Author: Awareness News

India: the biggest lockdown in the world

June 15, 2020February 2, 2021by Awareness NewsLeave a comment

The COVID 19 pandemic stopped the world. Most of the globe entered in quarantine to prevent the spread of the new coronavirus, some with great success, others not so much. Now, we witness the consequences of the pandemic in one of the most populated countries in the world: India. The country is famous for its colossal population growth, low living standards, questionable working conditions and a bad public health system. A terrible recipe to face an epidemic.

The first confirmed case was reported on the 30th of January and many others in the months that followed. . It was on the 24th of March that the government implemented a countrywide lockdown, with 519 confirmed cases, forcing 1350 million people to stay at home in quarantine. Out of those, 280 million live under the poverty line.

Everyone is highly advised to stay indoors and commuting between and within cities or villages is either greatly conditioned or prohibited. Some neighbourhoods in big cities are completely blocked by fences. Even movement of goods, some essentials like food, are conditioned.

A great number of Indians lost all sources of income due to the confinement. It wasn’t long when people started disobeying it. Not because they do not fear nor understand the threat of the virus, but because they have no other choice. If the markets do not open, suppliers can’t sell their products and earn the little income they need to survive, and consumers are unable to obtain essential goods like food and health protection equipment. Also, because of the movement restrictions, the markets that do open have a shortage in supply. Therefore, prices for food and masks have inflated by around 30% according to Público.

Citizens are desperate as they can’t lose their sources of income as, if they do, they’ll most likely starve. Nevertheless, the lockdown and confinement are being enforced by the police, many times resorting to violence. There are reports of police forces beating up big crowds and drivers that are passing where they shouldn’t. They were probably just trying to deliver food to shops or driving to the only market opened for miles.

In the big cities, the situation is much worse. In Mumbai, for example, there are 27000 people per square kilometre. Many live in slums: enormous neighbourhoods with streets no more than 3 meters wide and exposed sewers, where many houses are just composed of one room. Families of 5 members cook, eat and sleep in that one room. How did they get there? Most of them are people from rural areas, brough to the city to work. They accept the job for a low salary and one of those houses in the slums that are generally provided by the company.

During this crisis, the majority either lost their jobs, did not receive the full monthly wages or both. These people now have no income, no home, and no food supplies, being their survival very dependent on food charities. This is the reality for a great number of Indians, having the unemployment rate reached 23.5% last April, according to the Centre of Monitoring Indian Economy (CMIE).

*Unemployment rate in India (Source: CMIE)*

Some try to leave the city on foot as trains and buses are non-operational. If found, the police will beat them and force them to go back, which they do, just to try again by a different route. When they are able to pass, these families carry their children for hundreds, sometimes thousands of miles to return to their home regions. They walk right next to the highways. 180 people, including a 2 years old girl, already died on these routes, either by exhaustion or run over by a passing car. When they reach another settlement, the police will probably try to keep them out.

In the middle of all this, the government has tried to help, but with no success. It has provided buses and train rides between cities, but there aren’t enough for so many. It correctly informed the population about the threat of the virus and why it is so important to stay at home, and acted quickly when more positive cases were being confirmed. But instead of sustaining the confinement by supplying the population, they lockdown cities by all means necessary.

Everything they have to show for their hard efforts, both from part of the government and the people, are the statistics. By the time that this article was written, India had a number of confirmed cases and confirmed deaths that put the mortality rate in 0,03%. Relatively speaking, that is not bad. Many call it a miracle or, at the very least, a mystery. It also has a great number of recovered people. It is true that India has a young population and a generally hot climate, both factors contributing positively to ease the severity of the proliferation of the virus. But that does not tell the full story.

Testing in India has not been enough in comparison with the rest of the world. The hospitals seem completely full of COVID-19 cases. Some became so restricted that other patients cannot get treatment for other diseases, like HIV/AIDS. India is also full of other dangerous illnesses. Pulmonary Tuberculosis, a disease eradicated in so many countries, still exists there and has very similar symptoms as the coronavirus like persistent cough, fever, fatigue and breathlessness. Of all deaths in India, only 22% are medically certified, and wrong diagnosis are often. Hence, many deaths are not being registered as COVID-19 caused, when some most likely are. Many deaths happen at home in India. A family member reports it by phone, and then authorities conduct a “verbal autopsy”.

“Counting deaths has always been an inexact science in India.”

— BBC

Under-reporting of COVID-19 cases and deaths is not uncommon amongst infected countries, but India already has a reputation of a terrible account of its diseases and deaths. All of this makes you wonder: how viable are those “miraculous” statistics?

*Map of cases per million in India by states (source: Ministry of Health and Family Welfare)*

What is more dangerous, the disease or the lockdown preventing it?

Many specialists are studying to get an answer for this question, but for the time being, we just don’t know. Until we have a better understanding and a better system to deal with the pandemic in India, the disease will continue to spread and people will die, let it be by the disease, starvation or another cause related to the lockdown. And as it was shown to us this year, the world can always get worse. A new strain of the coronavirus was found in India, resulting from a mutation, that experts say there is still no reason for alarm, but it can lead to the ineffectiveness of a potential COVID-19 vaccine. Not only that, but the strongest storm ever recorded in the Bay of Bengal, the Cyclone Amphan, is about to hit India and Bangladesh.

The people of India are in need of international help now more than ever. If you think you can help, please consider donating to a charity institution, such as Kolkata Relief.

Site: https://www.kolkatamonsoonrelief.org/
Instagram: @kolkatarelief https://www.instagram.com/kolkatarelief/

Sources: Público, RTP, ABC, South China Morning Post, BBC, CNN, CMIE, MoHFW.

Is TAP worth taxpayers’ money?

June 5, 2020February 2, 2021by Awareness NewsLeave a comment

The nationalization of TAP Air Portugal (hereby simply referred to as TAP) has been a hotly discussed topic recently. In this article, the major pros and cons of such a move by the Portuguese government are put into perspective, during a time in which taxpayers cannot afford to cover a bad decision from those in charge.

Founded back in 1945, under the Estado Novo dictatorship, TAP was initially a private company. During the first three decades of existence, its development occurred at a slow pace, mainly due to the fact that Portugal was a poorly internationalized country by the time. With the deposition of the regime, which led to the nationalization of the company (along with many other businesses), and a further global integration of the country, TAP could grow, expanding its routes and reaching more points on the globe. The fact that TAP took almost 20 years to reach the one million passengers milestone, compared to the 17 million attained in 2019, is a proof of the tremendous development registered not only by the company, but also by the sector as a whole.

