Davos, Ramstein, Ecofin, summits of uncertainty

In a fragmented and complex geo-economic framework, the international summits are the week’s special observed ones. The one in Ramstein, which sees the defence ministers and military leaders of the approximately 50 countries gathered to discuss the forthcoming aid to Kiev; the World Economic Forum 2023 in Davos; and the Economic and Financial Affairs Council (ECOFIN), which brings together the Economy and Finance ministers of the EU member states.  

In Ramstein, supporters of Ukraine gathered to establish a new aid package to support Ukraine: the US, UK, Sweden and Denmark announced before the summit new supplies including armored vehicles.

Washington says it is ready to provide a new aid package worth $2.5 billion, bringing the US total military support to $26.7 billion since the outbreak of Russia’s invasion of Ukraine. However, Washington has ruled out sending heavy tanks, justifying the choice by the lack of sufficient training and maintenance-related issues on the Ukrainian side.

The United Kingdom will contribute 600 Brimstone missiles to the cause, Denmark 19 Caesar cannons and Sweden 19 Archer self-propelled vehicles. However, the Ukrainian demands are partly disregarded, the weapon systems have a shorter range than hoped for and the number of vehicles is deemed insufficient by the Kiev military leadership.

The Russian-Ukrainian conflict also holds court among the Davos topics. The Ukrainian delegation is large and aims to convince the axis of Western countries to quickly provide Kiev with more weapons.

European Commission President Ursula von der Leyen reassures Kiev: ‘Europe will always be with you for as long as you need it’, reconstruction included. However, the geopolitical fragmentation reverberating on the trade and investment front is compounded by other concerns.

Among business leaders and economists taking part in the World Economic Forum 2023, the Wall Street Journal reports, ‘the mood is somber. The ghosts stirring managers’ thoughts are those of a possible recession, as some data suggest that inflation – triggered only in part by the return of war in Europe – has peaked.

The Planet’s largest economies remain under special surveillance: China and the United States, where the conflicting frictions over Taiwan stand in an uncertain geopolitical framework. Beijing delivers a GDP growth of just 3%, at its lowest since 1976. A risk for China’s public accounts, which will have to cope with problems related to welfare and social security. Ready for the pass of the baton is India, as the world’s most populous country.

In the US, the shadow of a recession is partly offset by the good propensity of American consumers to spend and the containment of the unemployment rate, which was registered 3.5% in December (all-time low). The US executive’s efforts are now focused on reducing the deficit and containing inflation. Biden’s formula is contained in the Inflation Reduction Act, the package that envisages a set of measures worth more than $750 billion spread over ten years, ranging from supporting investment in domestic energy and manufacturing production, to reducing carbon emissions by almost 40 per cent by 2030, via a plan of tax breaks and credits to support the manufacturing of sustainable technologies and the demand for goods.

However, the Inflation Reduction Act worries Europeans. Protectionist measures to support the ‘Buy American’ risk causing an escape of companies from the old continent to benefit from subsidies and tax rebates overseas. A concern addressed in the Ecofin discussions on January16th, to which the European Union is preparing to respond with measures ranging from state aid to new common debt.

The Union’s attention remains high not only at the economic level: the great uncertainties about the future also affect everyday politics. The week was marked by extraordinary resignations. Firstly, the German Defence Minister Christine Lambrecht – to be replaced by Social Democrat Boris Pistorius – which followed a long spiral of criticism for Berlin’s uncertain response to the war in Ukraine. And then, surprisingly, the resignation of New Zealand premier Jacinda Ardern: “I know what this job takes. And I know that I no longer have enough in the tank to do it justice. It’s that simple”.

Less simple than a year that began amid great uncertainty.