Aurelia Butler

JERUSALEM (Reuters) – Israeli Finance Minister Bezalel Smotrich on Sunday called for talks next week to draft the 2025 state budget which he said would be “marathon discussions” aimed at moving the economy on from a war that has strained public finances to boosting growth.In a letter to budget chief Yogev Gradus, Smotrich said the budget discussions would be held on June 18-19, a process that typically takes two months rather than two days. Bank of Israel Governor Amir Yaron is scheduled to participate.”I will ask you to prepare for two days of marathon discussions on Tuesday and Wednesday, 18 June 19,” he said in the letter. Smotrich said they would examine the data to obtain a comprehensive and clear picture to respond quickly and efficiently to the challenges the country faces.Smotrich said the war and its effect on the economy required fiscal responsibility and full transparency in policy formulation and decision-making.Israel’s economy is projected to grow around 2% this year, or zero on a per capita basis.Smotrich, has faced criticism from the public and opposition lawmakers for allowing big spending increases to finance the war against Palestinian Islamist group Hamas since Hamas’ attacks on Israel on Oct. 7, as well as against Hezbollah in Lebanon. The extra spending has not been offset with cutbacks in other areas or higher taxes, so that the annual budget deficit reached 7.2% of gross domestic product in May, above a 6.6% target for all of 2024 – which itself was raised from a pre-war level of 2.25%.In March, parliament approved an amended budget for 2024 that included tens of billions of shekels of war-time financing.Smotrich last month won a battle with Defence Minister Yoav Gallant to set up a committee to examine Israel’s defence budget. Central Bank Governor Yaron said at the time that the war does not necessitate a “blank check” to the military.On Smotrich’s watch, both S&P Global Ratings and Moody’s (NYSE:MCO) have this year lowered their credit ratings for Israel due to elevated geopolitical risks.Smotrich has said the cuts were not based on sound economic reasoning and tantamount to a pessimistic “manifesto.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.European buyers are seeking to reduce their dependence on China, sourcing executives say, as Brussels increases scrutiny of goods from the world’s largest export economy.Brussels has launched probes investigating Chinese government subsidies for manufacturing and the European Commission is expected to soon disclose any further tariffs on Chinese electric vehicle imports. “The big trend right now is for companies to reduce their dependence on China,” said Richard Laub, chief executive of Belgium-based Dragon Sourcing, adding that while the US had taken the lead in decoupling European countries stepped up efforts to look for alternatives since the end of the pandemic. “What I’m seeing now is the EU catching up on that trend as well.”But unlike US companies, which have aggressively sought new suppliers following Washington’s imposition of a stringent regime of tariffs and other restrictions, Europeans are focused on reducing their dependence in specific areas where they believe they have become over-reliant on Chinese goods. European customers were increasingly concerned about their exposure to China, especially those in non-food retail industries, a category that includes everything from garments and appliances to consumer electronics and toys, Laub said, estimating that the country accounted for 80-90 per cent of sourcing spend for some of the continent’s larger groups. “Non-food [is] very, very dependent on China . . . Those types of companies in Europe are pushing hard to look for alternatives,” he added.“A lot of the European countries, you know, may not have any problems working with China, but they think that if China’s going to be impacted, OK, they better also think about how it’s going to affect them,” said William Fung, deputy chair of Fung Group, which controls Li & Fung, one of the world’s largest sourcing groups by revenue. “As a result, there will be more diversification away from China, even though China may be the most optimal place, you know, you can’t afford to be optimal and wrong,” he added. He added that it was part of a global push. “Customers are saying that, I don’t care what you do William, just get me to 30 per cent outside of China, and sometimes even more. Some have even said that I want to be completely out of China,” he told reporters last month.Naveen Jha, who runs a clothing and textiles sourcing business from eastern China’s Changzhou, said that European businesses were sourcing an increasing share of their garments from India, Bangladesh and Vietnam, despite incurring longer lead times and higher costs.“Many of the buyers feel a risk in procuring from China. So if the price has a little bit of room they prefer to go to India,” he said.European companies have benefited from the price competitiveness of Chinese goods as US buyers have looked elsewhere, said Frederic Neumann, chief Asia economist at HSBC. But even so, he added, companies in certain chemicals, pharmaceuticals and electronics businesses are looking to reduce their China dependence.Analysts cautioned that the push to de-risk was unlikely to hit China’s overall exports too severely, pointing to increased shipments to Chinese-built factories in alternative overseas manufacturing hubs such as Vietnam and Mexico, and the increased competitiveness of domestically produced goods.The appeal of the Chinese production base will also complicate efforts to find new suppliers, they add, with certain products, particularly the more complex ones, very difficult to source outside the country.“So far we’re seeing more of a musical chair type scenario,” said Maersk chief executive Vincent Clerc at a HSBC forum in Hong Kong in April. “Wherever Chinese goods are going, it’s not the same place as it was before. But how many shoes are . . . produced in China is still pretty much the same as it was a couple of years ago.” More

