The Weekly Lift - October 20, 2022

Dear Readers:

Europe may be going through its most challenging times since the end of World War II. In fact, Russia invading Ukraine may have effectively shattered the relative geopolitical stability in the region and has triggered a humanitarian crisis unseen in Eastern Europe since the breakup of Yugoslavia in the 1990s.

The war in Ukraine has of course, also created a large-scale energy crisis that has engulfed the whole continent and beyond. Economic woes stemming from inflation have fueled social unrest that may only worsen in the foreseeable future. The twenty seven countries in the European Union no longer seem to speak in unison and the leadership void left by post-Angela Merkel’s Germany is taking its toll on common political and policy decisions.

The rise of far right political movements also seems unstoppable. This has been mostly evidenced by the stronghold of Viktor Orban over Hungarian politics for the last twelve years and the Law and Justice Conservative party reigning in Poland, but also in Sweden, where the anti-immigrant Democrat party has just earned the right to take part in the political process.

In France, the right-wing Front National candidate Marine Le Pen became the strongest contender to the incumbent president, Emmanuel Macron earlier this year. Far right political parties in Spain and The Netherlands are gathering strength in local and regional elections. Immigration from the Global South continues to fuel the rise of populist forces across Western Europe.

The most dramatic development might be the outcome of the last election in Italy and the victory of Giorgia Meloni, the hard right politician, who heads Brothers of Italy, a political party that has its roots in Mussolini's fascism. She now leads the first far-right government in Italy since World War II, building a conservative coalition that includes Matteo Salvini, the leader of the xenophobic, anti-immigrant League Party, and a professed sympathizer of Putin.

Thankfully, these voices are not left unchecked. This could not be better symbolized than by a 92-year-old life Senator and a World War II Holocaust survivor, Liliana Segre, opening the new Parliament session in Italy. In her speech, Ms. Segre stated, perhaps as a rebuke to Ms. Meloni, that “in this month of October, which marks the centenary of the March on Rome that began the fascist dictatorship, it falls to me to temporarily assume the presidency of this temple of democracy” (see article below).

This was a small gesture, but for The Weekly Lift, it represents courage, hope and optimism and also a poignant reminder about our collective responsibility to protect and respect institutional memory and those who continue to carry it.

This week’s selection of headlines and articles*:

Politics: Holocaust Survivor Opens Senate Session With Far-Right To Govern Italy

The Los Angeles Times (US) reports that "Italy’s fascist past and its future — which will be governed by a party with neo-fascist roots — came to an emotional head Thursday when a Holocaust survivor presided over the first seating of Parliament since last month’s general election.

Liliana Segre, a 92-year-old senator-for-life, opened the session in the upper chamber, subbing in for a more senior life senator who couldn’t attend. Her speech formally launched the?sequence of events that is expected to bring the far-right Brothers of Italy party, which won the most votes in the Sept. 25 election and has its origins in a neo-fascist movement, to head Italy’s first far-right-led government since the end of World War II.

Speaking to the Senate, Segre marveled at the “symbolic value” of the fact that she was presiding over the proceedings as Italy soon marks the 100th anniversary of the March on Rome, which brought fascist dictator Benito Mussolini to power, and as war rages once again in Europe with Russia’s invasion of Ukraine.

“Today, I am particularly moved by the role that fate holds for me,” Segre told the hushed chamber. “In this month of October, which marks the centenary of the March on Rome that began the fascist dictatorship, it falls to me to temporarily assume the presidency of this temple of democracy.”

Segre was?of the few Italian children who survived deportation to a Nazi death camp, and she has spent recent decades teaching Italian schoolchildren about the Holocaust. Her advocacy led President Sergio Mattarella to name her a senator-for-life in 2018.

In her speech, Segre choked up as she recalled the Italian laws that once forbade Jewish children like her from attending school. “It is impossible for me not to feel a kind of vertigo, remembering that that same little girl who on a day like this in 1938, disconsolate and lost, was forced by the racist laws to leave her elementary school bench empty. And that, by some strange fate, that same girl today finds herself on the most prestigious bench, in the Senate.”

Her emotional remarks brought the 200 senators to their feet in applause, including the Brothers of Italy delegation headed by Ignazio La Russa. La Russa, who once proudly showed off his collection of Mussolini memorabilia, was elected Senate speaker later Tuesday.

Taking up his post, La Russa presented Segre with a bouquet of white roses and praised her “moral” leadership.?“There is not a word that she said that didn’t deserve my applause,” he said, promising also to serve all political forces in the chamber.

