Today’s top stories
Facebook owner Meta was hit with a record €1.2bn fine from the EU over inadequate safeguards for data transfers to the US. The ruling is the latest in a string of global fines for the social media giant’s lax privacy protections.
Ireland said it would become the world’s first country to label alcoholic drinks with comprehensive health warnings and calorie counts, angering some of its trading partners and setting up a clash at the World Trade Organization.
Greek premier Kyriakos Mitsotakis’s centre-right New Democracy party unexpectedly increased its vote share in parliamentary elections, although fell just short of an outright majority. Mitsotakis called for fresh elections on June 25.
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Good evening.
Joe Biden’s hopes of a “thaw” in US-China relations took a knock after Beijing launched punitive action against American chipmaker Micron.
Following some strong rhetoric from the G7 over the weekend about China’s “economic coercion” and its ambitions in the South China Sea, Beijing had hit back, arguing that “the G7 talks about pursuing a peaceful, stable, and prosperous world [while] actually doing things that are undermining world peace and regional stability and suppressing other countries’ development”.
Beijing followed that with the move against Micron on Sunday, arguing its products posed “serious network security risks” and banning their use in key infrastructure in the first big measure against a US semiconductor group.
The company said China’s move would dent revenues by a “single-digit percentage”, although it would have a much bigger impact if the ban were extended to include their much wider use in mobiles and consumer electronics. The move is part retaliation for Washington’s extensive chip export controls introduced last October.
Foreign policy experts said the G7’s tough language — and the US successfully persuading European countries to take a harder line — would make China even less willing to co-operate on issues of concern with the west. An early test will come this week when China’s commerce minister Wang Wentao becomes the first senior official to visit Washington since 2020.
In the meantime, global efforts to build alternative chip supply chains have been given new impetus by the threat of worsening relations between China and Taiwan, which produces more than 60 per cent of the world’s chips and 90 per cent of the most advanced. A potential invasion of the island by China could kill supply stone dead and bring factories around the world to a halt.
Seven of the world’s largest manufacturers, including Taiwan’s TSMC, the world’s biggest contract chipmaker, have set out plans to expand in Japan, while the UK last week announced its long-awaited semiconductor strategy, with £1bn on offer to chip companies over the next decade. The UK has also announced a semiconductor partnership with Japan involving R&D co-operation and skills exchange as part of a broader economic accord.
The UK’s semiconductor ambitions however remain tiny compared with efforts by the EU and US. Brussels has loosened state aid rules and mobilised billions of euros in grants to stop chip manufacturers and clean energy companies decamping to the US for the huge subsidies on offer. Germany in particular is spending big, even if some economists believe it does not make economic sense.
But back to the consequences of the Micron decision. Washington will not be pleased with today’s signal from South Korea that it would not block its chipmakers Samsung and SK Hynix from filling the gap left by the US company, ignoring a plea from the White House last month.
In the meantime, the tech battle between the US and China continues at what the Lex column calls “the leaden pace of two heavily armoured knights biffing each other with yard brooms”.
Need to know: UK and Europe economy
The Bank of England is pinning its hopes on UK inflation falling when new data is published on Wednesday. It expects the annual rate of consumer price inflation to drop almost 2 percentage points from 10.1 per cent to 8.4 per cent in April before falling to its 2 per cent target in late 2024 or early 2025.
Germany received record levels of foreign direct investment last year, fuelled by a boom in UK companies setting up a post-Brexit toehold in the EU. FDI is likely to fall this year as green tech investment heads across the Atlantic for the incentives on offer in the US.
The EU will push ahead with more joint purchasing of hydrogen and critical raw materials after a successful round of aggregated gas buying.
Policymakers across Europe are imposing price caps to try to limit soaring food costs. Economists however are not convinced of their effectiveness.
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Need to know: Global economy
US president Joe Biden and House Speaker Kevin McCarthy meet again today to try to ease tensions in the escalating debt ceiling crisis. Worried companies are rushing to borrow money in the bond market as they fret about the possibility of turmoil over the summer.
Climate experts criticised the G7 final communique for failing to commit to tough action on fossil fuels, after Germany and Japan argued for the continued use of gas and coal respectively.
India’s central bank sought to calm the public after announcing the withdrawal of its highest-value currency notes from circulation. The government played down comparisons with previous “demonetisation” attempts that hurt cash-reliant small businesses.
An FT Big Read looks at how the AI revolution is already transforming education, forcing schools and universities into a fundamental rethink of how they teach and test their students.
Japan’s economy is bouncing back and its stock market is at a 33-year high. Another Big Read asks how long the rally might last.
Need to know: business
Data seen by the FT showed profits at Goldman Sachs, Morgan Stanley and other big western banks fell sharply last year because of Covid lockdowns and political tensions.
A switch to hydrogen planes in Europe would need €300bn of investment and a tax on traditional jet fuels, according to a new study by a clean energy group.
Allen & Overy and Shearman are merging to create a $3.4bn law firm in the first tie-up between a “magic circle” group and a US rival in more than 20 years. The combined firm will have nearly 4,000 lawyers across 49 offices.
Ryanair said it had returned to profit in the latest evidence of the bounce back in the European airline industry. Its boss Michael O’Leary is aiming to double passenger numbers over the next decade to 300mn a year by 2034 — more than any airline has yet managed.
Macau casino groups such as Galaxy Entertainment are also enjoying a rebound. The Chinese territory has overtaken Las Vegas to regain its status as the world’s casino capital.
The World of Work
“Workcations” — when part of a trip away is spent working — are increasingly popular in the US, where nearly half the workforce who have paid time off report not using all of it. Good news for leisure companies, though.
Economist Daniel Chandler, whose book ‘Free and Equal’ makes the case for workplace democracy, tells the FT that the UK is for many “a sphere of subservience and powerlessness quite unlike any other domain of life in a modern democratic society”. Too many companies act like a “benevolent dictatorship” — but without the benevolent part, he argues.
Columnist Camilla Cavendish, on the other hand, argues too many rules on workers’ rights are holding the UK back.
A new FT series from the Working It team looks at mental health initiatives in the workplace.
Governments and businesses alike face formidable challenges in equipping the workforce for the modern digital economy. The latest in our Tech for Growth Forum discusses technology and the great skills shortage.
Some good news
The world’s first house made with nappy-blended concrete has been built in Indonesia. In an attempt to solve two environmental problems at once, researchers in Japan found that shredded nappies could be used to replace a good proportion of the sand used in making concrete without reducing its strength.
Source: Economy - ft.com
