European Union

EU debt’s credibility problem is worsening

9 May 2023

Borrowing costs of the bloc’s jointly issued bonds have risen above those of similarly rated sovereigns. The EU’s inability to deliver on promised joint revenues is exacerbating the impact of higher rates. That in turn reinforces investor fears that Brussels debt isn’t permanent.

Lagarde fine-tuning will aid sputtering euro zone

4 May 2023

The European Central Bank’s move to raise rates by just 25 basis points and speed up its exit from bond-buying signals a less aggressive approach. High inflation calls for more hikes, but Frankfurt’s decision to use a scalpel rather than a hammer will benefit Europe’s economy.

Capital Calls: Exxon, US regional banks

28 Apr 2023

Concise views on global finance: Exxon’s two golden eggs are the Permian and Guyana; market composure gives time for a First Republic fix.

Capital Calls: US GDP, Eli Lilly, EU budget

27 Apr 2023

Concise views on global finance: Consumer spending provided fragile support for the US economy in the first quarter. Meanwhile pharma group Eli Lilly is racing against rising obesity expectations, and the European Commission faces German hurdles to replacing its budget rules.

Dollar bulls are praying for a mild downturn

26 Apr 2023

The greenback has lost 14% versus the euro since September, as investors bet on Europe’s recovery and China’s reopening. Inflation and interest rate trends still favour the single currency. The best hope for the buck is a minor economic slowdown to boost its safe haven status.

EU bank crisis plan makes best of bad landscape

18 Apr 2023

The European Union’s proposal to extend its bank-failure system to smaller lenders is an attempt to work around political constraints. Broader use of deposit guarantee schemes should limit bailouts and help troubled banks find buyers. But even sensible tweaks may not be possible.

Rome foot-dragging can help EU kick bad aid habits

18 Apr 2023

The Italian government is clashing with Brussels over 19 bln euros in pandemic loans. Missing milestones is bad policy for the biggest recipient of European aid. But the country’s pushback may have a silver lining if it prompts the bloc to be more flexible with money.

New EU debt rules have way to avoid past mistakes

4 Apr 2023

The European Union’s old stability pact was a poorly fitting straitjacket, yet recrafting it is politically fraught. The bloc now aims to replace strict diktats with medium-term goals. A successful framework can revive growth. But it will only work if countries follow it.

Europe throws ignition cars a thin lifeline

28 Mar 2023

A last-minute EU deal will exempt autos running on carbon-neutral propellants from a 2035 combustion engine ban. That may help sports carmakers like Ferrari. Such fuels are costly and energy-intensive. Brands betting big on electric rides, like VW, will struggle to change tack.

Capital Calls: Saudi and Credit Suisse, EU patents

27 Mar 2023

Concise views on global finance: The resignation of the chairman of Saudi National Bank, Credit Suisse’s largest shareholder, may prompt a quiet period for other investors; big companies want Europe’s new system for registering intellectual property to cover more countries.

EU and US green arms race misses bigger picture

16 Mar 2023

The European Union’s response to Joe Biden’s Inflation Reduction Act gives member states leeway to push back with their own green subsidies. Yet plans for production targets are misguided. To decarbonise while managing China risks, it’s better to seek common ground with the US.

EU power rejig may only solve tomorrow’s problem

14 Mar 2023

Spooked by the 2022 gas crisis, the European Commission wants to boost long-term electricity contracts at fixed terms to shield consumers. That’s wiser than splitting the whole power market. Yet while it might aid green investment, it won’t curb prices in the short term.

UK begins long and uncertain road back from Brexit

27 Feb 2023

Rishi Sunak agreed a deal over Northern Ireland trade with the European Union. If the UK leader can get it past his own party, it should improve relations and collaboration. Closer links will need bigger compromises than Sunak can stomach, but his deal is symbolically important.

A post-Erdogan Turkey could come in from the cold

27 Feb 2023

Investors shunned the country as the president let inflation rip. He strained relations with the West by cosying up to Putin and did too little on climate change. An opposition win in coming elections, more likely after the recent earthquake, may change all that, says Hugo Dixon.

Rolling EU debt would boost investment and markets

21 Feb 2023

European Union bonds to fund 900 bln euros in pandemic aid have cheered investors. The bloc needs ongoing debt sales to buoy traders’ confidence, invest cross-border and challenge the U.S. dollar. Separating borrowing plans from spending rows could make the politics possible.

ECB’s inflation-fighting hose may have a blockage

20 Feb 2023

The central bank has hiked rates by 3 percentage points since July, pushing up corporate borrowing costs and squeezing demand for credit. Yet firms and households have longer-term debt than in the past. That means tighter monetary policy will take a while to cool the economy.

Hydrogen is elemental to U.S.-EU green compromise

10 Feb 2023

Joe Biden’s Inflation Reduction Act has raised fears of a transatlantic subsidy spat. The sustainably produced version of hydrogen may be a way to de-escalate tensions. Because it’s a potential jobs engine rather than a current one, both sides have scope for a face-saving deal.

China ban would slow, not halt, Western solar push

3 Feb 2023

Reacting to the chip war, Beijing may ban the export of technology for making solar panels, a $235 bln sector it currently dominates. Yet the West already has green energy know-how. Creating a rival industry without Chinese expertise may be slower and costlier but not impossible.

Italy may hold key to unlock EU green subsidies

1 Feb 2023

Europe’s response to the U.S. green-subsidy surge now hinges on tapping existing budgets, rather than new money. Ursula von der Leyen wants to channel unspent pandemic billions into tax credits and tweak state aid. Italy’s Giorgia Meloni may be the one to broker a deal.

Euro zone can afford to keep fiscal taps running

31 Jan 2023

The bloc’s governments pumped up spending by 3.75% of GDP over the past two years to cushion the blow of Covid-19 and higher energy prices. Now they are closing the spigots. That’s a mistake. Manageable debt costs leave room to support growth – and help the ECB fight inflation.