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The Changing Future of the European Union



The Changing Future of the European Union

By Eduardo Brunstein, General Manager, Standard Commerce Bank

Despite recent seismic changes, the European Union is decidedly not in danger of complete collapse.

However, it is unclear what the future of the EU will hold for its member states. The state of collective uncertainty has raised questions among citizens and experts alike.

Yogi Berra famously said “The future ain’t what it used to be”. Plans to build a collective of 30 countries with just one border and one currency, without internal trade tariffs and in which everyone is employed, mobile and happy are no longer feasible. Recent developments changed visions of the EU’s future dramatically.

The fact of the matter is no one could possibly be 100% certain of the future of the EU, as it is currently quite fluid.

There are, however, reliable experts with well-informed insights on the macro trends that are shaping the Union as it moves forward.

As we all know, the dramatic upset in the European Union’s structure is Brexit, the United Kingdom’s exit from several -but not all -of the EU’s agreements.

The UK voted on the formal exit in June 2016. It is programmed to execute at 11pm UK time on Friday 29 March 2019. According to the BBC, “The UK and EU have provisionally agreed on the three “divorce” issues: of how much the UK owes the EU, what happens to the Northern Ireland border and what happens to UK citizens living elsewhere in the EU and EU citizens living in the UK”.

Britain’s exit fee will be steep: Investopedia estimates that the UK may owe the EU up to 100 billion Euros. The economic outlook is now rather bleak, to say the least. Bankers are already fleeing in droves, courted by Dublin and Frankfurt, even Paris; traditional finance is suffering, as well as up and coming Fintech companies.

Shortly after the vote, Uri Friedman made a compelling case in The Atlantic that the decision process itself was badly engineered from the start. He pointed out that (a) having a one-step process to decide such an important issue is wrong; (b) Britain, being a parliamentary democracy should at least give some weight to Parliament’s opinion, and (c) that perhaps the people weren’t at all prepared to take a stance on the issue.

Friedman’s claims are evident, growing numbers of British citizens and politicians alike are calling for a referendum vote.

Before dissecting the potential referendum vote, it’s important to understand why British citizens voted out. Some of the reasons that led the UK to leave are leading other nations to rethink their stance on the Union as well. The graph below shows the results of a poll taken by the BBC among those who voted “yes” on Brexit.

Percentage of Leave Voters

Percentage of Leave Voters

Reasoning behind the vote was somewhat divided and arguably a bit ill-informed. The given reasons are issues that could have been managed, controlled, or negotiated within the realm of the EU without an abrupt exit.

Immigration control was the most popular priority among voters and taking law-making control away from the EU took a close second. The age-old complaint that the UK contributes a disproportionate amount of financial assistance to the EU is ever present. The least popular reason was, at best, a childish attempt to send a message to politicians. None of these issues are new,all have com up occasionally in public policy debates over the years, but they’ve never been demonstrated -even collectively – to justify such a radical move.

Despite the looming doubt and a degree of voter’s remorse, citizens in other parts of Europe share the concerns that led British citizens to vote “yes” on Brexit.

Consequently 9 different countries,not including the UK, are considering (in various degrees) leaving the European Union. A poll done by the Washington Post revealed this wave of discontentment:

Disagreement on 'ever c.loser' union

Disagreement on ‘ever c.loser’ union

In all but 1 of the countries listed, the majority of those polled believe that some lawmaking capabilities should be restored to individual countries’ governments, rather than the EU. Even in Poland, the proportion of the populace that believes the current division of power should remain only outnumbers those who want to seize power back from the Union by 1%.

Concerns about the EU’s effect on member states are surprisingly consistent across borders,but perhaps the shock of Brexit will encourage other politicians across Europe to treat the decision of whether to remain in the Union a bit more delicately. If the issue is put to a popular vote, it should ideally be complemented by a parliamentary vote. Regardless, it may be wise to require atwo-thirds majority.

Another consequence of Brexit is that even though some believe that the EU should continue as it is and potentially get more involved in member states’ economies, the Union’s progress is undoubtedly slowing down. Some advocate a “multi-speed” approach to the EU in which new members are incorporated at a fast pace and older members can reevaluate their stance.

In a September 2017 interview with Financial Times, President Andrzej Duda of Poland warned that a multi-speed bloc would undermine the fundamental idea of the EU as a “union of equals” and ultimately lead to the collapse of the union. “If the EU formally becomes a union of different speeds it would in effect be formally divided into better and worse members and it would to a large extent lose its attractiveness for those countries that were deemed second class,” he said.

