LONDON — Emergency support to help Brits grappling with rising bills should go to “those who need it most,” Chancellor Rachel Reeves said Tuesday — all-but ruling out a Liz Truss-style universal bailout in response to the Iran war. Pledging to “learn the mistakes of the past,” Reeves told MPs Tuesday that, while “contingency planning” is underway for “every eventuality,” the government will be “responsible” with public finances in any new state intervention. Oil and gas prices have soared since the conflict began, leading to higher fuel prices in the U.K. and sparking fears of a sharp increase in family and business energy bills when a regulated price cap period ends in July. Reeves said that, while the full impact of the crisis is not yet known, “the challenges may be significant.” In response to the 2022 energy crisis sparked by Russia’s invasion of Ukraine, the government of then-Prime Minister Liz Truss subsidized the bill of every household in the country — a policy backed by the Labour Party at the time. But Reeves today criticized the “unfunded, untargeted” 2022 package, saying it had pushed up borrowing, interest rates and inflation. Between 2022 and 2024, households in the top income decile received an average £1,350 of direct energy bill support, Reeves said, contributing to national debt “still being paid today.” However, the chancellor stopped short of explicitly ruling out a similar approach. She said: “Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our ironclad fiscal rules to keep inflation and interest rates as low as possible.” The government has already announced a £53 million package of support for households that use heating oil, which are not protected by the energy price cap. The majority of households that use gas and electricity will not see prices rise until July, when the next price cap period ends. The latest expert projections suggest the average annual bill could rise by more than £200 from current levels. On fuel pricing, Reeves said the government would give an update “within the next month,” amid pressure from opposition parties to extend a longstanding five pence tax relief on gasoline and diesel — the fuel duty cut — beyond its expiry date in September. U.K. gasoline prices have have risen by nearly 16 pence per liter since the war began, while diesel has risen by more than 31 pence.

Listen on * Spotify * Apple Music * Amazon Music Nach dem Wahldebakel der SPD in Rheinland-Pfalz steht die Koalition mit dem Rücken zur Wand. Friedrich Merz, Bärbel Bas und Lars Klingbeil haben sich auf eine Flucht nach vorn verständigt: den Weg der schmerzhaften Reformen. Gordon Repinski präsentiert das inoffizielle „Inspirationspapier“ von POLITICO mit radikalen Vorschlägen für Deutschland – vom Rentenrealismus über eine echte Steuerreform bis hin zur mutigen Zusammenlegung von Ministerien. Ist Schwarz-Rot bereit, den eigenen Funktionären und den Wählern echte Kompromisse abzuverlangen? Während die Sozialdemokratie weiter wankt, blickt SPD-Spitzenkandidat Armin Willingmann in Sachsen-Anhalt auf die nächste Schicksalswahl. Im 200-Sekunden-Interview spricht er über die „bedingt hilfreiche“ Performance aus Berlin, warum er rollende Köpfe an der Parteispitze derzeit für kontraproduktiv hält und wie er die Arbeiter im Osten mit einer Politik für die Mitte zurückgewinnen will. Bei den Liberalen ist die nächste Krisenstufe gezündet: Nach dem Verschwinden aus den Umfragen im Südwesten soll im Mai die komplette Parteispitze neu gewählt werden. Rixa Fürsen analysiert das personelle Vakuum: Kann Christian Dürr seinen Posten halten oder schlägt jetzt die Stunde von Marie-Agnes Strack-Zimmermann und dem NRW-Landeschef Henning Höne? Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. ⁠Jetzt kostenlos abonnieren.⁠ Mehr von Host und POLITICO Executive Editor Gordon Repinski: Instagram: ⁠@gordon.repinski⁠ | X: ⁠@GordonRepinski⁠. POLITICO Deutschland – ein Angebot der Axel Springer Deutschland GmbH Axel-Springer-Straße 65, 10888 Berlin Tel: +49 (30) 2591 0 ⁠information@axelspringer.de⁠ Sitz: Amtsgericht Berlin-Charlottenburg, HRB 196159 B USt-IdNr: DE 214 852 390 Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna **(Anzeige) Eine Nachricht der PKV: Hätten Sie’s gedacht? Vom jährlichen 15,5-Milliarden-Euro-Mehrumsatz der Privatversicherten profitiert das gesamte Gesundheitswesen. Denn neben den Haus- und Fachärzten kommen die höheren Honorare auch den zahnärztlichen Praxen zugute, dem Arzneimittelbereich oder Therapeutinnen. So stützt die PKV die medizinische Versorgung in Deutschland zugunsten aller – auch der gesetzlich Versicherten. Mehr auf pkv.de**

