Economy

PARIS (Reuters) -Thousands of people demonstrated across France on Saturday against Emmanuel Macron’s decision to pick centre-right politician Michel Barnier as prime minister, with leftist parties accusing the president of ignoring election results. Macron named 73-year-old Barnier, a conservative and the former Brexit negotiator for the European Union, as prime minister on Thursday, capping a two-month search following his ill-fated decision to call a legislative election that delivered a hung parliament.”Democracy is not only the art of knowing how to accept victory, but the humility to accept defeat,” Jean-Luc Melenchon, head of the far-left France Unbowed party (LFI), told protesters at the start of the march in eastern Paris.”I call on you to undertake a long battle.” The organisers said about 300,000 people demonstrated peacefully across France, including 160,000 in Paris, although police in the capital said 26,000 people had protested in the city.The Interior Ministry did not immediately give a figure for the entire country, but its numbers are usually much lower than those given by organisers.Barnier meanwhile made his first official visit, meeting staff at a Paris hospital. The worsening condition of the public health sector has been one of the areas that people have demanded action after months of procrastination.”Without carrying out miracles, we can make improvements,” Barnier, who lacks a clear majority, told reporters.He said on Friday he wants to include conservatives, members of Macron’s camp, and some from the left in his future government.But he faces the daunting task of trying to drive reforms and pass the 2025 budget with the threat of a no-confidence vote hanging over him at the start of October, when he is due to outline his policy objectives to parliament.DENIAL OF DEMOCRACY France is under pressure from the European Commission, the European Union’s executive body, and from bond markets to reduce its deficit.The left, led by LFI, has accused Macron of a denial of democracy and stealing the election, after Macron refused to pick the candidate of the New Popular Front (NFP) alliance that came top in the July vote.Barnier’s centre-right Les Republicains party is only the fifth bloc in parliament with less than 50 lawmakers, and the left believes he will push wholesale spending cuts and a tougher stance on immigration.Across 130 locations in France, people carried banners attacking Macron for betraying them and called on him to be impeached. “He (Barnier) has no social conscience and will constitute a government which will be in the same line as the previous ones. So that is enough now,” civil servant Jeanne Schmitt, 45, told Reuters on the sidelines of the Paris march.Pollster Elabe published a survey on Friday showing that 74% of French people considered Macron had disregarded the results of the elections, with 55% believing he had “stolen” them.Barnier continued consultations on Saturday as he looks to form a government, a tricky job given he faces a potential no-confidence vote.NFP and the far-right National Rally (RN) together have a majority and could oust the prime minister through a no-confidence vote should they decide to collaborate.The RN gave its tacit approval for Barnier, citing a number of conditions for it to not back a no-confidence vote, making it the de facto kingmaker for the new government.”He is a prime minister under surveillance,” RN party leader Jordan Bardella told BFM TV on Saturday. “Nothing can be done without us.” More

The talks, co-chaired by U.S. Under Secretary of Commerce for International Trade Marisa Lago, are the second this year involving the two officials and come amid trade tensions between the two powers.China’s commerce ministry said earlier this week that the United States should lift all tariffs on Chinese goods, ahead of an announcement by the Biden administration on expected hikes in levies on Chinese-made items, including electric vehicles.In a statement on Saturday the Chinese ministry said the two sides had conducted “professional, rational and pragmatic” talks on policy and business issues raised by the business communities of both countries.It added that China was focused on expressing concerns about issues including U.S. tariffs on Chinese goods, and said China was opposed to the implementation of trade and investment restrictions under the pretext of overcapacity. More