The Brothers of Italy, headed by Giorgia Meloni,?has its origins in the Italian Social Movements or MSI, which was founded in 1946 by former Mussolini officials and drew fascist sympathizers into its ranks. It remained a small far-right party until the 1990s, when it became the National Alliance and worked to distance itself from its neo-fascist past.?

Meloni was a member of the youth branches of MSI and the National Alliance and founded Brothers of Italy with La Russa in 2012, keeping the tricolor flame symbol of the MSI in her party logo. During the campaign, amid warnings that she represented a danger to democracy, Meloni insisted that the Italian right had “?handed fascism over to history for decades now", and had condemned racial laws and the suppression of democracy.

Segre didn’t refer to the party by name in her speech, but she said Italian voters had expressed their will at the ballot box.?“The people have decided. It is the essence of democracy,” Segre said. “The majority emerging from the ballot has the right to govern, and the minority has the similarly fundamental obligation to be in the opposition.”

Looking ahead to the upcoming legislature, she called for a civilized debate that does not degenerate into hateful speech and respects and implements the Italian Constitution, which was drafted in 1947 by a constituent assembly of anti-fascist forces.

Segre recalled the Constitution was not some “piece of paper, but the testament of 100,000 dead who fell during the long fight for freedom,” a reference to the Italians who fought Nazi-fascism.?

She cited in particular the Constitution’s Article 3, which states that all Italian citizens are equal under the law “without distinction of sex, race, language, religion, political opinion or personal or social condition.”

Energy: Biden To Announce Release Of More Petroleum From Strategic Reserve

The Washington Post (US) reports that "President Biden will announce on Wednesday that he is releasing 15 million more barrels of fuel from the Strategic Petroleum Reserve, a move aimed at easing?gas prices three weeks before voters anxious over rising costs head to the polls as Democrats have been battered by GOP attacks on the economy.

Biden and the Democrats face strong head winds in the upcoming?midterms elections, and Republicans have zeroed in on inflation and rising costs as they try to persuade voters that Biden’s economic policies are hurting their pocketbooks. Polls regularly show that the economy and the cost of living are at the top of voters’ concerns by a wide margin.

Biden has largely tried to pin those cost increases on Russia’s unprovoked invasion of Ukraine, and the fuel shortages and supply disruptions that followed. The president has repeatedly called the cost increases “Putin’s price hike,” while working on other measures to bring down prices at the pump.

Prominent among those has been release of batches of oil from the strategic reserve, which was created to protect the United States from oil shortages that affect its national security. The White House has released roughly 165 million barrels of oil from the reserve since announcing a spring drawdown of as many as 180 million barrels, the largest-ever release from the reserve.

This month, OPEC Plus, a coalition of oil-producing nations led by Russia and Saudi Arabia,?announced that it will slash oil production by 2 million barrels per day, threatening further price increases in countries already grappling with high costs. The move was especially frustrating to the White House since Biden made a?controversial visit to Saudi Arabia in July in an effort to bolster relations.

Biden has also lashed out at energy companies that he said have not lowered prices at the pump as oil prices have gone down. An administration official who spoke to reporters on background ahead of Biden’s announcement said those corporations’ actions are “adding 60 cents to the average gallon of gas, and have kept pump prices higher than they would be otherwise.”

Industry officials respond that the administration is cherry-picking numbers from their balance sheet, ignoring the long stretches early in the pandemic when the firms were losing money. At one point, oil was trading at zero dollars per gallon. Oil executives also warn that placing windfall taxes on the profits they are earning now, as many Democrats have advocated, would discourage investment in infrastructure and drilling, exacerbating shortages.

Critics, including many Republicans, have argued that Biden is misusing the reserve for his own political purposes, rather than limiting its use to a true national crisis as intended. But the administration official, speaking on the condition of anonymity to discuss the move before the official announcement, said the SPR has 400 million barrels remaining.

“That is still a large amount of barrels,” the official said. “This is a bridge. This is a longer bridge. This is trying to use this tool incredibly responsibly.”

The reserve is currently at a 40-year low, but it is far from empty. At capacity it can hold about 714 million barrels. Even so, the administration has been heavily criticized for its moves in part because gas prices have largely stabilized. The releases continued during the summer as prices at the pump dropped for 99 consecutive days, falling below $4 per gallon and staying there.

Critics argued the administration at that point should have started filling the reserve back up instead of continuing to draw from it. But there was a reluctance to make any moves that would put upward pressure on gas prices.

After OPEC recently announced its cuts in production, the administration vowed it would move to stabilize prices. But before it took any action, prices were already stabilizing on their own. The cost of gas fell this week amid concerns of a looming recession. The latest move comes against the backdrop of a hard-fought midterm campaign with Election Day just three weeks away.

