The discussion surrounding the digital euro is strategically important to Europe. On Dec. 12, the EU finance ministers are aiming to agree on a general approach regarding the dossier. This sets out the European Council’s official position and thus represents a major political milestone for the European Council ahead of the trilogue negotiations. We want to be sure that, in this process, the project will be subject to critical analysis that is objective and nuanced and takes account of the long-term interests of Europe and its people. > We do not want the debate to fundamentally call the digital euro into question > but rather to refine the specific details in such a way that opportunities can > be seized. We regard the following points as particularly important: * maintaining European sovereignty at the customer interface; * avoiding a parallel infrastructure that inhibits innovation; and * safeguarding the stability of the financial markets by imposing clear holding limits. We do not want the debate to fundamentally call the digital euro into question but rather to refine the specific details in such a way that opportunities can be seized and, at the same time, risks can be avoided. Opportunities of the digital euro:  1. European resilience and sovereignty in payments processing: as a public-sector means of payment that is accepted across Europe, the digital euro can reduce reliance on non-European card systems and big-tech wallets, provided that a firmly European design is adopted and it is embedded in the existing structures of banks and savings banks and can thus be directly linked to customers’ existing accounts. 2. Supplement to cash and private-sector digital payments: as a central bank digital currency, the digital euro can offer an additional, state-backed payment option, especially when it is held in a digital wallet and can also be used for e-commerce use cases (a compromise proposed by the European Parliament’s main rapporteur for the digital euro, Fernando Navarrete). This would further strengthen people’s freedom of choice in the payment sphere. 3. Catalyst for innovation in the European market: if integrated into banking apps and designed in accordance with the compromises proposed by Navarrete (see point 2), the digital euro can promote innovation in retail payments, support new European payment ecosystems, and simplify cross-border payments. > The burden of investment and the risk resulting from introducing the digital > euro will be disproportionately borne by banks and savings banks. Risks of the current configuration: 1. Risk of creating a gateway for US providers: in the configuration currently planned, the digital euro provides US and other non-European tech and payment companies with access to the customer interface, customer data and payment infrastructure without any of the regulatory obligations and costs that only European providers face. This goes against the objective of digital sovereignty. 2. State parallel infrastructures weaken the market and innovation: the European Central Bank (ECB) is planning not just two new sets of infrastructure but also its own product for end customers (through an app). An administrative body has neither the market experience nor the customer access that banks and payment providers do. At the same time, the ECB is removing the tried-and-tested allocation of roles between the central bank and private sector. Furthermore, the Eurosystem’s digital euro project will tie up urgently required development capacity for many years and thereby further exacerbate Europe’s competitive disadvantage. The burden of investment and the risk resulting from introducing the digital euro will be disproportionately borne by banks and savings banks. In any case, the banks and savings banks have already developed a European market solution, Wero, which is currently coming onto the market. The digital euro needs to strengthen rather than weaken this European-led payment method. 3. Risks for financial stability and lending: without clear holding limits, there is a risk of uncontrolled transfers of deposits from banks and savings banks into holdings of digital euros. Deposits are the backbone of lending; large-scale outflows would weaken both the funding of the real economy – especially small and medium-sized enterprises – and the stability of the system. Holding limits must therefore be based on usual payment needs and be subject to binding regulations. -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany * The ultimate controlling entity is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany More information here.

BRUSSELS — The U.S. must preserve and grow the dominance of its financial sector worldwide, President Donald Trump argues in his new National Security Strategy. The 33-page document is a rare formal explanation of Trump’s foreign policy worldview by his administration, and can shape U.S. policy priorities. “The United States boasts the world’s leading financial and capital markets, which are pillars of American influence that afford policymakers significant leverage and tools to advance America’s national security priorities,” the document states. “But our leadership position cannot be taken for granted,” it continues, calling on America to leverage “our dynamic free market system and our leadership in digital finance and innovation to ensure that our markets continue to be the most dynamic, liquid, and secure and remain the envy of the world.” The strategy lists the “world’s leading financial system and capital markets, including the dollar’s global reserve currency status” as one of the U.S. key levers of power. Trump’s comments come as Europe looks to grow its own finance system to reduce the continent’s dependence on Wall Street. The EU has put forward a broad plan to boost its own finance industry by strengthening its single market for investment, and it will draft policy plans in the coming months aiming to boost its banks’ ability to compete globally. It is also creating a digital version of the euro currency, which would reduce its reliance on the dollar and on U.S. payment giants.

