Tag: ECON

U.S. may skirt recession in 2023, Europe not so lucky – Morgan Stanley
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TOKYO, Nov 14 (Reuters) – Britain and the euro zone economies are likely to tip into recession next year, Morgan Stanley said, but the United States might make a narrow escape thanks to a resilient job market.

At the same time, China’s expected reopening after almost three years of COVID-19 curbs is set to lead a recovery in its own economy and other emerging Asian markets, the investment bank’s analysts said in a series of reports published on Sunday.

“Risks are to the downside,” the reports said, projecting the global economy to grow by 2.2% next year, lower than the International Monetary Fund’s latest 2.7% growth estimate. read more

Next year, Morgan Stanley predicts a sharp split between developed economies “in or near recession” while emerging economies “recover modestly” but said an overall global pickup would likely remain elusive. China’s economy was predicted to grow 5% in 2023, outpacing the average 3.7% growth expected for emerging markets, while the average growth in the Group of 10 developed countries was forecast at just 0.3%.

Central banks across the globe have raised interest rates this year to curb raging inflation, and in the United States, Morgan Stanley predicted the Federal Reserve to keep rates high in 2023 as inflation remains strong after peaking in the fourth quarter of this year.

“The U.S. economy just skirts recession in 2023, but the landing doesn’t feel so soft as job growth slows meaningfully and the unemployment rate continues to rise,” the report said, predicting a 0.5% expansion next year.

“The cumulative effect of tight policy in 2023 spills over into 2024, resulting in two very weak years,” the report added.

Globally too, the peak in inflation should come in the current quarter, the analysts said, “with disinflation driving the narrative next year”.
U.S. core inflation to fall to 2.9% at end-2023, headline inflation to 1.9%

Asia growth to dip to 3.4% in 1H23 before recovering to 4.6% in 2H23, fuelled by domestic demand

Cross-asset returns – especially in fixed income – will look much better in 2023 than in 2022, driven by cheaper starting valuations

High-grade fixed income to outperform global equities

EM and Japan stocks to outperform, with U.S. shares lagging
Reporting by Kevin Buckland, editing by Miral Fahmy

Our Standards: The Thomson Reuters Trust Principles.
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November 14, 2022
Biden and Xi clash over Taiwan in Bali but Cold War fears cool
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Biden, Xi meet for 3 hours before G20

Both leaders stress need to get ties back on track

Indonesia seeks partnerships on global economy at G20

Ukraine’s Zelenskiy to address G20 on Tuesday
NUSA DUA, Indonesia, Nov 14 (Reuters) – U.S. President Joe Biden and Chinese President Xi Jinping engaged in blunt talks over Taiwan and North Korea on Monday in a three-hour meeting aimed at preventing strained U.S.-China ties from spilling into a new Cold War.

Amid simmering differences on human rights, Russia’s invasion of Ukraine, and support of domestic industry, the two leaders pledged more frequent communications. U.S. Secretary of State Antony Blinken will travel to Beijing for follow-up talks.

“We’re going to compete vigorously. But I’m not looking for conflict, I’m looking to manage this competition responsibly,” Biden said after his talks with Xi on the sidelines of the G20 summit in Indonesia.

Beijing has long said it would bring the self-governed island of Taiwan, which it views as an inalienable part of China, under its control and has not ruled out the use of force to do so. It has frequently accused the United States in recent years of encouraging Taiwan independence.

In a statement after their meeting, Xi called Taiwan the “first red line” that must not be crossed in U.S.-China relations, Chinese state media said.

Biden said he sought to assure Xi that U.S. policy on Taiwan, which has for decades been to support both Beijing’s ‘One China’ stance and Taiwan’s military, had not changed.

He said there was no need for a new Cold War, and that he did not think China was planning a hot one.

“I do not think there’s any imminent attempt on the part of China to invade Taiwan,” he told reporters.

On North Korea, Biden said it was hard to know whether Beijing had any influence over Pyongyang weapons testing. “Well, first of all, it’s difficult to say that I am certain that China can control North Korea,” he said.

Biden said he told Xi the United States would do what it needs to do to defend itself and allies South Korea and Japan, which could be “maybe more up in the face of China” though not directed against it.

“We would have to take certain actions that would be more defensive on our behalf… to send a clear message to North Korea. We are going to defend our allies, as well as American soil and American capacity,” he said.

Biden’s national security adviser Jake Sullivan said before the meeting that Biden would warn Xi about the possibility of enhanced U.S. military presence in the region, something Beijing is not keen to see.

