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☆ Bond-buying scars will open European can of worms
▼ + stars: | 2022-12-16 | by ( Pierre Briancon | ) www.reuters.com time to read: +3 min

LONDON, Dec 16 (Reuters Breakingviews) - The euro zone will soon have to pay for a decade of European Central Bank largesse. The first is to use provisions accumulated by national central banks over the past decade. But the central banks had wide differences in their approach to provisioning, meaning some may be left weaker than others. A central bank cannot be declared bankrupt, but operating with little or negative equity could hurt its credibility. And even if central banks don’t penalise them, they face the added risk that governments may tax them instead.

☆ EU greenlights only half of global tax deal
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +2 min

BRUSSELS, Dec 16 (Reuters Breakingviews) - The European Union has at last found unanimity on the global minimum tax, half of an almost 140-nation pact to clamp down on global tax avoidance. Hungary finally dropped its veto this week, only for Poland to provide last-minute drama before finally allowing the EU to proceed. Whack-a-mole objections have become EU routine on tax matters, which require the unanimity of the 27 member states. The other half of the global deal, struck under the Organisation for Economic Co-operation and Development auspices in 2021, concerned big digital services companies. In the meantime, trade wars over a hodgepodge of national digital services taxes are likely to continue.

☆ EU gas price cap will be self-defeating
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +2 min

MILAN, Dec 16 (Reuters Breakingviews) - Setting a ceiling on the price of European gas would do more harm than good. European Union energy ministers will meet on Monday to try and agree on the cap, which backers believe will prevent gas prices from spiralling out of control. Under the latest proposal, the cap may be set at 220 euros per megawatt hour for the most liquid future contracts exchanged at the Dutch Title Transfer Facility, Europe’s gas benchmark. The Intercontinental Exchange, which handles the majority of TTF future contracts, believes the additional cost would be $47 billion. Traders could even opt to buy TTF contracts on the Chicago Mercantile Exchange.

☆ Breakingviews: Unilever ice cream saga may sour ESG deals
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +2 min

LONDON, Dec 16 (Reuters Breakingviews) - Unilever’s (ULVR.L) drawn-out ice cream drama offers food for thought on buying companies with strong political leanings. The consumer goods group said on Thursday that its litigation with the independent board of Ben & Jerry’s over the sale of its Israeli ice cream business has “been resolved”. The ice cream mess made for an odd corporate drama. Unilever bought the hipster brand in 2000 for $326 million, leaving Ben & Jerry’s board more independence than a typical subsidiary. The company also asked a judge to stop Zinger from selling the ice cream in the West Bank.

☆ Ukraine’s Nestlé boost is as important as EU aid
▼ + stars: | 2022-12-13 | by ( ) www.reuters.com time to read: +2 min

Consumer group Nestlé (NESN.S) on Monday announced a small war-time investment in Ukraine which may be as important for the country’s future as an 18 billion euro European Union aid package agreed on the same day. Nestlé will invest 40 million Swiss francs (41 million euros) in a new facility that will help to produce cold sauces, seasonings, soups and instant food. The Swiss consumer group, which already has 5,800 employees in the country, will add 1,500 new jobs in the process. Meanwhile the EU struck a deal with holdout Hungary that will allow it to disburse aid to Ukraine next year. While still at war with Russia, Ukraine needs Western aid to help the government pay its teachers, doctors and soldiers, and start rebuilding railroads and power plants.

☆ Total’s belated Russian exit is still partial
▼ + stars: | 2022-12-09 | by ( ) www.reuters.com time to read: +2 min

LONDON, Dec 9 (Reuters Breakingviews) - TotalEnergies (TTEF.PA) took its time before realising it would be impossible to sell its stake in Russian gas company Novatek (NVTK.MM). One of them, Gennady Timchenko, is known as a 30-year friend of Russian President Vladimir Putin. As Total notes, it cannot abide by a shareholder agreement giving the owners preemption rights on the stake, since Timchenko is hit by Western sanctions. Fine, but as long as Pouyanné clings to his Yamal project in Siberia, Total’s Russian exit remains piecemeal. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ UK’s Big Bang barely mitigates City’s Brexit pain
▼ + stars: | 2022-12-09 | by ( Liam Proud | ) www.reuters.com time to read: +4 min

Hence Friday’s package, long trailed as a “Big Bang”, supposed to turbocharge the City. Eventually, he could end the regime if banks prove they can safely be wound down. Hunt’s broader push is to enlist the Financial Conduct Authority and Prudential Regulation Authority supervisors in his Big Bang, giving them a statutory responsibility for boosting the economy’s competitiveness. The only way to undo the damage would be to align with European rules indefinitely or to re-join the bloc, both of which are political no-gos. The government will also introduce new statutory objectives for the Financial Conduct Authority watchdog and the Prudential Regulation Authority, which supervises banks and insurers.

