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U.K.’s Johnson warns lockdown will last until at least March 8

InternationalJan 28. 2021A woman walks past a closed souvenir stall and government messaging on a telephone box on Oxford Street in London on Jan. 15, 2021. MUST CREDIT: Bloomberg photo by Chris J. Ratcliffe.

By Syndication Washington Post, Bloomberg · Tim Ross, Alex Morales, Emily Ashton

Prime Minister Boris Johnson put England on notice that the national virus lockdown will continue for at least another six weeks, with schools staying closed and new border quarantine rules coming into force.

A day after the British death toll passed 100,000, Johnson said the government will review the impact of pandemic measures and the effectiveness of the vaccine program in mid-February.

But the soonest restrictions could begin to be eased and schools fully reopened is March 8, he said, and some rules will be tightened.

In an attempt to stop dangerous mutant strains of the virus entering the U.K., new 10-day hotel quarantine measures will be imposed on all passengers arriving from hot spot regions such as South America, South Africa and Portugal.

“Everyone yearns to know how much longer we must endure these restrictions, with all their consequences for jobs, livelihoods and most tragically of all, the life chances of our children,” Johnson told members of Parliament on Wednesday. “We will not persist for a day longer than is necessary, but nor can we relax too soon.”

Johnson rejected a call from Tory colleague Steve Brine to consider opening some schools before March 8. “This is about as fast as we think we can prudently go,” the prime minister told Parliament. While the lockdown appears to have curbed the spread of infections, “we do not yet have enough data to know exactly how soon it will be safe to reopen our society and economy,” he said.

The U.K. is three weeks into its third national lockdown since the pandemic began almost a year ago, with tens of millions of workers ordered to stay home and retail and hospitality businesses shuttered. Since then, the government has committed almost 300 billion pounds to emergency support for the economy.

Despite the lockdowns and stimulus measures, the U.K. has suffered the fifth-highest death toll in the world and the heaviest economic hit of any Group of Seven country.

In recent weeks, Johnson’s administration has focused on driving ahead with a mass vaccination program that aims to provide shots to the 15 million most vulnerable people and carers by Feb. 15. Once that goal has been achieved, ministers will consider if and how restrictions can safely begin to be eased.

“We remain in a perilous situation,” Johnson said. The spread of a more contagious and potentially more deadly new strain of the virus, first found in southeast England, has set back the government’s ambitions for reopening the economy in the spring, he said.

Other strains have been identified in Brazil and South Africa and ministers have been debating border measures including quarantining all arrivals in hotels. In the end, Johnson announced a more limited policy aimed at arrivals from specific countries thought to be most at risk of carrying a new variant of the disease.

“In order to reduce the risk posed by U.K. nationals and residents returning home from these countries, I can announce that we will require all such arrivals who cannot be refused entry to isolate in government-provided accommodation such as hotels for 10 days, without exception,” the prime minister told the House of Commons. “They will be met at the airport and transported directly into quarantine.”

Extra police will also be stationed at ports and airports to stop Britons leaving the U.K. to go on holiday or for any other non-essential reason, Home Secretary Priti Patel said. “Anyone who does not have a valid reason for travel will be directed to return home,” she told Parliament.

Johnson, who has been criticized for being slow to take action throughout the pandemic, said the government will review the lockdown and vaccine roll-out in mid-February and aims to publish a plan for easing the restrictions in the week of Feb. 22.

“We have one of the highest death rates in the world,” said Keir Starmer, leader of the U.K.’s main opposition Labour Party. “The truth is this was not inevitable, it wasn’t just bad luck. It’s the result of a huge number of mistakes by the prime minister during the course of this pandemic.”

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France holds off on new lockdown, worries about unrest risk

InternationalJan 28. 2021A morning commuter wearing a protective face mask passes the steps of the Grande Arche monument in Paris on Jan. 21, 2021. MUST CREDIT: Bloomberg photo by Benjamin Girette.