The European Central Bank is hatching a plan to boost the use of the euro around the world, hoping to turn the world’s faltering confidence in U.S. political and financial leadership to Europe’s advantage. Liquidity lines — agreements to lend at short notice to other central banks — have long been a standard part of the crisis-fighting toolkits of central banks, but the ECB is now thinking of repurposing them to further Europe’s political aims, four central bank officials told POLITICO. One aim of the plan is to absorb any shocks if the U.S. — which has backstopped the global financial system with dollars for decades — suddenly decides not to, or attaches unacceptable conditions to its support. The other goal is to underpin its foreign trade more actively and, ultimately, grab some of the benefits that the U.S. has historically enjoyed from controlling the world’s reserve currency. Officials were granted anonymity because the discussions are private. Bruegel fellow Francesco Papadia, who was previously director-general for the ECB’s market operations, told POLITICO that such efforts are sensible and reflect an increasing willingness among European authorities to see the euro used more widely around the world. WHAT’S A LIQUIDITY LINE? Central banks typically use two types of facilities to lend to each other: either by swapping one currency for another (swap lines) or by providing funds against collateral denominated in the lender’s currency (repo lines). The ECB currently maintains standing, unlimited swap lines with the U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Swiss National Bank, and the Bank of Japan, as well as standing but capped lines with the Danish and Swedish central banks. It also operates a facility with the People’s Bank of China, capped in both volume and duration. Other central banks seeking euro liquidity must rely on repo lines known as EUREP, under which they can borrow limited amounts of euros for a limited period against high-quality euro-denominated collateral. At present, only Hungary, Romania, Albania, Andorra, San Marino, North Macedonia, Montenegro and Kosovo have such lines in place. But these active lines have sat untouched since Jan. 2, 2024 — and even at the height of the Covid crisis, their use peaked at a mere €3.6 billion. For the eurozone’s international partners, the knowledge that they can access the euro in times of stress is valuable in itself, helping to pre-empt self-fulfilling fears of financial instability. But some say that if structured generously enough, the facilities can also reduce concerns about exchange rate fluctuations or liquidity shortages. Such details may sound academic, but the availability of liquidity lines has real impacts on business: A Romanian carmaker whose bank has trouble securing euros may fail to make payments to a supplier in Germany, disrupting its production and raising its costs.  “The knowledge that foreign commercial banks can borrow in euros while being assured that they have access to euro liquidity [as a backstop] encourages the use of the euro,” one ECB rate-setter explained.  French central bank chief François Villeroy de Galhau suggested that Europe could at least take a leaf out of China’s book, noting that the Eurosystem “can make euro invoicing more attractive” by expanding the provision of euro liquidity lines. | Kirill Kudryavtsev/Getty Images “Liquidity lines, in particular EUREP, should be flexible, simple and easy to activate,” he argued. One option, he said, would be to extend them to more countries. Another could be to make EUREP a standing facility — removing any doubts about whether, and under what conditions, euro access would be granted. Papadia added that the ECB could also ease access to EUREP by cutting its cost, boosting available volumes or extending the timeframe for use. NOT JUST AN ACADEMIC QUESTION French central bank chief François Villeroy de Galhau suggested in a recent speech that Europe could at least take a leaf out of China’s book, noting that the Eurosystem “can make euro invoicing more attractive” by expanding the provision of euro liquidity lines. China has established around 40 swap lines with trading partners worldwide to underpin its burgeoning foreign trade, especially with poorer and less stable countries. By contrast, the ECB — a historically cautious animal — “is not marketing the euro to the same extent that the Chinese market the renminbi,” according to Papadia.  