NEW YORK (Reuters) – A beloved public garden in lower Manhattan may soon become a casualty of New York’s push to develop more housing despite opposition led by celebrities such as Robert De Niro and Martin Scorsese.Elizabeth Street Garden, built by an antiques gallery owner on land leased from the city in 1991, is an urban oasis in the densely crowded Little Italy neighborhood, the backdrop for “Mean Streets,” Scorsese’s classic New York movie starring De Niro.In 2013, the city proposed a 123-unit affordable housing project for seniors on the one-acre (0.4 hectare) plot. Opponents have proposed alternative sites nearby that could create 700 units, but housing officials remain unconvinced. Legal options are running out to stop the garden’s eviction after the lease expires on Sept. 10.Thousands of people, including Scorsese, De Niro and another downtown luminary, poet and musician Patti Smith, have written letters asking Mayor Eric Adams to preserve the garden. “I support increasing the availability of affordable housing,” wrote De Niro, “but I’m also passionate about preserving the character of our neighborhoods.”The controversy is just one example of the tensions that have surfaced as New York strives to build more homes in one of the country’s most populous and expensive housing markets.Its vacancy rate dropped to 1.4% in February, the lowest since 1968, according to the city’s Department of Housing Preservation and Development.Adams has made building more housing a priority for his administration. In August, he ordered agencies to review all city-owned property for potential development, part of a goal he set in 2022 to build 500,000 new homes by 2032.Since 2016, the city has required 20-30% of new housing developments to be affordable, meaning residents earning an average of 40-80% of the area median income can buy the units.However, the nonprofit that runs Elizabeth Street Garden noted that the site’s affordability requirement ends after 60 years.Gentrification is at the heart of the opposition to another contentious plan: One45 Towers, a massive $700 million high-rise complex in Harlem.’CITY OF YES’In 2022, Adams unveiled a three-pronged plan called City of Yes to update zoning regulations for new development. The final portion, which the city council is expected to vote on this year, is designed to “build a little more housing in every neighborhood,” said Adams. This includes converting underused office buildings and allowing apartments above businesses in low-density commercial areas.Much of the opposition has come from low-density neighborhoods in New York’s boroughs outside of Manhattan.”I think it’s fear – fear of change,” said Queens Borough President Donovan Richards, who provided conditional support for City of Yes last week. Only in Staten Island, the most suburban of the five boroughs, did the borough president issue an unfavorable recommendation.Critics fear zoning changes will overcrowd their neighborhoods, making them like Manhattan.One controversial aspect allows homeowners to convert basements, garages and backyard cottages into rental apartments. Another proposal would eliminate mandates to provide parking for new development, angering residents of car-dependent areas.Richards called City of Yes a modest proposal that would not significantly alter low-density neighborhoods, but acknowledged the need for more affordable housing and parking in areas with little public transit.Paul Graziano, an urban planner who lives on a suburban block in Queens, called City of Yes “apocalyptic.” The plan’s ultimate goal, he said, is to transform areas with mostly owner-occupied single-family homes into neighborhoods dominated by market-rate or luxury apartments.”If you build it, they will come, right?” said Graziano. “If you enable it, it’s going to happen. This is what happens in the city of New York.”Quality of life is the bottom line for many in New York City, where low-density neighborhoods feel increasingly squeezed, as in Queens, or where green spaces are especially rare, as in lower Manhattan.”There’s nothing like Elizabeth Street Garden in the city, and the city will never build anything like it again,” said Joseph Reiver, who took over the space from his late father. “They’re never going to tear down buildings to build gardens.” More

After surviving the “terrible prophecies,” Europe’s economy must face the challenges of the war in Ukraine and navigating trade ties with China, EU’s Paolo Gentiloni says.
The EU’s economy underwent “overall a weak growth, but nothing of the terrible prophecies that we heard in the last two or three years: recessions, blackouts, divergence, divisions in Europe in front of Russia’s invasion,” Gentiloni said in an interview with CNBC’s Steve Sedgwick at the Ambrosetti Forum.
The European Union must “support Ukraine, keep the doors of international trade open, which is not accepting China’s position, of course, we abandon our ingenuity in the trade relation with China,” he noted.

The European Union has successfully avoided the “terrible prophecies” that threatened its economy in recent years, but must still contend with Russia’s war in Ukraine and a tenuous trade relationship with China, outgoing European Commissioner for Economy Paolo Gentiloni said Saturday.
The bloc’s economy underwent “overall a weak growth, but nothing of the terrible prophecies that we heard in the last two or three years: recessions, blackouts, divergence, divisions in Europe in front of Russia’s invasion,” Gentiloni said in an interview with CNBC’s Steve Sedgwick at the Ambrosetti Forum at Cernobbio, on the shores of Italy’s Lake Como.

