Economy

ROME (Reuters) – Italy’s record on spending its bumper share of the EU’s post-COVID funds is patchy at best, data showed, as the minister in charge of the matter faced a European Parliament hearing on Tuesday over his prospective new job at the European Commission.EU Affairs Minister Raffaele Fitto is in line to become the EU Commission’s vice-president for Cohesion and Reforms, a position that would give him responsibility of overseeing EU funds spending by member states, including Italy itself.If confirmed, Fitto would leave his as-yet unnamed successor in Prime Minister Giorgia Meloni’s government with a tough task.Italy is due to receive 194.4 billion euros ($206.6 billion) in cheap loans and grants from the bloc’s Recovery and Resilience Facility (RRF) by 2026, more than any other state in absolute terms.Since the investment programme began in 2021, successive governments in Rome have presented the RRF cash as the key to unlocking the country’s growth potential and modernising its sluggish economy.However, Italy is behind schedule in using the 113.5 billion euros it has already secured, and also expects the funds to provide less of an economic boost than it had hoped.Data from the anti-corruption watchdog ANAC seen by Reuters on Tuesday showed that more than 60% of tenders in 2023 and 2024 were still incomplete.As of Oct. 2, Rome had spent 53.5 billion euros on projects to make Italy’s economy greener, ultra-fast broadband networks and rail infrastructure, the latest available data showed.This spending represents less than 30% of the total resources to which Italy is entitled, and is below previous government goals, already revised downwards several times.Tardy implementation puts Italy at risk of losing money unless it renegotiates commitments agreed with Europe.Delays already come at a cost with the Treasury saying in its multi-year budget plan that the recovery funds were expected to boost GDP growth by just 0.7 percentage points in 2024, one third of the 2.1 points it had originally forecast in April 2022 for the current year.Complicating matters, the Italian economy is seen as losing traction despite the EU funds and a deficit-to-GDP ratio targeted to fall below the EU’s 3% ceiling only in 2027.Most analysts and forecasting bodies see growth below 1% both this year, broadly in line with last year’s 0.7% rate and far below the 4.7% reported in 2022.($1 = 0.9409 euros) More

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BRASILIA (Reuters) -Brazil’s central bank said on Tuesday that further deterioration in inflation expectations could extend the monetary tightening cycle, with its action remaining “a fundamental factor” in steering expectations back towards the 3% target.In the minutes from the Nov. 5-6 meeting, when policymakers accelerated the tightening pace with a 50 basis-point hike that pushed rates to 11.25%, the central bank noted that recent concerns over rising public spending and the sustainability of the country’s fiscal framework have significantly impacted asset prices and market expectations.Despite the central bank’s two rate hikes since September and signals of more to come, market inflation expectations have continued to drift from the target amid a more challenging outlook for inflation, marked by a weakening Brazilian real against the U.S. dollar, stronger-than-expected economic activity, and a tight labor market.This backdrop includes inflationary pressures fueled by policy proposals from U.S. President-elect Donald Trump and Brazil’s fiscal uncertainties, which have driven up risk premiums on Latin America’s largest economy. President Luiz Inacio Lula da Silva’s economic team had indicated that a package to curb mandatory spending would be presented following the conclusion of October’s municipal elections. However, despite a series of meetings with ministers, the leftist leader has said he is yet to make a decision.In the minutes, the central bank reinforced the need for sustainable fiscal rules, and said that “the reduction of spending growth, especially in a more structural way, could even induce economic growth in the medium term through its impact on financial conditions, risk premium, and better allocation of resources.”Regarding the United States, policymakers stressed continued high uncertainty around the pace of disinflation and economic slowdown, adding that potential shifts in economic policy – such as fiscal stimuli, labor supply constraints, and new import tariffs – heighten outlook doubts. More

GENEVA (Reuters) -The World Trade Organization plans a special meeting of its top decision-making body later this month where a call could be made on the reappointment of its Director-General Ngozi Okonjo-Iweala, a document showed on Tuesday.Trade sources said such a meeting appeared to be a route that could fast-track the months-long appointment process to avoid any risk of it getting blocked by U.S. President-elect Donald Trump, whose teams and allies have criticised both Okonjo-Iweala and the trade watchdog in the past.A WTO document sent by the General Council chair said the first day of the Nov. 28-29 meeting would allow Okonjo-Iweala, a former Nigerian finance minister, to present her vision for the 166-member organisation and answer delegates’ questions. The second day “could then provide an opportunity for Members to take a decision on the appointment of the next Director-General”, it said.Okonjo-Iweala is the sole candidate for the job but some have observed that the WTO’s lengthy reappointment process could allow for U.S. President-elect Donald Trump’s team to oppose her candidacy.In 2020, Trump’s administration sought to block her first term. She secured U.S. backing only when President Joe Biden succeeded Trump in the White House.Those who follow the trade body say it is likely to face a messy, recriminatory period for trade under Trump, who has promised to impose a 10% tariff on all imports and higher rates on countries such as China. More