During a debate with the presidents of Georgia and Macedonia at an economic conference in southern Poland, President Duda argued that “thanks to our membership we have become a fully-fledged member of the political union of the west … If now we were going to go back and find ourselves in ‘category B’, for Poles that would mean a reduction in the attractiveness of the EU,” he said. “In addition the EU would become less attractive for those aspiring to join… It would mean one would have to go through many stages to get to the center where some countries stick together and think that they are better.” Macedonian President Gjorge Ivanov echoed Duda’s concerns and said that a two-speed Europe did not make sense “even as a metaphor”, pointing out that it was not possible for a train to move at two speeds simultaneously.

The below graph indicates the results of an ongoing poll The Economist published in March 2017:

love lost

In 5 of the 6 countries polled, public opinion of EU membership has diminished over time. The only country whose opinion has improved is Poland, which had more to gain from joining the Union than most.

In December 2017, The World Economic Forum (“WEF”) published a blog indicating that the same stance guides investors and analysts today, regarding the European Union’s future: “investors have recognized that Europe is doing well, they are putting their money where their mouth is -and they want to know what’s next for the Euro area”.

The WEF has also listed 5 challenges currently facing Europe. Successfully managing these challenges will benefit the EU and, ultimately, the world economy as a whole:

  1. Moving toward a human-centered economy: Europe can boost economic growth through digitization and automation, while also ensuring the benefits are shared equitably across society.”
  2. Management of immigration and borders: Europe’s next generation aspires to convert migration into the foundation of a strong society where migrants and their integration are regarded as drivers of economic prosperity and a flourishing and dynamic cultural lifestyle”.
  1. Leading global sustainability: European governments, businesses, and citizens have recognized that that economic growth and sustainable energy policy can go hand-in-hand. Unaddressed climate change would increase global instability with a direct impact on some parts of Europe, while increasing geopolitical uncertainty that may limit European access to energy and resources. European citizens, especially young people, want a stronger action agenda to address climate change.”
  1. Dealing with threats to public safety: “With increasing collaboration or integration in defense and security among countries, Europe is well positioned to take on a greater global role in security and defense and there is a currently a strong effort underway to strengthen Europe wide collaboration on defense and security and ideas such as the establishment of a “European DARPA” can help in that direction.”
  1. Working to be relevant, responsive, and trustworthy: Europe can benefit from the Fourth Industrial Revolution if we ensure the technological advancements are used to help public sector institutions more effectively deliver services and identify citizen needs. We need to recognize the different needs of countries while also ensuring mutual benefits and progress for all members of this union.”

Soon after sharing these challenges, the WEF also published the following 5 crucial elements they believe will pave the way for a stronger European Union:

1) Complete the Banking Union by supporting the Single Resolution Fund (SRF) –this is a fund designed to reinin problematic banking practices. Having a fund like the European Stability Mechanism backing it would prepare the fund for any eventuality, thus enhancing confidence in the markets as a whole.

2) Establish common deposit insurance for the Banking Union: There are currently 19 different potential plans to protect depositors. If the EU can come up with just one comprehensive scheme, it will be a great leap.

3) Europe needs to further harmonize its financial markets to simplify investments between countries:“…at the moment, bankruptcy laws, for instance, vary massively between European countries. The same differences exist in corporate law, and in tax law. If it took less time to figure out the laws in the country you wanted to invest in, it would open up investments abroad, helping venture capital and the private equity market. That’s good news for companies, who would have a new financing channel. Pushing the Capital Markets Union in Europe forward is, therefore, a must.”

4) A limited fiscal facility: a stabilizing fund or entity that will absorb potential future economic emergencies, funded gradually through member states. This doesn’t mean more centralization –a higher concentration of resources could be achieved by re-routing some of the EU’s existing funding.

5) Establish a European Monetary Fund: the International Monetary Fund (IMF)has recently scaled back its involvement in Europe. It also has its own conditions attached to each accord (recent examples include Portugal, Greece and Spain) which often don’t coincide with the interests of the EU, its methods or even its long-term vision. As a result, the EU needs its own monetary fund to fill the void left by the IMF.

The European Union’s future is complex and subject to numerous factors. Worldwide, experts and politicians are heatedly debating the possibilities, as the eventual outcome will affect the entire world, not just EU member states.