What’s the company’s current situation?

Despite the pronounced long-term growth of the aviation industry, TAP exhibits long-lasting liquidity/solvency problems, presenting, year after year, worrying financial statements. As a matter of fact, the incapability of the firm to deliver sustainable results throughout decades led to its reprivatization (2015) in the aftermath of the financial crisis that hit Portugal.

Before diving into the numbers, let us proceed with a brief characterization of the firm’s organization nowadays. In fact, the aviation company itself, TAP SA, belongs to a holding, TAP SGPS, founded in 2003. Besides TAP SA, the group owns eight additional subsidiaries working on related businesses, such as catering, maintenance, cleaning services and computer engineering.

In 2015, under Pedro Passos Coelho’s government, the group was privatized and the Atlantic Gateway consortium, headed by David Neeleman and Humberto Pedrosa, acquired a participation of 61%. Later, in 2016, António Costa’s office partially reverted the process and secured a 50% share to the state, assuring an even split across private and public ownership. This ended up translated into an ambiguous shareholder structure, which has remained unchanged since then. But for how long?

TAP SGPS is in severe financial distress. The graph below says it all. In 2008, owners’ equity became negative and net income simply disappeared, almost never to be seen again. To make things even worse, the level of indebtedness is currently at dangerous levels (above 200%) and, even though the expansion of the aircraft fleet has been contributing to increased assets, liabilities struggle to be reduced. In finance, such analysis should ideally be conducted via peer comparison, but the values presented (namely, those relative to income) are intrinsically poor and are a good portrait of the group’s frightening financial situation.

Should TAP become a state-owned company again?…

In this dramatic scenario, one may wonder what factors could be a justification for state ownership, as the financial situation does not seem to be one. Consequently, on the one hand, nationalization’s supporters argue that private management would only care about profit and this would potentially mean the elimination of important routes for the Portuguese community, such as the links with Guiné-Bissau or Cabo Verde. On the contrary, the state would defend the best interests of citizens, even if they led to inefficient outcomes. In this domain, the fact that most European countries have state-owned airlines is often used as an authority argument to back nationalization.

Another idea in favor of state control is the role of ambassador of the Portuguese culture that TAP is believed to play abroad. The defendants of this thesis argue that, by becoming private, the brand would lose connection to its Portuguese background and start to be seen as just another airline, which would harm Portugal’s international exposure. In fact, this is one of the main concerns of António Costa’s government, which considers TAP as a «strategic company». Taking into account that the aviation industry is among the most affected by the COVID-19 pandemic, he says that the government will avoid its bankruptcy at all costs. Also, TAP employs more than 10,000 people nowadays and many believe that privatization, a merger or an acquisition by a competitor would mean many jobs lost.

*Could thousands of employees fill unemployment claims in case of privatization?*

… Or should it be effectively privatized?

On the privatization side, people argue that the state has no right to arbitrarily inject taxpayers’ money into a company near bankruptcy and which can well be run by a private entity with no prejudice for national interests. If for a bank that is admissible due to systemic risk, an airline company is not believed to be worth of taxpayers’ effort, especially considering that there are loads of similar companies providing the same kind of services, many times at a lower cost for the client.

An interesting counterargument to that of national interests is precisely that, as opposed to the theorized, TAP does not defend the interests of Portuguese citizens, but rather those of Lisbon. The company is accused of regionalism, namely owing to the fact that it announced the re-establishment of more than 70 routes from Lisbon and just 3 from Oporto after the lifting of containment measures. So, if the company only serves one city, it is argued not to be fair that all taxpayers are equally liable for it.

To rebut the vision of job posts loss, the apologists of privatization argue that, if TAP goes bankrupt, other companies will come over and fill its place. This would mean that, despite scale advantages, most workers will not lose their jobs, but will rather be hired by other companies. In the context of Lisbon’s airport, given TAP’s large share, this could mean lower fees in case of bankruptcy, as competition would increase. The case of the United States of America seems to support this theory. After World War II, the country deregulated airlines market and, despite Pan American (their public company by the time) went bankrupt, the increase in competition led to lower fees and routes’ expansion.

What does the future hold?

At this moment, there is no certainty about the future of TAP and, even though state’s help (through convertible bonds, for instance) is a possibility, nationalization is unlikely to happen, as the burden it would imply on households during these times would be massive. Extraordinary times demand extraordinary policy action, but taxpayers could well not be able to deal with a questionable public rescue to TAP.

Sources: ECO, Jornal de Negócios, NiT, Notícias ao Minuto, Sabi Nova SBE, Showbiz Cheat Sheet, TAP, Wikipédia

The German clash with the EU

May 28, 2020February 2, 2021by Awareness NewsLeave a comment

In 2015 the German Constitutional Court received a request from a group of 1750 german citizens, raising some doubts about the public debt purchase program undertaken by the ECB near its member states, claiming this to violate article 123 of the Treaty on the Functioning of the European Union. The article states that the ECB does not have the power to directly finance its member states, either through credit concessions or direct purchase of public debt. At the time, the ECB argued the validity of their operations given the legal support from the European Court of Justice.

On the 5th of May of the present year, the German Constitutional Court analyzed once more the 2018 response from the Court of Justice of the European Union in relation to the doubts raised in 2015 by a group of German citizens, and demanded that the ECB deliver, within a 3 months deadline, an analysis of the proportionality of its monetary policies. That is, the German Court does not question whether the monetary policy undertaken by the ECB violates article 123 of the TFUE, it rather wants to infer whether the public debt buy program complies with the principle of proportionality to which the ECB is obliged to stick. The German judges consider that the monetary policies led by the ECB are followed with disregard towards the consequences that those policies may have, and that this approach constitutes a violation of the principle of proportionality. Until the report is delivered, the German Constitutional Court has used its power to prohibit the Bundesbank (the German central bank) from buying any more foreign debt and it has even allowed the Bundesbank to sell the securities it is holding, if it wishes to do so.

Germany being the strongest economy of the European Union, the decision taken by the German Constitutional Court represents a serious drawback in the monetary goals established by the ECB. The decision gets even more preoccupying given that currently all Europe is combining efforts in trying to tackle the major economic crisis striking European economies.