The Trump administration violated the Constitution when it sought to restrict press access to the Pentagon and limit what reporters could cover, a federal judge ruled Friday. U.S. District Judge Paul Friedman granted a request from The New York Times to void the Pentagon’s press credential policy on grounds it violated the First and Fifth Amendment, rejecting the government’s argument that the restrictions were needed to prevent the disclosure of classified information. “The Court recognizes that national security must be protected, the security of our troops must be protected, and war plans must be protected,” Friedman wrote. “But especially in light of the country’s recent incursion into Venezuela and its ongoing war with Iran, it is more important than ever that the public have access to information from a variety of perspectives about what its government is doing.” The ruling, which comes as journalists around the world seek information about the war in Iran, rolls back a highly aggressive attack on press freedom implemented last year by Defense Secretary Pete Hegseth, a former Fox News host who has had a strained relationship with the media. “Americans deserve visibility into how their government is being run, and the actions the military is taking in their name and with their tax dollars,” said Charlie Stadtlander, a spokesperson for The New York Times. “Today’s ruling reaffirms the right of The Times and other independent media to continue to ask questions on the public’s behalf.” Pentagon spokesperson Sean Parnell said the administration would appeal the ruling. Last January, the Defense Department removed Pentagon workspaces for several credentialed outlets, including POLITICO, CNN and the Times and granted access to organizations considered more friendly to the administration. In May, Hegseth announced additional restrictions on areas open to the media within the Pentagon shortly after he inadvertently shared sensitive information about U.S. airstrikes in Yemen on a Signal group chat that included Jeffrey Goldberg, editor in chief of The Atlantic. The Pentagon’s most prohibitive measure came in September, when the department said it would only credential reporters if they pledged not to publish information that was not approved for public release by the Pentagon. Nearly every major news outlet refused to make that commitment. Friedman said the policy violated the First Amendment because “the undisputed evidence reflects the Policy’s true purpose and practical effect: to weed out disfavored journalists.” An attorney representing the paper hailed the decision as a “powerful rejection” of the Trump administration’s attempt to “impede freedom of the press” by restricting Julian Barnes, a reporter covering the Pentagon for the paper. “The district court’s opinion is not just a win for The Times, Mr. Barnes, and other journalists, but most importantly, for the American people who benefit from their coverage of the Pentagon,” said Theodore Boutrous Jr.

LONDON — U.K. Home Secretary Shabana Mahmood has been warned her planned overhaul of settlement rules for migrants will not save the £10 billion she has claimed. Instead, the policy to drastically increase the length of time migrants must wait before gaining permanent residency could end up costing the Treasury billions, according to a private briefing note shared with the Home Office and obtained by POLITICO.  The document, drawn up by the IPPR think tank where Mahmood made the case for her reforms earlier this month, is being used by Labour MPs to pressure for a rethink of the policy. A leading critic said it totally “dismantles” her financial argument. In her speech, Mahmood cited increased welfare costs from the 196,000 migrants on health and social care visas and their dependents who arrived during a post-Brexit immigration spike, and who are expected to start getting settled status soon, as a key reason for the overhaul.  Under her proposals, care workers would have to wait around 15 years before being eligible for indefinite leave to remain (ILR), up from the current five years.  “If we do not, we will see a £10 billion pound drain on our public finances and further strain on public services, like housing and healthcare, already under immense pressure,” Mahmood said. But the progressive think tank, which is well-connected in Labour circles, argues the Home Office’s calculations are flawed for four reasons.  