Latest news with #LeighThomas
Gulf Today
4 days ago
- Business
- Gulf Today
France has become less attractive to foreign investors
Yoruk Bahceli and Leigh Thomas, Reuters France is missing out on the investor optimism that has defined Europe's markets this year, hamstrung by its strained public finances and political volatility that threatens to paralyse policy until at least 2027. Global investors and French executives cite the risk that budget negotiations could trigger another government collapse in the autumn, while pessimism among French households is dragging on consumer spending and economic growth. Centrist Prime Minister Francois Bayrou has faced eight no-confidence motions in parliament since taking office in December and his minority government is now struggling to find 40 billion euros ($47 billion) in spending cuts for the 2026 budget. The contrast with neighbouring Germany, whose new government is preparing to loosen historically tight purse strings and pump billions into the economy through defence and infrastructure spending, could hardly be starker. "While all the other highly indebted European countries — Greece, Portugal, Spain and Italy — have taken advantage of years of inflation to reduce their public debt ratio, France — whose deficit is now the highest in the euro zone — is increasingly diverging," said Pierre Moscovici, head of the Cour des Comptes public audit office and a former finance minister. To narrow the budget gap, Bayrou will have to convince opposition parties to stomach spending cuts only slightly smaller than those proposed in the 2025 budget that brought down his predecessor. Germany's historic embrace of looser fiscal policy and the impact of President Donald Trump's sometimes erratic policymaking on confidence in US assets have given a boost to European financial markets and other investments this year. A key beneficiary has been Italy, which has seen the risk premium paid on its 10-year debt compared to that of safe-haven Germany drop towards where it traded in 2010, before the euro zone debt crisis escalated. But the 10-year risk premium paid by French debt over German is still at 70 basis points, well above levels of around 50 bps seen before French President Emmanuel Macron called a shock snap election last summer. The French-Italian yield gap is meanwhile near all-time lows, even though Italy has a bigger debt pile. Candriam's chief investment officer Nicolas Forest said he favoured German, Italian and Spanish bonds and was underweight France, a situation he called "completely unusual". French stocks are missing out, too. The blue-chip CAC 40 index trades below where it was before the election was called and is lagging Europe's STOXX 600 aggregate. The Paris index has returned just 5% this year, four times less than Germany's DAX. Simon Blundell, co-head of fundamental European fixed income at BlackRock, the world's biggest investor, said he had no big positions in French debt and favoured Italian bonds, encouraged by political stability in Rome and declining volatility. Even if France's government survives the autumn, investors expect the budget squeeze to underwhelm as a fix for fiscal strains and so fail to increase the appeal of French assets. "Any compromise political parties find will be really temporary in terms of measures, and not great for debt reduction and deficit improvement," said Candriam's Forest. And even presidential and parliamentary elections in 2027 may not fully dispel the political uncertainty, if no party emerges dominant. To prod opposition parties to back Bayrou's budget, Public Finances Minister Amélie de Montchalin has suggested France could turn to an IMF bailout if it does not decisively grip its finances. Carrefour CEO Alexandre Bompard said such doomy talk only caused the French to save more, jeopardising a consumer spending recovery that he said was more fragile than in the supermarket giant's other European markets. "If we have 5 percentage points more savings than other European countries, it's because we have an extraordinarily high level of political and fiscal uncertainty," Bompard told an economics conference in Aix-en-Provence on Friday. With consumers hesitant to spend, French business activity has consistently lagged European peers this year, even though the private sector is less exposed to US trade tensions than Germany or Italy's more export-focused economies. Brushing aside any prospect of IMF intervention to prop up France's public finances, the Fund's French chief economist Pierre-Olivier Gourinchas insisted Paris could no longer put off getting its fiscal house in order. "France is not exempt from the laws of gravity, so we're going to have to adapt," Gourinchas said in Aix-en-Provence. "We can't fly, we're going to have to plan our landing and make spending cuts."
