Spain’s migrant crisis reopens deep EU rifts

0:03Good morning from the Financial Times. Today is Monday, August 3rd, and this is your FT News Briefing. We have the scoop on mega merger talks in the pharmaceutical industry, and new analysis breaks down the cost of wildfires ravaging Europe. Plus, Spain's migrant crisis is reopening deep divisions in the EU. I think some governments will use this to push some of their more hardline policies. I'm Victoria Craig, and here's the news you need to start your day.

0:42AstraZeneca and Bristol-Myers Squibb have held talks to create the world's fourth biggest pharmaceutical company. A tie-up would forge a$400 billion giant in the industry and would help expand AstraZeneca's footprint in the United States. Aaron Kirchfeld is part of the team that broke that story for the FT. He joins me now. Hi, Aaron. Hi there. So how advanced are these discussions, what do we know about this so far? So according to our sources, these talks have been going on for some time. And like all deals, it's always hard to predict whether they'll reach a deal or not. But it sounds like if things go smoothly, according to our sources, that we could see something materialize in the near term.

1:24And what would a deal mean, not just for AstraZeneca, but also more widely for competition across the pharmaceutical industry? Well, as you flagged previously, this combination would create a juggernaut. And this is all about drug makers trying to strengthen their pipelines. And this would provide Astra a couple things. Some of Bristol-Myers drugs that it's developed and others that are in the pipeline, as well as more exposure to the U.S., which remains by far the biggest pharmaceutical market in the world. And what's really interesting and what we'll see play out over the coming days is the reaction on the political level, because AstraZeneca is one of the biggest companies in the UK.

2:03It's a bit of a trophy asset over here. And this would see it pivot even more to the US and would definitely raise some questions. Is there a risk of the UK losing another big blue chip company? Obviously, a huge deal for the UK if that happens. But how likely, Aaron, is this deal to actually come to fruition? Well, look, I think we've been, you know, covering M &A over here for decades. And we've seen many of these deals get close to the finish line and collapse. However, Pascal Soria, the CEO of AstraZeneca, he's done some big deals previously, although this would be his biggest. He's also renowned for fending off a takeover from Pfizer many years ago with the pledge to bolster his pipeline.

2:42And he has succeeded. He's really turned the company around, especially in oncology. And that's shown in their boost in market cap. So whether this gets across the line, you know, only the top board members will know. but you know in the reporting led by our pharma deals reporter in the u.s oliver barnes sources said look these talks are serious uh they're ongoing and they're hoping to reach a deal um you know in the near future so time will tell but it's looking like there is definitely some appetite among the players to get this done and you mentioned regulators i just wonder if we have a sense of how regulators in the uk and here in the u.s might view a potential tie-up Both companies have big cancer divisions.

3:21Could that be a potential issue? You're absolutely right. Look, any deal of this size in the pharma space will be scrutinized by regulators globally, including in the U.S., the U.K., and Europe. So they will look at what kind of market share the combined companies would have in areas like in oncology and other therapeutic areas. So there's no doubt it will be scrutinized. However, under the Trump regime, there is a general feeling that big deals can happen, especially if they result in new commitments, fresh investments and jobs in the U.S. But look, this story, you know, it's developing. It was breaking on a Sunday.

3:53But you don't get involved in these kind of deals unless you have some conviction that you can get it done. We should say that at the time of this recording, AstraZeneca declined to comment while Bristol-Myers Squibb did not immediately return a request for comment. Aaron Kirchfeld is the FT's chief European business correspondent. Thanks so much for your time, Aaron. Thanks for having me.

4:18The cost of wildfires and heat waves sweeping across Europe has already reached more than 3 billion euros in the five worst-hit countries alone. That's according to FT analysis out today. That is far higher than the estimated 2.5 billion euro average annual impact for the whole of the EU. The estimates are based on the so-called restoration cost of returning burnt areas to their previous states. Almost half a million hectares have burned in the first two months of the fire season. Damage to crops, property, and disrupted tourism will likely lead to even higher costs. Separately, the impact of drought has yet to emerge.

4:57For example, Hungary is preparing for electricity rationing. That's because record low water levels on the Danube River are forcing the country to shut down its only nuclear power plant. That plant provides up to 40 percent of the country's electricity.