The department’s figure is based on the cost of welfare spending over the individuals’ lifetimes. But the IPPR points out that estimates from the government’s own Migration Advisory Committee (MAC) show dependents making net positive financial contributions until they stop working, claim the state pension and start having higher health costs. Though Mahmood’s proposals will lengthen the time it takes them to gain access to the welfare system, the change “will not make a significant difference to the lifetime fiscal impact” of these migrants, according to the report. “The only way this policy would significantly bring down the £10 billion lifetime fiscal cost is if it led to large numbers of care workers and dependents leaving the U.K. before they reached the qualifying period for settlement,” the IPPR says. As it stands, that’s not the case Mahmood is making. The primary reason care workers make a negative net lifetime financial contribution is because they are poorly paid. Gaining settlement would allow them to earn more by opening the door to work in any occupation. But delaying this traps them in lower-paid work for longer, the document argues. “The overall fiscal impact of the proposed earned settlement reforms should therefore consider the potential costs of lower tax contributions from the care worker cohort while they wait for settlement, as well as the fiscal benefits of restricting access to public funds for longer,” the IPPR says. If indeed the policy is to encourage care workers and their dependents to leave the U.K. in large numbers then the briefing argues it could in fact add to costs.  Estimates by the MAC, which advises the Home Office, point out that their adult dependents are net positive contributors for 20 — and it’s only after around 40 years that they make a cumulative net negative financial impact to the British state. “Given the [Treasury’s] fiscal rules work to a 5-year horizon, the emigration of care workers would make it harder — not easier — for the Treasury to meet its fiscal targets,” the IPPR argues. ‘DISMANTLES THE RATIONALE’ The briefing also digs into the wider “earned settlement” policy. Estimates of the effects are hard to ascertain because behavioral impacts are uncertain. But last year’s immigration white paper was accompanied by an illustrative example of a drop of between 10-20 per cent in skilled workers, care workers and their dependents. The IPPR uses this to calculate the cost to the Treasury based on that reduction being applied to both care workers and skilled workers. They argue that this would mean a potential cost to the exchequer of £11 billion to £22 billion over the lifetimes of migrants granted relevant visas last year.  “Even if the policy is designed in such a way to minimise any direct effects on skilled workers who make a positive fiscal contribution, it is possible that the reforms will deter (and indeed may already be deterring) higher-paid workers who seek certainty for their and their family’s status,” it says. “Even a small impact on higher-paid skilled workers would counteract the savings from care workers, given the per person net lifetime fiscal contribution of skilled workers is £689,000, nearly 20 times larger than the per person net costs of care workers.”  Leading Labour critic of the policy Tony Vaughan used the findings to argue that Mahmood’s proposals “will be a fiscal cost to the U.K. for decades.” “The IPPR report dismantles the rationale for this earned settlement policy,” the MP told POLITICO. “It would also undermine community cohesion and integration, weakening the bonds that hold our society together. This is not a policy that can be trimmed around the edges. It is fundamentally flawed and should be abandoned.” POLITICO reported this week that the government is considering watering down the proposals, potentially introducing transitions to ease the retrospective nature of the changes that are proving most controversial among Labour MPs. But, as critics consider parliamentary action to force a vote on the issue, Vaughan indicated the compromises under consideration would not be enough.  “I say that as a loyal Labour MP who has never voted against the government and who desperately wants us to succeed, but cannot in good conscience stand by and see a policy as flawed as this, which is so strongly against our national interest, reach the statute books,” he said. The Home Office has yet to respond to a request for comment.