☆ No China is no fix for Britain’s industrial woes
▼ + stars: | 2022-11-17 | by ( ) www.reuters.com time to read: +2 min

LONDON, Nov 17 (Reuters Breakingviews) - The British government has blocked the sale of a silicon wafer factory in Wales to a subsidiary of China’s Wingtech Technology (600745.SS). It’s a sign of the growing wariness among western governments of the risks involved in Chinese investment. The decision to force Netherlands-based Nexperia to sell most of its stake in the Newport Wafer Fab business isn’t illogical. The plant makes basic silicon wafers, used in chips for switches in domestic appliances such as vacuum cleaners. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ Fiscal “black hole” obsession adds to UK problems
▼ + stars: | 2022-11-16 | by ( Pierre Briancon | ) www.reuters.com time to read: +3 min

His government is preparing to fill what media reports now describe as a “black hole” in the country’s public finances, by raising around 50 billion pounds within five years. And while new Chancellor of the Exchequer Jeremy Hunt has reversed many of Truss’ tax cuts, he’s kept measures worth some 17 billion pounds a year. The impact of his plan, based on the UK Office for Budget Responsibility’s growth forecast, will depend on its size, timing and structure. The bigger the adjustment to the public finances, which media reports reckon could be anywhere between 30 and 60 billion pounds, the larger its impact on growth. Talk of a “black hole” obscures the fact that Sunak and Hunt have multiple options.

☆ Europe’s diverging prices complicate ECB’s task
▼ + stars: | 2022-11-01 | by ( Pierre Briancon | ) www.reuters.com time to read: +4 min

LONDON, Nov 1 (Reuters Breakingviews) - The euro zone monetary policy debate may soon become more tense. The region’s inflation rate, at 10.7% in October, masks wide disparities among member states. The recent dispersion in euro zone inflation rates began with the recession triggered by Covid-19. Retail energy prices in the euro area increased by 40% between August 2021 and August 2022. Monetary policy may become less predictable.

☆ ECB stops financing undue bank profits
▼ + stars: | 2022-10-27 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 27 (Reuters Breakingviews) - The European Central Bank managed on Thursday to appear dovish, despite increasing its key interest rate by another notch and announcing its first attempt to shrink its balance sheet. The central bank bumped its key rate from 0.75% to 1.5%, as expected, but suggested further increases may not come as fast as feared, triggering a 1% slide in the euro and lifting bank stocks. With TLTRO loans available at preferential interest rates, lenders could take advantage of an arbitrage opportunity to book a risk-free profit by parking the funds with the central bank. The hope is that the new conditions will prompt lenders to repay the loans early, allowing the ECB to start cutting the size of its 8.8 trillion euro balance sheet, a form of tightening. Changing the TLTRO contractual terms carries however some legal risks, as ECB boss Christine Lagarde acknowledged.

☆ Truss’s exit highlights America’s free pass
▼ + stars: | 2022-10-21 | by ( Lauren Silva Laughlin | ) www.reuters.com time to read: +3 min

While British Prime Minister Liz Truss’s tax proposals cut her time in office short, U.S. fiscal policy for years hasn’t been that much different. If it weren’t for the greenback’s status as the world’s reserve currency, the laws of economics would apply to America, too. Her ideological mentors in America have long argued that such tax cuts pay for themselves, and they are nothing new stateside. Still at least by some measures, the United States looks worse than Truss’s country. While Truss’s policy experiment wasn’t given any rope, the United States seems to know no failure.

☆ Massive fiscal U-turn leaves UK in political funk
▼ + stars: | 2022-10-17 | by ( Pierre Briancon | ) www.reuters.com time to read: +4 min

By the tax year ending in April 2027 this should help the government claw back 32 billion pounds of the 45 billion pounds a year Kwarteng and Truss had planned. Beyond that, the scheme, which the government had estimated might cost some 60 billion pounds over six months, will become less generous. The pound strengthened against the U.S. dollar while yields on 10-year UK government bonds declined by nearly 45 basis points. But they remain at 12-year highs, suggesting that the UK has much to do to regain credibility with global investors. Government spending cuts will also be required to narrow a hole in public finances that the Sunday Times reported was as big as 72 billion pounds ($81 billion).

☆ Next Italy PM is bolstering her EU credentials
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +2 min

MILAN, Oct 14 (Reuters Breakingviews) - Italy’s would-be premier Giorgia Meloni is seeking to score points with investors. The hard-right Brothers of Italy party leader, expected to become prime minister later this month, is looking to appoint pro-European lawmaker Giancarlo Giorgetti, 55, as finance minister. A veteran member of the League, Meloni’s coalition partner, Giorgetti is a moderate, pro-market politician. But the central banker, a top candidate to become Bank of Italy governor next year, turned down Meloni’s approach, people close to him told Reuters Breakingviews. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ Europe can shrug off Putin’s Chinese gas Plan B
▼ + stars: | 2022-09-14 | by ( Pierre Briancon | ) www.reuters.com time to read: +3 min

LONDON, Sept 14 (Reuters Breakingviews) - Selling more gas to China is one of Vladimir Putin’s oldest pet projects. A pivot of Russia’s gas trade towards China may well happen over time. But for the next few years, Moscow won’t have the pipelines, the ships, or even the gas to make Putin’s dream come true. Register now for FREE unlimited access to Reuters.com RegisterChina is also taking some of Russia’s liquefied natural gas, from Russia’s eastern fields. Right now, European member states seem to be cooling on enforcing a cap on Russian gas prices.

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