While the German Constitutional Court claims to have power over national institutions, the CJUE already condemned the Court`s decision claiming this to seriously affect the European monetary policy strategy and the latter not to have the right to jeopardize or to contradict ECB measures that are backed by the CJUE, given that the principle of proportionality was always taken into account. CJUE also claims precedence in matters that involve the European Union and, therefore, does not acknowledge the legitimacy of the decision taken by the German Constitutional Court. Isabel Schnabel, member of the executive committee of the ECB, said that the public debt buy program will continue to happen, “regardless of the decision of the German Constitutional Court, given that CJUE has exclusive jurisdiction over BCE and its actions”. The fact that European legislation is above national legislations was not a part of treaties, it merely came into play in 1964 when the European Court of Justice (ECJ) decided so.

Is this the first time that a member state clashes with EU justice?

This is not the first time there is a clash between national courts and European law. A few countries have sought to mitigate this by enshrining the primacy of EU law in their constitutions. And most national constitutional courts have, at some point, declared that, based on article 6(3) of the Treaty on European Union, EU law takes primacy over national law as long as it doesn’t violate the human rights protected by their national constitutions. Constitutional courts have addressed these conflicts in different ways.

One alternative is to interpret constitutional law more broadly, so as to accommodate European law. For example, in 2011, the Greek Council of State recalibrated its interpretation of article 14(9) of the Greek Constitution. This article had previously been understood to prohibit owners of media corporations from applying for government contracts in other areas. But the Council of State decided that, according to the European principle of proportionality, this interpretation was doing more than what was necessary to ensure the objective of the law: transparency in public contracts.

The second alternative national judges have is to interpret European law in accordance with their national constitutional law, assuming the former cannot contradict the latter. This is based on the idea that the national constitution protects certain rights and freedoms that cannot be violated by any law, local, national or European. Few cases like this have appeared so far, but several national supreme courts, namely in Germany, Italy and Spain, have asserted that they have the power to review European law in this way and check if it complies with their constitutions.

A third possible alternative is for national judges to convince the Court of Justice of the European Union to change its interpretation of European law, so that the new interpretation is compatible with their national constitution. For example, in Taricco I, the CJEU held that the statutes of limitations in the Italian penal code violated European law, because they harmed EU financial interests (1). The Italian Constitutional Court then asked the CJEU for an opinion, arguing that complying with their decision would force the Italian penal code to contradict the Italian constitution. The CJEU granted their point and clarified their decision in Taricco I in a more relaxed way.

The fourth alternative national judges have is disobedience, or non-compliance with European law as the CJEU interprets it. This is, of course, an option of last resort. It occurred, for example, when the CJEU declared that a Social Security rule in the Czech Republic that gave an old age benefit only to Czech nationals in Czech territory violated the rights of EU nationals from other member states living there. The Czech Constitutional Court decided it would not apply the CJEU decision and would allow the rule to remain unchanged. The arguments were that the CJEU had exceeded its powers and that the CJEU had failed to take into account the historical fact that that rule was related with the dissolution of Czechoslovakia.

While in many cases national and European justice reach a consensus, it is unavoidable that other cases, like the German Constitutional Court one, will continue to happen. Some consider that these persistent challenges towards European Law from national courts undermine the strength and credibility of the European institutions. Others say that the preference from European Law over National one was a severe and non-democratic imposition over its member states. Nonetheless, this is an important question that urges to be answered in order to better define the future of the European Union: What are the limits, if any, that Europe wants to impose over National Courts in their interference on European policies?

(1) The European Union is partly financed by a share of member states’ VAT. The statutes of limitations for fiscal fraud in the Italian penal code, in the CJEU’s opinion, did not give people enough incentives to not commit fiscal fraud, and therefore harmed the EU’s financial interests.

Afonso Silveira Botelho Manuel Barbosa

Nuno Teixeira de Sampayo

Sources: Euronews, Expresso, Observador, Renascença, EUR-LEX

EU’s Black Sheep: The False Prophets of Poland

May 26, 2020February 2, 2021by Awareness NewsLeave a comment

Freedom, democracy and the rule of law. These were the three most important principles upon which the European Union was founded, as stated by Article 2 of the Treaty on the European Union. In May 2004, when Poland and nine other countries accessed the EU, these were the beliefs they sought to comply with, to their people. However, never have these values suffered from such blatant and dangerous violations, as of today. Sixteen years after the largest expansion of the Union, the Polish state constitutes a major threat to the ideals that cement and define Europe. But how have we come to this point? And most importantly, how will this mayhem be turned around?

Context and History

The Polish “European Project” dates back to its notable economic performance in the 1990’s and its desire of convergence and dissociation with the eastern bloc. Years of negotiation led to a national referendum, in which 77% of voters were in favour of Polish accession to the EU. In 2007, charismatic pro-EU politician Donald Tusk became prime-minister, ensuring a somewhat successful ruling alongside his party, Civic Platform. The following years marked a significant period of growth in Poland, with the reinforcement of its infrastructures, schools, industries and highways, the financial support of the EU and remarkable economic development.

Image 1 - Poland’s GDP per capita growth rate (1992-2019), compared with other European counterparts. The Polish growth has been considerably superior. — *Image 1 – Poland’s GDP per capita growth rate (1992-2019), compared with other European counterparts. The Polish growth has been considerably superior.*

Although the approval rates of the EU were indeed favourable in Poland, the rise of the nationalist, conservative and Eurosceptic party, PiS (Law and Order) was imminent. Founded in 2001 by the Kaczyński twins, two enticing politicians, this party claimed that the Polish government had become representatives of a corrupt and elite institution, submissive to the European Union. This narrative was appealing to a conservative mass of Polish citizens. It is important to highlight Poland’s issues with its independence, as the country has faced numerous attacks and invasions in the past centuries, often having its own sovereignty withdrawn. The impact of all these devastating decades was a collective trauma and insecurity of losing independence and identity. PiS were very successful in portraying this image to the Polish people, promising to retrieve Poland to its fellows citizens. In the 2015 parliamentary elections, the moderate coalition was unable to secure a victory, after Tusk, its main figure, left to preside over the European Council. As a result, PiS formed a majority government, following its crushing victory.

After PiS gained control of both houses of parliament, they also took over the presidency, with Andrzej Duda’s victory in 2015, who stands in office as of today. His voter-friendly appearance and posture allows the party to appeal to the more moderate voters, while Kaczyński operates behind the curtains. The next step for the party was to take over the judicial system.

Democratic Threats and the European Response

Firstly, Law and Order neutered the constitutional court. What was supposed to be an unbiased judicial body to assess the legislation according to the fundamental laws of the country, was now a servant of the main party, packed with loyalist judges and lacking any sort of independence.

