The European Central Bank is set to enter territory last visited in the run-up to the global financial crisis as it raises interest rates during what looks likely to be a recession. It was July of 2008, just as the euro area began four quarters of contraction, when the Governing Council raised borrowing costs for the first time in more than a year, only to reverse course soon after the collapse of Lehman Brothers. Attention is increasingly switching to how high the bank will eventually go. Analysts polled by Bloomberg see the deposit rate peaking at 2.5% in March, though expect the pace of hikes to diminish after this month. - Craig Stirling and Lyubov Pronina

What's Happening

Meloni’s Mission | Giorgia Meloni, who took over from Mario Draghi as Italian prime minister yesterday, plans to uphold the country’s pro-Ukraine and pro-NATO stance, but her government is set to shift internal policy to provide a greater shield for companies and industry. She’ll also rename some of the ministries in a way that points to a domestic policy focus. 

Energy Loans | European energy firms reaching out to banks and investors for more cash are quickly drying up those pools. Their outstanding loans have climbed 23% this year, after raising a record €158 billion, the highest annual loan tally from the sector since 2007. The industry now owes around €790 billion in loans, and that’s set to rise further as a growing number of companies seek additional funds.

Polish Policy | Poland is painfully finding out what happens when investors start to fear that policymakers are turning their backs on inflation to keep the economy humming for next year’s election. In the past month, Polish debt has fallen more than anywhere else in the world. The yield spike is even worse than the UK, where a massive selloff helped bring down the prime minister.

Climate Losses | Rich nations could cover the climate-induced economic losses suffered by the world’s most vulnerable countries if they forced the fossil fuel industry to pay for the damage caused by their emissions, according to Oxfam International. The profit from six large oil companies in the first half of 2022 was enough to offset the financial impacts with $70 billion left over.

In Case You Missed It

Double Standard | French President Emmanuel Macron last week slammed US trade and energy policies for creating “a double standard,” with lower energy prices domestically while selling natural gas to Europe at record levels. Macron will be hitting these points hard when he visits Washington for a state visit in early December.

China Controversy | German Chancellor Olaf Scholz denied reports that he has already reached a decision over the disputed sale of a stake in a Hamburg container terminal to China’s state-owned shipping conglomerate Cosco Shipping Holdings. He said last week that the Chinese company didn’t intend to buy the whole Hamburg port, but only a minority stake in one of Hamburg’s four container terminals.

Low Confidence | Euro-area consumer confidence stayed close to a record low in October, highlighting the continued risk of a recession this winter as households struggle with surging inflation and an acute cost-of-living crisis. A monthly gauge from the Commission inched up to -27.6 from -28.8 in September, according to preliminary data released last week.

German Fund | Germany’s lower house of parliament approved the ruling coalition’s plan to borrow as much as €200 billion to tackle the energy crisis as well as the required suspension this year of a constitutional limit on net debt. Scholz said the new off-budget mechanism would allow measures to put a “large protective umbrella” over Europe’s biggest economy.

Chart of the Day

Traders, tanker companies and the world’s most powerful governments are becoming increasingly fixated upon one question in the oil market: can the petroleum industry’s supply chain handle the harshest sanctions on Russian exports in history? A vast shadow fleet of tankers with unknown owners is being amassed to service Moscow’s interests.  With about six weeks until the bloc’s measures enter into force, little clarity exists on whether these steps will really suffice to help the world’s third-biggest oil producer to get much of its output to buyers to fend off a supply shock. 

Today's Agenda (All times CET.)

• 10:45 a.m. Commission President Ursula von der Leyen speaks at the Grand Challenges Annual Meeting 2022
• 12 p.m. German Chancellor Scholz, Ukraine’s Prime Minister Denys Shmyhal at German-Ukraine economic forum in Berlin, with President Volodymyr  Zelenskiy joining remotely
• 4:15 p.m. EU foreign policy chief Josep Borrell speaks to reporters in Uruguay
• 5:20 p.m. Home Affairs Commissioner Ylva Johansson and Czech Interior Minister Vit Rakusan hold news conference
• Vice President Valdis Dombrovskis holds video call with US Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo
• EU Military Committee meets at level of chiefs of defense
• Environment ministers meet in Luxembourg