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PARIS (Reuters) – France and the United States will work harder to prevent a broader escalation in the Middle East with a key priority to calm the situation between Israel and Hezbollah, President Emmanuel Macron said on Saturday.”We are redoubling efforts together to avoid a regional explosion, particularly in Lebanon,” Macron said in a joint statement with Joe Biden during the U.S. President’s state visit to France.Macron added that the sides were working on “advancing parameters” to reduce tensions and end an institutional vacuum in Lebanon.France and the United States have in recent months worked to try to defuse tensions with Paris submitting written proposals to both sides aimed at stopping worsening exchanges between Israel and Hezbollah on the border.The United States has also worked on the issue, but diplomats have said there have been problems in coordinating efforts.Macron said the two countries had developed “a close coordination” in the discussions “with Israel on one side and with Lebanon and all the parties involved on the other side”.Biden made no mention of Lebanon in the short statement and also did not mention Iran, which Macron said was adopting a strategy of escalation in the region, citing Tehran’s attack on Israel and the development of its nuclear programme.”Our two countries are determined to exert the necessary pressures to stop this trend,” Macron said. Despite U.S. reservations, France, Britain and Germany last week put forward a resolution against Iran that was passed over its nuclear programme at the U.N. nuclear watchdog’s 35-nation Board of Governors. While eventually backing the resolution, Washington had shown misgivings beforehand with diplomats saying the U.S. feared it could provoke Iran, something it wants to avoid before November’s presidential election. Fresh from commemorating the 80th anniversary of D-Day, Biden’s state visit to France is marked by pomp as well as talks on trade, Israel and Ukraine. More

The ECB cut the rate it pays on bank deposits to 3.75% from a record 4.0% on Thursday but held back from promising any more easing after a string of disappointing wage and inflation data in recent weeks.Holzmann, the head of Austria’s central bank, was the only member of the ECB’s 26-member Governing Council to oppose the rate cut. The bank’s decision had been widely expected after the ECB had telegraphed its intentions ahead of time. Going forward, the bank would be looking to avoid putting itself in any sort of bind, Holzmann told Austrian radio.When asked whether the rate cut marked a shift towards lower borrowing costs, or was a step that did not commit the bank toward a particular direction, Holzmann was cautious.”I think it’s a step in the right direction,” he said. “I hope – I don’t know – that there won’t be a need to raise rates again,” he added, saying future decisions would depend on data.Among factors to consider would be the rate differential between the ECB and its U.S. counterpart, the Federal Reserve, Holzmann said in the interview.If, as U.S. policymakers have intimated they would this year, the Fed does not cut rates three times, that would affect exchange rates to the euro’s detriment against the dollar, which could fan inflation in the single currency area, he noted.The ECB could only declare victory on inflation once it had eased to the bank’s target of 2%, he said.”We hope we’ll be there in 2026,” Holzmann said. “That’s what the models predict. And that’s all based on the assumption that there are no further shocks.”Euro zone annual inflation accelerated to 2.6% in May from 2.4% in April, according to a flash estimate. More

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