The financial crisis has shifted corporate finance in Europe, with more firms using capital markets instead of banks for fundraising purposes. In the US, the majority of corporate debt is made up of bonds, while bank loans dominate in Europe. The latest presentation from Apollo's Torsten Sløk reveals that bank loans for US corporate funding dropped from 39% in 2008 to 23% in 2019, while bank loans in Europe have decreased from 86% in 2008 to 77% in 2019; the European bond market share has increased from 13% to 22%. Europe will continue to rely more heavily on banks than the US, but their role will decline.
Ireland says it will become the world’s first country to label alcoholic drinks with comprehensive health warnings, linking them to a slew of fatal illnesses. In a move that has caused controversy ahead of debate at a World Trade Organization (WTO) meeting this month, the new legislation will take effect in three years to give producers time to add detailed warnings about calorie content, alcohol content and health risks to labels. While thirteen EU member states, including France, Italy and Spain, have made their own concerns known to the EU, Ireland has defended its move as consistent with health warnings in other drinks and food products.
Keir Starmer’s speech about the NHS on Monday was largely devoid of visions for how to improve the service, says Kristian Niemietz in The Critic. Starmer failed to offer any tangible policy measures, instead opting for vague goals that have been voiced time and time again throughout the past few decades. Niemietz argues that both Labour and the Conservatives are failing to address the bigger, structural issues facing the NHS and failing to confront the fact that UK system performs worse than international peers.
The renminbi is not a viable alternative to the US dollar because it is not suited to be a global reserve currency, according to Karthik Sankaran, an FX veteran, and a longtime friend of Paul McNamara. However, the Chinese currency is the obvious candidate to take share away from the dollar given China's role in global trade and the size of its economy. Sankaran believes the US dollar's displacement by the renminbi is unlikely and the euro appears to have a greater chance of regional displacement due to its status as the number two reserve currency. Sankaran argues that a more multipolar FX landscape might be good for world financial stability.
Sankaran believes a multipolar FX landscape might come about via creeping regional displacement and the euro has already done this to some extent, for example, in Central and Eastern Europe. He advises against looking for the replacement of the dollar, and to consider instead creeping regional displacement. Countries might try to stop using the dollar, but they don’t have many alternatives at present.
Sankaran disagrees with the idea that a reserve currency issuer needs to run a trade deficit. It is not necessary for the country that is the center of the international monetary system to run a trade deficit, he said. Britain under the gold standard was a huge exporter of capital, while the US until the mid-1960s was the center of the Bretton Woods system and was also a huge exporter of capital.
European Union (EU) member states risk losing the single market bit by bit if they prioritise the pursuit of “strategic autonomy” and economic security over joint policies, says former Italian Prime Minister Mario Monti. He argues that objectives should be more easily achieved through joining forces and warns the single market must be a priority despite the rise of new concerns. Monti also calls for an overhaul of single market rules and the “soft” nationalism of governments, regulators and central banks impeding integration in the banking and capital markets union.
Bulgaria is aiming to form a coalition government with a rotating Prime Minister. The e-failed and corruption plagued country has endured five elections during a two-year period and hopes the new arrangement will finally bring an end to the stalemate. Centre-right party GERB will alternate the post of the Prime Minster with runner-up We Continue the Change. Both parties will hold the top post for a nine month period. The coalition will need to be approved by the 240-seat National Assembly, where both groups hold a combined majority of 133 seats.
FIFA has extended a rule that allows players and coaches to suspend contracts with clubs in Ukraine and Russia for another season, despite legal challenges. FIFA first introduced the temporary measure in February 2022 in response to Russia’s invasion of Ukraine. The rule has been extended to "protect foreign players and coaches who have left the territory of Ukraine or Russia due to the conflict and who do not wish to currently return in view of the circumstances". However, it is unpopular with Ukrainian and Russian clubs. Legal challenges to the rule have been filed, including a complaint with the European Commission by Shakhtar Donetsk.
The G7 summit sent a message of solidarity against Russia’s aggression towards Ukraine, and now the US, and aligned the EU with US relations towards China. The declaration announced new measures to increase pressure on Russia and support Ukraine’s maximal position in future peace negotiations. The group launched the Co-ordination Platform on Economic Coercion to deter and respond to future economic threats and restrict China’s access to cutting-edge technologies that could be used for military purposes. The Outcome of the G7 meeting greatly complicates China's ability to benefit from economic engagement with the EU over the US, perfectly showcasing their divide and conquer strategy.
President Biden's prediction of a "thaw" in relations with Beijing after what he called the "silly" act of China sending a giant surveillance balloon over the United States has been overshadowed by US plans to support Ukraine with new arms packages, including an avenue to provide F-16 fighter planes. President Biden sees a struggle in China between factions that want to restart the economic relationship with the United States and a far more powerful group that aligns with the country's emphasis on national security over economic growth. Though the G7 have assured China that they are not trying to contain the country, a string of diplomatic wins for the US and losses for China has created a tighter nuclear alliance between the US, Japan, and now South Korea in Beijing's neighbourhood. In response, China accused the G7 of "vilifying and attacking China" and "crudely meddling in China’s domestic affairs."
Administration officials hope that a more regular dialogue with China will eventually be established, although the war in Ukraine will continue to shadow the relationship and the course of the relationship between Moscow and Beijing. Analysts have predicted that while the US’s de-risking strategy may seem like risk reduction for the US and Europe, it could be perceived as nicely worded containment strategy in Beijing.