A former prime minister of Italy, Gentiloni has served as the European Commissioner for Economy under EC President Ursula von der Leyen since December 2019. The European Commission is responsible for the 20-nation euro zone’s economic strategy and legislation — such as tariffs — while the European Central Bank oversees the region’s monetary policy and interest rate decisions.
Gentiloni will not be returning for a second term as commissioner following Von der Leyen’s tumultuous re-election as president — but he has laid out the economic picture that awaits his imminent successor.
“The economy is growing, slowly, but growing. And the risks of differences among the European Union, that was very high when the pandemic happened, are very limited,” he noted. “The bad part of the story is that if we don’t raise out capacity in terms of competitiveness, if we don’t make enormous progress in what we call the capital markets union, and if we don’t address the challenge of defense … if we don’t do that, well, the new situation of the world will appear very difficult for Europeans.”
Resurging from the Covid-19 pandemic, Europe has been battling a cost-of-living crisis and high-inflation environment exacerbated by Russia’s February 2022 invasion of Ukraine and energy supply tightness following sanctions against Moscow. The euro zone’s economy has expanded in the first half of this year, with flash figures showing better-than-expected gross domestic product growth of 0.3% in the three months to the end of June, compared with the previous quarter.
In its spring forecasts, the European Commission projected the EU’s GDP will swell by 1% in 2024 and by 0.8% in the euro area, with respective growth of 1.6% and 1.4% in the two regions in 2024. At the time, the Commission flagged growth on the back of accelerated private consumption, declining inflation and a strong labor market, but also broader geopolitical risks amid ongoing conflicts in Ukraine and the Middle East.

Amid a drop in inflation, the ECB in June took the first step to ease monetary policy since 2019, trimming the central bank’s key rate to 3.75%, down from a record 4% where it has been since September 2023. As of Friday, markets had fully priced in another ECB rate cut in its forthcoming meeting of Sept. 12.  

The Chinese relationship

Looking ahead, Europe must now weather the dual storm of close-call elections in key trade partner the U.S. in November, and frictions in its trade relationship China. The EU has come into Beijing’s crosshairs following the bloc’s June decision to impose higher tariffs on Chinese electric vehicle imports that were found benefit “heavily from unfair subsidies” and pose a “threat of economic injury” to EV producers in Europe.
Gentiloni on Saturday stressed that trade diplomacy with China and the war in Ukraine must top the agenda of challenges facing a new Commission — and that they are more pressing concerns than the advent of a potential second U.S. administration under former President Donald Trump.
The European Union must “support Ukraine, keep the doors of international trade open” but also “abandon our ingenuity in the trade relation with China. But this does not mean that we can accept the idea that international trade and international trade rules [are] over,” Gentiloni noted.
He downplayed the economic impact of a Trump victory in November, adding, “I think that a change in the U.S. administration, meaning Trump winning the election, of course it will not be welcome in Brussels, but I don’t think that the change would be enormous in terms of economic relations.”

Winds of change

Gentiloni has yet to announce his next steps after departing from the Commission, at a time when Europe and its legislative body face a rising wave of far-right support.
“You should never organize your next role when you are having a role. But of course I will give my contribution to European affairs and maybe also to Italian politics and Italian affairs,” he said Saturday.
The leftist politician was unlikely to garner the support of Italian Prime Minister Giorgia Meloni, who has nominated Minister for European Affairs Raffaele Fitto from the ranks of her right-wing Brothers of Italy party to join the new EU executive.

Far-right factions gained substantive ground in the latest European election, leading the right-wing prime minister of Hungary — which currently holds the presidency of the EU Council — Viktor Orbán to question whether a van der Leyen Commission is appropriate, given the political sentiment.
“The core of the difficulty is the following: the previous Commission proved to be very much unsuccessful, in terms of competitiveness, of European economy, migration, stopping the war. So generally speaking, it was an unsuccessful Commission,” the Hungarian leader told CNBC’s Sedgwick on Friday, noting that a decision was taken to “create the same Commission, basically.”
He added: “So I have [a] great belief that [people] can change and be able to deliver better performances than they have done previously. But [is is] difficult to think so. So I try to support the Commission as much as we can, but being a rational man, I think we neglected the desire of the voters for change, and the same establishment [is] still in position in Brussels, and it’s not good.”