The European Union’s current leadership role will probably only increase in relevance and depth, largely because its attempt to lead by example is somehow lost on other nations, thus creating a trust or moral discrepancy. While other nations are entrenching themselves in endless debates about minutia, Europe is regaining its role as the torch bearer of individual rights, humanism and careful planning for the future.

However imperfect, however limited the EU’s future will be, leaders cannot simply wait to see what the it will hold without getting involved. Europe is doing just that, and the rest of the world should follow suit.

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19



Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19 1

Organizations in the Middle East have had to take immediate actions in reaction to the COVID-19 pandemic, such as shifting to remote and virtual work, implementing new ways of working and redirecting the workforce on critical activities. According to Deloitte’s 10th annual 2020 Middle East Human Capital Trends report, “The social enterprise at work: Paradox as a path forward,” organizations now need to think about how to sustain these actions by embedding them into their organizational culture.

“COVID-19 has created a clarifying moment for work and the workforce. Organizations that expand their focus on worker well-being, from programs adjacent to work to designing well-being into the work itself, will help their workers not only feel their best but perform at their best. Doing so will strengthen the tie between well-being and organizational outcomes, drive meaningful work, and foster a greater sense of belonging overall,” said Ghassan Turqieh, Consulting Partner, Human Capital, Deloitte Middle East.

According to the Deloitte report, many organizations in the Middle East made quick arrangements to engage with employees in the wake of the pandemic through frequent communications, multiple webinars where senior leaders addressed employee concerns, virtual employee events, manager check-ins, periodic calls and other targeted interactions with the workforce.

The report also discussed how UAE and KSA governments have reexamined work policies and practices, amended regulations and introduced COVID-19 initiatives to support companies and the workforce in the public and private sectors. Flexible and remote working, team-building and engagement activities, well-ness programs, recognition awards and modern workspaces are among the many things that are now adding to the employee experience.

Key findings from the Deloitte global report include:

  • Only 17% of respondents are making significant investments in reskilling to support their AI strategy with only 12% using AI primarily to replace workers;
  • 27% of respondents have clear policies and practices to manage the ethical challenges resulting from the future of work despite 85% of respondents saying the future of work raises ethical challenges;
  • Three-quarters of leaders are expecting to source new skills and capabilities through reskilling, but only 45% are rewarding workers for the development of new skills; and
  • Only 45% of respondents are prepared or very prepared to take advantage of the alternative workforce to access key capabilities despite gig workers being likely to comprise 43% of the U.S. workforce this year according to the Bureau of Labor Statistics.

“Worker well-being is a top priority today, and similarly to the rest of the world, companies in the Middle East are focusing their efforts to redesign work around well-being by understanding workforce well-being needs,” said Rania Abu Shukur, Director, Human Capital, Consulting, Deloitte Middle East.

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One in five insurance customers saw an improvement in customer service over lockdown, research shows



One in five insurance customers saw an improvement in customer service over lockdown, research shows 2

SAS research reveals that insurers improved their customer experience during lockdown

One in five insurance customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics. This far outweighed the 11% of customers who felt it had deteriorated over the same period.

This is positive news for insurers during such challenging times, with 59% of customers also saying that they would pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of insurance customers using a digital service or app has grown by 10%. Three-fifths (60%) of new users plan to continue using these digital services moving forward.

However, while the number of digital users grew over lockdown, half of the insurance customer base has not yet chosen to move to digital insurance apps or services.

Paul Ridge, Head of Insurance at SAS UK & Ireland, said:

“It’s impressive that there was a net improvement in customer experience during lockdown, despite the challenges the industry was facing with a transition to remote working and increased claims for things like cancelled holidays. While many were forced to wait on customer help lines for long periods, part of the improvement may be explained by even a small (10%) increase in the number of digital users.

“However, it’s clear that a huge number of customers are still yet to make the move online. It’s vital that insurers provide the most accurate, timely and relevant offerings to customers, and this is best achieved by having additional insight into online customer journeys so they can understand them better. Using analytics and AI, insurers can seize this opportunity to digitalise their customer experience and offer a more personalised approach.”

Meanwhile, for insurers that fail to offer a consistently satisfactory customer experience, the price could be severe. A third (33%) of customers claimed that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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The power of superstar firms amid the pandemic: should regulators intervene?



The power of superstar firms amid the pandemic: should regulators intervene? 3

By Professor Anton Korinek, Darden School of Business and Research Associate at the Oxford Future of Humanity Institute. Gosia Glinska, associate director of research impact, Batten Institute for Entrepreneurship and Innovation, Darden School of Business

Recent news that Apple hit a market cap of USD2 trillion highlights an extraordinary success story: A once struggling computer-maker on the verge of bankruptcy innovates its way to becoming the most valuable publicly traded company in the United States.

