Susanne Mundschenk

The euro is nearly level with the dollar. It should not matter in theory, because of the relatively low share of the US in EU trade. But it does in practice. Some predict that the euro will fall below parity. There is a straightforward explanation for this: the war in Ukraine and unpredictable Russian gas supplies to Europe make the dollar a safe haven for investors. On top of this, US interest rates offer a higher return on investment. But it is not only the dollar. Looking at the broader picture, the European Central Bank's measure of the euro's real effective exchange rate against 42 partner countries confirms this trend towards a new historic low: really bad news comes from the combination of the euro's falling value, the energy crisis, and the return of inflation.

Recep Tayyip Erdogan is once again using Turkey's geopolitical position for his own ends, this time dictating grain shipments from Ukraine through the Black Sea. Turkish customs authorities detained a Russian cargo ship carrying Ukrainian wheat on Sunday, following a request of Kyiv. The Russian cargo ship Zhibek Zholy left the south-eastern port of Berdyansk over the weekend carrying 7,000 tons of grain, worth about £1.75 million. The Russian-appointed head of the occupied region had hailed it as the first commercial ship to leave a Ukrainian port after months of war. He said this would take desperately-needed supplies to friendly countries, according to Politico. The reality is, of course, that the shipment is a provocative move from Russia given it isn't Moscow's grain.

After the pandemic, is energy the next European crisis? Gas prices have hit new records, reaching $180 per barrel in the Netherlands, representing a fivefold increase over the past six months. This is driven by news that Russia has diverged gas flows from its main European pipeline to one that is going east via Poland. Experts are pondering over the reasons, be it geopolitical muscle-flexing or the fact that Russia is hit by a cold front of minus 20 degrees. The results are the same: Vladimir Putin promised more gas for Europe, and it is still not coming. The prospect of a Russian invasion in Ukraine just adds more uncertainty and pressure on the market. Europe still depends on Russian gas, amounting to 35 per cent of European supply. Will there be enough gas to get through the winter?

The European Commission's Fit-for-55 emission plan, with its extended emission trading scheme and the new carbon border tax, will be fighting an uphill battle. The carbon border tax scheme — the first of its kind in the world — could become Europe's opening bid to get moving internationally beyond mere discussions. If there is an international agreement in the end, it would have served a purpose. If not, it may only end up creating new battle lines between trading partners. There may be broad consensus on the goal of reducing carbon emissions, but questions remain: who is to shoulder the bill?

The European Commission is set to propose EU-wide minimum taxes on kerosene, the fuel for planes, as part of their EU energy taxation plans to meet the new eco 2030 targets. However, it remains to be seen if this tax will be agreed by all member states, as taxation issues require unanimity.  A leaked draft from the Commission proposes a minimum tax on flights inside the EU. Freight flights are to be exempted, so as not to give a competitive advantage to non-EU competitors, which could be seen as a muddled approach to satisfy too many objectives at once. And there are alternatives, such as including aviation companies in the CO2 emissions trading. Taxes are the prerogative of member states, though the EU can set minimum rates Why do planes not have to pay taxes on their fuel?

France’s deficit is set to reach 9.4 per cent of GDP this year, more than last year, even though France's first lockdown was more severe and lasted for a longer time. This may relate to accounting issues, as some spending is only reported this year even if it is related to last year. But these are details – the main issue is something else entirely. The journalist Dominique Seux wonders whether France has maxed out its spending capacity at the moment when environmental challenges require extraordinary efforts. Were France's spending choices last year done with full awareness of how they would compromise future fiscal room for manoeuvre? France was always amongst the high deficit countries in the EU.