Listen on * Spotify * Apple Music * Amazon Music Der EU-Handelsausschuss hat für den Zolldeal mit den USA gestimmt, doch das Tauziehen ist noch nicht vorbei: Zwei Abgeordnete kämpfen als Delegation aus Brüssel in Washington um letzte Garantien. Joana Lehner und Jürgen Klöckner sprechen über das Finale und beleuchten zusammen mit einem US-Kollegen, ob Donald Trump den Deal als politischen Sieg im Inland verkaufen kann oder ob die deutsche Industrie weiterhin Milliarden an Zöllen verliert. Im Policy Talk begrüßen die beiden VDA-Präsidentin Hildegard Müller. Sie spricht über das „weinende und lachende Auge“ der Branche, die aktuelle Milliardenbelastung durch US-Zölle und die schwindende Wettbewerbsfähigkeit des Standorts Deutschland. Müller warnt: Wenn Europa wirtschaftlich schwach wird, verliert es im Spiel der Großmächte an Relevanz. In Berlin tobt derweil ein Ökonomen-Streit: Neue Studien vom ifo-Institut und dem IW Köln werfen der Regierung vor, große Teile des bisher eingesetzten Sondervermögens für Haushaltslöcher statt für neue Investitionen zu nutzen. Rasmus Buchsteiner berichtet Off the Record über das anfängliche Kommunikationsdebakel im Finanzministerium und die Frage, warum die versprochenen Bagger in den Kommunen noch immer nicht rollen. „Power & Policy“ zeigt jede Woche, wo und wie die Entscheidungen in der Wirtschaftspolitik fallen. ⁠Jürgen Klöckner⁠ und ⁠Joana Lehner⁠ von POLITICO sprechen mit Top-Entscheidern und liefern Off-the-Record-Einblicke aus der Redaktion und Machtzentren. Präzise Analysen, lange bevor Gesetze beschlossen sind. Der Podcast für alle in Wirtschaft und Politik, die einen Wissensvorsprung brauchen — immer donnerstags. Für Policy-Profis: Abonnieren und die Pro-Newsletter ⁠Industrie & Handel⁠, ⁠Energie & Klima ⁠und ⁠Gesundheit⁠. Jetzt kostenlos testen. Fragen und Feedback gern an ⁠powerandpolicy@politico.eu⁠ POLITICO Deutschland – ein Angebot der Axel Springer Deutschland GmbH Axel-Springer-Straße 65, 10888 Berlin Tel: +49 (30) 2591 0 ⁠information@axelspringer.de⁠ Sitz: Amtsgericht Berlin-Charlottenburg, HRB 196159 B USt-IdNr: DE 214 852 390 Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna

The Bank of England warned it may have to take a tougher line on interest rates as the spike in energy prices caused by the U.S.-Israeli war on Iran pushes inflation higher. “Monetary policy cannot reverse this shock” to world energy supply, Governor Andrew Bailey said in a statement on Thursday, after the Monetary Policy Committee voted unanimously to leave the Bank rate unchanged at 3.75 percent. “Monetary policy must, however, respond to the risk of a more persistent effect on U.K. consumer price inflation,” Bailey added. The Bank had only last month declared victory over inflation, which has been above its 2 percent target for over four years. However, its latest analysis suggests headline inflation will rebound back above 3 percent in the next three months and could add as much as 0.75 percentage points to the consumer price index over the summer, as higher fuel bills percolate through the economy. “The MPC is alert to the increased risk of domestic inflationary pressures through second-round effects in wage and price-setting, the risk of which will be greater the longer higher energy prices persist,” the Bank stressed. However, it also acknowledged that the energy price spike is likely to hurt economic growth, and that it is “assessing the implications for inflation of the weakening in economic activity that is likely to result from higher energy costs.” Until the U.S. and Israel attacked Iran, most analysts had predicted that a slowing economy and growing prospects of easing inflation would allow the MPC to cut rates at Thursday’s meeting. However, the invasion and the ensuing turmoil in world commodity markets have turned the situation on its head, by closing a vital chokepoint at the mouth of the Persian Gulf, through which irreplaceable volumes of oil, gas and fertilizer pass every day. As a result, the Bank warned that there is now a real threat of higher energy prices causing a broader rise in prices across the economy. Food prices face a similar risk. ALREADY OUT OF DATE? The situation is changing so fast that the Bank’s latest forecasts could already be out of date. The Bank said they were based on the situation as of March 16, when Brent oil futures were only at $100 a barrel. But a succession of strikes on key energy installations around the Persian Gulf since then has already pushed prices up by another 12 percent. “The news flow around the war in Iran looks more worrying for global markets with each passing day,” Deutsche Bank strategist Jim Reid said in a note on Thursday. Analysts argued ahead of the meeting that the Bank would prefer to err on the side of keeping policy tight in the face of the new risks, given lingering concerns about its credibility due to its slow response to the inflation shock in 2022. Inflation peaked at 11.1 percent back then, the highest rate posted by any major economy. The Bank’s change in outlook will make life doubly uncomfortable for the Labour government, which had hoped that its efforts to close the U.K. budget deficit would be rewarded with lower inflation and lower interest rates. Instead, the government’s key 10-year borrowing costs have risen by nearly half a percentage point since the war started, and they leaped again on Thursday, first in response to Iranian attacks on a Qatari gas field, then to the BoE’s statement. At 4.89 percent, the 10-year gilt yield is now at its highest in 15 months. The pound, by contrast, was steady against the dollar and euro after the decision. The Office for Budget Responsibility earlier this month already cut its forecasts for U.K. growth this year. That implies lower tax receipts which, combined with higher borrowing costs, threaten a new two-way squeeze on Chancellor Rachel Reeves’ fiscal arithmetic, less than six months after she had to raise taxes sharply at her latest budget.