Beijing had halted a series of formal dialogue channels with Washington, including on climate change and military-to-military talks, after U.S. House of Representatives Speaker Nancy Pelosi upset China by visiting Taiwan in August.

Biden and Xi agreed to allow senior officials to renew communication on climate, debt relief and other issues, the White House said after they spoke.

Xi’s statement after the talks included pointed warnings on Taiwan.

[1/7] U.S. President Joe Biden speaks during a news conference following his meeting with Chinese president Xi Jinping, ahead of the G20 leaders’ summit, in Bali, Indonesia, November 14, 2022. REUTERS/Kevin Lamarque

“The Taiwan question is at the very core of China’s core interests, the bedrock of the political foundation of China-U.S. relations, and the first red line that must not be crossed in China-U.S. relations,” Xi was quoted as saying by Xinhua news agency.

“Resolving the Taiwan question is a matter for the Chinese and China’s internal affair,” Xi said, according to state media.

Taiwan’s democratically elected government rejects Beijing’s claims of sovereignty over it.

Taiwan’s presidential office said it welcomed Biden’s reaffirmation of U.S. policy. “This also once again fully demonstrates that the peace and stability of the Taiwan Strait is the common expectation of the international community,” it said.

SMILES AND HANDSHAKES

Before their talks, the two leaders smiled and shook hands warmly in front of their national flags at a hotel on Indonesia’s Bali island, a day before a Group of 20 (G20) summit set to be fraught with tension over Russia’s invasion of Ukraine.

“It’s just great to see you,” Biden told Xi, as he put an arm around him before their meeting.

Biden brought up a number of difficult topics with Xi, according to the White House, including raising U.S. objections to China’s “coercive and increasingly aggressive actions toward Taiwan,” Beijing’s “non-market economic practices,” and practices in “Xinjiang, Tibet, and Hong Kong, and human rights more broadly.”

Neither leader wore a mask to ward off COVID-19, although members of their delegations did.

U.S.-China relations have been roiled in recent years by growing tensions over issues ranging from Hong Kong and Taiwan to the South China Sea, trade practices, and U.S. restrictions on Chinese technology.

But U.S. officials said there have been quiet efforts by both Beijing and Washington over the past two months to repair relations.

U.S. Treasury Secretary Janet Yellen told reporters in Bali earlier that the meeting aimed to stabilise the relationship and to create a “more certain atmosphere” for U.S. businesses.

She said Biden had been clear with China about national security concerns regarding restrictions on sensitive U.S. technologies and had raised concern about the reliability of Chinese supply chains for commodities.

G20 summit host President Joko Widodo of Indonesia said he hoped the gathering on Tuesday could “deliver concrete partnerships that can help the world in its economic recovery”.

However, one of the main topics at the G20 will be Russia’s war in Ukraine.

Xi and Putin have grown close in recent years, bound by their shared distrust of the West, and reaffirmed their partnership just days before Russia invaded Ukraine. But China has been careful not to provide any direct material support that could trigger Western sanctions against it.

Reporting by Nandita Bose, Stanley Widianto, Fransiska Nangoy, Leika Kihara, David Lawder and Simon Lewis in Nusa Dua, and Yew Lun Tian and Ryan Woo in Beijing; additional reporting by Jeff Mason and Steve Holland in Washington; Writing by Kay Johnson and Raju Gopalakrishnan; Editing by Angus MacSwan, Grant McCool, Heather Timmons and Rosalba O’Brien

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November 14, 2022
Analysis: Sanctions fail to halt North Korea’s accelerating weapons programs

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WASHINGTON, Nov 4 (Reuters) – Economic sanctions, the primary means the United States has used for years to try to exert pressure on North Korea, have abjectly failed to halt its nuclear and missile programs or to bring the reclusive northeast Asian state back to the negotiating table.

Instead, North Korea’s ballistic missile program has become stronger and it has carried out a record-breaking testing regime of multiple types of weapons this year – including of intercontinental ballistic missiles designed to reach the U.S. mainland. Expectations are that it may soon end a self-imposed five-year moratorium on nuclear bomb testing.

Now, U.S. policy makers and their predecessors can do little more than pick through the wreckage and seek to determine what went wrong, and who might be to blame.

“We’ve had a policy failure. It’s a generational policy failure,” said Joseph DeThomas, a former U.S. diplomat who worked on North Korea and Iran sanctions and served in the administrations of Democratic Presidents Bill Clinton and Barack Obama.