By Syndication Washington Post, Bloomberg · Ania Nussbaum, Rudy Ruitenberg

The French government is delaying an agonizing decision to lock down the country once more, mulling options to slow new variants of covid-19 as the current curfew is considered insufficient.

President Emmanuel Macron “has asked for additional analysis” on the spread of the virus before deciding on any new restrictions, government spokesman Gabriel Attal said after a defense cabinet meeting Wednesday. Maintaining the status quo is “unlikely” as the 6 p.m. – 6 a.m. national curfew isn’t doing enough, and a strict lockdown is one option being considered, he said.

Macron is under pressure to shut down the economy for the third time in less than a year, as doctors and researchers raise the alarm about mutations of the coronavirus spreading through the country.

Yet with a presidential race coming up next year, the French leader also has to navigate criticism of his handling of the crisis, including a slow start to the vaccination campaign. And while surging U.K. cases and deaths demonstrate the perils of the new virus variants, riots in the Netherlands against a government curfew show the risks of tighter measures.

Christophe Castaner, head of Macron’s party at the National Assembly, told Le Parisien newspaper there was a risk of “civil disobedience” in France, too, should a new lockdown be imposed.

Voters have much less appetite for strict measures now than at the beginning of the pandemic, with 93% of adults approving of the first lockdown, compared to just 67% in favor of a third, according to a recent Elabe opinion poll.

“I know there is a fatigue,” Attal said during the press conference. A decision on whether to tighten measures will depend on health indicators, he said.

France’s second lockdown started late October and ended mid-December with a curfew that was expanded earlier this month. It brought only partial relief for the health system, with hospitalizations and intensive-care patients remaining more than five times higher than in August.

Restaurants, cafes, clubs, theaters, cinemas and sports venues have been closed since October and are being propped up by government aid, like many areas of the economy.

A third lockdown would cause an economic contraction by 10% to 18% compared to pre-crisis levels, according to a Ministry of Finance study cited by Parisien, depending on the severity of the measures. During the first — and strictest lockdown — in the spring of 2020, activity contracted by more than a third.

While the government is banking on a strong rebound of its economy in the second half of the year, another lockdown would threaten its growth forecasts.

Finance Minister Bruno Le Maire called a third lockdown a “last resort” on Wednesday. A recent survey by the French statistics agency showed rising concern in households in January, as consumers plan to save more cash for difficult times. Consumer sentiment is at its lowest since November.

“Let’s look at where we are,” Le Maire said. “There’s no haste.”

The more contagious U.K. variant of the virus represented 9.4% of cases in an analysis of positive tests in the Paris region between Jan. 11 and 21. Across France, hospitalizations have been climbing in the past two weeks to the highest level since early December, and the number of severely ill Covid patients in intensive care rose above 3,000 this week.

Macron could still make a final decision in the coming days — the defense cabinet, a small and close-knit group of ministers who gather around the president and prime minister, have met over weekends in the past.

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British Hinkley Point nuclear plant delayed with higher costs

InternationalJan 28. 2021A crane lifts a prefabricated steel containment ring into position at the nuclear Reactor Unit 1, at Hinkley Point C nuclear power station construction site, near Bridgwater, England, on Dec. 17, 2020. MUST CREDIT: Bloomberg photo by Luke MacGregor.

By Syndication Washington Post, Bloomberg · Francois de Beaupuy, Rachel Morison

Electricite de France said the completion of its flagship British nuclear plant project will be delayed at least six months and cost about 500 million pounds ($687 million) more than previously planned because of the coronavirus pandemic.

While the delay announced Wednesday is short at this stage, it’s likely to revive controversy about how expensive the technology is and whether further holdups are inevitable. EDF is already struggling to finish a French reactor more than a decade behind schedule.

“We are still facing the full force of the pandemic,” Hinkley Point C Managing Director Stuart Crooks said. “This means we have not been able to bring on the extra people needed to catch up on work we postponed at the height of the crisis.”