LONDON — The U.K. government is considering substantial compromises on its plan to make it harder for migrants to permanently settle in Britain, following a backlash from Labour MPs. Downing Street declined to guarantee on Wednesday that proposals to significantly extend the length of time migrants must wait for permanent residence would proceed as planned.  Angela Rayner, a frontrunner to succeed struggling Prime Minister Keir Starmer, made a major intervention on the issue Tuesday night, intensifying the existing pressure to change tack from MPs in Starmer’s center-left party. Rayner, his former deputy PM, branded the plans “bad policy,” a “breach of trust” and “un-British” in a speech. The government issued a statement on Wednesday backing the broad policy of increasing the standard route to settlement from five to ten years. But officials reiterated that they were looking at transitional arrangements for migrants already in the U.K. — suggesting that not all proposals would apply retroactively. That would address concern from Rayner and other critics that the government is “moving the goalposts” — but also be a major headache for the Home Office, which is facing the consequences of a surge in legal migration after Brexit. One senior minister, granted anonymity to discuss internal conversations, said one potential compromise was to introduce more routes for migrants to obtain indefinite leave to remain (ILR) in a shorter timeframe. They told POLITICO that the proposals had been “shifting anyway” before Rayner’s intervention. “No. 10 and the chief whip are heavily engaged with MPs, in a way that they weren’t with the welfare reforms,” they added. Critics have complained that lower-earning migrants will have to wait far longer than high earners before being granted settlement under the government’s proposed changes. Tony Vaughan, the backbench leader of a push to get Starmer to rethink the plans, told the same event that Rayner spoke at: “We cannot have a system where the child of a banker gets settlement after three years and the child of a care worker gets it after 15.” On Wednesday, officials came under intense pressure to back Home Secretary Shabana Mahmood’s plans. By the afternoon, the government released a statement insisting it would “double the route to settlement from five to ten years,” but added that “we are consulting to apply this change to those [who are] in the U.K. today but have not received settled status.” That consultation — which the government says has received 200,000 responses — gives ministers wriggle-room to water down their proposals. But if the changes aren’t applied retroactively, it risks undermining the argument that they are being introduced to target the so-called “Boriswave,” a nickname for the significant spike in migrants arriving in the U.K. following COVID lockdowns under former Conservative Prime Minister Boris Johnson. These people are due to start receiving settled status shortly. ‘OPEN FOR DISCUSSION’ Mahmood’s proposals are being dispersed through various pieces of legislation — making a fightback against them harder for critics. The ILR restrictions will be made via a rule change that doesn’t require legislation at all. But some Labour opponents asked whether that position is sustainable. “The big question is if politically they can do that even if they can legally,” said one Rayner ally. “The one thing that appears to unite a growing body of people is a blunt retrospective five to ten year element, with no protections.” The opponents hope they can get the PM to water the plans down himself, but failing that, they want to push for a vote. They’re yet to land on a means, but tabling an amendment to one element of the legislation is one possibility under discussion, one adviser told POLITICO. Like other critics, the same adviser had been buoyed by Rayner’s speech: “That was very helpful last night. That was a big intervention.” Vaughan, an immigration lawyer at the firm where Starmer practised, Doughty Street Chambers, has written a detailed letter to the PM calling for a rethink that has amassed more than 100 signatures from fellow Labour MPs.   One government official said: “They’re doing an awful lot of engagement with MPs. It’s been going on for weeks. I hadn’t heard that they were willing to shift, but I’ve noticed that they’ve been doing loads of engagement. Anyone who wants to talk to a minister is being put in front of one, and anything on the proposals that have been floated has been open for discussion.” Mahmood, however, thinks her plans are popular with the wider public. Her team points to research by the More in Common think tank that suggests extending the waiting period for ILR, even if applied to those already living in the U.K., is backed by Green supporters on the left of British politics. A LEADERSHIP PITCH? Rayner’s comments on the migration proposals were part of a broader swipe at the direction and strategy of Starmer’s government, from which she resigned over a tax scandal in September. She said her party was “running out of time” to show change and “cannot just go through the motions in the face of decline.”  Some of Rayner’s supporters — and critics — in Labour suggested privately that her intervention was geared toward winning the support of grassroots members in any future leadership contest. Leadership contenders generally require some support from major unions, which are formally affiliated to Labour. One of the largest, UNISON, branded the migration reforms “reckless” in February. One union official said: “Rayner’s intervention on changes to indefinite leave to remain is savvy. It’s one of UNISON’s big campaign asks right now — UNISON represents a lot of migrant social care workers. Rayner coming out publicly against Mahmood’s proposals won’t go unnoticed.” The left-wing TSSA union, which has already publicly backed Rayner to replace Starmer, praised her “sound advice” on Wednesday while Andy Burnham, the Greater Manchester mayor who had been touted as a possible leadership contender before he was blocked from running for parliament, said Rayner “needs to be listened to.” A second union official said: “She’s playing a canny game, the way she’s got the unions and Burnham on her side over this. She’s making clear that she is the default candidate.”