Biden and his fellow Democrats have struggled to persuade voters they are handling the economy as best they can, while Republicans have made headway citing inflation — especially gas prices — along with immigration and crime to suggest that the country is descending into chaos under Biden.

The president has sought to turn the focus to?abortion rights, voting integrity and the swirl of investigations surrounding former president Donald Trump, hoping a critical mass of voters see those as sufficiently stark issues to overcome their economic anxieties.

On the economy, Biden has emphasized the legislation passed by Democrats to tackle prescription drug prices, as well as his move to forgive student loan debt. But top White House advisers have long believed that their political fortunes in the Nov. 8 congressional elections will depend heavily on the ups and downs of gas prices.

Biden plans to announce several additional moves Wednesday beyond the petroleum release. He is expected to say that the administration will purchase crude oil for the strategic reserve when prices are at or below roughly $70 a barrel, an effort to ensure the reserve gets replenished and to create more certainty around the future demand for oil.

In addition, Biden will call on oil companies to pass through lower energy prices to consumers. The White House argues that energy refining companies are currently making far more than their usual profit on every gallon of gasoline.

Energy Secretary Jennifer Granholm earlier put oil companies on notice that the administration is considering a temporary ban of exports of refined fuel such as diesel, which will be in particularly short supply in the United States in coming months. But the administration has so far stopped short of implementing such a ban.

White House press secretary Karine Jean-Pierre, in her briefing Tuesday, sought to emphasize that even though the recent streak of gas prices falling has been broken, the overall trend remains good, with prices down $1.15 from their peak.

“Every month, the typical two-driver family saves about $120 at the pump compared to where we were in mid-June,” Jean-Pierre said. “Every day, Americans save about $420 million at the pump compared to mid-June.”

She also noted that gas prices have begun falling again, dropping by five cents over the past week, with sharper declines in states like California, Wisconsin and Oregon. But even as gas prices have stabilized in parts of the country, they remain quite high in some key battlegrounds, adding to the challenges Democrats face in the upcoming election.

In California, where there are at least eight hotly contested House seats, gas prices remain above $6 per gallon, despite the recent decline. In Nevada, a state where Democrats are at risk of losing a Senate seat and polls show a tight governor’s race, the price of a gallon of gas is $5.23.

Even if gas prices do not shoot up any further between now and Election Day, drivers could be in for more pain as winter closes in. Europe is planning to implement its full ban of Russian oil in early December, a move that administration officials have long worried will create a price shock worldwide.

American and European leaders are hoping to mitigate the impact of that ban with a price cap on Russian oil that would allow some of it to continue to make its way into the world market. But there is no guarantee that would work."

Global Economy: Emerging Markets Look Unusually Resilient

The Economist (UK) reports that "the script?is familiar. A Federal Reserve bent on taming inflation?mercilessly raises rates. The dollar soars, global financial conditions tighten and the world economy falls?into a broad slowdown. But this time, there is a twist. Where writers would normally pencil in an emerging-markets crisis, there is instead an eerie calm.

For decades, fast-growing middle-income countries have been a source of financial trouble. In the early 1980s, the Fed’s crusade against double-digit inflation sparked a Latin American debt crisis; in the 2010s, the normalisation of policy after the global financial crisis rattled the “fragile five” (Brazil, India, Indonesia, South Africa and Turkey).

Much the same might have been expected during present tightening, which is the most intense since the early 1980s. In forecasts published on October 11th, the?imf?again marked down its projections for global growth, and warned that economies accounting for a third of global?gdpare heading for downturns. The world’s very poorest countries are on the ropes. More than a billion people live in economies now facing severe distress.

And yet most big, middle-income countries are weathering the storm. The?imf?reckons that emerging economies will substantially outgrow rich ones this year and next, despite a slowdown in China and a contraction in Russia. While the euro, pound and yen are?tumbling against the dollar, the Indian rupee and Indonesian rupiah have managed a more graceful decline, and the currencies of Brazil and Mexico have risen (see chart 1). Emergency central-bank intervention is?unfolding in London rather than Brasília.

The resilience of the emerging world is in part a story of maturation. Since the crises of the 1980s and 1990s, local financial markets have grown deeper and banks better managed. Policymaking has improved. Officials have learned the hazards of careless budgeting and large current-account deficits. Central banks are more independent, and have adopted the inflation-targeting approaches used in the rich world.?

This sophistication and care has demonstrated its value over the past two years. Many middle-income central banks began raising rates well in advance of rich countries. This prevented rising inflation from slipping out of control, and also stopped destabilising currency declines.