The French state-controlled utility warned last year that such risks had risen as Covid-19 slowed construction of the two reactors it’s building with its Chinese partner at Hinkley Point in Southwest England. EDF had planned to make up key milestones missed in 2020 by the end of this year but continued social distancing requirements have limited the number of workers allowed on site.

The project completion cost at Hinkley Point C is now estimated at 22 billion to 23 billion pounds, half a billion more than estimated in 2019, EDF said in a statement Wednesday. The first reactor will begin producing power in June 2026, compared with end-2025 as initially announced in 2016, it said.

The six-month delay is dependent on being able to begin to ramp up back to normal site conditions from July, EDF said.

EDF fell 3.2% to 10.40 euros by 11:20 a.m. in Paris. The utility will have to shoulder the extra costs and won’t be paid any money from the U.K. government until the project is finished and electricity is being produced.

Nuclear doesn’t have a good track record for finishing on time. EDF is struggling to finish a reactor at Flamanville, which is delayed by more than 10 years, leading France to put further new projects on hold.

“Not great news, though given the covid-19 crisis and the very poor project evolution at Flamanville this is a fairly benign update,” JPMorgan Chase analysts said in a note, referring to EDF’s delayed nuclear project in France.

Delivering Hinkley Point C without huge delays is important for both EDF and U.K. policymakers who are relying on power from the reactor to plug a supply gap that’s emerging as older reactors shut. The utility is in talks with the government about financing a second project at Sizewell C. The government says the project needs to be cheaper than Hinkley Point C.

In a show of the importance of making a success of Hinkley, U.K. energy minister Kwasi Kwarteng gave his public backing to the project last week.

“I’m confident that if we do Hinkley Point C on time, which is looking likely, or if we miss it, it won’t be by very much, ” he said.

The U.K. is likely to need nuclear power as a source of low carbon electricity to meet its commitment to zero-out emissions by 2050. Electricity use is set to double by then as heating and transport sectors electrify. The huge program of offshore wind the U.K. is planning to roll out within nine years will need back up for when the weather is calm.

The delay and cost overruns will trim EDF’s projected rate of return on the project. The French company reiterated that units 1 and 2 still face another potential delay of 15 and 9 months, respectively, which might result in additional costs of about 700 million pounds.

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European economy lags China and U.S. on pandemic recovery

InternationalJan 28. 2021A dockworker monitors a shipping container being loaded onto a freight train at the railway terminal at Behala inland port in Berlin on Jan. 26, 2021. MUST CREDIT: Bloomberg

By Syndication Washington Post, Bloomberg · Craig Stirling

Europe’s economy is starting to follow the familiar script of lagging its international peers when recovering from a crisis.

That was the upshot of the International Monetary Fund’s forecasts on Tuesday, which downgraded the growth outlook for 2021 across Europe and underscored a generally poorer performance compared with China and the U.S.

Such diverging fortunes reflect the stringency of lockdowns across the euro zone to contain the coronavirus, as well as a late and stumbling vaccination campaign — headwinds that threaten to deepen what already looks likely to be a double-dip recession. Political unease over the future leadership of Germany and a crisis in Italy are compounding the gloom.

By contrast, China is fulfilling a V-shaped recovery, and the U.S. is strutting more confidently with a new president overseeing an extra stimulus injection and a more aggressive vaccine effort.

“We’ve started the year on a softer footing, particularly in Europe, because much of Europe seems to have gone back into recession,” Janet Henry, chief global economist at HSBC Holdings in London, told Bloomberg Television. “China is already back above pre-pandemic levels and, on our projections, the U.S. will be by the end of 2021. For the euro zone, it’ll be the end of 2022.”

That divergence was emphasized in the IMF’s forecasts, which showed euro-area gross domestic product rising only 4.2% this year, after falling 7.2% in 2020. The U.S. economy is seen expanding 5.1%, more than recouping last year’s 3.4% contraction.