“An entire generation of people worked on this. It’s failed … so alright, now we have to go to the next step, figure out what we do about it.”

Biden administration officials concede that sanctions have failed to stop North Korea’s weapons programs – but they maintain they have at least been effective in slowing North Korea’s nuclear program.

“I would disagree with the idea that sanctions have failed. Sanctions have failed to stop their programs – that’s absolutely true,” a senior administration official told Reuters. “But I think that if the sanctions didn’t exist, (North Korea) would be much, much further along, and much more of a threat to its neighbors to the region and to the world.”

The State Department, U.S. Treasury and White House’s National Security Council did not immediately respond to requests for comment.

Former officials and experts say sanctions were never imposed robustly enough for long enough and blame faltering U.S. overtures to North Korea as well as pressures like Russia’s war in Ukraine and U.S-China tensions over Taiwan for making them ineffective and easy for North Korea to circumvent.

North Korea has long been forbidden to conduct nuclear tests and ballistic missile launches by the U.N. Security Council.

The Security Council has imposed sanctions on North Korea since 2006 to choke off funding for it nuclear and ballistic missile programs. They now include exports bans coal, iron, lead, textiles and seafood, and capping imports of crude oil and refined petroleum products.

However U.N. experts regularly report that North Korea is evading sanctions and continuing to develop its programs.

Russia and China backed toughened sanctions after North Korea’s last nuclear test in 2017, but it is not clear what U.N action – if any – they might agree to if Pyongyang conducts another nuclear test.

CHINESE AND RUSSIAN INFLUENCE

The senior Biden administration official told Reuters Washington believes China and Russia have leverage to persuade North Korea not to resume nuclear bomb testing. But the Biden administration has accused China and Russia of enabling North Korean leader Kim Jong Un.

Anthony Ruggiero, who headed North Korea sanctions efforts under former President Donald Trump, said they were only pursued vigorously enough from the last year of the Obama administration to early in Trump’s second year. They then dropped off in the ultimately vain hope of progress in summit negotiations between Trump and Kim.

Some critics like sanctions expert Joshua Stanton fault both the Trump and Biden administrations for failing to exert maximum pressure to stop China allowing North Korea’s sanctions evasion. They point to the powerful option of imposing sanctions on big Chinese banks that have facilitated this.

“The sanctions we don’t enforce don’t work, and we haven’t been enforcing them since mid-2018,” Stanton said, noting that history had shown a correlation between stronger enforcement and North Korea willingness to engage diplomatically.

“The Biden administration’s most significant failure is its failure to prosecute or penalize the Chinese banks we know are laundering Kim Jong Un’s money,” he said.

Some experts like DeThomas argue that taking what some call the “nuclear option” of going after Chinese banks could exclude huge Chinese institutions from the international financial system and have catastrophic consequences not just for the Chinese, but for the U.S. and global economies – something Stanton considers unfounded.

“Going full bore against the Chinese over North Korea is always a possibility, but it’s a high-risk option,” said DeThomas, arguing that such a measure should be reserved for an even more pressing scenario, such as deterring any move by China to all-out support for Russia’s war in Ukraine.

“You want them to be thinking about that. And you can’t fire that gun twice,” he said. “And even if you sanctioned the Chinese banks, you wouldn’t get the North Koreans to change.”

Some U.S. academic experts argue that Washington should recognize North Korea for what it is – a nuclear power that is never going to disarm – and use sanctions relief to incentivize better behavior.

“I do think we can buy things other than disarmament with our economic leverage,” Jeffrey Lewis, a non-proliferation expert at the Middlebury Institute of International Studies told a conference in Ottawa this week.

“I do think we can buy things other than disarmament with our economic leverage,” Jeffrey Lewis, a non-proliferation expert at the Middlebury Institute of International Studies, told a conference in Ottawa this week.

The senior Biden administration official said maintaining sanctions was not just punitive, but about the international community showing it is united.

He rejected the idea that Washington should recognize North Korea as a nuclear-armed state.

“There is an extraordinarily strong global consensus … that the DPRK should not, and must not, be a nuclear nation,” he said. “No country is calling for this … the consequences of changing policy, I think would be profoundly negative.”

Additional reporting by Steve Holland and Michelle Nichols
Editing by Alistair Bell

Our Standards: The Thomson Reuters Trust Principles.

