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April 25, 2018

Macron's pitch to Trump

Is Emmanuel Macron to Donald Trump what Tony Blair was to George Bush? Or is this the beginning of a beautiful Franco-American friendship? On his carefully choreographed visit Macron courted Trump with a lot of flattery. As nonted by the FT, this would be a long-term investment that would make Macron the first man Trump would call in Europe. The two men marked their special relationship with a lot of hugging, handshaking, cheek kissing, and squeezing. But this special relationship took a bold turn when Donald Trump brushed off what he said was a speck dandruff from Macron's blazer: "We have to make him perfect - he is perfect!" the message was clear: Trump is the boss, Macron the apprentice. Sometimes images say more than thousand words. 

Macron pitched a new deal to convince the US not to walk away from the joint comprehensive plan of action (JPCOA) with Iran, a deal which eases sanctions on the country in return for its agreement not to develop nuclear weapons. Trump called it a bad and insane deal at their joint press conference, while Macron said it was just not good enough. He proposed to complement the JCPOA with another deal. Macron argued that while the JCPOA restricts Iran’s major nuclear activities only until 2025, a new deal would go further, by imposing a permanent check on those activities while also limiting the country’s development of ballistic missiles and restricting its military operations across the region, particularly in Syria. Both men seem to have agreed on the need of a broader agreement for the region, according to Al Jazeera. But the French have no illusions and were cautious not to talk up expectations. Will personal chemistry between the two men and this new proposal be enough to keep Trump engaged in Iran? We will see. Trump's decision on the JCPOA will be known by May 12, when he has to decide whether or not to renew sanctions relief for Iran. Under US law, the president is required to renew the waiver on sanctions every 120 days. Trump last issued a waiver in January.

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April 25, 2018

Montoro in Schleswig-Holstein

Spain's minister of finance Cristóbal Montoro has gotten himself in a bit of a pickle with his claim that ministry control of Catalan regional government spending ensured that no public money was used to organise the separatist vote of last October 1st, and related activities. This is a problem for the Spanish government's judicial strategy against the Catalan separatists, because the defendants also stand accused of misuse of public funds. There is now an open confrontation between the finance ministry and the supreme court. Montoro's deputy has come out in support of his boss. Already a week ago the supreme court magistrate investigating the case demanded that Montoro document his claims. The judge has now commissioned a report by the state legal counsel to substantiate that the evidence in his possession indeed points to misuse of public funds. As if this were not bad enough, the very public spat between the ministry and the court has reached Schleswig-Holstein. There, the regional court that must decide whether to extradite former Catalan regional premier Carles Puigdemont has asked to be kept informed of how the dispute is resolved. Meanwhile, Mariano Rajoy has changed his tune and his way of supporting Montoro, by suggesting that the invoices that the judge claims prove misuse of public funds may have been falsified.

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April 25, 2018

The old world and the new

One of the reasons of our interest in the fate of the car industry is that it encapsulates Europe's malaise. Europe has strong industries and some excellent companies, but both society and industry are not ready for the big changes needed to make the transition to next-generation technologies. The EU continues to live off the dividends of the past. The biggest IT and biotech companies are all American, and it looks increasingly as though the battle for the next generation cars and the artificial intelligence industry in general is going to be one between the US and China. 

Today we picked up two stories that tell of different aspects of this shift. The first is the news of a dramatic decline in diesel sales. the second is a realisation among top European scientists that the EU is about to lose the plot on artificial intelligence. What both stories have in common is a reflection of how the political system is failing to provide the conditions for the EU to adjust to the new world. The EU was originally conceived as a producers' cartel. Protecting the likes of Volkswagen through golden shares and fake emission tests seemed at one time to be a good idea to bolster domestic industry against competition. But it does not look so good at a time when the car industry faces two simultaneous technological revolutions - from fuel-drive to electric, and from self-driven to driver-less. 

Süddeutsche is reporting this morning that the fall in diesel sales in Germany is dramatic. The second-hand market has collapsed completely, as dealers are sitting on a stock of unsold diesel cars. And, with a large and growing oversupply, they are now refusing the buy them altogether. The paper reports that the recent ruling of Germany's highest administrative court in favour of diesel bans in cities has triggered massive insecurity among buyers. We find it interesting that German journalists treat the buyers as irrational in this context. The situation reminds us of Mervyn King's statement about the rationality of a bank run. It may not be rational to start one, but it surely is rational to join it once it has started. 

The paper cites the latest data by the European Environment Agency showing that petrol-engine cars are now outselling diesel cars. The market share of electrical and hybrid cars is a meagre 1.5%, though. Another interesting statics is that the CO2 emissions of newly sold cars are rising again. 

The second story we found interest is an open letter by some of Europe's top scientists  who are warning that the EU is falling behind the rest of world in the development of artificial intelligence systems. They write: 

"... machine learning is at the heart of a technological and societal artificial intelligence revolution involving multiple sister disciplines, with large implications for the future competitiveness of Europe. Europe is not keeping up: most of the top labs, as well as the top places to do a PhD, are located in North America."

The problem is Europe's inability to organise an intersection between academia and the private sector. It is interesting that the two universities mentioned - Cambridge and ETH Zurich - are either outside the EU or will be will be soon. The scientists are advocating the creation of a pan-European research institute to which academics can contribute. They are saying the problem is not a lack of money but a lack of researchers doing work on systems with actual industrial potential.

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