The European Union is set to move ahead next week with plans to slap unprecedented sanctions on one of its own members, Poland, for failing to uphold democratic norms during overhauls of the country’s legal system.
Backed by Germany and France, the EU’s executive arm is likely to recommend activating a European Treaty article that would bring Poland a step closer to losing its voting rights, Budget Commissioner Guenther Oettinger said Friday.
Polish Prime Minister Mateusz Morawiecki was defiant, saying his country has the right to revamp courts without interference from Brussels.
Back in Warsaw, Poland’s senators passed two more pieces of contested legislation, overhauling the Supreme Court and a judicial council which appoints judges late on Friday.
The zloty suffered its worst week in more than a month amid rising political risk.
Imposing sanctions would require unanimous support from the bloc’s other 27 countries, which is unlikely as Hungary has vowed to back Poland.
As the standoff escalates, EU officials are separately working on limiting access to EU funds for countries that disrespect the bloc’s values, which could harm Poland -- the biggest net beneficiary from its budget.
“There is much that suggests Article 7 will be triggered for the first time,” Oettinger told Deutschlandfunk public radio.
Cash and Values The conflict was set off by judicial changes implemented by Poland’s ruling Law & Justice party that the EU and with human-rights groups say undermine the independence of courts and the rule of law.
French President Emmanuel Macron and German Chancellor Angela Merkel said during an EU summit in Brussels that they would support the commission if it calls for application of sanctions on Poland.
EU leaders have criticized Poland for taking about 10 billion euros ($11.
8 billion) per year in EU aid while failing to respect the bloc’s values.
Merkel vowed to work with Morawiecki and said the EU felt it was forced to act.
Macron urged Poles to clarify ambiguities and said he saw positive steps.
Click here to read more about Poland’s turn towards populism Morawiecki said Poland needs to revamp courts to speed up judicial procedures and kick out judges who were active during the pre-1989 communist era.
“I didn’t go to Brussels to ask for anything,” he told reporters during the flight back to the Polish capital.
“The commission has its own procedures and we have the right to reform our courts.
” The Senate approved the final batch of judicial overhauls, which will force 40 percent of the country’s Supreme Court Justices into mandatory retirement as well as give politicians more sway over court appointments.
The draft laws now await the signature of President Andrzej Duda, who vetoed similar legislation in August but whose advisers said this week that he would probably sign the two current bills.
The zloty gained 0.
2049 against the euro on Friday, paring its weekly decline.
Polish bonds gained while Warsaw’s WIG20 stock index, which has surged 24 percent this year, declined 0.
7 percent on Friday.
“The zloty is performing worse than other currencies from the region, which may be explained by an increase of political risk connected to EU sanctions,” MBank SA analysts, led by Ernest Pytlarczyk, said in a note.
However, the lack of a “synchronized sell-off” indicates that political risk “isn’t yet a significant factor for investors.
” If the commission were to make an Article 7 recommendation, four-fifths of EU governments would need to support the move, which would amount to a declaration that Poland poses “a clear risk of a serious breach” of democratic principles.
A subsequent step would be for the bloc’s leaders to decide unanimously that Poland represents “a serious and persistent breach” of EU principles and then for national governments, acting by a weighted majority, to decide on sanctions including the suspension of voting rights.
— With assistance by Ewa Krukowska, Konrad Krasuski, and Arne Delfs.
They met for talks in Paris on Wednesday, shared a joke in Brussels on Thursday, and stood side-by-side on Friday to deliver their common vision for Europe.
The love-in between President Emmanuel Macron and Chancellor Angela Merkel was on full show this week, culminating in their joint appearance after a two-day summit of European Union leaders.
While they differed on tone and emphasis, the direction of travel was clearly the same.
“With the chancellor we have a clear idea of our common ambition and where we want to go,” Macron told reporters at closing press conference as Merkel stood to his left.
“That’s what makes me optimistic.
” On Poland’s standoff with the European Commission, the composition of the Airbus board and the prospect of EU unity in the face of Brexit, they had common cause.
And on the contentious drive for reform of the euro area of which they are the two most important members, they committed to do all they can to reach a joint road map by March.
A common solution may not be easy but “will be necessary for Europe,” Merkel said.
“I can only say that I want to,” the German Chancellor said.
“If there is a will, there is also a way.