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November 4, 2022
UK’s Sunak reinstates Braverman as interior minister

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LONDON, Oct 25 (Reuters) – British lawmaker Suella Braverman was reappointed as interior minister on Tuesday by Prime Minister Rishi Sunak, less than a week after she resigned from the role for breaching government rules.

Braverman, 42, stepped down a day before former prime minister Liz Truss did after breaching email security rules, also voicing concerns about the direction of Truss’s government in her resignation letter.

First elected to parliament in 2015, Braverman is regarded as being on the right wing of the governing Conservative Party.

She supports Britain’s exit from the European Convention on Human Rights as what she calls the only way the country can solve its immigration problems, and says it was her “dream” to see a flight deporting asylum seekers to Rwanda take off.

She has said Britain should replace the ECHR with a strengthened British Bill of Rights.

A committed Brexit supporter, she was appointed as a minister in the Department for Exiting the European Union but resigned in protest at former prime minister Theresa May’s proposed divorce deal.

After Boris Johnson became leader, she was later appointed Attorney General in 2020, when she was criticised by some lawyers over whether some government policies were legal.

Reporting by William James, writing by Muvija M and Alistair Smout, editing by Elizabeth Piper

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October 25, 2022
UK justice secretary Brandon Lewis resigns – statement

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LONDON, Oct 25 (Reuters) – British justice secretary Brandon Lewis resigned on Tuesday following the appointment of Rishi Sunak as prime minister.

“The new PM will have my support from the back benches to tackle the many challenges we face – as a party and as a country,” Lewis said on Twitter.

Reporting by Sachin Ravikumar, writing by William James

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October 25, 2022
Saudi Arabia ‘maturer guys’ in spat with U.S., energy minister says
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OPEC+ oil output cut led to U.S., Saudi spat

Saudi Arabia and U.S. “solid allies” – minister

Big Wall St turnout at flagship Saudi investment summit
RIYADH, Oct 25 (Reuters) – Saudi Arabia decided to be the “maturer guys” in a spat with the United States over oil supplies, the kingdom’s energy minister Prince Abdulaziz bin Salman said on Tuesday.

The decision by the OPEC+ oil producer group led by Saudi Arabia this month to cut oil output targets unleashed a war of words between the White House and Riyadh ahead of the kingdom’s Future Investment Initiative (FII) forum, which drew top U.S. business executives.

The two traditional allies’ relationship had already been strained by the Joe Biden administration’s stance on the 2018 murder of Saudi journalist Jamal Khashoggi and the Yemen war, as well as Riyadh’s growing ties with China and Russia.

When asked at the FII forum how the energy relationship with the United States could be put back on track after the cuts and with the Dec. 5 deadline for the expected price-cap on Russian oil, the Saudi energy minister said: “I think we as Saudi Arabia decided to be the maturer guys and let the dice fall”.

“We keep hearing you ‘are with us or against us’, is there any room for ‘we are with the people of Saudi Arabia’?”

Saudi Investment Minister Khalid al-Falih said earlier that Riyadh and Washington will get over their “unwarranted” spat, highlighting long-standing corporate and institutional ties.

“If you look at the relationship with the people side, the corporate side, the education system, you look at our institutions working together we are very close and we will get over this recent spat that I think was unwarranted,” he said.

While noting that Saudi Arabia and the United States were “solid allies” in the long term, he highlighted the kingdom was “very strong” with Asian partners including China, which is the biggest importer of Saudi hydrocarbons.

The OPEC+ cut has raised concerns in Washington about the possibility of higher gasoline prices ahead of the November U.S. midterm elections, with the Democrats trying to retain their control of the House of Representatives and the Senate.

Biden pledged that “there will be consequences” for U.S. relations with Saudi Arabia after the OPEC+ move.

Princess Reema bint Bandar Al Saud, the kingdom’s ambassador to Washington, said in a CNN interview that Saudi Arabia was not siding with Russia and engages with “everybody across the board”.

[1/3] Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman Al-Saud speaks at the Future Investment Initiative conference, in Riyadh, Saudi Arabia, October 25, 2022. REUTERS/ Ahmed Yosri

“And by the way, it’s okay to disagree. We’ve disagreed in the past, and we’ve agreed in the past, but the important thing is recognizing the value of this relationship,” she said.

She added that “a lot of people talk about reforming or reviewing the relationship” and said that was “a positive thing” as Saudi Arabia “is not the kingdom it was five years ago.”