Apple’s 13-figure valuation is indicative of a larger trend that is not entirely benign — the rise of a handful of superstar firms that dominate the economy. Over the past three decades, advances in information technology, mainly the Internet, have supercharged the superstar phenomenon, allowing a small number of entrepreneurs and firms to serve a large market and reap outsize rewards. And COVID-19 has greatly accelerated the phenomenon by pushing us all into a more virtual world.

Apple — along with Amazon, Facebook, Google, Microsoft and Netflix — is a case in point. The combined market value of those six companies exceeds USD7 trillion, which accounts for more than a quarter of the entire S&P 500 index. Even amid the pandemic’s economic wreckage, these megacompanies continue to prosper. The combined share price for Apple and its five peers was up more than 43 percent this year, while the rest of the companies in the S&P 500 collectively lost about 4 percent.[1]

Superstar firms can be found in almost every sector of the economy, including tech, management, finance, sports and the music industry. They command increasing market power, which has consequences for technological, social and economic progress. It is, therefore, critical to understand how their advantages arose in the first place.


The “economics of superstars” was first studied by the late University of Chicago economist Sherwin Rosen. Forty years ago, Rosen argued that certain new technologies would significantly enhance the productivity of talented workers, enabling superstars in any industry to greatly expand the scope of their market, while reducing market opportunities for everyone else.[2] Digital innovations, including advances in the collection, processing and transmission of information, is what Rosen envisioned would lead to the superstar phenomenon.

Digital technologies are information goods, which are different from the traditional, physical goods in the economy. What it means is that fundamentally different economic considerations apply. Unlike physical goods — a loaf of bread or a car — information goods have two key properties: They are non-rival and excludable. Non-rival means that something can be used without being used up. Excludability means that an owner of digital innovation can prevent others from using it, by protecting it with patents, for example. These two fundamental properties of information goods are what give rise to the superstar phenomenon.

In a working paper I co-authored with Professor Ding Xuan Ng at Johns Hopkins University[3], we described superstars as arising from digital innovations that require upfront fixed costs that allow firms to reduce the marginal costs of serving additional customers.[4] For example, once an online travel agency has programmed its website at a fixed cost, it can easily displace thousands of traditional travel agents without much additional effort, scaling at near-zero cost.

Because a firm can exclude others from using its digital innovation, it automatically gains market power. The innovator then uses that power to charge a mark-up and earn a monopoly rent — basically, a price superstars charge in excess of what it costs them to provide the good — which we call the ‘superstar profit share’.


In a vibrant free market economy, businesses compete for customers by innovating and improving their offerings while keeping prices low; otherwise, they are displaced by more innovative rivals entering the market. Unfortunately, the increasing monopolization of the economy by technology superstars is weakening the competitive environment around the world.

Monopoly power is the main inefficiency from the emergence of superstar firms, because superstars can exclude others from using the innovation that they have developed.

So, what policy measures can be employed to mitigate the inefficiencies arising from the superstar phenomenon?

We do have antitrust policies designed to promote competition and hence economic efficiency. Authorities could take a drastic measure and break up monopolies. Or they could tax all those excess profits megacompanies make.

Another policy to consider involves giving consumers control rights over their data. Right now, only companies have that data, and they are selling it. If you free it up and don’t allow them to sell it anymore, it reduces their monopoly profits. And if you give consumers more freedom over their data, they could, for example, share it with the latest start-up and create a more competitive landscape.

However, such policy remedies can be a double-edged sword. On the one hand, they reduce monopoly rents. On the other hand, they can also reduce innovation.

Innovation requires investments in R&D, which represent a significant sunk cost that only large firms can afford. Government regulations can easily backfire, discouraging large firms from making long-term R&D investments.

What, then, is the best policy intervention? Professor Ding Xuan Ng and I believe that basic research should be public. Digital innovations should be financed by public investments and should be provided as free public goods to all. This would make the superstar phenomenon disappear, and the effects of digital innovation would simply show up as productivity increases.[5]

We live in a brave new world that is increasingly based on information. Because the information economy is different from the traditional economy, antitrust policy should be revamped to reflect that. Instead of worrying about the economy being eaten up by these gigantic monopolies, policymakers need to focus on the question ‘What specific actions can we pursue to make the economy more competitive and efficient?’

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