LONDON — Green Party Leader Zack Polanski says the British government should freeze energy bills this summer, as high costs caused by conflict in the Middle East threaten to hit families. In a speech at the left-leaning New Economics Foundation think tank Wednesday, Polanski said ministers should not allow the energy price cap — a limit on the amount homes pay for their energy — to increase when it is recalculated for July. The government should instead “guarantee right now that it will not allow energy bills to rise beyond the April-June price cap,” Polanski — whose party is riding high after a by-election victory last month — said.  But the plan has already drawn attacks from the Greens’ political opponents, keen to paint the left-wing challenger outfit as profligate. The last time the U.K. government intervened with a universal cap on costs was in 2022, when then-Prime Minister Liz Truss froze average bills at £2,500 per year, after energy prices rocketed on the back of Russia’s war in Ukraine.  That universal move ended up cost a whopping £23 billion. Polanski said his policy, which would freeze bills at £1,641 for the average household, would cost £8.4 billion, paid for in part through taxing high-polluting oil and gas firms in the North Sea.  Government ministers have already stressed that homes covered by the price cap would not see their bills rise before July. But they are under pressure to get support in place for people exposed to bill spikes once the price cap runs out, after wholesale gas prices surged as a result of the Iran conflict.  Chancellor Rachel Reeves said last week that the Treasury is looking at “targeted options” to help the poorest households. Prime Minister Keir Starmer said on Monday the government is not “ruling anything out.”  The Resolution Foundation think tank said this week that the government should “resist pressure to rush out updated versions of old support schemes like the universal blank cheque approach of Liz Truss.” Polanski insisted targeted interventions “are conversations we should have but they’re not things we could bring in immediately”  He said if that means bailing out “wealthy people,” then the government should overhaul the tax system, too. Polanski used his speech to repeat calls for a wealth tax as well as bringing capital gains tax in line with income tax.  “The number one priority has to make sure that people can afford their energy bills today and tomorrow,” he said.  Labour Party Chair Anna Turley said Polanski has the “wrong answers on the economy.”   “Respected economists have sounded the alarm over the Greens’ ‘catastrophic’ plans to print money, which would hammer working people and their living standards,” she argued. 

BRUSSELS — The European Union and Australia are expected to conclude talks on a long-awaited trade deal early next week, with Commission President Ursula von der Leyen on Wednesday announcing she would visit from March 23-25.  Von der Leyen will meet Australian Prime Minister Anthony Albanese in Canberra, according to a Commission statement. Trade Commissioner Maroš Šefčovič is also expected to join the trip, although planning might yet change due to flight disruptions in the Middle East. Albanese confirmed the visit, saying in a statement that he would meet both von der Leyen and Šefčovič on March 24. Brussels and Canberra relaunched trade negotiations after Donald Trump’s return to the White House last year. They had collapsed amid acrimony at the end of 2023 amid disagreements over quotas on beef and lamb. The breakthrough comes as the EU looks to get closer to the Pacific-centered CPTPP trade bloc through its deepening bonds with Australia. In a letter to EU leaders shared Monday, von der Leyen said the EU and Australia were in “the final stretch towards concluding” their trade agreement.  “In addition to removing trade barriers, it will also facilitate access to critical raw materials — such as lithium, cobalt, rare earth elements, and hydrogen — and strengthen Europe’s presence in one of the world’s most dynamic economic regions,” she wrote, as part of a list on the Commission’s efforts to boost competitiveness. Negotiators had grappled in the home stretch to close the gap on access for Australian beef and lamb to the European market; EU trade protections on specialty foods; critical minerals; and an Australian tax on luxury cars. Canberra and Brussels are also looking to seal a security and defense partnership, which is finalized.  The EU top diplomat Kaja Kallas, who would be signing the defense deal, known as Security and Defense Partnership, is however not expected to be part of the trip. The pace would come on the heels of similar partnerships signed with the U.K., Canada and most recently India. Speaking last week at at the annual gathering of diplomats with the External Action Service, the EU’s diplomatic body, Kallas said that the deal was coming as she announced that “later this week, I will sign the tenth [SDP] with Australia and subsequent ones with Iceland and Ghana in the coming days.”     James Panichi, Zoya Sheftalovich, Sebastian Starcevic and Nette Nöstlinger contributed reporting.