FULL ATTENDENCE AT FII

Like previous years, the FII three-day forum that opened on Tuesday saw a big turnout from Wall Street, as well as other industries with strategic interests in Saudi Arabia, the world’s top oil exporter.

JPMorgan Chase & Co Chief Executive Jamie Dimon, speaking at the gathering, voiced confidence that Saudi Arabia and the United States would safeguard their 75-year-old alliance.

“I can’t imagine any allies agreeing on everything and not having problems – they’ll work it through,” Dimon said. “I’m comfortable that folks on both sides are working through and that these countries will remain allies going forward, and hopefully help the world develop and grow properly.”

The FII is a showcase for the Saudi crown prince’s Vision 2030 development plan to wean the economy off oil by creating new industries that also generate jobs for millions of Saudis, and to lure foreign capital and talent.

No Biden administration officials were visible at the forum on Tuesday. Jared Kushner, a former senior aide to then-President Donald Trump who enjoyed good ties with Prince Mohammed, was featured as a front-row speaker.

The Saudi government invested $2 billion with a firm incorporated by Kushner after Trump left office.

FII organisers said this year’s edition attracted 7,000 delegates compared with 4,000 last year.

After its inaugural launch in 2017, the forum was marred by a Western boycott over Khashoggi’s killing by Saudi agents. It recovered the next year, attracting leaders and businesses with strategic interests in Saudi Arabia, after which the pandemic hit the world.

Reporting by Aziz El Yaakoubi, Hadeel Al Sayegh and Rachna Uppal in Riyadh and Nadine Awadalla, Maha El Dahan and Yousef Saba in Dubai; Writing by Ghaida Ghantous and Michael Geory; Editing by Louise Heavens, Mark Potter, Vinay Dwivedi, William Maclean

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October 25, 2022
UK leader in peril after Treasury chief axes ‘Trussonomics’

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LONDON — The U.K.’s new Treasury chief ripped up the government’s economic plan on Monday, dramatically reversing most of the tax cuts and spending plans that new Prime Minister Liz Truss announced less than a month ago. The move raises more questions about how long the beleaguered British leader can stay in office, though Truss insisted she has no plans to quit.

Chancellor of the Exchequer Jeremy Hunt, said he was scrapping “almost all” of Truss’ tax cuts, along with her flagship energy policy and her promise — repeated just last week — that there will be no public spending cuts.

While the reversal of policy calmed financial markets and helped restore the government’s economic credibility, it further undermined the prime minister’s rapidly crumbling authority and fueled calls for her to step down before her despairing Conservative Party forces her out.

Truss declined to attend the House of Commons to answer a question on the economy from the leader of the opposition, sending House of Commons leader Penny Mordaunt in her place. Mordaunt denied a lawmaker’s suggestion that Truss was “cowering under her desk” to avoid scrutiny.

“The prime minister is not under a desk,” Mordaunt said, words hardly likely to inspire confidence in the leader who only came to power last month.

Truss’ spokesman said the prime minister and Hunt had jointly agreed on the economic changes. But Hunt told Conservative lawmakers that Truss “backed him to the hilt in making difficult decisions” — suggesting he has a free hand to make policy.

With Truss sitting silently beside him, Hunt told lawmakers that he was canceling Truss’ plan to reduce the basic rate of income tax by 1 percentage point and most of her other libertarian economic policies. In a message aimed squarely at reassuring the financial markets, he said Britain was “a country that funds our promises and pays our debts.”

“And when that is questioned, as it has been, this government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances,” Hunt said.

Hunt was appointed Friday after Truss fired his predecessor Kwasi Kwarteng, who spent less than six weeks in the Treasury job. Hunt is seeking to restore the Conservative government’s credibility for sound fiscal policy after Truss and Kwarteng rushed out a plan for tax cuts without detailing how they would pay for them.

Truss and Kwarteng jointly came up with a Sept. 23 announcement of 45 billion pounds ($50 billion) in unfunded tax cuts that immediately spooked the financial markets. The cuts fueled investor concerns about unsustainable levels of government borrowing, which pushed up government borrowing costs, raised home mortgage costs and sent the pound plummeting to an all-time low against the dollar. The Bank of England was forced to intervene to protect pension funds, which were squeezed by volatility in the bond market.

Over the weekend, Hunt has been dismantling that economic plan. The government had already ditched parts of its tax-cutting plan and announced it would make a medium-term fiscal statement on Oct. 31, weeks earlier than previously scheduled.