The most immediate cause of Europe’s relative weakness is the need for stricter and longer lockdowns to combat a resurgent coronavirus outbreak, and to contain nastier strains of the disease.

As European Central Bank President Christine Lagarde put it last week, a contraction in the fourth quarter will now “travel” into the first three months of the year.

“The short-term risk is tilted to the downside,” she added somberly. “Uncertainty is in the air.”

Sluggish immunization programs also threaten to widen the disparity between Europe and the rest. The European Union’s best performers in that regard, tiny Malta and Denmark, have administered only around 4 shots per 100 people. The U.S. has managed 7 and the U.K. is above 10. The EU is now in a standoff with AstraZeneca over delayed vaccine deliveries.

With such shortcomings likely to cement lockdowns even further, the contrast in economic destinies is looking stark, with banks including Barclays Plc pointing to an “Atlantic divide.”

“The U.S. outlook is improving, Europe’s is deteriorating” BofA Global Research’s economics team wrote in a report. “Don’t think of both economies’ recovery prospects as equal.”

Such a trajectory evokes the frequent impression that Europe has become a natural economic laggard to the rest. That sense has persisted for much of the current century, not least after the region’s sovereign-debt crisis impaired its recovery from the global financial crash a decade ago, while the U.S. and China powered ahead, at least in relative terms.

Newfound political disarray is only serving to highlight Europe’s listlessness. Post-Brexit trade curbs with the U.K. are already an irksome reminder of the recent trauma of divorce disfiguring the region.

Meanwhile, the succession to Germany’s Angela Merkel is still unresolved, keeping open the question of how the bloc will galvanize itself into fighting crises in the era after she leaves. Even after a candidate to replace her as chancellor is settled, an election in September — no doubt followed by coalition talks — will prolong the drift.

The sudden resignation of Italian Prime Minister Giuseppe Conte, against a backdrop of burgeoning debt obligations, also shows how turmoil is never far from erupting somewhere in the region. The country has been the focus of the EU’s efforts to forge a joint recovery fund to shore up the integrity of its common currency.

For all their potential despair, European policymakers can still cling to hopes that their economies remain sound beneath the surface.

Government support programs in the region have tended to be highly targeted toward keeping companies and jobs afloat even when output is shut down, possibly avoiding unnecessary destruction to growth potential.

“Economies are being held in an imperfect state of suspended animation, and by and large it keeps underlying economies healthy,” said Kallum Pickering, an economist at Berenberg. “My hunch actually is that there’s a bit less scarring than most people think.”

In any case, Europe’s finance chiefs are now resigning themselves to being patient for when vaccination setbacks can be cleared, and the pandemic tamed, so that their economies can finally be unleashed — even if that happens far later than global rivals.

“We have to divide the year 2021 in two parts,” French Finance Minister Bruno Le Maire said in a Bloomberg Television interview. “We have everything that is required to have a very strong, very quick rebound as soon as the pandemic is over.”

Dutch central bank Governor Klaas Knot shares that view — but also cautions that there will be a long road ahead to repair the damage.

“There is optimism, but then of course we will be stuck with the legacy of the corona pandemic,” he told Bloomberg Television. “Output will be below potential for some time to come.”

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EU-Astra vaccine call back on after chaotic morning in dispute

InternationalJan 28. 2021Pascal Soriot, chief executive officer of AstraZeneca, poses for a photograph following a Bloomberg Television interview in London on Nov. 8, 2018. MUST CREDIT: Bloomberg photo by Simon Dawson.

By Syndication Washington Post, Bloomberg · Suzi Ring, Jonathan Stearns, Nikos Chrysoloras

The clash between the European Union and drugmaker AstraZeneca over covid-19 vaccine delays temporarily descended into chaos on Wednesday before the two sides confirmed that a crunch call to resolve the standoff will take place.