Yahoo
04-06-2025
- Business
- Yahoo
EU, China tackle trade issues ahead of leaders' summit
By Leigh Thomas and Julia Payne PARIS (Reuters) -The European Union's trade chief on Wednesday said Brussels and Beijing were working hard to address issues in their trade relationship ahead of a July summit, as Europe joined a chorus of alarm over China's stranglehold on critical minerals. Trade Commissioner Maros Sefcovic described talks in Paris with China's Commerce Minister Wang Wentao as "focused and in depth", though there was no clear sign of progress in resolving the tit-for-tat dispute over European tariffs on Chinese-made EVs and Chinese anti-dumping measures on European brandy. U.S. President Donald Trump's upending of global trade has injected energy into EU trade negotiations with countries including China, although the EU still has deep concerns over what it calls market-distorting Chinese state aid and barriers to the Chinese market. The talks took place against a backdrop of growing concern about China's export restrictions on critical minerals and magnets which have impacted supply chains central to automakers, aerospace manufacturers and semi-conductor companies globally. Europe faces a delicate task to advance its own trading relationship with China without riling the Trump administration, which has hit European steel and aluminium with 50% tariffs and has threatened the bloc with 50% reciprocal tariffs if no trade deal is forthcoming. Sefcovic held separate meetings in Paris with Wang and U.S. Trade Representative Jamieson Greer and he said talks with the U.S. were moving in the right direction. Europe's diversification of raw material supply chains is critical to guaranteeing economic autonomy, EU Industry Commissioner Stephane Sejourne said on Wednesday. "We must reduce our dependencies on all countries, particularly on countries like China, on which we are more than 100% dependent," Sejourne told a press conference in Brussels. European and Chinese leaders are due to meet next month at a summit in Beijing to mark 50 years of diplomatic ties. China is the EU's second largest trading partner after the United States, with bilateral trade reaching 793 billion euros in 2023, according to EU data. Shares in Europe's Airbus rose on Wednesday as evidence of talks to sell hundreds of planes to China gathered pace. The dispute with Beijing over Chinese duties on brandy is proving tougher to resolve with the French cognac industry bearing the brunt of the levies. France's trade minister Laurent Saint-Martin told Wang he wanted "responsible dialogue" while Wang said it was necessary to find solutions based on "win-win cooperation", according to a Chinese commerce ministry statement. (Writing by Richard Lough, editing by Ed Osmond)
Yahoo
04-06-2025
- Business
- Yahoo
EU, China tackle trade issues ahead of leaders' summit
By Leigh Thomas and Julia Payne PARIS (Reuters) -The European Union's trade chief on Wednesday said Brussels and Beijing were working hard to address issues in their trade relationship ahead of a July summit, as Europe joined a chorus of alarm over China's stranglehold on critical minerals. Trade Commissioner Maros Sefcovic described talks in Paris with China's Commerce Minister Wang Wentao as "focused and in depth", though there was no clear sign of progress in resolving the tit-for-tat dispute over European tariffs on Chinese-made EVs and Chinese anti-dumping measures on European brandy. U.S. President Donald Trump's upending of global trade has injected energy into EU trade negotiations with countries including China, although the EU still has deep concerns over what it calls market-distorting Chinese state aid and barriers to the Chinese market. The talks took place against a backdrop of growing concern about China's export restrictions on critical minerals and magnets which have impacted supply chains central to automakers, aerospace manufacturers and semi-conductor companies globally. Europe faces a delicate task to advance its own trading relationship with China without riling the Trump administration, which has hit European steel and aluminium with 50% tariffs and has threatened the bloc with 50% reciprocal tariffs if no trade deal is forthcoming. Sefcovic held separate meetings in Paris with Wang and U.S. Trade Representative Jamieson Greer and he said talks with the U.S. were moving in the right direction. Europe's diversification of raw material supply chains is critical to guaranteeing economic autonomy, EU Industry Commissioner Stephane Sejourne said on Wednesday. "We must reduce our dependencies on all countries, particularly on countries like China, on which we are more than 100% dependent," Sejourne told a press conference in Brussels. European and Chinese leaders are due to meet next month at a summit in Beijing to mark 50 years of diplomatic ties. China is the EU's second largest trading partner after the United States, with bilateral trade reaching 793 billion euros in 2023, according to EU data. Shares in Europe's Airbus rose on Wednesday as evidence of talks to sell hundreds of planes to China gathered pace. The dispute with Beijing over Chinese duties on brandy is proving tougher to resolve with the French cognac industry bearing the brunt of the levies. France's trade minister Laurent Saint-Martin told Wang he wanted "responsible dialogue" while Wang said it was necessary to find solutions based on "win-win cooperation", according to a Chinese commerce ministry statement. (Writing by Richard Lough, editing by Ed Osmond) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Gulf Today
07-05-2025
- Business
- Gulf Today
Europe's costly military pensions complicate defence build-up
