EU officials and ministers will wrap up their trips to Washington today with a special Eurogroup session attended by US Treasury Secretary Janet Yellen. Both sides want to identify areas of further cooperation. But underneath the warm rhetoric, transatlantic ties need some urgent repair. A new trade dispute emerged over “green” subsidies granted by the Biden Administration in its Inflation Reduction Act, while the US is unhappy with the amount of financial support provided by the Europeans to Ukraine. Meanwhile, approval of the digital tax, championed by the EU, could face further turbulence after the mid-term elections.
— Jorge Valero
What’s Happening
Cold Reception | Finland is reluctant to consider further common EU debt issuance to cope with the energy crisis out of concern it could fuel soaring inflation, Finance Minister Annika Saarikko told us. She noted that the government in Helsinki promised voters that a support package financed by joint borrowing created during the pandemic would be a one-off.
Tax Delay | The embattled global tax agreement, struck with much fanfare in Rome last year, received some much-needed support in Washington, with Economy Commissioner Paolo Gentiloni vowing to “never give up” seeking to bring to life what he called a “historical agreement.” The deal for a 15% minimum tax on large multinationals has failed to receive necessary approvals from EU members and from the US Congress, threatening to kill it before it even comes into force.
No Solo | The Netherlands indicated it’s against unilaterally implementing the minimum tax, as Hungary continues to block an EU-wide solution. The Hague would only back this option “if we would come to the worst and that is the only alternative, as a last resort,” Marnix van Rij, state secretary for tax affairs, told us.
Energy Use | Price caps and subsidies adopted by member states are eroding the urgency to curb energy consumption when the EU is struggling to keep homes warm this winter, according to analysts. “The precise impact of this is hard to estimate, but likely leads to higher demand than previously estimated,” Morgan Stanley said.
Turbulent Times | Airbus CEO Guillaume Faury said high energy prices are weighing hard on its suppliers and some smaller firms are having to idle production. Faury acknowledged that Airbus’s supplier base wasn’t as prepared as it could be as the group sought to bounce back from the pandemic.
In Case You Missed It
Turkish Diplomacy | Turkish President Recep Tayyip Erdogan met yesterday with Russia’s Vladimir Putin in Kazakhstan, where the pair discussed a potential Turkish gas hub. Before the meeting, Erdogan said Ankara’s goal is to help stop the “bloodshed” in Ukraine. Read our rolling Ukraine update here.
Gas Target | Germany reached a natural-gas storage target more than two weeks ahead of a Nov. 1 schedule, a rare spot of good news for Europe’s largest economy with winter looming and Russian pipeline deliveries cut. While the progress in filling up reserves lessens the risk of rationing, the outcome depends on how much households and companies reduce consumption and how cold the winter will be.
Mild Winter | There was additional positive news from a weather outlook which suggested that Europeans are more likely to experience mild temperatures than a deep freeze this winter. Scientists at the Copernicus Climate Change Service said temperatures probably will be significantly above normal during the peak heating season between December and February, potentially slackening gas demand.
European Shield | At least 15 countries, mainly NATO members, have signed a letter to join a German project to create a European anti-missile shield. The system will have several layers to intercept various kinds of missiles from different heights, and would be fully deployable through the NATO territory.
Internal Dispute | Italian lawmakers yesterday elected Ignazio La Russa, an ally of right-wing leader Giorgia Meloni, as Senate president. But ex-Premier Silvio Berlusconi’s Forza Italia, a member of the coalition, chose not to vote for him. Meloni is finding it difficult to build consensus within her government while continues to try and recruit a finance minister, her main priority.
Chart of the Day
Anxiety is mounting over the safety of critical infrastructure to ensure energy supply to Europe. Concerns are rising just as Russia’s escalating war in Ukraine is putting at risk the last pipeline route for Kremlin’s gas shipments to western Europe. “Volatility is the new normal,” said Katja Yafimava, senior research fellow at The Oxford Institute for Energy Studies.
Today’s Agenda
- 2:45 p.m. EU foreign policy chief Josep Borrell speaks on panel at EU ambassador's conference
- 3:30 p.m. Eurogroup press conference following a meeting with US Treasury Secretary Janet Yellen in Washington
- 3:40 p.m. German Chancellor Olaf Scholz gives a news conference with his Mongolian counterpart after talks in Berlin
- 6:30 p.m. Scholz hosts his Spanish and Portuguese counterparts
- EU home affairs ministers meet in Luxembourg
- Financial Services commissioner Mairead McGuinness meets Yellen, US Federal Reserve Chair Jerome Powell and Jamie Dimon, CEO of JP Morgan