Another policymaker told POLITICO that while there is a broad consensus that liquidity lines should be made more widely available, the Governing Council had not yet hashed out the details. Austrian National Bank Governor Martin Kocher told POLITICO in a recent interview that there has been “no deeper discussion” on the Council, adding that he sees no reason to promote euro liquidity lines actively. “I’m not arguing that you should incentivize or create a demand. Rather, if there is demand, we should be prepared for it,” he said, acknowledging that “preparation is very important.” He noted that erratic U.S. policies could force the euro “to take on a stronger role in the international sphere” — both as a reserve currency and in transactions. According to a Reuters report earlier this month, similar concerns among central banks worldwide have sparked a debate over creating an alternative to Federal Reserve funding backstops by pooling their own dollar reserves. The ECB declined to comment for this article. RISK AVERSION AND OTHER OBSTACLES  However, swap lines in particular don’t come without risks. “The main risk is that the country would use a swap and then would not be able to return the drawn euros,” said Papadia. “And then you will be left with foreign currency you don’t really know what to do with.” That is exactly the kind of trap some economists warn the U.S. is stumbling into with its $20 billion swap line to Argentina. “The United States doesn’t really want Argentina’s currency,” the Council on Foreign Relations’ Brad Setser wrote in a blog post. “It expects to be repaid in dollars, so it would be a massive failure if the swap was never unwound and the U.S. Treasury was left holding a slug of pesos.” Austrian National Bank Governor Martin Kocher said there has been “no deeper discussion” on the Council, adding that he sees no reason to promote euro liquidity lines actively. | Heinz-Peter Bader/Getty Images Such thinking, another central bank official said, will incline the ECB to focus first on reforming the EUREP lines, which have always been its preferred tool. The trouble with that, however, is that EUREP use may be limited by a lack of safe assets denominated in euros to serve as collateral. Papadia noted that the Fed’s network of liquidity lines works because “the Fed has the U.S.  Treasury as a kind of partner in granting these swaps.” So long as Europe fails to create a joint debt instrument, this may put a natural cap on such lines.  Even with a safe asset, focusing on liquidity lines first could be putting the cart before the horse, said Gianluca Benigno, professor of economics at the University of Lausanne and former head of the New York Fed’s international research department. Europe’s diminishing geopolitical relevance means that the ECB is unlikely to see much demand — deliberately engineered or not — for its liquidity outside Europe without much broader changes, Benigno told POLITICO. Liquidity lines can be used to advance your goals if you already have power — but they can’t create it. For that, he argued, Europe first needs a clear political vision for its role in the global economy, alongside a Capital Markets Union and the creation of a common European safe asset — issues that only politicians can address.

House lawmakers released more than 20,000 pages of documents related to Jeffrey Epstein on Wednesday — and they include communications between the convicted sex offender and high-profile individuals in politics, media, Hollywood and foreign affairs. One email shows Epstein communicating with a former White House counsel. Some showed offensive emails between Epstein and former Treasury Secretary Larry Summers. Another offers insight into Epstein’s offer to help Trump’s former adviser Steve Bannon. The documents, a small batch released by Democrats and a larger one released by Republicans, also shed light on the disgraced financier’s private musings about Trump and to what extent Trump may have known about his criminal conduct. The Trump administration pushed back on allegations of wrongdoing Wednesday, with White House press secretary Karoline Leavitt alleging Democrats “selectively leaked emails to the liberal media to create a fake narrative to smear President Trump.” Trump, in a social media post, also accused Democrats of “trying to bring up the Jeffrey Epstein Hoax again because they’ll do anything at all to deflect on how badly they’ve done on the Shutdown, and so many other subjects.” Here are some of the most stunning revelations from the latest trove of documents. EPSTEIN AND FORMER TREASURY SECRETARY LARRY SUMMERS Epstein’s inbox features several appearances by Larry Summers, a prominent economist who served in the Clinton and Obama administrations. In one exchange, Summers shares snippets from a 2017 trip to Saudi Arabia, including a quip that the “general