Aurelia Butler

The Belarus package will include import and export bans on goods worth around 60 million pounds ($73 million), including on exports of oil refining goods, advanced technology components and luxury goods, and imports of Belarusian iron and steel.Britain will also ban more Belarusian companies from issuing debt and securities in London.”The Belarus regime has actively facilitated Putin’s invasion, letting Russia use its territory to pincer Ukraine – launching troops and missiles from their border and flying Russian jets through their airspace,” the British government said in a statement.Britain has already raised import tariffs on a range of products from Belarus by 35 percentage points and sanctioned Belarusian President Alexander Lukashenko and senior government officials.Britain, along with Western allies, has been imposing sanctions against Russian elites, banks and strategic industries since Russia invaded Ukraine in February. Russia says it is conducting a “special military operation” in Ukraine.The six Russians named by Britain’s finance ministry on Monday were mostly associated with the websites SouthFront and NewsFront, which Britain said had “spread disinformation relating to Ukraine and promoted the Government of Russia’s false narrative about the Russian invasion of Ukraine”.Britain also sanctioned United World International, which it called an “online news site which promotes pro-Russian disinformation”.Under the sanctions, British financial institutions must freeze immediately any assets they hold on behalf of sanctioned individuals or companies and report them to the government.($1 = 0.8267 pounds) More

The head of Germany’s Bundesbank has warned it will be “virtually impossible” to decide if a divergence of borrowing costs between eurozone countries is justified, arguing it would be “fatal” for governments to rely on the European Central Bank’s support.Joachim Nagel’s comments in a speech on Monday were the first sign of serious disagreement at the ECB over its plan to develop a new asset purchase tool to counter any “unwarranted” surge in the bond yields of more vulnerable countries once it starts raising interest rates. Nagel said “it would be fatal if governments were to assume that the eurosystem will ultimately be ready to assure favourable financing terms for the member states”, and that rate-setters could find themselves in “dire straits” legally over the tool.The comments by Germany’s central bank chief reflect rising concern among more stable northern European countries that the ECB risks overstepping its mark to keep bond yields low for more indebted southern member-states. Some policymakers worry that if governments are not encouraged to rein in spending it could undermine the ECB’s effort to tackle high inflation.Since the ECB announced plans to start raising rates this month, bond yields of weaker countries like Italy have soared faster than those for more stable countries like Germany, prompting it to accelerate work on a “new anti-fragmentation instrument”. It is against EU law for the central bank to finance governments and Nagel said the ECB would have to put enough safeguards in place to avoid straying into “monetary financing”.

The central bank has defended its earlier bond-buying against numerous legal challenges in Germany, but this could be harder now without the justification of fighting excessively low inflation. The ECB worries that a bond market panic could push up weaker countries’ borrowing costs to a level that tips them into a financial crisis. It believes a new tool to counter this risk is justified as it would preserve its ability to transmit monetary policy evenly to all 19 members of the single currency bloc.The difference, or spread, between German 10-year government borrowing costs and those of Italy has doubled from 1 percentage point a year ago to around 2 percentage points in recent weeks.Nagel, however, cautioned against “using monetary policy instruments to limit risk premia, as it is virtually impossible to establish for sure whether or not a widened spread is fundamentally justified”. “One can easily find oneself in dire straits,” he said, adding “it is clear that unusual monetary policy measures to combat fragmentation can be justified only in exceptional circumstances and under narrowly defined conditions”.Since Nagel took over at the Bundesbank at the start of the year, he has become increasingly concerned as eurozone inflation has shot up to a record level of 8.6 per cent. He said the ECB, of which he is a member of the governing council, should “concentrate all of our efforts on combating this high level of inflation”.The German central banker set out a number of parameters for any new instrument by the ECB, including that it be “strictly temporary” and be designed in a way that it did not hamper its efforts to bring inflation back down to its target. He added that it should provide governments with “sufficient incentives” to achieve sustainable debt levels. Such a tool should be “predicated on comprehensive and regular analyses covering a broad set of indicators” and only be used if interest rate spreads are “the result of excesses in financial markets”, he added. More