— CNBC’s Katrina Bishop contributed to this report. More

Both the Trump and Biden administrations have introduced ambitious initiatives aimed at reshoring manufacturing, including tariffs, tax incentives, and substantial government investments, said analysts at Alpine Macro.U.S. manufacturing has been in gradual decline for decades. In the early 1970s, manufacturing value added made up 23% of GDP, but today it stands at around 10%. While a few key sectors have helped lift overall figures, median output across sub-industries has fallen by 20%. This indicates that, rather than a broad recovery, the modest increases in output are concentrated in a small number of industries, such as semiconductors, leaving much of the manufacturing sector stagnant.“In terms of employment, the secular drop in manufacturing payrolls has continued, although there has been a gain of 1.5 million manufacturing jobs since 2010,” the analysts said, this recovery is small in comparison to the 6 million manufacturing jobs lost in the 2000s. With manufacturing jobs now making up just 8% of the workforce, the sector’s long-term decline continues, raising questions about claims of an industrial revival.While there has been an increase in manufacturing investment, it has been restricted to specific industries like semiconductors. Overall capital investment in manufacturing has stagnated, with fixed asset formation flat for decades. Capital outlays on equipment, which once accounted for 8% of GDP in the 1980s, have dwindled to a mere 5%. This slowdown in capital accumulation is closely tied to diminishing productivity in the sector, further undermining any claims of a renaissance. In fact, Alpine Macro’s data show that productivity growth within manufacturing continues to lag behind other segments of the U.S. economy, making it unlikely that the sector will experience a broad-based recovery​The structural challenges facing U.S. manufacturing extend far beyond investment and productivity. As economies evolve, the transition from industrial-based growth to service-driven economies is inevitable. Wealthier societies tend to shift their consumption patterns away from goods and toward services, diminishing the overall importance of manufacturing. Even China, often regarded as the world’s manufacturing powerhouse, has seen a decline in its manufacturing share of GDP since 2008. This broader economic shift renders attempts to re-industrialize the U.S. not only difficult but also largely counterproductive. High-income countries like the U.S. would need to rely heavily on exporting manufactured goods to achieve any meaningful manufacturing expansion, a model that has not resulted in higher income growth for other industrial giants like Germany and Japan​One of the most significant hurdles to a U.S. manufacturing revival is the country’s high labor costs. American workers are about 70% more productive than their Chinese counterparts, yet they earn six times the wages. This disparity makes it nearly impossible for U.S. companies to compete in labor-intensive industries, regardless of how efficient their operations may be. As a result, the U.S. manufacturing sector remains concentrated in high-value, specialized industries such as aerospace, advanced machinery, and medical devices, while industries requiring more labor have increasingly shifted operations to lower-cost countries like Vietnam and Cambodia​Alpine Macro flags that much of the rhetoric surrounding a manufacturing renaissance is driven more by political motivations than economic realities. The promises of revitalizing domestic manufacturing play well in swing states like those in the Rust Belt, where industrial job losses have taken a significant toll on communities. However, policies aimed at reversing these trends, such as the Biden administration’s Inflation Reduction Act (IRA) or Trump’s tariffs on Chinese imports, have failed to deliver meaningful results. While the IRA has spurred nearly $400 billion in investment, these efforts have been narrowly focused on semiconductors, with other critical sectors, such as electric vehicles and green energy technologies, seeing little benefitFurther complicating the situation is a lack of skilled labor to meet the potential demand in advanced manufacturing. The pipeline of new workers is insufficient, and the manufacturing workforce continues to age, with those under 25 comprising only 9% of the sector, compared to 13% across all other industries.Moreover, bureaucratic red tape has caused significant delays in many of the large-scale investments planned under the IRA, casting further doubt on the policy’s long-term impactFrom a market perspective, Alpine Macro underscores the lack of tangible benefits for industrial stocks. The sector continues to underperform, reflecting the broader productivity stagnation in manufacturing. Although government subsidies have boosted the U.S. chip sector, the tightening of export controls, particularly those targeting China, threatens to erode these gains. “In 2021, China accounted for $18 billion, or about 23%, of U.S. semiconductor and circuit-related exports,” the analysts said. In the long run, China’s increasing self-sufficiency in low-end semiconductor production could intensify competition and limit growth opportunities for U.S. firmsWhile the U.S. onshoring narrative remains politically charged, a more significant trend is emerging: the rise of “friend-shoring.” U.S. companies are increasingly relocating production to countries with similar wage levels and economic complexities as China, but with less geopolitical risk. Nations like Vietnam, Malaysia, Mexico, and India are poised to benefit from this trend as companies shift away from China in response to escalating tensions between Washington and Beijing. For investors, this presents new opportunities as global supply chains realign, even as the vision of a domestic manufacturing revival in the U.S. fades further into the distance​ More