view” among Saudi officials was that “Donald is a clown, increasingly dangerous on foreign policy.” In another email, Summers remarks that “I observed that half of the IQ In world was possessed by women without mentioning they are more than 51 percent of population.” “I’m trying to figure why American elite think if u murder your baby by beating and abandonment it must be irrelevant to your admission to Harvard, but hit on a few women 10 years ago and can’t work at a network or think tank,” Summers added before directing Epstein: “DO NOT REPEAT THIS INSIGHT.” Summers has attracted scrutiny for his rhetoric about women in the past, including a 2005 speech in which he cited a controversial theory that has been used to suppose that men are more prone to extremely high or low IQs than women as one reason women are underrepresented in science and engineering. The backlash generated by the speech contributed to Summers’ decision to step down as president of Harvard University in 2006. A representative for Summers did not respond to a request for comment about the exchange. MICHAEL WOLFF’S ADVICE In a series of emails dating back 10 years, Epstein discussed his predicament and his ties to Trump with author and journalist Michael Wolff. Wolff on several occasions offered advice to Epstein regarding how he might best publicly navigate his relationship with Trump, who at the time was in the midst of his 2016 presidential campaign In a 2015 email, Wolff offers advice on what to do if Trump was asked about his relationship with Epstein. Specifically, Epstein asked Wolff how Trump would respond to such a question. “I think you should let him hang himself,” Wolff wrote of Trump in a 2015 email. “If [Trump] says he hasn’t been on the plane or to the house, then that gives you a valuable PR and political currency.” In a 2019 email to Wolff, Epstein wrote that “Trump said he asked me to resign, never a member ever. [O]f course he knew about the girls as he asked ghislaine to stop.” The message appears to reference Trump’s Mar-a-Lago club and Ghislaine Maxwell, a convicted Epstein co-conspirator currently serving a 20-year prison sentence for crimes connected to Epstein. The following year, Epstein and several associates received word that Reuters was readying a story about a lawsuit filed against the disgraced financier and Trump over an alleged sexual assault from 1994. “Well, I guess if there’s anybody who can wave thus [sic] away, it’s Donald,” Wolff wrote. “Let me know if there’s anything I can do.” Wolff’s attorney did not respond to a request for comment. EPSTEIN AND FORMER WHITE HOUSE COUNSEL KATHRYN RUEMMLER Epstein’s inbox also features repeated appearances by another member of the Obama administration: former White House Counsel Kathryn Ruemmler. In a 2018 exchange, Ruemmler — then a partner at law firm Latham & Watkins — discusses the criminal case against former Trump attorney Michael Cohen, who admitted to conspiring with Trump to pay porn star Stormy Daniels hush money during a New York criminal investigation. In one of the messages, Epstein exclaims: “you see, i know how dirty donald is. my guess is that non lawyers ny biz people have no idea. what it means to have your fixer flip.” In a separate exchange, Ruemmler shared her apparent disdain for the people of New Jersey during an email about a planned road trip to New York. “Think I am going to drive,” she wrote. “I will then stop to pee and get gas at a rest stop on the New Jersey turnpike, will observe all of the people there who are at least 100 pounds overweight, will have a mild panic attack as a result of the observation, and will then decide that I am not eating another bite of food for the rest of my life out of fear that I will end up like one of these people.” Ruemmler did not respond to a request for comment. She is now the chief legal officer at Goldman Sachs, which declined to comment. EPSTEIN AND PETER THIEL In one 2018 exchange, Epstein asks PayPal founder Peter Thiel — an ally of Vice President JD Vance — if he was enjoying Los Angeles. Epstein also complimented Thiel on his “trump exaggerations, not lies.” “Can’t complain thus far…,” Thiel answered, to which Epstein replied, “Dec visit me Caribbean.” Epstein’s private island near St. Thomas in the Caribbean has long been the subject of speculation about which possible conspirators may have visited the island, which Epstein allegedly used to conceal his criminal behavior. A spokesperson for Thiel said he never visited the island. EPSTEIN AND STEVE BANNON In several of Epstein’s exchanges with business associates and friends, he boasts of his relationships to powerful figures in