” On Thursday, as they prepared to break for the night, Macron shouted out, “Good night, Angela.
” “Oh no,” she said, laughing as it was already well after midnight.
“See you today!” As the two made their way out on Friday afternoon, Macron put his hand on Merkel’s back, and with a gentle pat the leaders exited together.
The Great Recession is a speck in the rear-view mirror for America’s financial markets.
They’ve advanced far beyond pre-crisis levels.
In fact, Goldman Sachs says you can go back a century before 2008, and still not find a “bull market in everything” like today’s.
If the real economy had roared back the same way, Donald Trump might not be president.
Instead, it’s been a grind.
While unemployment is near a two-decade low, wages have grown slowly by past standards.
They’re nowhere near keeping pace with the asset-price surge.
Elected on a promise of better jobs and pay, Trump is about to pull the most powerful lever any government has for firing up the economy: fiscal policy.
By slashing taxes on corporate profits, its authors say, the Republican plan will unleash the animal spirits of American business -- and everyone will benefit.
A rising tide does lift all boats -- but nowadays, in the U.
Under both parties, recoveries have become increasingly lopsided.
The current one has helped millions of people find work; it’s also benefited asset-owners far more than people who trade their labor for a paycheck.
Income distribution, already the most unequal in the developed world, is getting worse.
And that’s starting to influence everything from America’s spending habits to its elections.
“The story of our time is polarization -- by party, by class and by income,” said Mark Spindel, founder and chief investment officer at Potomac River Capital in Washington, and co-author of a 2017 book about the Federal Reserve.
“I don’t see anything in the tax bill to make that any better.
’’ The Fed’s post-2008 toolkit included massive purchases of financial assets, which supported a liftoff on the markets but took time to trickle through to the real economy.
Trump’s tax critics say his plan will have a similar effect, because companies will spend the windfall on share buybacks or dividends, instead of job-creating investments.
Plenty of executives say that’s exactly what they’ll do.
Bank of America’s most recent buyback program totals $18 billion.
Chairman Brian Moynihan championed the tax proposal this month.
“It’s good for corporate America, and it’s good for us,” he said.
There was an echo there of one of the American business world’s classic slogans.
As applied to the Trump tax cuts, it’s highly misleading, according to Nell Minow, vice chair of ValueEdge Advisors.
Good for U.
? This isn’t a case of “what’s good for General Motors is good for the U.
,” said Minow, who’s dedicated her career to pushing corporations toward long-term investments in people and businesses.
“In my list of the top 100 things companies should do for sustainable wealth creation, buybacks would be number 100.
” Companies in the S&P 500 Index bought $3.
5 trillion of their own stock between 2010 and 2016, almost 50 percent more than in the previous expansion.
The pace has slowed in the last two years.
The tax bill could kickstart it.
Buybacks have fueled the stock rally (there’s disagreement about how big a part they played).
And the rally’s biggest benefits go to the richest.
On Twitter last week, Trump invited his followers to check their swelling retirement accounts.
Only about half the country’s households have any such nest-egg.
Soaring markets helped the top 1 percent of Americans increase their slice of the national wealth to 39 percent in 2016, according to the Fed’s Survey of Consumer Finances.
The bottom 90 percent of families held a one-third share in 1989; that’s now shrunk to less than one-quarter.
Republicans are gambling that they can run the economy so hot that companies will hire more workers, and eventually boost their wages.
There’s a strong argument that the private sector can train them better than government programs can.
‘Benefits Everybody’ “The more growth we have, the more that benefits everybody,” said Ike Brannon, a former Bush administration Treasury official who’s now president of Capital Policy Analytics, a consulting firm.
“It forces businesses to train people at the fringes.
” He points to the late 1990s, when growth averaged more than 4 percent and the poorest one-fifth of households saw substantial income gains.
Looming in the background then was a technology-stocks bubble.
It burst in March 2000, plunging the economy into recession.
What happened next is telling -- it illustrates the perverse asymmetry of bubbles.
In the following three years, those poorest households saw their incomes fall more than twice as much as their richest counterparts.
The pattern was repeated after the even bigger housing crash of late 2007.
Today, even after an increase of more than 9 percent over two years, incomes at the bottom are short of pre-crisis peaks, while higher earners have comfortably surpassed them.