5:17A migrant crisis in Spain is exacerbating divisions in the European Union over the bloc's migration policy. This week, governments will meet to discuss one of the biggest influxes of unauthorized immigrants in EU history and how they can find a way forward. It comes after about 60 ,000 people entered the Spanish enclave of Ceuta in North Africa on Thursday. More than 70 people died in the attempt, and many are still missing. Our correspondent Barney Jopson spent the weekend there and has the latest on the situation on the ground. The people of Ceuta are moving from shock into anger. It's home to 83 ,000 people, so the sudden arrival of another 60 ,000 from Morocco was a terrifying experience for many.

6:01The migrants have now been ordered home, and I walked with hundreds of them back to the Moroccan border. Some of them did U-turns away from soldiers who were trying to shepherd them forward. I saw others, at a distance, setting up camps in wooded areas, determined to stay. When I asked one man about his experience in Theuta, he replied in gestures. He pointed to his empty stomach, because hardly anyone had found food. He made a dusting-off gesture with his hands as if to say, I'm done with this. Then he raised his forefingers to his face and traced the path of tears down his cheeks. That was the FT's Barney Jopson, our Portugal and Spain correspondent.

6:40Well, the situation in Ceuta has ignited concern among European governments and reopened a deep rift about migration policy in the bloc. For a sense of the mood in Brussels, we turn now to Laura Dubois, our correspondent based in the EU capital. Hi, Laura. Hi. So there have been back and forth letters between EU leaders this weekend, each expressing deep discontent over the situation and placing blame. Let's start first with Spain. What have authorities there said about the situation? On Saturday, Pedro Sanchez, the Spanish prime minister, wrote a letter to the European Commission and the European Council, hitting back at criticism against Spain.

7:21Because almost as soon as the news broke, Far-eye and right-wing politicians blamed Spain basically for what was happening and pointed the finger specifically at a policy that Sanchez had implemented to regularize a large number of undocumented migrants. And Sanchez in his letter basically says this kind of criticism is driven by prejudice and fake news and asks for a meeting to discuss this. And so how have other EU leaders responded to that? Within hours of this letter landing, 22 other heads of state and governments, including Italy, Denmark, Germany and also Austria, wrote their own letter.

7:58And in this letter, they reiterate some of the criticism that we'd seen before and specifically mention the policy of regularization. And basically, they say we need to protect our external borders and sort of hint at the fact that a single EU country can't just go their own way. And what's also important to note is that some of these governments have even called for Spain to be excluded from the Schengen zone of free movement, something that would be very controversial and difficult to do. So a lot of finger pointing, a lot of disagreements. On Tuesday, EU Home Affairs ministers are going to meet virtually.

8:34What are we expecting from those conversations? ends. Yes, so then within hours of all these letters, they call this sort of crisis meeting for Tuesday and ministers are now expected to take stock of the situation. What's also important to note is that the Spanish government and the commission said that most of the people who crossed into Ceuta had been returned almost immediately back to Morocco. So no one actually crossed onto mainland Europe. But the ministers will now look at what happened, what are the potential causes. They might call for additional border control measures, maybe Ropen Frontex, the EU border control agency.

9:10And they will also look at the potential role that the Moroccan authorities might have played, because there is already speculation that such a big number of people couldn't have crossed into Ceuta in such a short amount of time without some kind of involvement from the Moroccan authorities or at least some kind of tacit consent. When we look at what's happened in Ceuta, I'm curious, Laura, for a little bit of perspective here. When was the last time Europe had to contend with a migration crisis of this magnitude? And can that help inform the bloc about how to move forward and what happens next?

9:46The big migration crisis that always comes to mind is 2015-2016, when a lot of people fled the Syrian civil war and poured into European countries. That was the last time we also saw very tragic footage at the borders, a lot of deaths. And the difference is that at that time, the sort of general mood was a lot more solidarity, whereas now you can really see how the mood has shifted. There are a lot more right wing and even far right governments in power in the EU. And you can see by the letter signed by so many leaders sort of hitting back at Spain that the majority around the EU council table is now very hard on migration.

10:23And they want more measures and are sort of using this moment also to push for more additional harsher measures. There's clearly a lot of division about how to deal with this. Can all of these sides come together and agree on a way forward? It's a good question. I think some governments will use this to push some of their more hardline policies, such as Italy and Denmark, who want to establish these so-called return hubs in African countries to be able to deport people from there. I also think Sanchez is really digging in in his progressive position. But he is sort of in the minority now in the EU, and it remains to be seen whether he will be able to convince other governments to give him some support.

11:05Certainly lots to watch in the coming days and weeks. Laura Dubois, our correspondent in Brussels for us. Thanks so much for your time. Thank you. You can read more on the migration debate in Europe and all of the stories in today's podcast using the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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