Take Brazil, which experienced hyperinflation as recently as the early 1990s, but has worked in recent decades to establish the credibility and independence of its central bank. When inflation leapt and the real wobbled early last year, the central bank responded with aggressive rate rises, amounting to a cumulative increase of almost 12 percentage points. Inflation has fallen from a peak of 12% in April to below 8%; the currency has been among the world’s best performing.

Meanwhile, in the rich world, central banks that have fallen behind the Fed’s tightening schedule, like the European Central Bank and the Bank of Japan, have experienced vertiginous currency depreciations, and have yet to see inflation peak.

Emerging-market foreign-exchange regimes have also improved. These economies once relied on exchange-rate pegs to contain inflation and secure cheaper credit. But the years of crisis encouraged a move in the direction of floating-rate regimes, in which markets get more of a say over a currency’s value. Now most governments only occasionally intervene to lean against undesirably fast or big moves.

Many have paired this with deeper foreign-exchange reserves. During good times they purchased assets denominated in reserve currencies, like dollars. This slows the pace of their currencies’ appreciation and builds a pile of safe assets. In 1998 global foreign-exchange reserves amounted to 5% of world?gdp.

By 2020, that figure had risen to 15%, representing a staggering $13trn. Although Chinese reserves of more than $3trn account for a large chunk, other emerging-market governments have built up formidable piles. India’s totals over $500bn, for instance, and Brazil’s is worth more than $300bn (see chart 2).

These reserves can be deployed to slow a currency’s depreciation when investor risk appetite drops. This year India has sold $40bn-worth to keep the rupee’s decline modest and orderly. Yet reserves are most valuable in the thick of a crisis, when they can be used to pay for critical imports and meet hard-currency debt repayments. Crucially, they help to reassure foreign investors that obligations will be honoured.

And emerging economies have addressed their greatest weakness: an inability to borrow in their own currency. Governments once had no choice but to accept loans denominated in other currencies. This vulnerability—referred to as “original sin”—could turn a drop in investor sentiment into a financial catastrophe.

Because a fall in the local currency increased the burden of foreign-currency debt, economic weakness or nervy markets could set in motion a cycle of capital flight, increased pressure to devalue and lost confidence in the creditworthiness of the government, which often ended in chaotic default.

But after the global financial crisis, bond yields in the rich world tumbled, pushing investors to look for returns elsewhere. This hunt, combined with improved economic management in emerging markets, allowed officials to shift borrowing to local-currency bonds (see chart 3). In the mid-2000s, some 46% of Indonesian public debt and 83% of Chilean debt was owed in a foreign currency. By 2021 those figures had fallen to 23% and 32%.?

The safety purchased by these innovations is impressive. But in a forbidding economic climate, emerging markets cannot afford a victory lap. Although governments have borrowed more in their own currencies, many companies have not—and if global woes force large firms to seek bail-outs their foreign obligations could become their governments’ foreign obligations.

If worsening financial conditions prompt a flight to safety, a Fed focused squarely on high American inflation may not ride to the world’s rescue with a torrent of emergency lending, as in March 2020.

Stability can also lead to greater risk-taking. The healthier financial position of emerging markets has allowed some to take on debt that would once have seemed too high even for rich countries. India’s debt has risen to 84% of?gdp;?Brazil’s stands at 88%. In the early 2000s, American and European eminences convinced themselves—to their subsequent sorrow—that financial crises were something that only afflicted poorer countries. Looking back at recent history, the right conclusion to draw is not that emerging markets are safe. It is that nowhere is."

Climate Change: Nations Agree To Curb Emissions From Flying by 2050

The New York Times (US) reports that "after almost a decade of talks, the nations of the world committed Friday to drastically lower emissions of planet-warming gases from the world’s airplanes by 2050, a milestone in efforts to ease the climate effects of a fast-growing sector.

The target to reach “net zero” emissions — a point in which air travel is no longer pumping any additional carbon dioxide into the atmosphere — would require the aviation industry to significantly step up its climate efforts. Previously, companies had relied on offsetting aviation’s emissions growth through tree-planting programs or through yet-to-be-proven technology to pull carbon dioxide out of the air.

But to reach net zero, companies and governments would need to invest hundreds of billions of dollars in increasingly efficient planes and cleaner fuels to sharply reduce emissions from air travel itself. And even those investments are unlikely to be enough, compelling countries and companies to adopt policies to curb flying itself, by scrapping fuel subsidies or halting airport expansion plans, for example, or ending frequent flier programs.