Leigh Thomas, Reuters European nations want to spend big on artillery, missiles and drones, but costly military pension commitments risk constraining those ambitious plans, according to previously unreported NATO-member defence budget data compiled by Reuters. NATO's European members are rushing to ramp up spending on military hardware as a bellicose Russia threatens their eastern flank and US President Donald Trump's long-term commitment to European security appears suddenly in doubt. But for over a dozen NATO members, whose military spending Reuters analysed, pensions make up a large — and largely overlooked — chunk of their defence budgets. While those are funds that could potentially be redirected toward firepower, experts warn that any cuts to generous retirement benefits could make it harder to recruit personnel. 'A non-insignificant portion of what is accepted as defence spending doesn't deliver any capabilities, nor more troops, nor anything, but is earmarked for pensions,' said Camille Grand, a former NATO assistant secretary general for defence investment. European nations' historical failure to meet a target to spend the equivalent of 2% of economic output on their militaries to shore up NATO's collective defences has angered Trump, who now wants to hike the threshold to 5%. And while 23 of NATO's 32 members now meet the 2% target — up from just six in 2021 — rules allowing governments to include military pension spending distort that picture. NATO does not publish the individual military pension expenditures of its members, 30 of which are European. Reuters, however, compiled data that 13 NATO members — the United States, Canada and 11 European allies — reported either in their national budgets or, for some, to the United Nations. In Belgium, Bulgaria and Italy, nearly 20% of defence budgets are used to pay soldiers' retirements, while France is not far behind at nearly 16%. Germany's pension burden is comparatively lower at 11.5% of defence spending, shining a kinder light on a country whose complex history has traditionally made it unwilling to countenance greater militarisation but which is now ramping up its capabilities. Germany's defence ministry did not respond to a request for comment. The average pension spend among the 13 nations analysed by Reuters was 12% of defence budgets. Eight of the 11 European nations met the 2% of GDP spending target last year. Excluding pensions, however, that number falls to just five. Although NATO spending has been rising, some members are still lagging behind. Belgium, Italy and Spain have notably committed to meet the 2% target this year, in time for a June 24-25 NATO summit in The Hague where Trump wants a deal on a 5% target. NATO chief Mark Rutte has proposed members boost defence spending to 3.5% of GDP and commit a further 1.5% to broader security-related spending to meet Trump's demand, Reuters reported last week. As countries debate spending hikes, however, they need to ensure the goal is actually increasing firepower, said Armin Steinbach with the Brussels-based think tank Bruegel. 'If much of the money goes into salaries or pensions, this is not productive investment,' he said. That won't be easy. Italy's economy minister Giancarlo Giorgetti said last month he was 'acutely aware' a spending hike was needed. But he also said the government, which currently excludes pensions from reported military spending, would change its accounting in part to reflect those costs as it seeks to meet NATO's expectations. Italy reported to the United Nations that it spent 5.2 billion euros ($5.9 billion) on military pensions in 2023, or 18% of total military expenditure, more than it spent on aircraft and ships. France, whose hopes for a defence build-up are limited by a huge budget deficit, only just meets the 2% target thanks to pension spending. Without that outlay, NATO's fourth-biggest military would only be at 1.7% this year. France's 2025 defence budget includes 9.5 billion euros on pensions, far greater than the 5.7 billion euros it spends on maintaining its air and submarine-borne nuclear arsenal. In contrast to its European allies' often bloated pension burdens, the United States, NATO's biggest military, spends the equivalent of 8.5% of its defence budget on retirement benefits. And Washington shifts much of that cost to other parts of the government, limiting the direct impact on defence spending. Of the $72 billion the US military retirement fund paid out in benefits last year, only $24 billion came directly from the Department of Defense's budget. The rest came from investment income and a subsidy from the US Treasury, according to the fund's audit report. The White House did not respond to a request for comment. Some European countries — Belgium, for example — appear ready to confront the pension problem directly. Brussels is looking to gradually raise the military retirement age to 67. Belgian soldiers can currently retire with full benefits at just 56. The Belgian defence ministry did not respond to a request for comment. Retirement conditions and benefits vary from country to country. But earlier retirement than for civilian jobs is one of the perks of service in many militaries, and reforms seen as threatening what many consider sacred cows could prove tricky. Emmanuel Jacob, the president of Euromil, an umbrella organisation that defends European soldiers' rights, said there was a limit to how far countries can squeeze military benefits. 'If you don't invest in men and women in the armed forces, then at the end you will have a big parking lot loaded with nice tanks, but nobody to work them,' he said.