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BERLIN (Reuters) – A new government beckons in Germany after the implosion of its ruling coalition, but it will face the same question: whether to allow higher public borrowing to prop up the flagging economy.Current polling suggests that, whatever the shape of that government, the conservative Christian Democrats (CDU) will be the largest party in it. That puts its leader, Friedrich Merz, in poll position to become chancellor.The following outlines Merz’s stance on Germany’s self-imposed borrowing limit, known as the “debt brake”, and the options he would have should he lead Germany’s next government.WHAT IS MERZ’S STANCE ON THE DEBT BRAKE?Merz has always said Germany should stick with the constitutionally enshrined debt brake, which limits public deficits to 0.35% of gross domestic product and was introduced by his party in 2009 under then Chancellor Angela Merkel. However, he has set two prerequisites for discussing a potential reform: having conditions for the money to be invested in pro-growth programs and controlling social welfare spending.”If we get the overall concept under control, then we can talk about reforming the debt brake, but not about abolishing it,” he said last week. WHAT IS THE VIEW WITHIN HIS CDU PARTY? Critics of the debt brake say it has held Germany back from investing in much-needed infrastructure improvements and contributed to its current economic decline.Within the CDU, the debate was reopened this year by Kai Wegner, the conservative mayor of Berlin. Several powerful CDU leaders from other regional governments have joined the push for reform because the states are also constrained by the debt brake.The CDU says it is not currently planning to change its position on the debt brake. But pressure is building within the party, with CDU state premiers pushing Merz to include reform plans in the election program in recent party meetings. WHAT IS THE POSITION OF THE OTHER PARTIES? Any change to the debt brake requires a two-thirds majority in the upper and lower houses of parliament. The pro-business Free Democrats of recently ousted finance minister Christian Lindner have always been fierce defenders of the debt brake. The far-right AfD, which is polling in second place after the CDU, also opposes any reform. Votes in favour of reform from the two parties in the now-minority government of the Social Democrats (SPD) and the Greens would not be enough. Germany’s new leftist populist party, the Sahra Wagenknecht Alliance (BSW), supports the reform.Together, these parties would have 64% of the votes, according to an INSA poll published on Saturday after the coalition break-up, being short of the two-thirds majority needed. If the CDU changes its line, that would be the decisive factor which tips the balance in favour of reform.WHAT ARE THE OTHER OPTIONS?One option is to suspend the debt brake citing special circumstances. Germany reimposed the debt brake in 2024 after four years in which it was suspended to allow extra spending due to the coronavirus pandemic and the energy crisis following Russia’s invasion of Ukraine.Another option would be off-budget funds to comply with the debt ceiling for financing Germany’s fiscal needs. Germany currently has 29 special funds at the federal level, worth a total of 869 billion euros ($925.75 billion) according to the independent auditing institution Bundesrechnungshof. However, a two-thirds majority would also be required to create one of these funds. ($1 = 0.9387 euros) More

“As we saw in the labour market data that was released this morning, pay growth remains quite sticky at elevated levels and levels that – given the outlook for productivity growth in the UK – are hard to reconcile with the UK inflation target,” Pill said at a conference organised by Swiss bank UBS.The BoE last week cut borrowing costs for only the second time since 2020 and said further reductions were likely to be gradual as it assessed the persistence of inflation pressures including from the first budget of Britain’s new government.Pill said Britain might be behind other economies in working its way through the impact of the COVID pandemic and other shocks in recent years, which could help to explain why investors are pricing higher UK interest rates than elsewhere.While it was not the BoE’s base case that Britain would need higher levels of rates to stabilise the economy, that possibility did need to be considered. “So (given) the fact that we are entertaining that story, it’s not surprising that markets are entertaining some of that story,” Pill said.Financial markets only price in 0.6 percentage points of interest rate cuts by the BoE by the end of next year, compared with 1.4 percentage points for the European Central Bank and 1.0 percentage points for the U.S. Federal Reserve.Pill voted last week with the majority of the BoE’s monetary policymakers to cut Bank Rate to 4.75% from 5% but has voted against lowering borrowing costs in other, closer decisions by the Monetary Policy Committee in recent months. More