That puts the onus on the world’s richest countries, which account for the bulk of global air travel. The richest 20 percent of people worldwide take 80 percent of the flights, according to estimates by the International Council on Clean Transportation, a nonprofit think tank. The top 2 percent of frequent fliers take about 40 percent of the flights.

“To build room for poorer countries to grow their aviation sectors, richer countries will need to peak emissions even faster,” said Dan Rutherford, director of the think tank’s aviation and marine programs.

Emissions from global commercial aviation made up about 3 percent of global emissions in 2019, and had surged more than 30 percent over the previous decade before the coronavirus pandemic hit and traffic slumped. But air travel has come back with a vengeance, making action to address rising emissions imperative.

The aviation industry has been slow to address its emissions, which aren’t covered by the Paris accord, the 2015 agreement among the nations of the world to fight climate change. Instead, a United Nations-like body called the International Civil Aviation Organization has overseen the climate talks. Those talks quickly became a microcosm of the politics involved in global climate negotiations, with less wealthy nations arguing that they should not face the same restrictions as richer nations.

India and China, where air travel is surging, argued at the talks in Montreal this week that their air carriers would require until 2060 or 2070 to achieve net zero emissions.

The 2050 target comes with no guarantees of success. Similar to the Paris agreement, ICAO’s targets don’t come with any authority to set policy. In addition, the agreement doesn’t assign targets to specific countries or airline companies, leaving the task of setting rules to member states.

Aviation’s contribution to climate change has been thrust into the spotlight in recent years by climate activists like?Great Thunberg, the Swedish environmentalist who inspired a worldwide no-fly campaign.

The European Union has also taken the lead in policy, proposing a plethora of changes like ending tax exemptions for jet fuel and taxing carbon emissions instead. French politicians have also proposed banning short-haul flights. In the United States, the ambitious Inflation Reduction Act passed this year includes subsidies for sustainable aviation fuel."

Immigration: Biden To Offer 24,000 Venezuelan Migrants A Legal Way Into The US

El Pais (Spain) reports that "the US Department of Homeland Security (DHS) has reached an agreement with Mexico in a bid to reduce the number of immigrants arriving at the southwest border. The United States has pledged to “create a more orderly and safe process” for people fleeing the humanitarian and?economic crisis in Venezuela through a humanitarian program that will be open to 24,000 applicants.

At the same time, Venezuelan nationals who attempt to enter the US illegally will be immediately returned to Mexico, instead of being released on American soil to face removal proceedings at a later date, as is currently often the case.

“Almost four times as many Venezuelans as last year attempted to cross our southern border, placing their lives in the hands of ruthless smuggling organizations. Meanwhile, irregular migration from northern Central America is down by a quarter from the level encountered last year,” said the DHS in a statement.

The economic, political and social crisis in Venezuela has caused?millions of people to leave the country?in recent years, in a desperate attempt to escape poverty and shortages in what was once the wealthiest country in South America.

US government sources explained in a call with journalists that the agreement aims to address the most acute irregular migration flows and help relieve pressure on the cities and states that are receiving these migrants.

It is a model similar to the one used to handle Ukrainian immigration to the US following?the Russian invasion. For now, it only applies to Venezuelan immigrants, who represent the majority of new arrivals in recent months. It will not be necessary for migrants to travel directly from Venezuela to the United States – in fact, there are currently no flights between the two countries.

The campaign will include new immigration checkpoints, additional resources and personnel, joint pursuit of human smuggling organizations, and expanded sharing of information related to transit nodes, hotels, stash houses and staging locations.

The DHS said the humanitarian program will be open to up to 24,000 Venezuelans, but could be expanded in the future. However, “the United States will not implement this process without Mexico keeping in place its independent but parallel effort to accept the return of Venezuelan nationals who bypass this process and attempt to enter irregularly.”

The program will allow US residents to apply on behalf of a Venezuelan citizen to come to the country for a period of up to two years and receive work authorization, government officials explained. The government said it would provide more details in the coming days, but revealed it will be necessary for applicants to demonstrate that they can financially support the migrant for the duration of the stay.

Immigration has been used as a political weapon by Republican governors in states such as Texas and Florida who have?sent buses and planes filled with immigrants to Democratic bastions including Washington DC, New York and Chicago. The limit of 24,000 migrants in the new program is much lower than the migratory flow that authorities are trying to control – more than 150,000 people in the last year.

In addition, the program could leave in a limbo those who have already made the journey from Venezuela but have not yet crossed the US border. Migrants now entering Mexico and Panama irregularly will not be able to participate in the legal process, according to US government officials, who said that they want to discourage dangerous crossings through places like the Darien jungle between Panama and Colombia."

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