Yahoo
07-05-2025
- Business
- Yahoo
Analysis-Europe's costly military pensions complicate defence build-up
By Leigh Thomas PARIS (Reuters) - European nations want to spend big on artillery, missiles and drones, but costly military pension commitments risk constraining those ambitious plans, according to previously unreported NATO-member defence budget data compiled by Reuters. NATO's European members are rushing to ramp up spending on military hardware as a bellicose Russia threatens their eastern flank and U.S. President Donald Trump's long-term commitment to European security appears suddenly in doubt. But for over a dozen NATO members, whose military spending Reuters analysed, pensions make up a large - and largely overlooked - chunk of their defence budgets. While those are funds that could potentially be redirected toward firepower, experts warn that any cuts to generous retirement benefits could make it harder to recruit personnel. "A non-insignificant portion of what is accepted as defence spending doesn't deliver any capabilities, nor more troops, nor anything, but is earmarked for pensions," said Camille Grand, a former NATO assistant secretary general for defence investment. European nations' historical failure to meet a target to spend the equivalent of 2% of economic output on their militaries to shore up NATO's collective defences has angered Trump, who now wants to hike the threshold to 5%. And while 23 of NATO's 32 members now meet the 2% target - up from just six in 2021 - rules allowing governments to include military pension spending distort that picture. NATO does not publish the individual military pension expenditures of its members, 30 of which are European. Reuters, however, compiled data that 13 NATO members - the United States, Canada and 11 European allies - reported either in their national budgets or, for some, to the United Nations. In Belgium, Bulgaria and Italy, nearly 20% of defence budgets are used to pay soldiers' retirements, while France is not far behind at nearly 16%. Germany's pension burden is comparatively lower at 11.5% of defence spending, shining a kinder light on a country whose complex history has traditionally made it unwilling to countenance greater militarisation but which is now ramping up its capabilities. Germany's defence ministry did not respond to a request for comment. The average pension spend among the 13 nations analysed by Reuters was 12% of defence budgets. Eight of the 11 European nations met the 2% of GDP spending target last year. Excluding pensions, however, that number falls to just five. FIREPOWER OR PENSIONS Although NATO spending has been rising, some members are still lagging behind. Belgium, Italy and Spain have notably committed to meet the 2% target this year, in time for a June 24-25 NATO summit in The Hague where Trump wants a deal on a 5% target. NATO chief Mark Rutte has proposed members boost defence spending to 3.5% of GDP and commit a further 1.5% to broader security-related spending to meet Trump's demand, Reuters reported last week. As countries debate spending hikes, however, they need to ensure the goal is actually increasing firepower, said Armin Steinbach with the Brussels-based think tank Bruegel. "If much of the money goes into salaries or pensions, this is not productive investment," he said. That won't be easy. Italy's economy minister Giancarlo Giorgetti said last month he was "acutely aware" a spending hike was needed. But he also said the government, which currently excludes pensions from reported military spending, would change its accounting in part to reflect those costs as it seeks to meet NATO's expectations. Italy reported to the United Nations that it spent 5.2 billion euros ($5.9 billion) on military pensions in 2023, or 18% of total military expenditure, more than it spent on aircraft and ships. France, whose hopes for a defence build-up are limited by a huge budget deficit, only just meets the 2% target thanks to pension spending. Without that outlay, NATO's fourth-biggest military would only be at 1.7% this year. France's 2025 defence budget includes 9.5 billion euros on pensions, far greater than the 5.7 billion euros it spends on maintaining its air and submarine-borne nuclear arsenal. SACRED COWS In contrast to its European allies' often bloated pension burdens, the United States, NATO's biggest military, spends the equivalent of 8.5% of its defence budget on retirement benefits. And Washington shifts much of that cost to other parts of the government, limiting the direct impact on defence spending. Of the $72 billion the U.S. military retirement fund paid out in benefits last year, only $24 billion came directly from the Department of Defense's budget. The rest came from investment income and a subsidy from the U.S. Treasury, according to the fund's audit report. The White House did not respond to a request for comment. Some European countries - Belgium, for example - appear ready to confront the pension problem directly. Brussels is looking to gradually raise the military retirement age to 67. Belgian soldiers can currently retire with full benefits at just 56. The Belgian defence ministry did not respond to a request for comment. Retirement conditions and benefits vary from country to country. But earlier retirement than for civilian jobs is one of the perks of service in many militaries, and reforms seen as threatening what many consider sacred cows could prove tricky. Emmanuel Jacob, the president of Euromil, an umbrella organisation that defends European soldiers' rights, said there was a limit to how far countries can squeeze military benefits. "If you don't invest in men and women in the armed forces, then at the end you will have a big parking lot loaded with nice tanks, but nobody to work them," he said. ($1 = 0.8804 euros) (Reporting by Leigh Thomas; Additional reporting by Giuseppe Fonte in Rome, Editing by Gabriel Stargardter and Joe Bavier)