Image 2 - Jarosław Kaczyński, the leader of PiS. This politician has been successful for the rise of a nationalist, conservative movement throughout the Polish territory. — *Image 2 – Jarosław Kaczyński, the leader of PiS. This politician has been successful for the rise of a nationalist, conservative movement throughout the Polish territory.*

Following this, the government set a number of laws that threatened the whole independence of the judicial branch. For instance, in 2017, a law was passed that set different retiring ages for male and female Supreme Court judges and giving the minister of justice discretionary power to prolong the mandate of some judges. Furthermore, a Disciplinary Chamber was created to review the decisions of the Supreme Court. Many questioned the independence of this body, whose members were appointed by the government. The Rule of Law was under imminent threat. Political rule reigned amidst Polish Courts, a pattern that followed through the next years, illustrated by various new laws. One of which was a recently appointed act which determined that judges may be punished for implementing a judgement of a supranational court. This represented a flagrant attack on the prevalence of European Law over domestic mandate. A further infringement occurred over a 2018 law that lowered the retiring age of all Supreme Court Judges. It resulted in the dismissal of 27 of the 72 justices, one of which was the President of the institution. The tension between the Supreme Court and the government had risen tremendously as an attempt of judicial takeover was on sight and European action was urgent.

“It is with a heavy heart that we’ve decided to initiate article 7.1”

— Frans Timmerman

These were the words of Frans Timmerman, the then European Commission First VP, in late 2017. The article in question is a punitive clause seeking to discipline countries that breach the core principles of the EU, and if needed to sanction them or even suspend their EU voting rights. The Union viewed the recent laws passed by the Polish government to disrupt the necessary independence of the judicial structure of the nation and an evident violation of the Rule of Law. It was not only a threat to the Polish people, but to the whole foundation of the European Union.

However, the case of Article 7 is still ongoing. Europe seems to be incapable of resolving the rule of law issues in Poland and the main cause of such irresolution is the need of unanimity from the remaining member-states for the European Commission to apply punishments. Poland is being backed by Hungary, another nation dangerously sliding onto autocracy and illiberalism. These two have formed an unofficial partnership which empowers their continuous breaches on democratic values through the need of unanimity vote to implement the punishments the EU seeks to apply. The constant mutual support of the two governments endangers all the values that shape the EU, since every time one ruptures the rule of law, it has the pat-on-the-back-like comfort of the other, which perpetuates the cycle to this day.

Freedom in Peril

The attack on judiciary independence doesn’t stand alone in the repertoire of the government’s attacks on democracy. Despite the democratically legitimacy of both parliamentary elections and a rule marked by intensifying nationalism and strong economic growth, Poland is holding a questionable position on humanitarian and progressive causes. During the refugee migration crisis, Poland was one of the nations who bluntly refused to receive migrants and blocked a deal on the redistribution of refugees within Europe. Kaczyński and PiS have adopted an Islamophobic, anti-immigration stance in their phenotype, despite the ECJ declaring their refusal to be against European Law.

Images 3 and 4 – Throughout the last decade, Poland has been marked by a number of protests from conservative to progressive ones. The most notable ones were the manifestations on Poland’s National Day in 2017, carried out by nationalists and white-supremacist groups.

Moreover, last year Poland declared the creation LGBT free zones, where almost 100 municipalities adopted an unwelcoming stance on the ideology. Whilst the declarations were local and unenforceable, the ruling party has often supported homophobic stances, further enhancing the Christian rhetoric of PiS. Poland is still a considerably homophobic country, as same-sex marriage and civil union are still not permitted. Freedom of press is equally in danger, as a growing tendency to criminalize defamation has pushed the expression of media and news outlets to an increasingly restricted ethos. Poland is the third worst-positioned EU country in the World Press Freedom Index, only behind Greece and Hungary.

*Image 5- Map of Poland, with the LGBT ideology-free zones in red. Almost a third of the country territory has declared these statements*

Image 6- Poland’s data regarding the 2020 World Press Freedom Index

The future is rather unsettling for Poland. If on the one hand, Poles are aware and willing to protest against the undemocratic decisions of the government, on the other, the residing feeling of Polish identity, the Polish family and Polish patriotism is boiling up through the masses, fevered by Kaczyński and his party. The certainty is the following: one must not overlook Poland’s situation. To say this is just a regular right-wing ruling would be an understatement, for we are witnessing the endangerment of European democracy right before our eyes.

Europe must stand its ground and fight the rise of illiberalism, or continue to dig an endless hole of bureaucracy and futile irresolution.

Sources: Financial Times, POLITICO Europe, World Bank, EuroActiv, Deutsche Welle

Teams: Global Politics, European Affairs

EU’s Black Sheep: Orbanism

May 25, 2020March 3, 2021by Awareness NewsLeave a comment

Almost two months ago, Hungary made news all around the world after the country’s National Assembly voted to allow Prime Minister Viktor Orban to rule by decree for an unspecified amount of time. He can now bypass the legislative body if deemed necessary, to fight the coronavirus pandemic. The parliament can repeal this at any time, but the current two-third majority Orban’s party, the Fidesz, holds on the National Assembly makes such a repeal without the government’s approval unlikely. As it was probably predicted, this sedation of Hungary’s democratic institutions resulted in widespread condemnation from all over the western world, but the authoritarian tendencies of Orban’s government have been making headlines for decades.

Hungary is a fairly new democracy, having only had its first free election after a smooth transition from a socialist soviet bloc country into a western-style democracy 30 years ago. Prior to this, the country has an extensive history of authoritarian domination. After breaking away from the Austrian-Hungary Empire at the end of WWI, Hungary became a totalitarian state and lost two-thirds of its territory as a result of the Treaty of Trianon. The humiliation of having lost a majority of its country and having more than three million Hungarians living in neighboring countries lead the government to eventual join sides with the Axis powers in WWII. The war was devastating for Hungary and after the Nazis surrender, the country was turned into a one-party socialist republic under the influence of the Soviet Union for the next 50 years. The lack of a long history of democratic institutions in Hungary could explain the insouciant feeling of the electorate towards Orban’s style of governing, but democracy is also fairly new in the Baltic States, and we do not see this sort of attacks on democracy in those three countries. The success of Orban seems to lie on his talent to appease to the nationalistic and conservative electorate that still dream of unifying the Hungarian people under one great country.

