Emmanuel Macron was hoping France’s six-month EU presidency would be a glorious closing chapter of his first term and a platform for his re-election bid in April. Reality is pouring cold water on those ambitions, with a Covid-19 resurgence threatening growth and inflation prospects, and EU foreign policy looking squeamish in the face of the latest Russian threats.
 

The U.S. and European nations have discussed curbing Russia’s access to technology and cutting it out of the global system for financial payments in the event of a Ukraine invasion, but some countries have voiced hesitancy because of potential economic damage and Russia’s ability to exacerbate the European energy crisis. Officials from Russia and the U.S. gather in Geneva today to discuss Ukraine, with NATO foreign ministers in Brussels to get on the same page shortly afterwards. While Macron vowed to boost the EU’s geopolitical leverage, the crisis with Russia has highlighted the bloc’s limitations once again.

— Aoife White and Samy Adghirni

What’s Happening
French Agenda | France is aiming to get EU governments to agree on a 15% global minimum tax rate, the Fit-for-55 climate package, an EU proposal on minimum wages and new digital rules. It may struggle to resolve differences on many themes Paris wants to push ahead, including common defense, the carbon market and related aid, and border controls. Talks will also aim to agree import duties for poorer nations and a proposal to allow the EU secure its own revenue streams.

Berlin Briefings | Paschal Donohoe, head of the Eurogroup, will meet Germany’s new finance minister, Christian Lindner, in Berlin to discuss the coalition’s plans and the European economy. Donohoe will also speak to Robert Habeck, the vice chancellor and minister for economic affairs and climate action. He travels to Latvia tomorrow and Lithuania on Wednesday.

Tough First Week | Joachim Nagel begins his first full week as head of Germany’s central bank with inflation near a three-decade high, industrial output unexpectedly shrinking and the government tightening restrictions on restaurants to stem surging Covid cases. Additionally, Germany will on Friday become the first G-7 economy to report 2021 gross domestic product, data that might point to a contraction in the final three months of the year.

New Nuclear | A “colossal” investment in nuclear energy will be needed over the next 30 years to meet the EU’s emissions-reduction targets and demand for electricity, internal market chief Thierry Breton said. Existing nuclear plants need 50 billion euros of investment through 2030, while the next generation will require 500 billion euros between now and 2050, Breton said in an interview with Journal Du Dimanche. 

In Case You Missed It
Green Inflation | The European Central Bank’s inflation forecasts may need to be revised upward because of the continent’s attempts to cut carbon emissions and transition to green energy, Executive Board member Isabel Schnabel said in a speech on Saturday. The energy transition “may lead to inflation remaining higher for longer,” she said.

Bond Volatility | It’s going to be an action-packed year for bond markets if the first week of 2022 is any guide. Treasuries had their worst-ever start and German debt followed to send yields to the highest since 2019. Now they are threatening to break above 0% as traders bet ECB policy makers will have to act to rein in inflation that has accelerated to record levels.

Truss Talk | U.K. Foreign Secretary Liz Truss says she’s prepared to unilaterally override parts of the post-Brexit agreement on Northern Ireland and is “willing” to trigger Article 16 if talks with the EU fail. Truss, appointed as the U.K.’s Brexit negotiator in December, laid out her position in the Sunday Telegraph ahead of a key meeting with her EU counterpart on Thursday.  

Anti-Vax Attack | From Boris Johnson to Emmanuel Macron, Europe’s leaders are increasingly going after anti-vaxxers as the battle against the fast-spreading omicron variant deepens the region’s pandemic fatigue. Macron has said his aim is to  “p--- off” those who have refused shots. In the U.K., Johnson accused anti-vaxxers of spreading “nonsense.” German Chancellor Olaf Scholz, who supports making shots compulsory, has labeled the anti-vax movement “a tiny minority of reckless extremists.”

Deltacron | A strain of Covid-19 that combines delta and omicron was found in Cyprus, according to Leondios Kostrikis, professor of biological sciences at the University of Cyprus and head of the Laboratory of Biotechnology and Molecular Virology. The discovery was named “deltacron” due to the identification of omicron-like genetic signatures within the delta genomes, he said.

Chart of the Day

Inflation in the euro region accelerated to record levels, defying expectations for a slowdown and complicating the task for ECB officials who insist the current spike is temporary. Consumer prices jumped 5% from a year earlier in December — faster than the previous month’s 4.9% gain and more than the 4.8% median estimate in a Bloomberg survey of economists. A measure that strips out volatile components such as food and energy came in at 2.6%, matching November’s reading.

Today’s Agenda
All times in CET.

• 10:30 a.m. French ambassador to the EU Philippe Leglise-Costa speaks on France’s EU presidency at European Policy Center event
• 10:45 a.m. NATO’s Jens Stoltenberg and Ukraine Foreign Minister Dmytro Kuleba hold a joint press conference
• 11:30 a.m. German Foreign Minister Annalena Baerbock talks with Italy’s Luigi Di Maio, followed by news conference at around 12:30
• Eurogroup chief Donohoe meets German Finance Minister Lindner in Berlin
• Eurostat releases unemployment data for November