On Monday, Hunt went further. He scaled back a cap on energy prices designed to help households pay their bills. It will now be reviewed in April rather than lasting two years — sweeping away one of Truss’ signature plans to help Britons facing a cost-of-living crisis as food, fuel and mortgage prices soar.

Hunt told lawmakers that the measures he announced would save 32 billion pounds a year, but that spending cuts were also coming.

“There remain, I’m afraid, many difficult decisions to be announced” in the fuller budget statement on Oct. 31, he said.

Hunt also said he was setting up a new Economic Advisory Council of economists and investment bankers to help inform policy — a far cry from Truss’ bid to throw out economic “orthodoxy.”

The pound rose more than 1% to above $1.13 in London after Hunt’s announcements. That pushed the U.K. currency back above where it was trading on Sept. 22, the day before Kwarteng announced the tax cuts.

Yields on 10-year government bonds, an indicator of government borrowing costs, fell to 3.947% from 4.327% on Friday. It was 3.495% on Sept. 22. Bond yields tend to rise as the risk of a borrower defaulting increases.

Paul Johnson, director of the Institute for Fiscal Studies think tank, said Monday’s announcements would not be enough “to undo the damage caused by the debacle of the last few weeks. But they are big, welcome, clear steps in the right direction.”

The financial fiasco has turned Truss into a lame-duck prime minister. She took office just six weeks ago after winning a party election to replace Prime Minister Boris Johnson, who was forced out in July after ethics scandals ensnared his administration. Many Conservatives now believe their only hope is to replace Truss — but they are divided about who should take over.

In a BBC interview, Truss conceded that she had made mistakes. But, she vowed, “I will lead the Conservatives into the next general election.”

Few believe that possible. The Conservative Party still commands a large majority in Parliament, and — in theory — has two years until a national election must be held. Polls suggest holding an election now would be a wipeout for the Tories, with the Labour Party winning a big majority.

Labour Party economics spokeswoman Rachel Reeves said Truss was “barely in office, and she is certainly not in power,” and claimed the Conservatives could not fix the problems they had caused.

“The truth is an arsonist is still an arsonist, even if he runs back into the burning building with a bucket of water,” she said.

Chris Beauchamp, chief market analyst at online trading firm IG, said the markets were reassured by the presence of Hunt, a former U.K. foreign secretary and health chief.

“I think markets in some ways would rather things just stayed as they are for a while,” he said. “OK, the PM has found her authority quite truncated. But at least you’ve got the chancellor in place almost running the country.

“I think they’re quite content with that slightly odd state of affairs, for the moment.”

———

Jo Kearney contributed to this story.

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October 17, 2022
As UK’s Truss fights for job, new finance minister says she made mistakes
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Truss sacked finance minister on Friday

New chancellor Hunt warns of tough decisions

‘I’ve listened, I get it’, Truss says

BoE’s Bailey says agrees with Hunt on need to fix finances

Some Conservative lawmakers say Truss will be ousted
LONDON, Oct 15 (Reuters) – Britain’s new finance minister Jeremy Hunt said on Saturday some taxes would go up and tough spending decisions were needed, saying Prime Minister Liz Truss had made mistakes as she battles to keep her job just over a month into her term.

In an attempt to appease financial markets that have been in turmoil for three weeks, Truss fired Kwasi Kwarteng as her chancellor of the exchequer on Friday and scrapped parts of their controversial economic package.

With opinion poll ratings dire for both the ruling Conservative Party and the prime minister personally, and many of her own lawmakers asking, not if, but how Truss should be removed, Truss is relying on Hunt to help salvage her premiership less than 40 days after taking office.

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In an article for the Sun newspaper published late on Saturday, Truss admitted the plans had gone “further and faster than the markets were expecting”.

“I’ve listened, I get it,” she wrote. “We cannot pave the way to a low-tax, high-growth economy without maintaining the confidence of the markets in our commitment to sound money.”

She said Hunt would lay out at the end of the month the plan to get national debt down “over the medium term”.

But, the speculation about her future shows no sign of diminishing, with Sunday’s newspapers rife with stories that allies of Rishi Sunak, another former finance minister who she beat to become leader last month, were plotting to force her out within weeks.

On a tour of TV and radio studios, Hunt gave a blunt assessment of the situation the country faced, saying Truss and Kwarteng had made mistakes and further changes to her plans were possible.

“We will have some very difficult decisions ahead,” he said.”The thing that people want, the markets want, the country needs now, is stability.”

