that any new member state would share the EU’s ideals, as well as economic prosperity, in an attempt to preserve vision and continuity.

However, while the Council agreed on joining and exiting procedures, it never agreed on how to expel a member state failing its obligations under the Copenhagen criteria.

Rutte suggested to journalists at the EU summit in Brussels last week that while one country alone cannot begin the process to expel another member state, perhaps there could be a possibility if 26 other countries agreed to.

The last Hungarian anti-LGBTQ law appears to contravene the very first requirement for membership according to the Copenhagen criteria: a country must have “stable institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities”.

The question surrounding EU membership is a contested one to say the least. Since its foundation, the EU has expanded to include ex-Yugoslav Balkan states, as well as economies that did not initially meet membership requirements, such as Greece. Since then, it has also seen the exit of a member state, the United Kingdom. However, there has never been a case of expelling a member state from the European Union, and the ability to—or lack thereof—sets a significant political challenge.  

Mark Rutte is an outspoken Europhile, who makes it his political ideology upholding human rights. He has spoken out against Assad’s regime in Syria and lately has said he won’t partake in an EU summit with Putin.

However, coalesced decision-making in the EU is hard to come by, and even harder without procedures in place.

News

Matt Hancock has resigned as the UK’s health secretary on Saturday, just a day after The Sun broke the news he was having an affair with his aide. In his resignation letter, Hancock apologised to prime minister Boris Johnson for breaking Covid regulations, as the article’s accompanying pictures were from May 6, weeks before cross-household contact was allowed indoors.

Classified documents from the Ministry of Defence were found behind a bus stop in Kent over the weekend. The documents contained details of the warship HMS Defender’s passage through Ukrainian waters off the Crimean coast as well as plans for a possible UK military presence in Afghanistan after US retreat. The government has since launched an investigation. 

Graeme Campbell, conservative councillor for South Lanarkshire, is stepping down from politics after a series of fire and acid attacks over the past three years. Scottish Conservative MSP Russell Findlay commented that, “there does appear to be an escalation in the use of this tactic of intimidation”. The Guardian reports multiple incidents over the past two months, including one which targeted former Celtic chief executive Peter Lawwell.

Business and economy

New data from the CBI’s latest monthly growth indicator has shown that private sector activity across the UK economy has grown at its fastest pace since May 2015 in the three months to June 2021. The CBI’s new trends also forecast the UK GDP to be on course to return to pre-Covid levels by the end of the year.

The Financial Conduct Authority (FCA) has banned one of the world’s largest cryptocurrency exchange platforms, Binance, from all regulated activities in the UK. The move is a sign of regulatory crackdown on the cryptocurrency industry over concerns that crypto exchange services such as Binance facilitate illicit activities such as money laundering and fraud. (£)

Jaguar Land Rover is the latest victim of chip shortages, suspending automobile production in Slovakia and in Merseyside. This comes at the heels of a failed lobby of the UK government to ease chip shortages by putting pressure on chipmakers. (£)

Columns of note

Amidst the growing media surrounding American pop singer Britney Spears’ battle to end her 13-year conservatorship, India Knight’s piece for The Times stands out. Britney Spears recently testified against her conservatorship, specifically her father, detailing a long list of forced abuse. Her father’s rebuttal, Knight argues, is like the modern-era equivalent of a Victorian man having his wife committed to a lunatic asylum. In her own words, “it’s the calm, rational man, using a calm, rational voice to show how sensible and sane he is, shaking his head sadly [at] the breathless woman, talking too fast.” (£)

Nick Cohen warns against the politics of nostalgia in his piece for The Observer. He sees the phenomenon to be a British malaise, evident in the way British culture picks and chooses which parts of its history to remember. Cohen also argues that it defines modern day politics, which are run on “remembering the golden days”. Yet, he warns, “the ultimate destination of the politics of nostalgia is a state like Vladimir Putin’s Russia, where remorse at the loss of Soviet imperial power and paranoia about western conspiracies sustains a hyper-aggressive and lavishly corrupt dictatorship.”

Cartoon source: The New Yorker

Markets

The week ahead

The week ahead closes the second strongest first half of the year gains in global stocks since the turns of the century; although the second half remains hard to predict. Investors will be looking to the effects of Covid variants in delaying a return to normality, as well as the slowdown of China’s economic recovery in H2 and the strain on supply chain driving up inflation, making it harder for central banks to justify more stimulus.

In Europe, the ECB is expected to release its June inflation figures on Wednesday, as the debate around rising prices continues. Inflation rose above the ECB’s 2% target in May, and investors await to see whether the ECB will justify this as a result of the reopening of many economies or a long-term effect of supply-chain delays.

Investors will also be eyeing the meeting among OPEC+ countries, which is intended to review the situation in the global oil market. Thursday’s meeting is expected to result in another boost in output to match recovering demand.

In the US, this week will see the Fed present its jobs report on Friday and updates on economic data. The highly-anticipated key economic indicators are expected to forecast whether inflation is a short-term or long-term problem.

What’s happening today?

Interims

Porvair

AGMs

Anglo-Eastern Plantations

Armadale Capital

Avacta

Escape Hunt

Eurasia Mining

Futura Medical

Icg-longbow

Immupharma

Iofina 

Kanabo Grp Plc

Symphony Env.

City Pub Group.

Volvere

Zinnwald Lith.

EGMs

Zhejiang Exp’h’

Final Dividend Payment Date

Maruwa         

Morrison (WM)

Interim Dividend Payment Date

Barings Emerg.

Barloworld    

Gateley Hldgs

Quarterly Payment Date

Util     

Special Dividend Payment Date

Barloworld

International Economic Announcements

(10:00) Economic Sentiment Indicator (EU)

(10:00) Industrial Confidence (EU)

(10:00) Business Climate Indicator (EU)

(10:00) Services Sentiment (EU)

Source: Financial Times

did you know

When the US Postal Service was established, it had an eleven pound weight limit but no restrictions on what you could mail.

An Ohio couple therefore sent their baby to visit his grandmother by post. He only cos $0.15 to mail but was insured for $50.

(source: QI Twitter)

Parliamentary highlights

House of Commons

Oral questions

Work and Pensions (including topical questions)

Legislation

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill: Second Reading

Motion

Motion relating to the appointment of lay members to the committee on standards

Motion relating to the membership of the parliamentary works sponsor body

East West Rail route consultation: North East Bedfordshire

Westminster Hall debate

e-petitions 300010 and 300025, relating to microchipping of pets

e-petition 324092, relating to Black history and cultural diversity in the curriculum

House of Lords 

Oral questions

Proportion of hospital patients referred to residential accommodation during the pandemic that were tested for COVID-19 prior to discharge

Meeting of the Arctic Ministerial Council in Reykjavik in May and security concerns about Russian military build-up in the Arctic

Construction of an underground Maglev rapid mass transport system between cities in the north of England

Government’s Integrated Communities Strategy green paper, to “explore the legal and practical challenges of limited reform relating to the law on marriage and religious weddings”

Private Notice Question

Covid-19: NHS Test and Trace System

Legislation

Environment Bill – committee stage (day 3)

Scottish parliament 

No business scheduled.

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