President Donald Trump is demanding that the Federal Reserve immediately lower borrowing costs. But the war in the Middle East has now made any interest rate cuts much less likely in 2026 — not just in the U.S. but around the world. With oil prices surging past $100 a barrel and Gulf shipping routes disrupted by Iran, governments and investors are bracing for a repeat of the 2022 energy shock from Russia’s invasion of Ukraine. And from Washington to Frankfurt, and London to Tokyo, the world’s central banks are likely to strike a more wary tone on inflation while assessing the fallout during a flurry of policy meetings taking place this week. The effective closure of the Strait of Hormuz, a channel through which roughly a fifth of global oil passes, is pushing up costs not only for energy and transportation, but also for other key goods that are shipped through the waterway. The result could be a toxic mix for central banks: higher prices and lower employment, two problems they’re not equipped to address simultaneously. “My best guess, but spoken with no conviction at all, is that this gets sorted out somehow in the next few weeks, and by the middle of the year, oil prices have come back down a fair amount,” said William English, a former top staffer at the Fed who is now a professor at Yale University. “But there’s a real risk, of course, that things go on for longer and are more damaging. And in that case, all bets are off.” The specter of a prolonged global energy crunch could dash the hopes of consumers, businesses and investors worldwide for rate cuts this year — and in some cases, throw those plans in reverse. No immediate moves are likely except in Australia, which raised its target rate by a quarter-point on Tuesday. But markets have already repriced their bets on what comes next from monetary policymakers. Indeed, if the Fed does cut rates later this year, it might be one of the few major central banks that does so, given that other economies like Europe are more exposed to higher energy costs than the U.S. Before the war, investors saw a chance of cuts from the Fed, the European Central Bank and the Bank of England. Now they’re pricing in an altogether tighter policy stance: at least one ECB rate hike this year, a 60 percent chance of a BoE increase, fewer and later cuts from the Fed and more urgency in raising rates from the Bank of Japan. Central bankers will prefer to wait until they get a better gauge of the economic repercussions from the conflict because “the shock could turn out to be negligible or very large,” said EFG chief economist Stefan Gerlach. But few doubt the need for strong messaging as central banks are wary of repeating 2022, when energy price shocks combined with the after-effects from Covid and fiscal stimulus to morph into the worst inflation spike in half a century. “There will be a significant contingent worrying about upside inflation risks in light of the 2022 experience,” J.P. Morgan economist Greg Fuzesi said ahead of the ECB’s policy-making council’s meeting on Thursday. The Iran conflict is further complicating efforts by Trump to demonstrate to voters that the GOP is addressing cost-of-living concerns before this year’s midterm elections. Already, the war has caused a surge in politically salient gas prices and erased some of the progress toward more affordable mortgage rates. And it’s further muddied the picture for a central bank that the president has been pressing hard to take decisive action toward rate cuts. Now, when Chair Jerome Powell and other Fed officials meet on Wednesday, they’re expected to be more open to the idea of rate increases later this year, though that’s still not the likeliest outcome. As Yale’s English pointed out, higher costs might ultimately increase the case for rate cuts if they slow the economy significantly. “With the higher oil prices and the shock to the global economy, the likelihood of overheating seems reduced now, so that’s one of the reasons you might be comfortable waiting through some period of higher inflation,” rather than hiking rates in response, English said. “This might be enough to push the economy into real weakness, and in that case, they might well have to cut.” But if households and businesses start to worry about a new acceleration in inflation and start expecting higher prices, that dynamic can be self-fulfilling and might call for rate hikes. Hawkish policymakers are already signaling the ECB won’t hesitate this time. “A reaction by the ECB is potentially closer than many people think,” Peter Kažimír, Slovakia’s central bank governor, told Bloomberg last week. “We will be ready to act if needed.” President Christine