Aurelia Butler

According to the report, this year’s budget is 1.7 billion reais over the spending ceiling, indicating the government would need to find additional funds elsewhere.While Brazil’s target for the 2023 primary deficit sits at 228.1 billion reais, Finance Minister Fernando Haddad has promised to reduce it via spending cuts and seeking new revenue streams to a deficit goal of around 100 billion reais.($1 = 5.0033 reais) More

Germany recorded its highest level of foreign direct investment last year, with a surge in UK companies setting up operations to keep a post-Brexit presence in the EU.FDI into Germany totalled €25.3bn last year, up 261 per cent from €7bn in Covid-hit 2021, according to official figures from Germany Trade & Invest (GTAI). The biggest sources of investment were the US, which accounted for 279 projects, Switzerland and the UK. The total of 170 FDI projects originating in the UK was up 21 per cent on 2021. “For British companies, it’s particularly important to have a foothold in the EU after Brexit,” said Robert Hermann, chief executive of GTAI. One of the biggest UK investments was by Frasers Group, the owner of Sports Direct, which announced last April that it was spending €300mn on a new distribution centre at Bitburg airport in western Germany that would become its European headquarters.UK company Mura Technology announced it would build a chemical recycling plant in the eastern town of Böhlen that would turn 120,000 tonnes a year of plastic waste into oil. Proton Motor Power Systems said it was expanding its Puchheim plant in southern Germany, which produces fuel cell stacks and hydrogen fuel cell engines. THEMPC, a promotional and branding company, set up an operations hub in Munich to produce and distribute printed goods and bespoke packaging inside the EU without customers needing to pay extra duties and taxes. In euro terms these were dwarfed by the biggest foreign investment in Germany announced in 2022: US chipmaker Intel’s plan to build a €17bn factory in the eastern German city of Magdeburg. Sweden’s Northvolt also announced a €4.5bn investment in a new battery factory in the northern state of Schleswig-Holstein.The GTAI figures measure the value of announced FDI projects into Germany in 2022 with the money likely to flow only in subsequent years.According to OECD figures which measure inflows, Germany attracted $11bn of FDI in 2022, less than the UK and a quarter of the size of France and Sweden. OECD figures also show that German companies invested $142bn abroad in the same year. Flows of FDI include greenfield investments in new factories, buildings and machinery and also cross border takeovers and mergers. With a large trade surplus, Germany generally provides much larger outflows of FDI than it receives in inflows. The huge increase in energy prices last year caused by Russia’s war in Ukraine made Germany a much less attractive place to do business than it was before the invasion. While gas prices are now close to prewar levels, many companies are still looking elsewhere, particularly the US where President Joe Biden’s Inflation Reduction Act has provided $369bn of subsidies and tax credits for clean energy technologies.“When it comes to new decisions, the numbers are dropping,” said Hermann, identifying the IRA as a potential factor. “We assume it will have an effect on investment in Europe and Germany,” he said.

The agency noted that inbound investment from China was in retreat, with only about 141 projects announced last year — the lowest figure in eight years. Some experts have attributed the decrease to tightened restrictions on M&A activity by Chinese companies in Germany. But Hermann blamed the decline on the aftermath of the Covid-19 pandemic, which had made it harder for Chinese executives to travel to Germany. More

Grand summits of the world’s wealthiest and most powerful nations are often criticised for a lack of output beyond vaguely phrased promises for co-operation and symbolic photo opportunities. Yet, in a time of deep geopolitical rifts — with the world’s two largest economies butting heads and Russia’s continued aggression in Ukraine — summits take on greater significance in helping to forestall disunity.In this light, the G7 meeting in Japan over the weekend had some notable achievements. The three-day gathering culminated in a broad but more unified approach by member nations on the war in Ukraine and China’s growing assertiveness. The convergence should not be taken for granted. But ultimately, the success of the Hiroshima summit will be determined by its ability to turn communiqués into concrete global action — and by that measure, considerable work lies ahead.The summit made a welcome effort at broadening international support for Ukraine. The G7 reaffirmed their commitment to countering Vladimir Putin’s aggression, and the invitation of the Ukrainian President Volodymyr Zelenskyy was also significant. It gave Zelenskyy a global platform, allowing him to press his agenda for peace in Ukraine also to the invited leaders of emerging powers — which are much more sceptical. The US decision to back allies in supplying F-16 fighter jets and help train Ukrainian pilots, alongside a new $375mn military aid package from Washington, was a particular boost for Kyiv too.On China, the group critiqued Beijing’s use of “economic coercion”, urged it to use its influence to push Russia to withdraw troops from Ukraine, and called for a “peaceful resolution” to tensions with Taiwan. Most significant was coalescence around “de-risking” economic relations with China, rather than “decoupling” — echoing the calls of European Commission President Ursula von der Leyen. Given differing economic interests, the west has been conflicted on how best to approach China’s vast state-led dominance of critical global supply chains, while also de-escalating tensions with Beijing. The G7 agreement is a step forward in providing a co-ordinated framework.Garnering support from the so-called “global south” will however continue to be a major challenge for the G7. Economic ties between these nations and Russia and China are a barrier. Indeed, India has been gorging on cheap Russian oil, and bilateral trade between Brazil and China has surged. With China also building ports and doling out billions in aid and investment across Latin America, Africa, and South East Asia, stronger dialogue will only go so far. Limited progress on climate commitments at the summit will also do little to convince poorer nations to boost their own efforts. The G7 will need to follow through on promises to support developing nations with investment and climate finance.The success of the G7’s strategy to “de-risk” ties with China will also hinge on whether there is common understanding on what precisely it means. Outlining and agreeing on the specifics will be the next step. De-escalating tensions with China will also not be simple, particularly if ambiguities remain. Indeed, on Sunday, Beijing banned US chipmaker Micron Technology’s products from its infrastructure over potential security risks — a decision the US commerce department said has “no basis in fact”.With the G20 summit set to take place in New Delhi later this year, the challenge now is to show the “global south” that it is not simply an afterthought. A unified approach on Russia and China among seven of the world’s major economic powers is a step in the right direction. But to make the strides ahead, and build a global compact, the G7 will need to accompany its words with money and greater detail. More

Today’s top storiesFacebook 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. For up-to-the-minute news updates, visit our live blogGood 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 economyThe 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 economyUS 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: businessData 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 newsThe 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. More