She held a special cabinet meeting earlier in the day to prepare policies that will be delivered at a 2-day meeting of parliament on Thursday and Friday that will mark the formal beginning of her administration.Paetongtarn was elected prime minister by the country’s House of Representatives last month following the shock removal of Srettha by a court for ethical violations.She said her government will mainly continue the policies of her predecessor with some adjustments. This includes tackling issues such as debt restructuring, supporting small and medium-sized enterprises as well as boosting the agricultural and tourism sectors.”Our work will continue from Srettha’s government, particularly in stimulating the economy,” Paetongtarn said at her first press conference since her cabinet was sworn in by King Maha Vajiralongkorn a day earlier.She did not directly address a question about potential adjustments to the government’s flagship digital wallet scheme or when it might be implemented. The scheme calls for 50 million Thais to each receive 10,000 baht ($295) via a smartphone application.Paetongtarn said this week that part of the government’s 450 billion baht ($13.4 billion) handout plan would be distributed in cash, signalling that the wallet scheme could be adjusted but did not provide details.The youngest daughter of the divisive former premier Thaksin Shinawatra, Paetongtarn has not served in government previously and will face difficulties on multiple fronts from the floundering economy to potential legal challenges similar to the one that led to the dismissal of Srettha.She is the fourth family member to hold the premiership, with the other three removed by either coups or court decisions.($1 = 33.71 baht) More

The revisions could run up to 450 pages and would include key changes to rules that center on operational risk provisions including a reduction in the capital that banks must allocate against business lines like wealth-management services and certain credit-card operations, the report added.The new revised proposal would also reduce the market-risk requirement for the country’s biggest lenders, which would not face as stringent requirements around mortgages or tax-equity exposures, the report said.Next Tuesday, Fed vice chair Michael Barr will preview the regulators’ revised proposal and explain the next steps at the Hutchins Center on Fiscal & Monetary Policy, Brookings said in a blog post.Regulators began rolling out the Basel III rules after the 2007-2009 global financial crisis forced taxpayers to bail out several undercapitalized banks.In July 2023, the Fed, the Office of Comptroller of the Currency, and the Federal Deposit Insurance Corporation published for comment proposed changes to bank capital rules. The rules are expected to overhaul how larger banks gauge risk and how much capital they should hold.Banks, which fiercely opposed the original “Basel III Endgame” proposal that would hike capital requirements for larger banks, have been calling for a re-proposal.Regulators have been working for months on revising the plan in a way that could significantly curtail the capital impact for larger firms.The Fed declined to comment on the report. FDIC and the Office of the Comptroller of the Currency didn’t immediately respond to Reuters requests for comment. More

This marks the strongest inflation in close to a decade, and remains far above the central bank 3.6% target for this year.Annualized inflation last exceeded current levels in February 2015 while the monthly price rise last surpassed this level over 13 years ago in February 2011, according to central bank data.Cumulative eight-month inflation, meanwhile, hit 4.61%. A year earlier, August inflation stood at 0.39% with a cumulative eight-month rate of 1.55%.INE director Humberto Arandia told a press conference that prices had gone up in staples such as rice, as well as chicken, tomatoes and other items.The statistics agency report said the monthly price hikes had been led by leisure and cultural activities, goods and services, and furniture and domestic work. Education and transport saw prices dip.Bolivia has been battling the largest number of wildfire outbreaks in 14 years, causing farmers to abandon their fields, as well as strikes over extended fuel shortages.The country closed 2023 with an annual inflation rate of 2.12%. More