Road to Power

Viktor Orban was born in 1963 in a rural zone near Budapest. He studied Law after his compulsory military service. His time in the military is said to have molded his opposition to the communist regime in Hungary, and soon he became very outspoken, with his master thesis being about Poland’s Solidarity Movement, which opposed communism in Soviet-controlled Poland. In 1988 he co-founded Fidesz (an acronym for “Federation of Young Democrats”) with other young opponents of the regime and demanded free elections and the withdrawal of Soviet troops from Hungary. In these early years, Orban was seen as a young liberal icon behind the Iron Curtain. In the late 1980s, Viktor Orban’s career was symbolic of the democratic and western leaning transformations of Eastern Europe. On the first free elections in 1990, Orban was elected as an MP for the National Assembly for the first time, transforming Fidesz from a youth political movement into an important party in the new democratic Hungary. Orban took over control of the party three years later, and under his direction, Fidesz moved away from the liberalism ideas that originally defined it to a more right-wing ideology. First, he rebranded it as a center-right Christian democratic party, and then later in 2002, as the nationalist and authoritarian party it is today. Orban thought that assuming an empty space on the political spectrum was the best way to have success against the left and liberal parties. Gradually, it became the dominant right-wing party in Hungarian politics. Fidesz’s changes are best understood as responses to Orban’s pursuit of power than as driven by ideological evolution. In 1998, Orban was elected prime minister, the youngest ever in the country’s history. His first term was a regular center-right government. Under his leadership, the foundations for Hungary’s membership of the EU and NATO were laid, and his performance was mostly praised. In 2002, Fidesz lost power to the Socialist Party, and Orban lead the opposition until 2010, when he was once again elected as prime-minister by using the Hungarian’s discontent with the Great Recession and widespread corruption charges against the socialist government to win in a landslide.

The second term of the new Orban government would start the demolition of democratic institutions in Hungary. After the win in 2010, Orban’s party had a two-thirds majority in the National Assembly, and it used it to approve – and then later amend to his benefit – a new constitution that reduced the power of the courts and severely diminished the freedom of the press. Under the new constitution, the number of MPs in the National Assembly was reduced by almost half. The now reduced number of MPs would be elected in redrawn constituencies that are believed to favor Orban’s party, the Fidesz. The new constitution also ended the requirement that judges for the Constitutional Court needed the support of the majority of the parties’ in the National Assembly to be elected, which means judges can now reach the court with a two-thirds majority despite objections from opposition parties, allowing Fidesz to pack the court with allies of the government. As for local courts, the government reduced the retirement age of judges, which forced hundredths to retirement and allowed the government to pack all levels of the judiciary system with Orban sympathizers. With government control of the media, the vanished power of the courts, and a political ally as President, Viktor Orban has created a fortress of power that allowed him to win once again a two-third majority in the National Assembly in 2014 and 2018. With this new coronavirus emergency bill granting Orban the power to rule by decree and to suppress what little remains of the free media in Hungary, the elections of 2022 will likely not be any different.

Can Europe do anything?

The European Union’s reaction to Orban’s recent power grab has so far been diplomatic and deemed “modest”. Although Orban has been suspended from the European People’s Party on his conduct, he has openly characterized the outcome as being “mutually agreed”, instead of a punishment. However, former EU chief Donald Tusk is urging the largest party in the European Parliament to expel Orban’s party, the Fidesz. A statement by thirteen EU countries reminded the risks to fundamental rights and the rule of law but did not directly name Hungary. President of the Commission Ursula von der Leyen urged governments to take strictly proportionate measures, without specifically targeting Budapest, although then mentioned it would analyze the newly passed law and monitor its application. The Council of Europe, the European Commission, Reporters without Borders and the European Parliament all have expressed that the law would pose a threat to democracy in Hungary.

The options the EU has to tackle a case like Hungary are limited. The sanctions process in Article 7 can end up in a member state losing its EU voting rights, but another member can block it – in this case, Hungary could most likely count on Poland’s vote. A proposal to include the rule of law into EU budget negotiations has not been conclusive. The most effective move the European Commission could make might be taking Hungary to the European Court of Justice, as non-compliance with the latter’s rule may lead the country’s first step to exiting the Union. Nonetheless, this process takes time, and for the time being, we have a de facto dictator in the European Union.

Sources: Euronews, Politico, New York Times, Institute Montaigne, The Atlantic, Kim Lane Scheppele on Hungary’s new constitution – the full lecture at CEU

Teams: Global Politics, European Affairs

Is self-control equal to sacrificing pleasure?

May 22, 2020February 2, 2021by Awareness NewsLeave a comment

Have you ever regretted eating that hamburger or that pizza some days later? Probably you have, and you are not the only one. How can this possibly be explained? Well, we are humans, it all lies in the way we perceive our own self-control.

Self-control is the concept of sacrificing short-term pleasure for an important long-term benefit. All existing theories are based on this idea of conflict of preferences between the “now” self and the “future” self. The “now” will seek (and consume) a tempting good, but the “future” one would regret such consumption.

Following this idea, preferences are a key element to have present. It is crucial to understand the reflection of individual taste as it explains one’s choice of consumption. Therefore, to address this opposing conflict we have to explore various properties of preferences and relate them with time.

Firstly, it must be recognized that the conflict between the present and the future implies that preferences actually change over time. This is what behavioural economists and scientists like to call time-inconsistent preferences. Similarly, preferences are usually ranked, meaning that one is more important than the other. So, as the importance of immediate gratification fades quickly as time passes, long-term preferences end up being superior to the short-term ones, forming a hierarchy which consequently characterizes all forms of self-control conflicts. Considering the previously mentioned characteristics, talking about anticipated regret seems pretty logical. Smoking a cigarette provides pleasure to the smoker, but brings with it a sore throat immediately after smoking and potentially cancer in the long term. Knowing this, the smoker who anticipates that he may regret giving into the temptation of smoking a cigarette is experiencing a self-control conflict.

Where does this bring us? Around 96% of the papers that explore the concept of self-control and present it use this idea that self-control lies where there is a given sacrifice of pleasure. More recently this idea is being presented as flawed mainly because of its assumptions. On one hand, it assumes that all consumers trade-off short-term goals with long-term ones and that the absence of a self-control conflict would inevitably result in the choice of the long-term goal (while the short-term goal always represents a breakdown in self-control).

Nevertheless, many elements may change since not all consumers pursue the same superordinate long-term goals. Consider the choice between pizza and grilled chicken salad. A consumer may choose the former but not necessarily experience a self-control failure because he/she does not care about restraining her calorie intake, or because she is a vegetarian, or because she likes pizza more than salad. (Actually, even though American consumers, in general, believe the better a food tastes the less healthy it is, in a recent cross-national survey conducted in the US, UK, France and Belgium, consumers associated ‘unhealthy’ only weakly with ‘tasty’).

