After amassing nearly €5 trillion in bonds since 2015, the European Central Bank will today unveil its strategy to unwind some of these holdings. Quantitative tightening, as the process is referred to in the world of finance, will start in the course of next year and probably involve a partial or complete halt of reinvestments of maturing debt. Policymakers hope that by putting investors — and governments — on alert, they can avoid any market turbulence that would jeopardize efforts to get stubbornly high inflation back under control. Interest rates will likely rise by another 50 basis points when the ECB announces its decision, taking the deposit rate to 2%. - Jorge Valero and Jana Randow
What’s Happening
South Alarmed | Berlin’s idea to counter US President Joe Biden’s green subsidy plan with a €10 billion package to support companies is setting off alarm bells in Paris and Madrid, we’re told. France and Spain want the bloc to come up with a joint response as they’re concerned that Germany’s solo tactic could give its firms an unfair advantage. EU leaders will discuss the possibility of additional funds to address the US initiative, although no decisions are expected.
Deal Closer | The EU and the UK are seeking to unlock an agreement on their post-Brexit trade relationship by February, we’re told. Both sides have intensified talks over recent weeks on the so-called Northern Ireland protocol after months of stalemate, and the mood in London and Brussels is more positive than it has been in a while. Maros Sefcovic, the EU’s Brexit chief, will meet Foreign Secretary James Cleverly in Brussels today.
Safer Europe | Sweden has outlined Europe’s security as the primary task for its six-month presidency of the EU next semester. It will also focus on economic and military support for Ukraine, as well as backing for Kyiv’s path toward membership, according to priorities outlined yesterday. Stockholm wants to ensure Europe’s security “by underscoring the EU’s geopolitical significance” in an increasingly insecure world, Prime Minister Ulf Kristersson told the Swedish parliament.
Poland Moves | Poland’s opposition expressed readiness to work with the government on legislation to roll back a contested overhaul of the judiciary to access more than €35 billion of EU funds. The changes proposed by the ruling Law & Justice party would entail altering the mechanism for disciplining judges and questioning their status. The draft emerged after the government reached a preliminary deal with the Commission on the changes.
Polish Ballots | Ten months before an election that may dislodge Poland’s nationalist ruling party, accusations of vote manipulation are setting the tone for what may be an acrimonious contest. Ruling party leader Jaroslaw Kaczynski has called for changes that would make ballot “manipulation and forgery” more difficult, such as having party faithful at every polling station. Now the opposition says it’s gearing up by mobilizing 54,000 volunteers to monitor the vote.
Spanish Standoff | Prime Minister Pedro Sanchez is heading for a major standoff with Spain’s judiciary in an escalation of a long-running controversy linked to an increasingly partisan political backdrop. Lawmakers are set to vote today on a proposal that would allow the government to get its two nominees onto on the Constitutional Court by changing how the judiciary’s governing body operates.
In Case You Missed It
Shield Targeted | The Russian government said any Patriot air-defense missile batteries in Ukraine would be a target for Russia’s military as the US weighs delivery of the system to Kyiv. Moscow launched a drone strike on the Ukrainian capital early yesterday, the first such attack in weeks, hitting some four residential buildings and an administrative complex. A third of Ukraine’s corn crop remains unharvested in fields as winter sets in, adding strain on its vital farming sector. Read our Ukraine update.
WTO Dispute | The Russian government may lodge a World Trade Organization complaint against Lithuania to review the EU’s restrictions on Kaliningrad, according to a report by state-run Russian news service Tass. The EU has imposed several rounds of sanctions against Russia and revoked its most-favored-nation trading rights in response to the invasion of Ukraine.
Paris Raids | The headquarters of the party of French President Emmanuel Macron were raided by criminal investigators as part of a probe into possible unlawful funding. Prosecutors said investigators also carried out searches at the premises of the party’s funding association and McKinsey & Co.’s Paris offices. Investigators are looking into possible financial irregularities linked to consultancy work in campaign accounts and are examining allegations of favoritism.
Home Office | Starting next January, the ECB will let staff work remotely for 110 days a year — roughly half their time. That’s stricter than the current system, under which employees must show up at the office at least eight days a month. The new system will be reviewed in two years and is the result of consultations with staff and a pilot project, a spokesperson of the institution said.
New Mines | Data centers are a booming global industry, hosting more of the world's money, entertainment and energy use than ever. Investments in the industry globally more than doubled in 2021 to $59.5 billion, according to some estimates. A hub in the foothills of the Italian Alps is a prime example of how these boxy buildings have become cornerstones of the economy.
Chart of the Day
Russia’s oil output is poised to plunge 14% by the end of the first quarter next year and increasing demand could bring another rally in 2023, the International Energy Agency said yesterday. If that forecast holds true, it could reverse the recent trend in oil futures which have retreated to $80 a barrel in London after their worst weekly slump in four months. The agency noted that “the full impact of embargoes on Russian crude remains to be seen.”
Today’s Agenda (All times CET.)
- 9:30 a.m. EU leaders summit in Brussels
- 2:45 p.m. ECB President Christine Lagarde holds news conference after Governing Council meeting in Frankfurt
- EU’s top court issues a non-binding opinion in a suit by the Commission against Poland, accusing it of undermining judicial independence