The Sunday Times said Hunt would rip up more of Truss’s original package by delaying a planned cut to the basic rate of income tax as part of a desperate bid to balance the books.

According to the newspaper, Britain’s independent fiscal watchdog had said in a draft forecast there could be a 72 billion pound ($80 billion) black hole in public finances by 2027/28, worse than economists had forecast.

Truss had won the leadership contest to replace Boris Johnson on a platform of big tax cuts to stimulate growth, which Kwarteng duly announced last month. But the absence of any details of how the cuts would be funded sent the markets into meltdown.

She has already ditched plans to cut tax for high earners, and said a levy on business would increase, abandoning her proposal to keep it at current levels. But a slump in bond prices after her news conference on Friday still suggested she had not gone far enough.

‘MEETING OF MINDS’

Kwarteng’s Sept. 23 fiscal statement prompted a backlash in financial markets that was so ferocious the Bank of England (BoE) had to intervene to prevent pension funds being caught up in the chaos as borrowing costs surged.

British Prime Minister Liz Truss attends a news conference in London, Britain, October 14, 2022. Daniel Leal/Pool via REUTERS

BoE Governor Andrew Bailey said he had spoken to Hunt and they had agreed on the need to repair the public finances.

“There was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that,” Bailey said in Washington on Saturday. “Of course, there was an important measure taken yesterday.”

He also warned that inflation pressures might require a bigger interest rate rise than previously thought due to the government’s huge energy subsidies for homes and businesses, and its tax cut plans.

Hunt is due to announce the government’s medium-term budget plans on Oct. 31, in what will be a key test of its ability to show it can restore its economic policy credibility.

He cautioned spending would not rise by as much as people would like and all government departments were going to have to find more efficiencies than they were planning.

“Some taxes will not be cut as quickly as people want, and some taxes will go up. So it’s going to be difficult,” he said. He met Treasury officials on Saturday and will hold talks with Truss on Sunday to go through the plans.

‘MISTAKES MADE’

Hunt, an experienced minister and viewed by many in his party as a safe pair of hands, said he agreed with Truss’s fundamental strategy of kickstarting economic growth, but he added that their approach had not worked.

“There were some mistakes made in the last few weeks. That’s why I’m sitting here. It was a mistake to cut the top rate of tax at a period when we’re asking everyone to make sacrifices,” he said.

It was also a mistake, Hunt said, to “fly blind” and produce the tax plans without allowing the independent fiscal watchdog, the Office for Budget Responsibility, to check the figures.

The fact that Hunt is Britain’s fourth finance minister in four months is testament to a political crisis that has gripped Britain since Johnson was ousted following a series of scandals.

Hunt said Truss should be judged at an election and on her performance over the next 18 months – not the last 18 days.

However, she might not get that chance. During the leadership contest, Truss won support from less than a third of Conservative lawmakers and has appointed her backers since taking office – alienating those who supported her rivals.

The appointment of Hunt, who ran to be leader himself and then backed Sunak, has been seen as a sign of her reaching out, but the move did little to placate some of her party critics.

“It’s over for her,” one Conservative lawmaker told Reuters after Friday’s events.

($1 = 0.8953 pounds)

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Reporting by Michael Holden, Alistair Smout and William Schomberg
Editing by Emelia Sithole-Matarise, Helen Popper, Ros Russell and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.
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October 15, 2022
China says it reserves right to use force over Taiwan

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BEIJING, Oct 15 (Reuters) – China reserves the right to use force over Taiwan as a last resort in compelling circumstances, though peaceful reunification is its first choice, a Communist Party spokesman said on Saturday.

Reunification of China and Taiwan meets the interests of all, including Taiwan compatriots, Sun Yeli told a news conference in Beijing.

President Xi Jinping is poised to win a third five-year term as general secretary of the ruling party, the most powerful job in the country, at the congress to be held in the Great Hall of the People in Beijing for a week starting on Sunday.

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Reporting by Yew Lun Tian, Writing by Martin Quin Pollard

Our Standards: The Thomson Reuters Trust Principles.

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October 15, 2022
Swiss National Bank monitoring Credit Suisse situation – Maechler

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ZURICH, Oct 5 (Reuters) – The Swiss National Bank (SNB) is following the situation at Credit Suisse (CSGN.S) closely, SNB Governing Board member Andrea Maechler told Reuters on Wednesday.