Why is this relevant? This is a powerful insight into consumer behaviour that is even relevant in policymaking. A good example of this is the food industry. Behavioural economists cannot substitute nutritionists but they can find a way to help consumers align their goals and actual behaviour with objective criteria. Consumer behaviour researchers can devise interventions that motivate consumers to consider the long-term consequences of their actions. Based on this “theorizing”, it should also be easier to exert self-control when abandoning the idea that pleasurable and beneficial consumption (hedonic consumption) represents a self-control failure. Rather than categorizing foods into good and bad, consumers could train themselves to use relative quantities as a benchmark for harmful consumption. Rationing portion sizes and consumption frequency are indeed powerful strategies to limit food-intake since how much we eat is as much governed by a food’s tastiness as by serving size.

Beyond food and bad habits, self-control is present in our day to day and regret is inherent to human nature. The more we sacrifice short-term pleasure for an important long-term benefit, the more we become aware and the less probable we are to be disappointed over something that we did or failed to do. Regardless, not everything in life is to be regretted and some things are meant to be done today.

Lab Grown Food: Opportunity for sustainability or dystopian nightmare?

May 13, 2020February 9, 2021by Awareness NewsLeave a comment

In 2014, the United Nations issued a report claiming that at current rates of soil degradation “all of the world’s topsoil could be gone within 60 years”.

The production of livestock is responsible for 14 to 18% of our greenhouse emissions and takes up to 70% of all agricultural land. Most of the world’s crops are used to sustain livestock and it is a major cause of deforestation and water contamination, problems which farther aggravate climate change and the health of our ecosystems.

While the world population has doubled over the last 50 years, the amount of meat produced has more than quadrupled – in fact, if the world ate as much meat as the top 20 meat-eating countries, the whole surface of habitable land would have to be used to feed people, and, even if packing animals together, that still wouldn’t be enough. Moreover, factory farmed animals are fed antibiotics: in the US, more than 70% of all antibiotics sold each year now go to farm animals, which has lead many to speculate that the industry is fueling the risk of a deadly pathogen that is resistant to bacteria, a so called super bug, that will have consequences greater than the current Covid-19 pandemic.

By changing the way we grow meat, or our meat consumption habits, this diagnostic would improve significantly. However, what if we could grow all our food from a lab? Meat might not be the only lab-grown product of the future.

Lab-grown meat, as the name suggests, consists on creating a piece of meat through cell culture. Initially, a small segment of cells tissue is taken from an animal and subsequently, added to a growth medium – like a soup that provides proteins, vitamins, sugars, and hormones. Along with a temperature-controlled environment, the cells are tricked into thinking they are still inside their owner, hence growing and replicating themselves. This process takes between two to six weeks, and the final product is a doughy chunk of meat, close to minced meat, which will then give rise to our everyday meat-products.

Artificial lab grown meat in Petri dish (YouTube)

World Population Projections (ResearchGate)

Maria Mendes

João Guedes

Daniel André

From the conference room to Zoom: the future of remote working

May 10, 2020January 23, 2021by Awareness NewsLeave a comment

Telecommuting, or remote working, has been frowned upon by employers for many years, who feared unsupervised workers would be much less efficient. However, developments in teleconference and telework technology and, most importantly, the constraints imposed by the coronavirus outbreak, have brought forward a great increase in the remote workers count, and key takeaways from the situation include a boost in employee productivity and reduction in fixed costs for firms, which not only mitigated the fears of employers, but also anticipated a shift in strategic and operational paradigms for firms.

Global crises are historically known to alter societal behaviours, namely on consumption and organizational levels, ultimately altering the path of history. The Black Death, the most fatal pandemic recorded in human history, which is estimated to have killed nearly half of the European population in the 14th century, is credited to have dismantled feudalism, as serfs (peasants) searched for higher wages due to labour shortages.

Rosie the Riveter Inspired women to serve in World War II

Another example is that of World War II when, due to the allocation of a significant share of the male population to war efforts, women were encouraged to enter the workforce, and such effects persisted in the aftermath. COVID-19 is no different, and while changes in consumption habits may only be temporary, this might be the beginning of a new era for employment in general.

From companies’ perspective, it is not only expected, but necessary, an increased focus on reconfiguring the work space to promote safety, as well as on enhancing working-related software, de-risking their supply chains and raising efforts for crisis preparedness. What’s more, a survey conducted by PwC unveiled that 49% of companies plan to make remote work discretionary for positions that allow them to do so, 40% intend to accelerate automation and new ways of working and 26% want to reduce real estate footprint. The latter finding means that this transition in work ethic is likely to hamper office real estate, as firms opt for smaller office spaces or none at all as their workforce transits to their own homes.

Regarding efficiency gains, there is no consensus on how productivity is affected at home. Despite some studies suggesting that teleworking leads to a substantial decrease in productivity, sometimes as much as 45%, there is no clear evidence of such, as there are external factors at play, for instance the conditions of the workplace. In fact, the impact on productivity depends, in part, on the nature of the characteristics of occupations and the nature of tasks, as more creative duties are likely to experience a positive impact, while more dull, repetitive ones are likely to be negatively affected.

Regardless of the possible impact on productivity, the current crisis changed both employees and employers’ perception over teleworking and its benefits. A survey conducted during the pandemic showed 82% of employees in offices would like to telework one or more days a week after the Covid-19 crisis (Colliers, 2020), implying the experience has been positive. Furthermore, 74% of companies say they intend to formally implement telework (Gartner, 2020), meaning companies are also satisfied with the new working conditions.

In these times of great uncertainty, it seems as if one thing is certain:

the working experience will not be the same even when normality returns.

According to researcher Christopher Kent, work routines and rhythms will most likely be restructured, shifting from the general workday structures of a 9 to 5 towards a more objective-based workday, managed by deadlines and check-ins. Furthermore, the technological developments that enhanced and allowed companies to continue its operations should not be set aside, but integrated and internalized. Now that the majority of companies have already gone through the painful process of adaptation of these tools, it is important that firms take the most out of them even after the crisis has gone by. Lastly, business leaders and managers must be wary of changes in policy and regulations in the work environment in order to prevent future crises like the one we are currently experiencing, while ensuring viable forms of staff surveillance shall telecommuting persist.