media, technology and foreign affairs. In a 2018 exchange with Bannon, Epstein says “there are many leaders of countries we can organize for you to have one on ones” with if Bannon agreed to spend eight to 10 days in Europe. “If you are going to play here, you’ll have to spend time, europe by remote doesn’t work,” Epstein wrote. A representative for Bannon declined to comment. EPSTEIN AND THE KREMLIN Epstein apparently leaned on his foreign policy connections in at least one instance: in the lead-up to Trump’s 2018 bilateral meeting with Russian President Vladimir Putin, Epstein suggested that Sergei Lavrov, Russia’s longtime foreign minister, seek his insights on Trump. “I think you might suggest to putin that lavrov can get insight on talking to me,” Epstein wrote in an email to Thorbjorn Jagland, a former prime minister of Norway who was leading the Council of Europe at the time. During the exchange, Epstein said he had already spoken with Vitaly Churkin, Russia’s ambassador to the United Nations, about Trump before Churkin died in 2017. “Churkin was great,” Epstein wrote. “He understood trump after our conversations. it is not complex. he must be seen to get something its that simple.” The Russian embassy did not respond to a request for comment. EPSTEIN AND CELEBRITIES The rotating cast of characters Epstein turned to for advice apparently also included the family of disgraced filmmaker Woody Allen. In one email, Epstein shared a news article about James Woolsey, who led the CIA during the Clinton administration, joining Trump’s 2016 presidential campaign as an adviser with Soon-Yi Previn — Allen’s wife and the adopted daughter of actress Mia Farrow, whom Allen had a relationship with. Previn replied that “Woody said it didn’t mean anything.” Previn and Allen could not be reached for comment about the exchange. EPSTEIN AND A WELL-KNOWN PUBLICIST In 2011, Epstein wrote to Peggy Siegal, a prominent publicist who has worked in elite New York and Hollywood circles, with an ask: Could she reach out to media mogul Ariana Huffington to enlist her help in clearing his name? In the exchange, Epstein and Siegal discuss “the girl who accused Prince Andrew” — an apparent reference to the late Virginia Giuffre, one of Epstein’s most prominent accusers who sued Prince Andrew in 2021 alleging he sexually assaulted her on several occasions. The prince was stripped of his titles and is now identified as Andrew Mountbatten Windsor. He has long denied any accusations of sexual wrongdoing. In one message, Epstein writes that Huffington — the co-founder of the Huffington Post, now HuffPost — “should champion the dangers of false allegations” and “send a reporter or reporters to investigate” Giuffre. Epstein wrote of the idea: “the palace would love it, the girl in the photo, was nothing more than a telephone answerer,, she was never 15, according to her version she worked for trump, first at that age, at MAra lago.” Siegal offered to send the message to Huffington on her own behalf if Epstein fixed the grammar in his message, although Huffington, who left HuffPost in 2016, told POLITICO she “was never contacted and never sent a reporter.” A spokesperson for HuffPost also said that “After reaching out to current and former staff, to the best of our knowledge, no talk of this coverage ever made it to HuffPost.” Siegal could not be reached for comment. EPSTEIN AND CONTROVERSIAL ARTIST ANDRES SERRANO While several of the emails released Wednesday call attention to Epstein’s apparent ties to Trump, in one conversation, he appears to express doubt about supporting the then-candidate’s presidential campaign. In the exchange from October 2016, Epstein discusses the election with artist Andres Serrano, whose controversial 1987 photograph “Piss Christ” — depicting a crucifix submerged in urine — attracted widespread condemnation. Epstein wrote to Serrano that there was “no good choice” in the electi on, to which Serrano replied “I was prepared to vote against Trump for all the right reasons but I’m so disgusted by the outrage over ‘grab them by the pussy’ that I may give him my sympathy vote.” Serrano was referencing the widely known Access Hollywood tape of Trump bragging about sexually abusing women. “I’m sure Bill C said things, too,” Serrano added, in an apparent reference to former President Bill Clinton. Serrano did not respond to a request for comment about the emails. Clinton has previously denied having a close relationship with Epstein and through spokespeople said he had no knowledge of Epstein’s crimes. Gregory Svirnovskiy, Cheyanne M. Daniels, Kyle Cheney, Josh Gerstein and Erica Orden contributed to this report.