Good eveningMore signs emerged today of how surging inflation is affecting economies and stretching the patience of businesses, as well as hitting consumers who are suffering a cost of living squeeze. In the UK, protesters blocked motorways to vent their anger at rising fuel prices, with the average cost of filling a family car now above the £100 mark. Chancellor Rishi Sunak has cut duty on fuel by 5p a litre but the competition watchdog is investigating whether this is being passed on to motorists.Meanwhile, a new survey today from the Resolution Foundation says many UK households are “brutally exposed” to inflation after growth in real disposable income for working-age families averaged just 0.7 per cent in the 15 years leading up to the coronavirus pandemic. People in rental accommodation, single parents and those with young children are particularly badly affected.The FT editorial board said the UK must decide how to share the pain of its many economic problems, including the possibility that inflation will still be rising as it starts to fall back elsewhere. “The cost of energy, a deterioration in trade, the loss of a tranche of workers — all have the same consequence: the country is poorer than it thought it would be,” it said.UK inflation of 9.1 per cent may be the highest in the G7 but pales in comparison with Turkey, where data today showed it was in sight of 80 per cent, partly due to the unconventional approach of president Tayyip Erdoğan, who has firmly rejected the mainstream approach to inflation-busting of raising interest rates.Inflation is also having a severe effect on trade. In Germany, Europe’s most export-led economy, new figures this morning showed the first monthly trade deficit since 1991 as import costs soared while exports were hit by supply chain disruption. The pressure of global inflation is also calling into question Japan’s ultra-loose monetary policy, as our latest Big Read explains.The business world is increasingly voicing its anguish. Amazon founder Jeff Bezos fell into a spat with Joe Biden at the weekend, accusing the US president of “misdirection” after Biden had hit out at price gouging on petrol forecourts. The only inflation-proof sector at the moment, at least according to FT Alphaville, appears to be drug dealing.The big question remains: what can or should policymakers do to mitigate the situation? FT commentator Martin Sandbu says central banks need to keep their cool and be sure that economic challenges are really long-lasting before taking action that could sacrifice jobs and growth.“Monetary contraction on the cusp of a recession will make things worse for no benefit,” he concludes. “Governments have to put in place support for those worst hit by the jump in prices. But maybe central banks — for the very sake of monetary and economic stability — should treat inflation with more benign neglect.” Latest newsUK to impose more sanctions on Belarus over support for Russia Kyiv says its national recovery plan will cost $750bn.Israel increases key interest rate by 0.5 per cent in attempt to tackle inflationFor up-to-the-minute news updates, visit our live blogNeed to know: the economyUK opposition leader Sir Keir Starmer said he would fight prime minister Boris Johnson at the next election over the economic effects of Brexit, addressing the “mess” caused by Johnson’s Brexit deal and mending relationships with the EU. Germany and Ireland said at the weekend there was “no legal or political justification” for Westminster to rip up Northern Ireland’s post-Brexit arrangements.Latest for the UK and EuropeLabour shortages are leading to “catastrophic” food waste say UK farmers, as the peak season for harvesting soft fruit and vegetables approaches with only a limited number of visas available for overseas workers.The EU is considering the creation of an EU-wide sanctions authority as it pushes for tougher and more consistent penalties related to the war in Ukraine. The task could be given to a new body similar to the Office of Foreign Assets Control in the US or by beefing up the powers of its planned Anti-Money Laundering Authority. Turkey has detained a Russian cargo ship accused of carrying stolen grain. Global latestNato’s united response to Russia’s invasion of Ukraine has masked new quarrels about the war’s rising economic costs. Our Big Read examines whether the rhetoric can be matched by increased financial contributions from member states.The forecast boom for Mexico as American companies sought to bring production facilities closer to home has failed to materialise. This Big Read explains why President Andrés Manuel López Obrador is copping the blame.Argentina was plunged deeper into crisis at the weekend as finance minister Martín Guzmán quit the ruling coalition, further unsettling investors worried about surging inflation and the country’s public finances. Need to know: businessThere was mixed news from the air travel sector as it struggles to take flight after the turbulence of the pandemic. EasyJet’s chief operations officer Peter Bellew quit after the company cancelled thousands of flights over the summer but low-costs rivals Ryanair and Wizz Air reported surges in June passenger numbers. Ryanair chief Michael O’Leary warned that ticket prices would rise over the next few years as fuel, staff costs and air traffic control charges increase. The £15bn takeover of UK Power Networks, Britain’s largest electricity distributor, by a consortium led by KKR and Macquarie, has collapsed after rising inflation prompted a last-minute price rise by its Hong Kong owner. Pret A Manger has returned to profit for the first time since the start of the pandemic as the sandwich chain shifted focus away from city centres to out-of-town outlets.The surge in business that led to massive congestion at the Port of Los Angeles last year became a symbol of global supply chain problems. There are now fears that disruption could return if employers do not meet dockers’ pay demands after their latest contract ended on Friday.More than $40bn of European corporate bonds are trading at distressed levels in another sign of how the darkening economic outlook is throwing doubt on companies’ ability to pay their debts. “Credit markets have rapidly moved towards pricing in a recession,” said one analyst.The European Central Bank is concerned about eurozone countries’ approaches to cryptocurrency rules and will raise the need for harmonisation at a meeting tomorrow. Crypto evangelists still believe they can make the world a better place, writes Lex’s Elaine Moore. Cruises have bounced back from their near-death experience during the pandemic but now face an iceberg of debt. The three big listed companies — Carnival, Royal Caribbean and Norwegian — have all more than doubled their gross debt over the past two years. More than a third of the UK company directors struck off in recent months were found to have abused the government’s coronavirus loan schemes or job support programme, according to official data. The World of WorkCompany financial executives may be worried by the lack of senior staff with experience of surging inflation and geopolitical upheaval, but existing employees have coped pretty well with the chaos caused by a global pandemic, says senior business writer Andrew Hill.Labour shortages in leisure and hospitality are indicative of a bigger and more serious trend, writes global columnist Rana Foroohar: the loss of women from the workforce because of the lack of affordable and flexible childcare.Shortages are also leading to more companies considering job applications from those with a criminal past, says columnist Pilita Clark.Have companies encroached too far into our personal lives? Emma Jacobs considers the rise of the nanny employer.Get the latest worldwide picture with our vaccine trackerAnd finally…Hong Kong’s reputation as Asia’s top international financial centre has taken a battering from three years of protests, political crackdowns and strict Covid lockdowns. Asia financial correspondent Tabby Kinder looks at the future of the city in our latest FT film.