Sources: McKinsey, PwC, BCG, Lavola, Forbes

Dubai: The Pearl of the Middle East

May 7, 2020February 9, 2021by Awareness News1 Comment

This city needs no introduction. As the main attraction and destination of the Middle East, Dubai is an exotic and trendy city full of luxury and amazement. Skyscrapers everywhere, including the highest in the world, building new ones nonstop. The most amazing and extravagant hotels, such as the Burj Al Arab: a seven-star hotel with 200 rooms, each 2 stories high. A coast with artificial capes and islands, full of extraordinary mansions. Its very own indoor ski resort, the Ski Dubai, while outside temperatures reach more than 40º Celsius. One of the most spectacular cities in the world, that in many ways makes no sense at all. How can a city so successful in so many ways be built in a hostile desert, by a previously unknown people, in a region so influenced by political tensions and wars?

The Past

Dubai is one of 7 monarchies that would make the United Arab Emirates (UAE), located on the coast of the Persian Gulf.

In the beginning of the twentieth century, Dubai was just a small insignificant trade port. The city survived by having special diplomatic relations with the United Kingdom, offering stability, and by selling its finest trade resource: high quality pearls. The only special thing about this city was its strategic position, close to the Strait of Hormuz.

In the 1930s, the creation of high-quality fake pearls and the Great Depression devastated the economy. Dubai experienced great migrations and economic losses, now as an official protectorate of the British Empire. It was in this period that the people realised the disadvantages of being dependent on one trade resource and the advantages of having stability in the region, provided by the British. These will be the two factors that will define Dubai.

Throughout the twentieth century, more and more oil was being found in the Emirates, but not much in the Emirate of Dubai. When the UAE became independent in 1972, the country was increasingly dependent on their oil exports. But Dubai learned from its past; it focused on diversifying its sources of income. As such, it invested their share of the oil revenues on infrastructure like ports, roads and airports. From there, they attracted foreign investment, granting special economic zones for any interested. All of this was only possible by having almost perfect stability in the country. As the years passed, they became great competitors in maritime trade, banking, finance, energy, science innovation, aviation and, of course, real estate. It was in the 1990s that the city exploded with the famous skyscrapers, while wars were being fought all over the Middle East.

The Present

Nowadays, it is a global city like no other. Over two million people live in Dubai, with more than 3 quarters being immigrants. While more than 80% of UAE’s GDP is dependent on oil related revenues, less than 5% of Dubai’s GDP is as such. Because it is right between Asia, Europe and Africa; and is so safe and diversified in its services, it serves as a bridge for business and diplomacy between the continents. It is, in many ways, the Switzerland of the Middle East.

The main types of people that Dubai attracts are entrepreneurs, to establish their companies in the city so that it becomes increasingly competitive; qualified workers, to work in such companies; and tourists, 13 million per year, from the extremely rich to the normal western, as tourism is a field where Dubai excels at.

I was able to interview an entrepreneur and a tourist so that they could share their experiences in Dubai:

Our entrepreneur is the owner and CEO of a marketing company in Portugal. He chose to do business in Dubai to take the advantage of the bridge between societies. Not only is it easy to set up business in the city, but also there is easy access to other markets from Asia and Africa. There are companies from all over the world in Dubai, making the competition fierce. It’s extremely difficult to survive in such a market, with all the big international players present. Still he is steadily surviving.

Our tourist is a student from Nova SBE that travelled to Dubai during the summer holidays. She found many comparisons between Dubai to the big cities of the USA: big skyscrapers, big shopping malls, great suburban areas, gigantic highways and the automobile as its main form of transportation. Everything like that, only everything more extravagant. She particularly liked the desert landscape, the extravagant shopping malls and the culture. Most of the old Dubai is often forgotten, but that is where you can truly find the roots of the people, in the old part of the city, like per example, the Souks, covered traditional markets with a different one for each type of product, from clothes to gold.

Dubai’s traditional covered markets, the Souks

Her trip dismisses the myth of Dubai being only for the super-rich. You can still have a great holiday in Dubai without spending that much.

These testimonies only confirm what was already stated. Dubai is a safe and exciting place to visit and work. But the city is far from perfect: it has serious problems.

The city grew exponentially in only 30 years. The city was not planned to grow that greatly, so there are very serious logistical problems. Big highways separate entire neighbourhoods and many streets are completely disconnected from each other by foot.

Dubai is seen as having a very relaxed law relative to neighbouring countries, and that is true for the most part. Women do not have to cover their hair, other religions are free to be practiced, even alcohol is legal. But there are still harsh laws. You can’t drink in the street, you can’t show intimacy in public (like hugging, holding hands and kissing) and you can’t say or report badly about the government, not in public nor in social media. There is no freedom of speech. One shocking case was of a British Phd student that was in Dubai to study. He was arrested for just suspicion of spying. Trialed and sentenced for life imprisonment with no lawyer present. He was later released, but not after 5 months in solitary confinement.

And then there is the rule of law itself. Many laws are ignored when it becomes convenient. There are reports from tourists of showing intimacy and drinking in public with no repercussions. Some labor laws are also ignored.

Living conditions of forced labor workers

And that leads to problems in human rights. Many less educated people come to Dubai to work. The more desperate are cheated out of their salary when recruited to various jobs, mostly construction. They are maintained in conditions considered less than humane, forced to work without pay. This is no different than slavery. It is possible that those amazing skyscrapers were constructed by these people.

The Future

Dubai will certainly outlast oil, thanks to its diversification and its eccentric identity, attracting business and attention worldwide. It has serious problems, but they should be overcome with increasing influence from the west.

Meanwhile, the increasingly more bizarre construction projects are underway, like the Dubai Creek Harbour. This will be an urban complex full of luxury apartments, green parks and the Dubai Creek tower. This latter will cost one billion US dollars and it will be the tallest structure ever made by mankind, standing 1,3 kilometres high. Construction was expected to finish in 2021, but that will probably be postponed due to the Covid-19 pandemic. Nevertheless, when it does finish, it will maintain Dubai in the hotspot that it is currently standing.

The Dubai Creek Tower (source: EMAAR Properties)

Crisis Makers: CDS and CDO

May 4, 2020January 23, 2021by Awareness NewsLeave a comment

CDS

A credit default swap, also described as CDS, is a type of financial derivative that provides an investor protection against the payment’s default.

In these types of derivatives, there is the buyer who is insured by a compensation in case of default. Usually, the payoff corresponds to the face value of the loan. And then, there is the seller who agrees to reimburse the investor in a situation of default. Most of the time, the holder of a CDS is required to pay a continuous premium called “fee” or “spread”, whilst holding the contract. The value of a CDS is determined upon the likelihood of default, as well as its demand.