Companies flush with cash are using it to buy more customers via mergers, or reward capital through dividends, according William Spriggs, chief economist at the AFL-CIO, the country’s biggest labor union group.
But American workers won’t put up with any more business cycles that yield them few gains, he says.
“This is the last time they can get away with it, because the backlash is going to be huge.
” In the end, the trend toward inequality amounts to capitalist suicide, Spriggs argues.
Companies need demand, which requires rising wages so that workers can afford goods and services.
“Businesses can’t create themselves, they respond to general growth in income,” he said.
“Inequality chokes off business development.
” Support for that kind of argument is surfacing in unlikely quarters.
The International Monetary Fund used to be so entwined with American government thinking that its preferred market-friendly recipe was known as the Washington Consensus.
Now, the Fund is cautiously backing redistributive measures -- falling foul of the Trump administration in the process.
In October, the IMF said rich countries can share their prosperity more evenly, without sacrificing growth, by shifting more of the tax burden onto high earners.
It warned that “excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth.
” ‘Broken System’ The U.
is already experiencing some of those strains.
During last year’s election campaign, both major parties effectively broke in half.
In both cases, an outsider candidate scored unexpected wins by running against the party establishment, and railing at an economic system they said was rigged against ordinary Americans.
Self-described socialist Bernie Sanders surprised pundits by mounting a serious challenge in the Democratic contest.
Trump won his party’s nomination and the presidency.
He told voters he had experience on the buy-side of American politics, having paid for favors from both parties, and so was well-placed to fix a “broken system” dominated by corporate lobbyists.
Now, Trump is about to hand corporations -- which are already making high profits by historical standards -- a giant tax cut.
The bill “addresses problems we don’t have, and makes existing problems worse,” said Alan Krueger, an economics professor at Princeton University.
“Especially the deficit, inequality, health care, and infrastructure investment.
” If the tax changes end up helping markets most, they’ll be widening a gap noted last month by JPMorgan Chase’s chief investment strategist, Jan Loeys.
There’s not much sign of “economic overheating,” which happens when companies start spending more on wages and other inputs, Loeys argued.
“Financial overheating, in contrast, is well advanced,” he wrote.
“It merits monitoring a lot more closely for signs of bubble-trouble.
”  Even Trump’s Treasury has flagged the danger.
Last week, the Office of Financial Research made its annual report to Congress on the vulnerabilities of the financial system.
It was sanguine about most of them, from inflation and bank solvency to debt levels.
But the agency, which color-codes its assessments, did see one major threat -- from market risk.
That gauge is at red alert.
Four intact child burials made more than 3,000 years ago are among a series of recent discoveries near the Egyptian city of Aswan, officials say.
One of the burials found by a Swedish-Egyptian team still had the linen used to mummify it, antiquities ministry head Dr Ayman Ashmawy said.
The burials date from Egypt`s 18th dynasty (1549/1550-1292 BC).
Meanwhile an Egyptian-Austrian team discovered part of a cemetery and a Swiss team found a statue of a woman.
The burials were found by archaeologists at the Gebel al-Silsila site.
One was a tomb carved into rock for a child aged between two and three.
In addition to the mummy linen, organic material from the remains of a wooden coffin was also found.
Objects including amulets and a set of pottery were found in both the second burial - for a child aged between six and nine in a wooden coffin - and the third - for a child between five and eight.
The fourth burial was also for a child of between five and eight.
The new discovery would shed more light on burial customs as well as people`s social, economic and religious life during the 18th dynasty, also known as the Thutmosid period.
said Dr Maria Nilsson, head of the Swedish mission.
So far 69 tombs have been found at the Gebel al-Silsila site, less than half of which have been excavated, Dr Nilson told the BBC.
Most of the excavated tombs had already been plundered during antiquity, she said.
Meanwhile an Egyptian-Austrian team working at a hill in Kom Ombo town uncovered part of a cemetery dating back to Egypt`s First Intermediate period more than 4,000 years ago.
Many of the mud-brick tombs contained pottery and other funeral items, mission head Dr Irene Foster said.
She said the remains of a town dating back to the Old Kingdom (2613-2181 BC) were found below the cemetery and included a ceiling impression of King Sahure from the 5th Dynasty (2494-2345 BC).
The third find in the area was that of an incomplete statue dating back to the Greco-Roman era.
It was found in Aswan by an Egyptian-Swiss mission.