Earlier on Wednesday, an EU official said the company had pulled out of the planned talks with the European Commission and government representatives. The official, who asked not to be named, said Astra executives had sent an email on Tuesday evening withdrawing “because there are too many moving parts.” The cancellation was disputed by Astra, and the EU subsequently said discussions were back on.

The contradictory statements were just the latest twist in a saga that erupted late last week when Astra warned of delays at a production plant in Belgium. That was followed by public disagreement over contract terms, accusations of blame, and even threats to put limits on vaccine exports. The latest confusion — which pushed the life-and-death issue into the realm of farce — is also an echo of the broader disorganization that’s marked the EU’s rollout of coronavirus shots so far.

Iskra Reic, Astra’s Executive Vice-President for Europe and Canada, will take part in the meeting, where the EU wants to get more details about the delay to the rollout of shots. Governments are desperate to speed up the vaccination, as it’s proved sluggish so far, and also keen to avoid taking the blame.

The on-off status of the call emerged after Astra Chief Executive Pascal Soriot used an interview with European newspapers to deflect responsibility to the EU. He said the company has a so-called best-effort agreement that doesn’t specify a quantity. That’s because the EU insisted on receiving the AstraZeneca vaccine about the same time as the U.K. despite putting in its order three months later.

A key part of the disagreement is the use of vaccines produced in U.K. factories. Speaking on condition of anonymity, an EU official said that Soriot’s claim that the U.K. has priority on vaccines from British plants doesn’t exist in the contract.

The EU’s vaccination pace is lagging way behind the U.S. and the U.K. in terms of the share of its population inoculated, according to Bloomberg’s global tracker. Soriot said that once Astra gets EU regulatory approval — expected within days — it will ship at least 3 million doses immediately, with a target of 17 million by February.

That should help Europe accelerate vaccinations and get economies closer to exiting damaging lockdowns that have crippled industries and caused growing discontent. Soriot suggested he understands that the situation is difficult for leaders across Europe, where Brussels has coordinated a vaccine-buying program.

“Everybody is getting kind of a bit, you know, aggravated or emotional about those things.” he said in the comments published in La Repubblica and other newspapers. “But I understand because the commission is managing the process for the whole of Europe.”

In an effort to alleviate supply shortages, French drugmaker Sanofi said it has agreed to help produce more than 125 million doses of the shot Pfizer Inc. developed with Germany’s BioNTech SE. That shot, and one by Moderna Inc., are already authorized for use.

Sanofi will provide BioNTech access to its production sites in Frankfurt starting this summer, it said in a statement Wednesday. The goal is to accelerate efforts to package and distribute the vaccine, which needs to be kept at ultra-cold temperatures.

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New pro-Beijing party signals China’s future plans for Hong Kong

InternationalJan 28. 2021The logo for the Bauhinia Party on a laptop as Charles Wong Chau-chi, co-founder, works at his desk in Hong Kong on Jan. 12, 2021. MUST CREDIT: Bloomberg photo by Paul Yeung.

By Syndication Washington Post, Bloomberg · Kari Lindberg

As China moves to neutralize Hong Kong’s pro-democracy opposition, it is also giving the green light to a new political party that provides a window into how Beijing may change the territory in the years ahead.

The Bauhinia Party, named after the flower on Hong Kong’s flag, was founded last May by Western-educated businessmen who were born in the mainland and have links to the Communist Party. Although still tiny, the group consulted with officials in the Hong Kong government, the Liaison Office — Beijing’s main body overseeing the city — and relevant offices in China, according to Charles Wong Chau-chi, one of the co-founders.

In an interview, Wong said that while the party never asked formally for the endorsement of those Chinese agencies, “we believe there is no reason they do not want to endorse us.”