Switzerland’s second-biggest bank saw its shares slide by as much as 11.5% and its bonds hit record lows on Monday, before clawing back some of the losses, amid concerns about its ability to restructure its business without asking investors for more money. read more

“We are monitoring the situation,” Maechler said on the sidelines of an event in Zurich. “They are working on a strategy due to come out at the end of October.”

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The SNB has declined to comment in the past about Credit Suisse, which has said it has a strong capital base and liquidity. It is due to announce details of a restructuring plan along with third-quarter results on Oct. 27.

In July, Credit Suisse announced its second strategy review in a year and replaced its chief executive, bringing in restructuring expert Ulrich Koerner to prune its investment banking arm and cut more than $1 billion in costs. read more

The bank is considering measures to scale back its investment bank into a “capital-light, advisory-led” business, and is evaluating strategic options for the securitised products business, Credit Suisse has said.

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Reporting by John Revill
Editing by Michael Shields and Mark Potter

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October 5, 2022
Italy’s right wing, led by Meloni, wins election, exit polls say
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Rightist bloc set for majority in both houses-exit polls

Meloni would be country’s first woman prime minister

Early vote follows collapse of Draghi government

Record low turnout casts shadow over result
ROME, Sept 25 (Reuters) – A right-wing alliance led by Giorgia Meloni’s Brothers of Italy party was on course for a clear majority in the next parliament, giving the country its most right-wing government since World War Two.

Meloni, as leader of the largest coalition party, was also likely to become Italy’s first woman prime minister.

Meloni, 45, plays down her party’s post-fascist roots and portrays it as a mainstream conservative group. She has pledged to support Western policy on Ukraine and not take undue risks with the third largest economy in the euro zone.

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However, the outcome is likely to ring alarm bells in European capitals and on financial markets, given the desire to preserve unity in confronting Russia and concerns over Italy’s daunting debt mountain.

An exit poll for state broadcaster RAI said the bloc of conservative parties, that also includes Matteo Salvini’s League and Silvio Berlusconi’s Forza Italia party, won between 41% and 45%, enough to guarantee control of both houses of parliament.

“Centre-right clearly ahead both in the lower house and the Senate! It’ll be a long night but even now I want to say thanks,” Salvini said on Twitter.

Italy’s electoral law favours groups that manage to create pre-ballot pacts, giving them an outsized number of seats by comparison with their vote tally.

RAI said the right-wing alliance would win between 227 and 257 of the 400 seats in the lower house of parliament, and 111-131 of the 200 Senate seats.

Full results are expected by early Monday.

Leader of Brothers of Italy Giorgia Meloni poses with her ballot at a polling station during the snap election in Rome, Italy September 25, 2022. REUTERS/Yara Nardi

RECORD LOW TURNOUT

The result caps a remarkable rise for Meloni, whose party won only 4% of the vote in the last national election in 2018, but this time around was forecast to emerge as Italy’s largest group on around 22-26%.

But it was not a ringing endorsement, with provisional data pointing to turnout of just 64.1% against 74% four years ago — a record low number in a country that has historically enjoyed a high level of voter participation.

Although heavy storms in the south appeared to have deterred many from voting there, participation fell across a swathe of northern and central cities, where the weather was calmer.

Italy has a history of political instability and the next prime minister will lead the country’s 68th government since 1946 and face a host of problems, notably soaring energy costs and growing economic headwinds.

Initial market reaction is likely to be muted given that opinion polls had forecast the result accurately.

“I don’t expect a big impact although it’s not necessarily the case that Italian assets will do particularly well tomorrow (Monday) given how the market is starting to treat Europe and countries with worrisome public finances and exposure to the crisis and Ukraine,” said Giuseppe Sersale, fund manager and strategist at Anthilia in Milan.

Italy’s first autumn national election in over a century was triggered by party infighting that brought down Prime Minister Mario Draghi’s broad national unity government in July.

The new, slimmed-down parliament will not meet until Oct. 13, at which point the head of state will summon party leaders and decide on the shape of the new government.

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Additional reporting by Gavin Jones, Rodolfo Fabbri and Giselda Vagnoni in Rome, and Danilo Masoni in Milan
Editing by Keith Weir

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September 25, 2022
White House says no new deadlines on reconciliation bill

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WASHINGTON, Oct 22 (Reuters) – U.S. President Joe Biden does not have any new deadlines as the administration continues to negotiate with Democratic lawmakers on the framework of a massive spending bill aimed at social programs and tackling climate change, White House press secretary Jen Psaki said on Friday.

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Reporting By Jarrett Renshaw

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October 22, 2021