The statue of a headless woman missing her feet and right hand was carved in limestone and is about 35cm (14in) tall.
Local antiquities head Abdel Moneim Saeed said the dress worn by the figure had similarities to that worn by the Greek goddess Artemis.
defense contractors are protesting a pilot program that would require losers in Pentagon competitions to pay the Defense Department’s costs if they challenge a decision and fail to overturn it.
The Professional Services Council, an industry group that represents contractors, opposes the “loser-pays” requirement as “both premature and unnecessary,” said Alan Chvotkin, its executive vice president and counsel.
The fiscal 2018 Defense Authorization Act (HR 2810) signed by President Donald Trump this week mandates a program beginning in two years and running for 36 months.
It will require contractors with more than $250 million in revenue to reimburse the Pentagon “for costs incurred in processing covered protests” filed with the Government Accountability Office.
While most defense contract challenges are routine, Boeing Co.
and Lockheed Martin Corp.
drew attention when they contested the Air Force’s decision in October 2015 to choose Northrop Grumman Corp.
instead of their joint bid for the B-21 bomber project that’s valued at about $80 billion.
The GAO rejected their challenge in February 2016.
A Compromise The pilot program was a compromise in response to a proposal by Senate Armed Services Committee Chairman John McCain, Republican of Arizona, that implied the reimbursement requirement would begin this fiscal year.
It also would have applied to companies with $100 million or more in revenue.
“If the protests are not legitimate --- most of them wind up being rejected -- we want to discourage” their use, Representative Adam Smith of Washington state, the top Democrat on the House Armed Services Committee, told reporters in November at a Defense Writers Group breakfast in Washington.
The final bill language “was sort of the compromise to try to do that,” he said.
The provision also gives the defense industry ample time to try and get it repealed before it takes effect.
The requirement is intended to cover all Defense Department costs, including personnel time and processing.
It doesn’t spell out details, such as the formula the Pentagon would use to calculate its expenses in defending an award when a protest is filed.
It’s difficult to say how much money is at stake, said a U.
government official who closely follows the protest process.
In some of the larger cases, big contractors use major law firms that run up hundreds of thousands of dollars in legal fees with attorneys paid $300 to $1,000 an hour, the official said.
taxpayers pay less for government employees to defend the disputed awards.
‘Data-Driven Analysis’ Lawmakers should have waited for publication of an assessment by Rand Corp.
on the protest process required under last year’s defense policy bill that “will contain data-driven analysis” to propose further reform, Wesley Hallman, senior vice president of the National Defense Industrial Association, said in an email.
That report is due to Congress later this month.
The GAO said in its latest annual report on the subject that challengers won 17 percent of contract protests, both on defense and non-defense government awards, in fiscal 2017, down from 23 percent in 2016.
The GAO sustained 12 percent of challenges in fiscal 2015 and 13 percent in fiscal 2014.
But the Pentagon said in a 2016 report that the GAO told it contractors won only about 1 percent of defense contract protests the previous year.
“The majority of protests are from small businesses,” Hallman said, adding that the loser-pays requirement “could deter new entrants that have relied on bid protests as one tool to break through the complex buying rules of the Defense Department.
” David Melcher, the outgoing president of the Aerospace Industries Association, said “the pilot program will demonstrate the negative effects on DOD’s acquisition process if industry is discouraged from filing legitimate bid protests.
Courts in two South African provinces on Friday dealt blows to the chances of Nkosazana Dlamini-Zuma of succeeding her ex-husband, Jacob Zuma, as head of the ruling party this weekend and national president in 2019.
In the town of Mahikeng in the North West province the court disqualified branches representing 50 delegates from attending the African National Congress electoral conference that starts Saturday.
In a separate judgment in Pietermaritzburg in the eastern province of KwaZulu-Natal, the court upheld a September ruling that overturned the 2015 election of provincial party leaders allied to Zuma and Dlamini-Zuma.
The court in Mahikeng disqualified 32 branches from the Bojanala municipal region, according to North West Provincial Secretary Dakota Legoete.
Branches in the province mostly indicated that they would be backing Dlamini-Zuma at the conference against Deputy President Cyril Ramaphosa.
“This is judicial overreach,” Legoete said.
“The courts are playing politics now.
In other countries the army makes coups.
Here it’s the judiciary.
” The ANC will appeal the ruling, he said.