Hungary’s surging opposition is demanding Prime Minister Viktor Orbán explain a “bailout package” he hinted at securing from U.S. President Donald Trump.   Orbán, a longtime Trump ally, traveled to Washington last week to meet with the American leader. As he returned to Budapest, the populist-nationalist Hungarian premier told his delegation the U.S. had agreed to provide Budapest a “financial shield.” “Certain Brussels instruments that could be used against Hungary can now be considered ineffective … The notion […] that the Hungarian economy can be strangled from the financing side, can now be forgotten,” he said, according to local media, adding, “We have resolved this with the Americans.”  After 15 years in charge, Orbán faces potential defeat in next spring’s national election — and the specter of financial assistance from Washington closely echoes Trump’s recent blockbuster move to save another ideological ally, Javier Milei in Argentina. Orbán’s remarks, which allude to EU money due to Hungary but frozen because of concerns about backsliding on the rule of law, triggered questions Monday from Péter Magyar, leader of Hungary’s opposition, which is leading the ruling Fidesz party in the polls. “Why was such a ‘financial shield’ necessary? Is there a near-state bankruptcy situation? What would Viktor Orbán spend the trillions of forints in American loans on? Why is he indebting his fellow citizens instead of bringing home the 8 trillion forints in EU funds owed to Hungarians?” Magyar demanded in a post on social media. In a separate missive, he added, “Why did Orbán secretly negotiate a huge bailout package?”  EU ESTRANGEMENT Hungarian media outlet Válasz Online reported that Trump and Orbán may have committed to a currency swap between their countries’ central banks — similar to the $20 billion exchange-rate stabilization agreement Argentina inked with the U.S. last month — essentially, a bailout package for Budapest.  If so, it would be the second time Trump provided financial assistance for a right-wing ally ahead of a crucial election, after he approved the bailout package for Milei, the chainsaw-wielding libertarian president of Argentina. That intervention, organized by Treasury Secretary Scott Bessent, included direct U.S. purchases of Argentine pesos and a $20 billion currency-swap agreement giving Buenos Aires access to dollars. Bessent also announced plans to marshal an additional $20 billion in private financing, though that money has yet to appear. There are differences, too, though, which make any Washington-Budapest arrangement more difficult to understand. Hungary’s central bank does not have dollar swap arrangements with the U.S. Federal Reserve, nor does Hungary have a formal backstop — basically, an agreement to help financially in times of fiscal disaster — with the Fed.  By contrast, it does have a swap arrangement for euros with the European Central Bank, and it could also turn to the International Monetary Fund if the ECB were unable, or unwilling, to help. Spokespeople for the White House and U.S. Treasury didn’t immediately respond to a request for comment. Donald Trump’s relationships with Budapest and Buenos Aires reveal clear parallels. | Roberto Schmidt/Getty Images Much of this is currently academic because Hungary is, to put it mildly, in a far better economic position than Argentina — it doesn’t even need a bailout. Hungary, like many EU countries, has weak growth, but the main threats to its financial stability under Orbán’s leadership relate to the potential for estrangement from the EU. ARGENTINA PARALLELS The U.S.’s Argentina intervention was a success, politically, for Milei, whose party won a decisive victory on Oct. 27 in midterm elections allowing him to press ahead with his radical economic overhaul of the country. Trump celebrated the outcome, saying the effort had “made a lot of money for the United States.” Bessent likewise said the U.S. investment had “turned a profit.” But the administration has released no details about the full scope of U.S. involvement or the returns it claims to have earned. Trump’s rescue package has drawn political backlash in the U.S. from both Democrats and even some Republicans, who blasted the administration’s assistance for Argentina as a bailout for a political ally that may boost wealthy hedge funds while risking U.S. taxpayer dollars on a chronically bankrupt country. Bessent said the Argentina intervention was aimed at countering China’s growing clout across Latin America and, more broadly, reasserting American economic power in the Western Hemisphere, comparing the U.S. effort in Argentina to an “economic Monroe Doctrine.”  Trump’s relationships with Budapest and Buenos Aires reveal clear parallels, and an effort to prop up key partners in regions where many leaders are not naturally allied with the U.S. president’s MAGA agenda. The White House also sided with Orbán over the Hungarian leader’s refusal to stop purchasing Russian oil despite a European push to wean off Moscow’s exports, exempting Hungary from U.S. sanctions on Russian energy for one year following his meeting with Trump. Further financial backing from Washington could embolden Orbán, a frequent thorn in the EU’s side, to take even stronger anti-Brussels positions. Seb Starcevic reported from Brussels. Michael Stratford reported from Washington, D.C.