Video: Hong Kong’s future as Asia’s financial centre | FT Film More

The European Central Bank will shift the corporate bonds it owns and accepts as collateral away from the most carbon-intensive companies, going further than most big rate-setting authorities but disappointing activists eager to see stronger measures.Announcing plans to “tilt” its €386bn portfolio of corporate bonds away from companies with “a poorer climate performance”, the ECB said it “aims to gradually decarbonise its corporate bond holdings” in line with the 2015 Paris Agreement to limit global warming.The central bank said it would also limit the share of non-financial corporate bonds with a “high carbon footprint” it accepts as collateral from individual counterparties, while requiring climate risk disclosure to hit certain levels before an asset or loan is accepted as collateral.ECB president Christine Lagarde, who has made fighting climate change a key focus of her leadership, said: “Within our mandate, we are taking further concrete steps to incorporate climate change into our monetary policy operations.” She added “there will be more steps” in future to align the ECB’s activities with the Paris Agreement to limit global warming to 1.5C since pre-industrial times. Temperatures have already risen at least 1.1C.The plan is more expansive than those announced by the Bank of England, which said last year it would refocus its corporate bond holdings on greener companies, and Sweden’s Riksbank, which said last week it would only buy the bonds of companies that disclosed their climate risks sufficiently.However, campaigners expressed disappointment that the ECB had not gone further. Greenpeace finance expert Mauricio Vargas said the measures announced on Monday were “overdue”, adding that the ECB “should actively sell the bonds of companies, like the big fossil fuel groups, that are not aligned with the goals of the Paris Agreement”.Stanislas Jourdan, executive director of campaign group Positive Money Europe, said he was “quite encouraged” by the ECB’s planned carbon-based limits on its collateral system, which he said “signals a move towards a near-exclusion of certain high carbon assets”.The ECB first announced plans to shift its corporate bond purchases and collateral rules away from heavy carbon-emitting companies last year when it presented the results of a strategy review. It has been criticised by some observers for focusing on green issues when they say it should have concentrated more on preventing inflation in the eurozone from hitting a high of more than quadruple its 2 per cent target. The ECB on Monday defended the measures, however, saying they “aim to better take into account climate-related financial risk in the eurosystem balance sheet and, with reference to our secondary objective, support the green transition of the economy in line with the EU’s climate neutrality objectives”.The shift in its corporate bond portfolio will come into force in October and will only affect how it reinvests the proceeds of maturing bonds it already owns after it stopped expanding its balance sheet last week. Corporate bonds make up less than 8 per cent of the overall €4.95tn of assets the ECB has bought under its quantitative easing policy, most of which are sovereign bonds.The carbon-based collateral limits on individual counterparties will come into force “before the end of 2024” and apply only to the assets issued by non-financial companies, which make up less than 3 per cent of the total collateral held by the ECB, after valuation adjustments, at the end of March.The ECB added that it would consider climate risks when adjusting the value of corporate bonds using accounting “haircuts” from this year. It will also push rating agencies to be more transparent and ambitious in how they assess climate risk at the companies they analyse.The new disclosure requirements for assets to qualify as collateral will only come into effect once the EU’s corporate sustainability reporting directive is fully implemented as expected in 2026, it said. More