While the court in Pietermaritzburg granted the Provincial Executive Committee leave to appeal to the Supreme Court, the September judgment is effective pending the outcome of any appeals, Judge Sharmaine Balton said.
This may disqualify KwaZulu-Natal’s 27 PEC votes from the conference.
KwaZulu-Natal has the biggest party membership of South Africa’s nine provinces and most branches back Dlamini-Zuma as ANC leader.
Tight Contest The contest is likely to be tightly fought.
Ramaphosa received the backing of 1,860 branches nationwide ahead of the conference Dlamini-Zuma was supported by 1,330.
The delegates, who account for 90 percent of the ballot, aren’t bound to vote the way their branches have indicated.
The rest come from provincial and national party leadership as well as women’s, veterans and youth leagues.
A win for Ramaphosa, a former trade unionist who built a multi-billion rand business empire before becoming the party’s deputy president, could spark a rand rally to below 13 per dollar, a level last seen in September, according to Rand Merchant Bank.
A victory for his main opponent, a former chairwoman of the African Union Commission, could see the currency test the record-weak levels it posted last year.
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Authors of an emerging House-Senate tax compromise have been focusing on sweeteners — such as cutting the top individual rate for the highest earners to 37 percent — to nail down support from their fellow Republicans.
As they scramble to deliver legislation to President Donald Trump’s desk by the end of next week, they’re poised today to unveil the full details of their latest plan.
Republican leaders have kept what they are offering largely under wraps, partly because they have a slim majority in the Senate and want to stymie last-minute demands — such as the boost in the child tax credit Florida Senator Marco Rubio said is needed to secure his vote.
Following this week’s loss in Alabama, Republicans are more desperate than ever to enact tax cuts to try to boost their chances in next year’s midterm elections.
Even if they succeed, their signature initiative runs the risk of exacerbating the lopsided economic recovery that has sent markets soaring as wage growth has been left in the dust.
Elected on a promise of better jobs and pay, Trump and his fellow Republicans have a lot riding on voters actually feeling the largely trickle-down benefits of their efforts — and fast.
A referendum on their leadership is just 11 months away.
Global Headlines The difficult bit | EU leaders in Brussels are set to endorse the U.
’s initial commitments on Brexit at a summit in Brussels today, triggering the second phase of negotiations on Britain’s departure.
After that, things get complicated.
EU members have maintained a united front so far, but that will be put to the test as talks turn to the future trade relationship with the U.
Decision time in South Africa | This weekend the ruling African National Congress can break with years of scandal-ridden rule when it picks a leader to succeed President Jacob Zuma as head of the party and probably the nation in 2019.
Supported by investors, labor and the ANC`s communist allies, Deputy President Cyril Ramaphosa should win, but Zuma is backing his ex-wife.
 Mike Cohen and Sam Mkokeli look at why the race is wide open.
North Korea’s economy grows | The United Nations’ tougher sanctions regime hit North Korea just as its tiny economy was showing signs of expansion, according to a South Korean government assessment.
Food and mineral production in the isolated country increased in 2016, while more people than ever are using mobile phones.
Still, per capita income last year was about $1,340, or just 4.
5 percent that of its southern neighbor.
Peru’s president digs in | The corruption scandal that upended Brazilian politics is spreading to Peru, where President Pedro Pablo Kuczynski is under pressure to resign over allegations he received payments from a disgraced builder.
“I’m not running, I`m not hiding, nor do I have any reason to,” Kuczynski said in an address to the nation last night.
The drama is unlikely to end soon: Some in the opposition want Congress to toss him out.
  “The hardest part is just beginning” | Emmanuel Macron has maintained a packed agenda since taking office, earning praise abroad and at home.
Yet the risk is that voters will turn away unless the French president can show concrete results soon.
The jobless rate, for example, remains stuck at levels roughly double that of the U.
Bloomberg’s Paris team takes stock of Macron’s performance and examines hurdles ahead.
  The gaps in security rules involving recreational drones are at least wide enough — to fly a recreational drone through.
That`s the takeaway from details the National Transportation Safety Board released yesterday about a September incident when an unmanned device smashed into a U.
Army helicopter, after flying undetected into a restricted zone over New York set up to protect Trump and the UN.
A former Federal Aviation Administration official said the near miss highlights the need for drones to be treated more like traditional aircraft.