Aurelia Butler

Updating its long-term forecasts, the ministry said growth in the euro zone’s second-biggest economy was now expected to slow from 2.5% this year to 1.4% next year.”The geopolitical uncertainties are huge both in terms of energy and trade,” Finance Minister Bruno Le Maire told journalists, citing the risk of a cut in Russian gas, lockdowns in China and a slowdown in the U.S. economy.Growth was seen gradually picking up to 1.8% in 2027 as the economy benefited from planned reforms ranging from the pension system to unemployment insurance, Le Maire added.As a result of the lower growth next year, the public sector budget deficit was seen unchanged from this year at 5% of gross domestic product. It would be gradually reduced afterwards to within an EU-limit of less than 3% by 2027, the ministry said.That would be achieved by keeping annual real public spending growth to an average of 0.6% over the next five years, which Le Maire said was the lowest in 20 years.”The nation’s growth has to increase faster than public spending,” Le Maire said. While central government was expected to trim spending growth by 0.4% on average and local governments cut by 0.5%, social spending would be allowed to grow 0.6%.The following are the Finance Ministry’s main macroeconomic forecasts for the next five years. Deficit and debt are as a percent of GDP.2022 2023 2024 2025 2026 2027 GDP growth 2.5 1.4 1.6 1.7 1.7 1.8 EU-hamonised 5.1 3.3 1.9 1.8 1.8 1.8 inflation public sector -5.0 -5.0 -4.6 -4.0 -3.4 -2.9 budget balance public debt 111.9 111.7 112.8 113.3 113.2 112.5 More

Russian and Ukrainian negotiators have agreed a deal to export millions of tonnes of stranded grain, Turkey has announced, and will meet in Istanbul on Friday to pave the way for an end to the months-long Russian blockade of Ukraine’s Black Sea ports.Unless derailed at the last minute, the deal will allow an estimated 22mn tonnes of wheat, corn and other crops to be collected by cargo ships from the Ukrainian coast and transported across the world, averting fears of a global food crisis.The signing will be attended by Recep Tayyip Erdoğan, Turkey’s president, and UN secretary-general António Guterres, who played key roles in negotiating the deal.İbrahim Kalın, a spokesman and adviser to Erdoğan, said the signing would be “critical for global grain security”.The final text was agreed after Erdoğan met his Russian counterpart Vladimir Putin in Tehran earlier this week.Although Russia has agreed not to attack cargo ships or Ukrainian ports as part of the deal, according to two people familiar with the text, Kyiv is still highly doubtful of Russia’s motives and the viability of its security guarantees.“Everyone is conscious that something could go wrong,” a Ukrainian official close to the talks said.A senior western diplomat also said that a memorandum of understanding had to be signed between the UN and Russia on facilitating exports of food, fertilisers and the raw materials used in producing fertilisers. Ukraine, the world’s fifth-largest wheat exporter and a vital supplier of the staple to countries across the Middle East and Africa, has also felt a sense of growing urgency to strike a deal in order to release grain silos since this year’s harvest has already begun.Under the deal, cargo ships travelling to and from Ukrainian ports will be inspected at monitoring sites in Turkey in order to allay Moscow’s concerns that the vessels could be used to smuggle weapons, according to two people briefed on the details.

A third, non-Nato country, whose identity is not specified in the agreement, may provide mine sweeping duties if needed to clear a safe path for cargo ships.Speaking on his way back from his visit to Tehran on Tuesday, Erdoğan told journalists that he hoped that the plan could start being implemented “in the coming days”. But some western officials have cautioned that it could take longer before shipments resume.A spokesperson for Ukraine’s foreign ministry said: “The Ukrainian delegation will support only those decisions that will guarantee the security of the southern regions of Ukraine, the strong position of the Ukrainian armed forces in the Black Sea, and the safe export of Ukrainian agricultural products to world markets.” More

Downing Street was accused of making “reheated announcements” after it unveiled a series of corporate measures — many of them months or years old — aimed at helping households cope with the cost of living crisis.David Buttress, former head of food delivery group Just Eat, was last month hired by outgoing prime minister Boris Johnson to find ways to ease the cost of living. Buttress on Thursday announced various discounts as part of a “Help for Households” campaign, saying the government had secured deals with companies including supermarket Asda and telecoms group Vodafone.“These deals are designed to reduce costs at the checkout, help provide entertainment and ensure access to necessary services for families during the summer holidays and beyond,” he said.Shadow business secretary Jonathan Reynolds said the “reheated announcements” showed a government that was running out of ideas. “It is farcical for the government to claim this sticking plaster is a solution to their cost of living crisis,” he added. Downing Street admitted the final package was a mix of new initiatives and existing pledges, with Johnson conceding the campaign would not “solve the issue overnight” but was “another weapon in our arsenal as we fight . . . inflation”. One senior retail industry figure said the campaign was more about highlighting existing deals than creating new ones. “The key word is ‘amplify’,” they said. “It’s not like retailers have suddenly woken up to the idea that they need to help their customers through the cost of living crisis.”Alison Garnham, chief executive of the Child Poverty Action Group, urged the government to do more to help families “stay afloat”, adding that it had “abandoned children and families to face a difficult summer with inadequate support”.

