This is an audio transcript of the FT News Briefing podcast episode: ‘Why admitting Ukraine into the EU is tricky’
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Marc Filippino
Good morning for the Financial Times. Today is Tuesday, August 8th, and this is your FT News Briefing.
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Meta is prioritising artificial intelligence projects that make it money. And PayPal says it’s launching a stablecoin. Plus, there may be a lot of chatter about Ukraine joining the European Union, but the FT’s Henry Foy explains there are a lot of roadblocks.
Henry Foy
It’s not just about Ukraine reforming its economy, its political structure, its judicial structures to join the EU. This is about how the EU reforms itself.
Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.
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Facebook’s parent company, Meta, ditched the first database of more than 600mn protein structures. The social media giant had employed about a dozen scientists and used artificial intelligence to predict protein structures. The project could have helped develop new drugs and treatments. But sources told the FT that the group was cut this spring as part of broader lay-offs across the company. The reason this is a big deal is because it shows that Meta is abandoning purely scientific goals. Sources say that the company is focusing more on AI projects that can generate revenue.
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PayPal announced on Monday that it is launching a stablecoin tied to the US dollar. It’s the first major financial institution to get into crypto payments. And the timing is interesting because regulators are cracking down on cryptocurrencies. The FT’s digital markets correspondent Nikou Asgari wrote about the move. She joins me now. Hi, Nikou.
Nikou Asgari
Hi, Marc.
Marc Filippino
So, Nikou, for those of us who don’t know what exactly stablecoins are, how do they differ from cryptocurrencies like bitcoin?
Nikou Asgari
So stablecoins are a type of cryptocurrency and they typically track the value of a major currency like the dollar, which this PayPal stablecoin is doing. So they’re pegged one-to-one. So $1 equals 1 PayPal stablecoin. The point of them really is to help the traders, or people who use them to move in and out of different cryptos, trade bitcoin, trade ethereum, for example, without paying high fees. You know, crypto proponents say that stablecoins are, (chuckle) the name, it’s in the name, more stable than other crypto coins because they’re pegged to, typically dollars, it can be gold, just other traditional assets that are, you know, underlying those coins. So they’re less volatile than bitcoin.
Marc Filippino
So knowing what we know about stablecoins — that, you know, many in the crypto industry view them as more stable — why is PayPal getting into the game?
Nikou Asgari
Well, PayPal is one of the biggest payments companies in the US, if not in the world, and they say that it makes sense for them now to move into crypto payments as people want to send money, whether it’s to friends and family, or whether it’s to buying something online or in a shop. They say that there’s, you know, interest and demand for doing this with crypto, and so they think that launching a stablecoin will help them corner that part of the market, that digital crypto payment part of the market.
Marc Filippino
Is this a bad time to be getting into stablecoins? It seems kind of odd.
Nikou Asgari
It’s an interesting time to be launching a crypto project, especially in the US. You’ve got the top US regulator, the Securities and Exchange Commission, making its position very clear on especially unregulated crypto activities. It’s going after Coinbase, it’s going after Binance. And because of this, other companies have pulled back their crypto projects in the US. For PayPal this week to be creating its own stablecoin and really actively pushing deeper into crypto I think is really interesting. I guess it shows the way that they are thinking about payments and where that’s headed.
Marc Filippino
Nikou Asgari is the FT’s digital markets correspondent. Thanks, Nikou.
Nikou Asgari
Thanks, Marc.
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Marc Filippino
The war in Ukraine kick-started a conversation about letting new countries into the European Union. The thinking is Russia’s gotten more aggressive, so it makes sense from a security perspective to admit more states. But there are still a lot of unanswered questions about whether admitting Ukraine is even possible. Here to talk more about this is the FT’s European diplomatic correspondent, Henry Foy. Hi, Henry.
Henry Foy
Hey.
Marc Filippino
So, Henry, what’s the argument for letting Ukraine into the EU?
Henry Foy
I think there are really two sides to this. The first is geopolitical. It’s look, we cannot leave countries in the waiting room for too long if they’ve stated a desire to join the western bloc. And we’re saying “yes but just wait” — that makes them vulnerable. And Russia has shown that it’s willing to use force to, if you like, keep those countries within its sphere of influence. The other reason is that Ukraine is an aspirant nation. It’s full of very pro-European citizens who want to bring them and their large population and their decent-sized economy inside the EU. And I think that it’s dawning on people in Brussels that this is a very, very good thing.
Marc Filippino
Let’s talk about some of the unanswered questions that I mentioned earlier. First off, what would be the economic implications if Ukraine joined?
Henry Foy
So I think it’s really important to make clear here that the EU has never taken in a country that is as poor as Ukraine. That affects the most important part of the EU budget, which is cohesion funds, which is a massive chunk of money that’s basically set aside to build up the economy of poorer members. The other thing about Ukraine that makes it very, very difficult to see a way that they could join in the current state is that they have an enormous agricultural sector. The other part of the EU budget that takes up the most money is the Common Agricultural Policy, which is effectively subsidies to the agricultural industry. Ukraine would absorb an enormous amount of that, taking money away from countries like France, Poland and also a huge amount of the cohesion funds. So together they account for about 60 per cent of the EU’s budget. And Ukraine would swallow a huge, huge part of it.
Marc Filippino
What about the governance and political structure in the EU? How would that change if Ukraine became a member state?
Henry Foy
The way that the EU decides things is based on two metrics effectively: the size of your population and whether or not there is a unanimous decision. So on the unanimity you’re bringing in another country that would have a lot of weight. It would be able to block things simply because it doesn’t agree with things. On the other side is a huge population. It would be in the top five or six. So it would have a huge amount of weight when it comes to voting on issues that don’t require unanimity, but you need a certain proportion of the EU’s population.
Marc Filippino
OK, so there are a bunch of issues. Are there any solutions being proposed?
Henry Foy
I mean, I don’t think anybody thinks that Ukraine can join without the system being changed slightly. Some ways that they can change the way things operate would be reducing the number of issues on which there’s unanimity required. So in that way, you are removing the veto risk. On the financial side, a lot of countries are starting to say, well, is there a way that they can join and there can be a sort of a sliding scale of market access. So there’s a way in which we can phase it in, because another thing that a lot of countries are telling us is, look, the EU single market is incredibly competitive and you don’t want to join it until you’re ready because your economy will be hurt by the competitiveness of the rest of the bloc. For me, the most interesting thing is that Brussels is finally waking up to the need that enlargement takes place and how it adapts to make sure it’s safe and benefits everybody.
Marc Filippino
Henry Foy is the FT’s European diplomatic correspondent. Thanks, Henry.
Henry Foy
Thanks so much.
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Marc Filippino
Before we go . . .
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The FT Weekend podcast recently interviewed the Talking Heads’ former frontman David Byrne. Host Lilah Raptopoulos talked to Byrne about the band’s seminal concert documentary called Stop Making Sense. A remastered version of it will be released later this month.
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Lilah Raptopoulos
What was it like to rewatch it? What has it been like to return to it?
David Byrne
I’m looking at my younger self (inaudible) from, what is this, like 40 years now? Forty years? I’m looking at this guy and he seems like a stranger. And I go, Who is that strange guy? This is a very clever show he put together (Lilah laughs), I’m like, as a person, he looks pretty odd.
Marc Filippino
We have a link to that episode in the show notes.
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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.
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