Saturday, April 29, 2023

Brussels Edition: A push to embrace China backfires

Lithuania's opposition was calling for a move back to business as usual with China but that seems to have backfired

Welcome to the weekend issue of Brussels Edition, Bloomberg's daily briefing on what matters most in the heart of the European Union. Join us on Saturdays for deeper dives from our bureaus across Europe.

VILNIUS — As Europe tussles over how to approach China these days, Lithuania has pushed ahead with one of the more provocative approaches by pursuing closer ties to Taiwan. That stance has made it a target for Beijing — which downgraded diplomatic ties  — as well as opposition politicians who accuse Foreign Minister Gabrielius Landsbergis of recklessly burning business bridges with Beijing.

Former Prime Minister Saulius Skvernelis said last year that Lithuania's foreign policy — carefully forged over the past 30 years — has been "completely destroyed'' after Taiwan was allowed to open an office in Vilnius. He questioned why the government is creating additional tensions with war raging on its borders.

Gabrielius Landsbergis, Lithuania's foreign minister Photographer: Valeria Mongelli/Bloomberg

All the major opposition parties spent months signaling that policies would switch back to business as usual following the October 2024 general election.

That stance appears to have backfired — particularly after the furor over China's ambassador to France casting doubt on the independence of former Soviet states. "We're not post-soviet," Landsbergis tweeted. "We're never-soviet."

The promised reversal on Taiwan may also now be in question. Andrius Mazuronis, deputy parliamentary speaker and chairman of the opposition Labor Party, said this week that Beijing's ambiguous position regarding Russia's war in Ukraine and the ambassador's interview has "taught the opposition a lesson."

"I must admit that our previous call to return to business as usual with China was wrong," Mazuronis said on national radio. "We made a mistake that must be corrected. Going back to business as usual with China would be naive and short-sighted."

A few opposition parties are sticking to government's official line: Now that Beijing has clarified its stance, let's move on. 

China is still trying to clean up its diplomat's loose talk. President Xi Jinping made a long-sought phone call to Ukraine's Volodymyr Zelenskiy.

But the damage won't be easily reversed, with all three Baltic states warning Beijing cannot be trusted as a mediator for peace in Ukraine. Landsbergis warned against a repeat of "geopolitical blindness," as in a once-failed strategy with Moscow.

Milda Seputyte, Vilnius reporter, with Ott Tammik in Tallinn

Editor's note: The Brussels Edition will take a break on Monday for the Labor Day holiday. The next issue will be published on Tuesday, May 2.

Weekend Reads

Europe Is Waking Up to Threat of an Eastern Version of Brexit

A pro-EU advertisement reading "Why would we be satisfied with less?" at a tram stop in Budapest Photographer: Akos Stiller/Bloomberg

A pro-EU messaging campaign is sprouting up around Budapest, an effort to counter the years that Viktor Orban has dominated Hungary with his railing against the bloc. Polls suggest Hungarians are increasingly looking eastward, and the risk is that a decline in support for the EU might loosen the most important guardrail against Orban's illiberal leadership.

ECB Wakes Up to Profits as Key Culprit in Inflation Struggle

The ECB is catching up to an inflation risk that's proving far more powerful than the wage-price spiral — so-called greedflation. The new focus is on surging corporate profits, with President Christine Lagarde warning of a "tit-for-tat" dynamic where widening corporate margins propel salaries and prices ever higher.

Ukraine Support Faces New Hurdle as Slovak Leader Eyes Return

Robert Fico Photographer: Michaela Nagyidaiova/Bloomberg

A former Slovak prime minister who could return to power later this year said he would end the nation's arms deliveries to Ukraine and put a brake on some plans to introduce more sanctions on Russia. Robert Fico's party leads the polls ahead of the September election and his victory would add a stiff new challenge to the EU's unity.

Germany Sets the New Standard for Cheap, National Mass Transit

Germany will start one of the most affordable public transit offers anywhere in the world next week, putting pressure on commuters to ditch their cars and for the government to make the shift work. A €49-per-month ticket allows unlimited travel on all regional trains, metros, buses and trams across the country. Now the transit network needs to hold up.

Biden's Made in America Push Sparks Global Subsidies Arms Race

Europe is starting to feel the impact of massive US subsidies for green tech, as there are signs that businesses are beginning to divert their investment plans. Swedish battery maker Northvolt has said it is prioritizing expansion in the US over Europe. Germany's VW opted in March to build a $2 billion factory for its new electric Scout brand in South Carolina, describing the incentives on offer as akin to "a gold rush."

This Week in Europe

  • Monday: Labor Day holiday in much of Europe
  • Tuesday: German Chancellor Olaf Scholz, European Commission President Ursula von der Leyen take part in Infineon groundbreaking ceremony for Dresden chip fab
  • Wednesday: France's Constitutional Council due to issue ruling on second request for referendum on President Emmanuel Macron's pension reform
  • Thursday: ECB rate decision, with news conference with central bank chief Christine Lagarde
  • Friday: EU health ministers meet in Stockholm

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