JERUSALEM (Reuters) -The Bank of Israel escalated its battle against inflation on Monday, raising its benchmark interest rate by a half percentage point, and signalled no sign of stopping despite an uncertain political environment.The central bank lifted its key rate to 1.25% — the highest level since 2013 and the most aggressive move since 2011 — from 0.75%, its third straight increase that follows similar moves from the U.S. Federal Reserve and others.Policymakers began the tightening cycle in April, raising the rate from an all time low of 0.1%.Israel’s annual inflation rate reached a new 11-year high of 4.1% in May, well above the government’s 1-3% annual target range, while the jobless rate dipped to 3.0%, raising concerns of further wage pressures.The central bank’s economists expect inflation to reach a 4.5% rate in 2022 before moderating to 2.4% next year, with the key interest rate projected to peak at 2.75% in the second quarter of 2023.”We are determined to return the inflation rate to within the target,” Bank of Israel Governor Amir Yaron told a news conference. Asked whether increases of a half-point or more would continue in subsequent decisions to reach the 2.75% forecast, Yaron was noncommittal, saying local and global data would determine the pace of coming hikes.”Governor Yaron sounded very hawkish,” said Leader Capital Markets Chief Economist Jonathan Katz, adding the Bank of Israel is heavily influenced by the Fed and other central banks. “It is very likely we will reach 2.75% before the second quarter of 2023.”Yaron also cautioned about the potential fallout from the demise of Israel’s government last week, but said the country’s economy has proven resilient during repeated election cycles.Parliament voted last Thursday to dissolve itself and hold a new election on Nov. 1, the fifth in less than four years.The campaign, Yaron said, will not prevent more rate hikes. “The Bank of Israel determines its monetary policy independently and disconnected from political developments. We look at and examine the data professionally to achieve our goals,” he said.He called on the next government to quickly pass a 2023 budget and make needed economic reforms that have been stalled.All 15 economists polled by Reuters had said they expected the monetary policy committee to raise rates, 14 of them predicting a 0.5 point increase while one projected a 0.25 point rise.The bank’s staff also trimmed its 2022 Israeli economic growth estimate to 5% from 5.5% and its 2023 forecast to 3.5% from 4%.The shekel appreciated to 3.50 per dollar after the decision from 3.51. More

BEIRUT (Reuters) – Lebanon’s top finance lawmaker said prime minister designate Najib Mikati had verbally proposed “very serious” changes to a recently-adopted plan to revamp the collapsed financial sector, in a move that could delay progress towards a final IMF deal. Lebanon’s government reached a draft agreement for a $3 billion IMF bailout in April, with a full deal conditional on the passage of pre-conditions such as the 2022 budget, banking secrecy reform and capital controls. Mikati’s last government adopted a financial recovery plan on May 20 that set the broad outlines of how to address a more than $70 billion hole in the financial sector at the core of Lebanon’s crisis. That plan placed the burden of losses on commercial banks and the central bank as well as on depositors via haircuts, but did not adopt a previously proposed fund of state assets or resources to plug the gap. But Mikati last week suggested “very serious” changes to that plan verbally during a meeting with the parliamentary finance and budget committee, said Ibrahim Kanaan, the committee’s chief. “We were told by the prime minister that it has been changed in a way that there is a financial recovery fund that will compensate the depositors or will pay the depositors back totally or partially,” Kanaan told Reuters in an interview. “The government keeps sending sometimes changes and amendments. It’s very important to turn this page and go to something definitive and finalize this work,” he said. The fund as proposed would be, among other sources, financed from budget surplus, Kanaan said, adding: “We don’t have a surplus at all since decades.” Mikati’s office did not immediately respond to a request for comment. Lebanese commercial banks have been the main proponent of a fund leveraging state assets or other revenues to plug the gap.Deputy Prime Minister Saade Chami, the architect of Lebanon’s IMF deal, has come out strongly against such a proposal, and the IMF draft agreement called for limiting recourse to public resources. Regarding other IMF pre-conditions, Kanaan said the committee was “90%” done with the 2022 budget but required a government revision of the exchange rate it used as the current numbers “may lead to a fake deficit as well as it may lead to some fake revenues”.Real revenues could be half or even a third of the figure currently stated, he said. Kanaan said the government’s capital control law as referred to parliament had been rejected by Lebanese civil society across the board, including groups representing depositors, and so the government must either amend it or adopt a version previously drafted by his committee.He said work at his committee on amending Lebanon’s strict banking secrecy regulations would begin this week.”I don’t have a time-frame before receiving the details [from the government], but I would say if the details are finally received in a reasonable amount of time, I would say weeks rather than months,” would be needed to adopt all IMF pre-conditions, he said. More