The party’s purpose, he added, was to support people to stand for the position of chief executive, which will be up for grabs next year when Hong Kong leader Carrie Lam’s first term expires. One possibility is Li Shan, the party’s chairman, who is chief executive of Silk Road Finance Corp., a board member of Credit Suisse and a delegate to the National Committee of the Chinese People’s Political Consultative Conference, an advisory body to Beijing. Li declined an interview request.

Wong said Li would be interested in becoming Hong Kong’s next leader only if he’s “required and asked to, not necessarily he wants to.” The Bauhinia Party, Wong said, isn’t ready to compete in September’s Legislative Council elections, which were delayed for a year due to the pandemic.

The group’s formation at a time when China is facing criticism in the West for locking up democracy advocates signals an effort by Beijing to refine a managed version of electoral politics that gives the Communist Party ultimate veto power. Chinese authorities last year passed a sweeping national security law that has been used to curtail free speech, while also imposing a patriotism test to disqualify pro-democracy lawmakers — a move that prompted opposition members in the Legislative Council to resign en masse in November.

The Bauhinia Party’s emergence points to a multi-party system that “competes for blessings and a show of loyalty and devotion to whoever is in charge in Beijing,” said Kenneth Chan, associate professor at the Hong Kong Baptist University.

Any moves by Beijing to further tighten its hold on Hong Kong would provide an early test for U.S. President Joe Biden, who has vowed to support democracy proponents in the former British colony. A former Hong Kong leader still close with Beijing recently suggested the next chief executive should be decided next year by consultation, rather than through a 1,200 person committee. Beijing in any case can veto any winner it doesn’t like.

The Bauhinia Party’s platform says it aims to “respect ‘one country,’ cherish ‘two systems,’ and safeguard Hong Kong’s core values of freedom, democracy and rule of law.” Yet while that sounds in line with Hong Kong’s moderate pro-democracy camp, the group’s diagnosis of the territory’s troubles mirrors that of Beijing.

Wong said the root causes of the 2019 unrest had “nothing to do with China” while pointing to factors such as high-priced housing, poor local governance and an opposition he said was “tearing apart the social fabric and getting everybody angry.” The national security law, he added, was “timely to help stabilize Hong Kong” and had no impact on “one country, two systems” — the framework that guaranteed the territory’s autonomy for 50 years after Britain handed over the former colony in 1997.

Wong laid out a series of policy proposals he said would help bolster Hong Kong’s economy for decades to come: “One country, two systems” should be expanded for another 50 years. Young people should learn more about China, study Mandarin and spend time working in the mainland. Hong Kong should take advantage of the Greater Bay Area, Beijing’s plan to link the territory with Macau and neighboring Shenzhen, home to Huawei Technologies Co. And the city should implement a proposal on universal suffrage endorsed by Beijing.

Perhaps the toughest problem, Wong said, was expensive housing. High property prices were affecting everyone, he said, boosting the cost of living and making Hong Kong “less and less competitive.” The party platform calls for “bold solutions” including land and waterfront reclamation, farmland re-zoning, land co-development with the nearby cities of Shenzhen and Zhuhai, and converting country parks that now make up about 40% of Hong Kong’s total land area.

“The supply of land is not a problem,” Wong said. The challenge, he added, was finding “a common denominator that is shared by everybody to really push your housing program through.”

While it’s unclear whether the Bauhinia party can gain much traction, the current Beijing-friendly groups in Hong Kong have dismissed its chances to win elections. “The business community will not invest their resources in new parties without political influence, and little prospect of winning seats in LegCo or at the district level,” said Regina Ip, a pro-establishment lawmaker.

Wong said the party aims to eventually have as many as 250,000 members. He added that the party’s communication with China’s government would likely be “quite fluid,” while saying it was “silly” that critics said it had Beijing’s backing.

“A lot of people try to pin us down as to whether we are from China,” Wong said. “I think they really miss the point. We should look at whether we are for Hong Kong or not. And China is there to help, but there are bottom lines, there are red lines.”