David Buttress announced various discounts as part of a “Help for Households” campaign © Hollie Adams/AFP/Getty Images

The deals include the extension of an Asda scheme that allows children aged 16 and under to buy a hot or cold meal for £1 in its cafés. Originally intended to run over the summer holidays, it will now continue until the end of the year. Besides a similar meal promotion, rival J Sainsbury introduced a “feed your family for a fiver” campaign to promote budget-friendly meal ideas at the end of June.Buttress also highlighted a “Kids Week” initiative enabling children to see West End theatre shows for free alongside full-paying adults, but this has run every year for the past 24 years. Vodafone is promoting a mobile social tariff of £10 a month, although the product, Voxi, has existed since March.The government underlined an initiative whereby Wm Morrison would provide a free meal for every child at in-store cafés when a parent bought an adult meal, but the retailer said this initiative was first announced about two weeks ago.One business figure said the government had asked hospitality and retail companies to re-promote existing offers, given many could not afford to create new promotions.Kate Nicholls, head of Hospitality UK, a trade body, struck a sceptical note, saying: “Businesses that could afford to do special offers to drive footfall into their businesses were doing that already.” “This isn’t going to fundamentally change the big challenges that we’ve got in terms of cost of doing business and cost of living,” she added. Emma Revie, boss of the food bank charity the Trussell Trust, said the announcement would “go some way” to helping families but added “it will do little for people who are already at breaking point”. More

Christine Lagarde proclaimed a “rather historical moment” on Thursday after the European Central Bank’s rate-setters unanimously agreed to create a bond-buying tool the ECB president hopes will stop higher interest rates from sparking a new eurozone debt meltdown.By giving itself the power to buy unlimited amounts of the bonds of any country that it judges to be suffering from an increase in its borrowing costs beyond the level justified by economic fundamentals, the ECB has addressed a key vulnerability haunting eurozone policymakers ever since a debt crisis almost ripped the single currency apart a decade ago.The idea to tackle big gulfs in the borrowing costs of member states had initially received a frosty reception from officials in frugal countries, such as Germany and the Netherlands, which were worried the central bank would encourage profligacy among weaker countries and could stray too close directly financing governments — a practice that is illegal under EU law.In the end, officials were rushed into finalising the new instrument sooner than they would have liked by a sell-off in Italy’s bond market, which deepened this week after the country’s prime minister and former ECB president Mario Draghi resigned, triggering a widening spread between yields on the debts of Rome and Berlin. How did the ECB reach an agreement?Lagarde said it was “gratifying” when all 25 governing council members backed the creation of the transmission protection instrument, or TPI — a tool which she said would be “critical to properly transmit our monetary policy going forward”.Analysts suspect a classic European compromise was struck, with the hawkish members of the ECB council succeeding in their push for a bigger than expected interest rate rise of half a percentage point in return for their support on the TPI. “It looks like a grand bargain,” said Holger Schmieding, chief economist at German investment bank Berenberg. “The proverbial hawks of the ECB prevailed with their demand for a 50 basis point rather than a 25 basis point rate [rise] today; the doves got a new line of defence against an excessive widening of yield spreads within the eurozone.”How will the instrument work?The ECB said it would primarily buy government bonds with maturities between one and 10 years of any countries “experiencing a deterioration in financing conditions not warranted by country-specific fundamentals”. What that means in plain English is that policymakers can react to any market pressure on member states — other than that caused by changes in the economic outlook. As part of this, it could also consider purchasing private sector securities “if appropriate”.There are very few limits on the scale of these purchases — their size will “depend on the severity of the risks” and not any pre-agreed limit. Lagarde said the ECB’s governing council would decide when to use the new instruments “under its own discretion” and without “being dependent on anyone”.The ECB claimed any bond purchases made under the scheme would not bloat its close to €9tn balance sheet, but it was vague about how exactly this could be done.Are there conditions attached?The ECB’s previous purchases of sovereign bonds have been challenged repeatedly in Germany’s constitutional court and there are almost certain to be similar moves against its latest plan. To protect itself, the ECB has attached some relatively light conditions to the new tool.All 19 eurozone countries will automatically be eligible for the instrument, as long as they have not fallen foul of the EU’s fiscal rules and are meeting the conditions attached to the EU’s recovery fund. The ECB will also consider if a country’s “trajectory of public debt is sustainable” and if it has “sound and sustainable macroeconomic policies”. Before activating the new tool, Lagarde said the council would assess “market and transmission indicators”, such as the cost of borrowing for governments and businesses, to determine if the impact of its monetary policy decisions was having the desired impact across the region and would then judge whether buying bonds would be “proportionate” in pursuing its 2 per cent inflation target.Will this help Italy?Most analysts do not believe the ECB’s new tool will be of much use if Rome falls into a deep self-inflicted political crisis — for instance, if a new government refuses to carry out the structural reforms agreed as part of the EU recovery fund.When asked about Italy, Lagarde said: “Political matters are for the democratic process of each and every member state and that is certainly the case for the country you are referring to.” She added that “differences in local financing can legitimately arise”, suggesting that the ECB would not intervene if it judged investors to be responding to justified concerns about the direction of Italian economic policy.If Italian bond yields steadily rose “amid lingering uncertainty over the election results, the ECB could decide not to activate the TPI”, said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. 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