CDO

It is also important to mention CDO’s, short name for collateralized debt obligations, when mentioning the financial securities involved in the 2008 financial crisis. These products are another type of derivatives and they are created by banks by pooling individual loans into a single product and sold to investors in the secondary market. Hence, the payment’s installments are now redirected to the investor who bought the CDO’s. They are collateralized, meaning there are assets associated with it that work as collateral in case of loan defaults. When constituted by mortgage-loans, these derivatives are called Mortgage-backed securities (MBS).

There is a variation of these instruments called synthetic CDO’s. It uses other derivatives to generate income such as credit default swaps or options, rather than mortgage loans that correspond to cash assets. The buyer takes a short position assuming the underlying assets like the CDOs or mortgage loans will default, paying a premium for the position. Essentially, the buyers are betting for the outcome of the loans. Usually investment banks or hedge funds are involved in finding the counterparty of the deal, since these instruments are not traded in the stock exchange.

The role of CDOs and CDSs in 2008

We often hear the terms CDS and CDO intertwined with the extreme economic downturn period that started in December of 2007 in the US and turned into a global recession in 2009, known as the Great Recession. The reality is that the collapse of the US housing and financial markets can be traced to the unregulated and irresponsible use of these financial instruments.

From 2001 to 2004, the US Federal Reserve held low interest rates to fight slowdown in the growth of economic activity. Simultaneously, federal policy encouraged home ownership which led to a boom in the housing market and its weight on the US economy. Mortgage debt rose at an astonishing rate at the same time as CDOs, using mortgage loans as collateral, proliferated.

Households resorted to mortgage lenders for mortgage loans with small worries about paying back since real estate prices were continuously rising. The lenders would sell these mortgages and pass the risk to investment banks who compiled mortgages in CDOs and split them in three tranches for their clients, passing on the risk. If the loan would default, the first tranche would be the first to get paid followed by the middle and the bottom, which made the top tranche safer than the middle or bottom. As it is in the financial markets, more risk was rewarded with higher return rates. Credit agencies would label the top tranches AAA, the middle BBB and would not even bother to rate bottom tranches.

The continuous rise in the housing market made the demand for CDOs very high, so mortgage lenders lower the standards for qualifying for a mortgage. In other words, these financial intermediaries attributed mortgages to households that were not credit worthy (subprime mortgages). Defaults were not a worry since mortgages would immediately be sold to an investment bank and house prices kept rising. Credit rating agencies did not downgrade these CDOs and investors kept blindly buying them until borrowers started defaulting and lost their homes. Lenders tried to sell all these houses, but since there were so many, housing values did the impossible and plunged, bursting the housing bubble and destroying the value of CDOs. Synthetic CDOs amplified the exposure of the economy to the mortgage market since they enabled infinite bets on the mortgage market and were easy and cheaper to create. Banks and financial institutions were filled with these assets and were unable to sell them, which collapsed and crippled the financial system dragging the US and World economy along.

*Collapse of Lehman Brothers in 2008, Source: The Guardian*

Post 2008 Scenario

A major lesson withdrawn from the crisis was the lack of regulatory oversight over CDS, which was considered one of the main grounds for the turmoil. Therefore, shortly after the financial crisis, on July 21, 2010, as an attempt to regulate de credit default swap market, the Dodd-Frank Wall Street Report Act of 2009 was signed into US federal law by President Barack Obama, the greatest regulatory overhaul of financial markets since the Glass–Steagall Act almost eight decades earlier. The act not only phased out the riskiest CDS, but also forbade banks from using customer deposits to invest in derivatives, including swaps – Volcker Rule -, enhancing the separation of proprietary trading from commercial banking activities. Also, it required the Commodity Futures Trading Commission to regulate swaps, setting up a clearinghouse to trade and price this type of derivatives.

*Sign of the Dodd-Frank Wall Street Report Act of 2009 by President Obama*

Consequently, many American banks shifted their swaps across the Atlantic to escape the strict U.S. regulation, since, although all G-20 countries agreed to introduce new legislation, most of them were still finalizing the rules. However, in October 2011, this strategy was sabotaged when the European Economic Area introduced the MiFID II, ensuring fairer, safer and more efficient markets and facilitating greater transparency for all participants.

Furthermore, in 2010, during the November Seoul Summit, leaders of the G-20 countries agreed on new bank capital and liquidity regulations – Basel III-, proposed by the Basel Committee on Banking. These new rules addressed some loopholes that had been exploited by banks, through CDS contracts. Yet, although these regulations appear to convey some degree of safety to banks, if many of their activities are taken off their balance sheets, the risk associated with their portfolios might, on the contrary, be amplified.

Also, the 2008 financial crisis aftermath meant a dry up in demand for CDOs. However, in the years following, the disappointment for the low returns of other bank vehicles reignited investors’ interest in these complex securities. Nevertheless, the environment is undeniably distinct from the scenario leading up to the “Great Recession”. Due to the tighter regulations and capital requirements imposed on these markets, lenders are far more cautious, and investors seem more reluctant when investing in these assets.

Despite the introduction of several regulatory measures on the credit default swap market two years earlier, public attention was once again focused on CDS after the large trading loss sustained by J. P. Morgan. On May 10, 2012, Jamie Dimon, J.P. Morgan Chase CEO, announced the loss of $2 billion, due to the bank’s bet on the strength of the market and, by 2014, the trade had cost the bank $6 billion. Some acknowledge the London Whale (1) case as the result of ineffective risk management, reigniting the controversies about the misuse of CDS and the need for even stricter regulations.

A decade later, the post crisis credit market is still undergoing major structural changes and one can argue that both Dodd-Frank and Basel III are still works in progress, ultimately reinforcing the emergence of Basel IV. Indeed, the effect of such regulatory measures remains under-research, but their impact is undeniable, and the market is responding through the creation of new products, such as CDS index swaptions and CDS futures. Hence, although there is an emergent need for greater regulation and insight of the market, the development of new CDS and CDO related products gives rise to an innovative market channel full of financial opportunities, setting the tone for a whole new paradigm in credit markets.

(1) Nickname given to the trader Bruno Iksil, who was considered the responsible for the loss of at least $6.2 billion for JPMorgan Chase & Co. in 2012.

Sources: Corporate Finance Institute, The Balance, Bank for International Settlements, Investopedia, Business News Daily