The European parliament's top lawmakers have proposed a cut in payouts from the special voluntary pension scheme provided for MEPs, which would fall by half. The scheme, which is used by almost 1,000 former and current members, includes former UKIP leader Nigel Farage and Marine Le Pen, Leader of the National Party in France. The European parliament's special plan pays out about €20m a year, with the average pension worth more than €2k a month. MEP members will also be offered the chance to leave the pension scheme for a one-off payment if the proposal passes.
The soaring numbers of gulls in the UK are posing a threat to vulnerable birdlife, with complaints to local councils about noise and damage caused by gulls having doubled in the past five years. While the RSPB and Natural England have issues with culling the birds, which are often red-listed species, farmer-conservationists say that with curlews and other birds approaching extinction, action must be taken. A report in The Guardian suggests the government has made the predator imbalance worse by amending regulations governing culling and applications for special licenses to kill the birds now arrives too late in the season to be of use.
Facebook’s parent company Meta has been fined €1.2bn ($1.4bn) by the European Union for contravening data protection laws regarding the transfer of data to the US. The bloc ruled that Meta’s legal basis for the transfer, known as standardised contractual clauses, was insufficient. It is unlikely to engender much sympathy, due to increasing privacy concerns and a global fear of overseas institutions’ use of citizens’ data. The fine is a record for the EU, but is still only a quarter of the maximum possible financial penalty and amounts to less than 1% of Meta's market capitalisation.
The US economy’s remarkable recovery from the Covid recession has included a significant reduction in commuting time, leading to significant economic benefits that will persist even after the pandemic ends, according to Nobel Prize-winning economist Paul Krugman. The gains from reduced commutes are probably worth up to several percentage points of national income, he wrote in a New York Times op-ed. The shift to remote work also shows that taking advantage of technology requires major changes in business operations, and economic numbers like GDP can be misleading indicators of what matters most in life.
Newcastle United are returning to the Champions League after a 20-year absence, having achieved their goal of qualifying for European competition reportedly through “smart recruitment, excellent coaching, and their Saudi owners”. United, who sat rooted at the bottom of the league after Eddie Howe’s first game in charge, finished three places above Leicester City last season but now stand 15 places above them. Howe has apparently transformed the team to a point where even a conference league spot would have been a success, yet they have propelled themselves back into the elite competition.
Jeff Bezos and Lauren Sánchez are thought to be engaged, with pictures of the couple on the Amazon founder's $500m mega yacht off the coast of Cannes spreading on social media. The couple, who went public with their relationship in 2019 after Bezos' divorce from Mackenzie Scott, had recently been photographed holidaying in Europe. Sánchez was spotted wearing a large ring, adding to speculation that an engagement was imminent. Bezos' Koru yacht is 417ft long and has a 250ft support vessel with a helipad, as well as a wooden sculpture of Sánchez erected on the prow.
Legal & General's CEO, Sir Nigel Wilson, has warned that London risks falling behind other global financial centres amid over-regulation and politically misguided interventions dating back to Gordon Brown's tax raid on pensions. He states that the UK pension industry is de-equitising, with funds increasingly investing in bonds rather than stocks. As a result, pension funds and insurers now own just 4% of the stock market, down from 39% in 2000. Wilson also argues that the UK has not adapted to support the growth of young firms in the way the US has, a concern which threatens the UK's intellectual capability and global competitiveness.
UK Chancellor Jeremy Hunt is meeting with food manufacturers to call on them to help ease pressure on household budgets amid rising food prices, which the Resolution Foundation suggests will overtake energy prices as the biggest source of pressure on family finances. The UK government has rejected the idea of imposing price controls or requesting that supermarkets cap the prices of certain essentials. The chancellor will also look at reforms to pricing rules to enable consumers to compare product prices more easily. Bank of England officials reportedly do not believe that “greedflation” is responsible for high inflation in the UK.
Asian stocks reached two-week highs on Tuesday boosted by prospects of avoiding US default and the resilience of Japan’s economy. MSCI’s broadest index of Asia-Pacific shares outside Japan touched its highest level since May 9, whereas Japan’s Nikkei extended its winning streak for the ninth session and rose 0.6%. The US dollar hit its six-month high of 138.88 yen in the Asian session. Purchasing Managers Index surveys are expected in Europe, Britain and the US later during the day and strong services growth may keep the composite readings in expansionary territory.
The record fine imposed on Facebook's parent company Meta by European regulators serves as a warning to businesses that transfer individuals' data across borders. The €1.2bn ($2bn) fine was made by Ireland's Data Protection Commission at the request of the European Protection Board for Meta's inadequate protection of user data transferred from Europe to the US. Europe has the toughest data privacy legislation globally, enforced via its General Data Protection Regulation law. US social media companies have accumulated large fines, including Amazon's €746m ($1.24bn) 2021 penalty for alleged misuse of data. Meta has previously been fined €1.3bn for related breaches. The EU and US are working towards a new data privacy regime potentially in July 2022, guaranteeing privacy protection for data stored and transferred in the US. Without a new agreement, companies operating “data for service” models may be unable to collect or hold data on Europeans.
Australian rugby is taking a big risk that could backfire ahead of the Rugby World Cup by allowing their teams to make changes to their squads for the rest of the Super Rugby season. Rugby Australia should be concerned about the damage being caused to the league in their country leading up to a pivotal Rugby World Cup, and their argument that success in the World Cup will make fans forget whatever happened in Super Rugby is flawed. Furthermore, resting players for the Crusaders game, as the New South Wales Waratahs are rumoured to be doing, flies in the face of history. Experts fear that rugby is on thin ice in Australia and the loyalty of fans should not constantly be put to the test.