Lagarde pledged to ensure that consumers “don’t suffer the same inflation increases like those we saw in 2022 and 2023.” Back then, the ECB was slow to react, helping inflation surge past 10 percent. Economists say today’s backdrop looks very different: In 2022, rates were near or below zero, balance sheets were bloated and fiscal policy was highly expansionary. “When inflation rose, it did so in an environment of strong demand supported by both fiscal and monetary stimulus,” said Gerlach. Now, tighter monetary and fiscal policy should limit the risk of energy shocks spilling through the economy into second-round effects. Still, Barclays analyst Silvia Ardagna says that if medium-term inflation expectations “deteriorate significantly,” she expects “the ECB to act more swiftly than in 2022, but to tighten policy gradually.” Nick Kounis, of Dutch bank ABN AMRO, also sees a more hawkish tone. “Uncertainty on the conflict is high, but if the current situation persists through to the April meeting, a hike becomes a distinct possibility,” he said. Many analysts say the first obvious central bank casualty of the war is likely to be the Bank of England, which was widely expected to cut this week but is now seen firmly on hold. That’s because the U.K. still hasn’t quite gotten on top of the inflation that was unleashed four years ago. Andrew Benito, an economist with hedge fund Point72 in London, reckons that the inevitable increase in fuel prices and household energy bills alone will add a full percentage point to headline inflation by summer, with “second-round” impacts on other prices pushing it even further away from the BoE’s target. That, says Deutsche Bank’s Sanjay Raja, will force the bank into some “uncomfortable trade-offs”: The U.K. economy has already slowed over the last year due to global trade uncertainty and various government tax hikes to close the budget deficit. Hiking rates when the economy is already struggling could risk needlessly making things worse. But any sign of complacency could be disproportionately punished by the markets, given that the BoE performed worse than any other major central bank during the last inflation shock (the headline rate peaked at over 11 percent). Raja expects BoE Governor Andrew Bailey to highlight the differences with 2022 — when inflation was accelerating rather than slowing — as one reason not to overreact to today’s price spike. However, he expects that Bailey, like the ECB and others, will talk tough about not letting business and households develop an inflationary mindset again. More important will be the Bank of Japan’s decisions and press conference on Thursday, due to the outsized influence of Japanese interest rates on global financial markets. For decades, Japan kept interest rates low and printed money furiously to escape deflation. As long as it did so, Japanese and foreign investors borrowed yen cheaply to throw at higher-yielding markets such as the U.S. Now, however, the BoJ’s concerns have finally switched from deflation to inflation, and BoJ Governor Kazuo Ueda is now in a hurry to “normalize” policy. Its key interest rate, at 0.75 percent, is the lowest in the developed world outside Switzerland. But Japan, too, faces a big headwind from higher energy prices because of its dependence on imports, and Gregor Hirt, chief investment officer for Multi Asset at Allianz Global Investors, argues that the BoJ will hesitate before raising rates again. The trouble with waiting and seeing is that the yen has already lurched lower, prompting alarm in Washington and sparking rumors of possible intervention to support it. “In order to stop further weakness, the BoJ may have to move up a rate hike to stabilize the currency,” Hirt said. Meanwhile, the war has presented the Swiss National Bank, which has kept interest rates at zero since June 2025, with a different kind of conundrum. One risk is that a global “flight to safety” drives the Swiss franc to even greater heights against the euro and others. That could make so many imports cheaper that the overall inflation rate could turn negative. Alternatively, the boost in energy prices could have the same malign impact on inflation as it will elsewhere. “The SNB will probably prefer to wait and see which of the two effects will have the greater impact on inflation prospects before acting in one direction or the other,” said ING economist Charlotte de Montpellier, who expects the Swiss central bank to stay on hold. That response, shot through with varying degrees of nervousness, looks likely to be the dominant one this week. But things will look very different if the war situation hasn’t improved by the next round of meetings.