LONDON — Britain’s financial watchdogs have been on a crypto journey — with a little help from Donald Trump.  The Bank of England publishes its long-awaited rules for stablecoin Monday. Two years after the central bank’s Governor Andrew Bailey dismissed the virtual currency — a theoretically more stable form of crypto — as “not money,” its rulebook is now expected to get a cautious welcome from an industry that’s been lobbying hard for a rethink. It would mark quite a shift from the U.K. central bank. Stablecoins “are not robust and, as currently organized, do not meet the standards we expect of safe money in the financial system,” Bailey told a City of London audience in 2023.  Now his top officials herald a “fabulous opportunity.”  The Bank chief’s initial position — that he doesn’t see stablecoins as a substitute for commercial bank money — has put him at odds with the U.K. Treasury, which is on an all-consuming mission to get the sluggish British economy moving. Chancellor Rachel Reeves wants the U.K. “at the forefront of digital asset innovation.”  The United States crypto lobby, fresh from several wins stateside, spied an opportunity. Exploiting those divisions — and pointing to a more gung-ho approach from Trump’s U.S. — has allowed firms to push for a British regime that more closely aligns with their own.  Monday could be a very good day at the office.  TREADING CAREFULLY Stablecoins are a type of cryptocurrency pegged to a real asset, like the dollar, with the largest and best-known offering being Tether. They’re seen as a more palatable version of crypto, and are used by investors to buy other cryptocurrencies, or allow cross-border payments.  The pro-stablecoin camp says their development is necessary to improve payments and overseas transactions for businesses and consumers, particularly as cash usage declines and sending money abroad remains clunky and expensive. If done well, a stablecoin could maintain a reliable store of value and be a viable alternative to cash.  Stablecoins (USDT) are a type of cryptocurrency pegged to a real asset. | Silas Stein/picture alliance via Getty Images Those more cautious, including the BoE, warn there are risks for the wider financial system including undermining public confidence in money and payments if something goes wrong.  And stablecoins are not immune to things going wrong: In 2022, the Terra Luna token lost 99 percent of its value, along with its sister token TerraUSD, a stablecoin which went from being pegged to the dollar on a $1-1 TerraUSDbasis, to being valued at $0.4. Tether also fell during that time to $0.95.  Other central bankers seem to agree with Bailey’s early caution. The Bank for International Settlements, a central bank body, issued a stark warning on stablecoins in June, saying they “fall short” as a form of sound money.  There are also concerns such coins are used to skirt money-laundering laws, with anti-money laundering watchdog the Financial Action Task Force, warning that most on-chain illicit transactions involved stablecoins. The EU has tough regulation in place for digital assets. The bloc prioritizes tighter control over the market than the U.S., with stricter rules on capital and operations.  That’s in stark contrast to the U.S., which passed its own stablecoin regulation — the GENIUS act — earlier this year, which is much more industry-friendly. Donald Trump, whose family is building its own crypto empire, has described stablecoins as “perhaps the greatest revolution in financial technology since the birth of the Internet itself.”  That’s put post-Brexit Britain in a bind: align with the EU, the U.S., or go it alone?  “The U.K. is a bit caught,” a former Bank of England official who now works in digital assets said. They were granted anonymity, like others in this article, to speak freely. “It doesn’t have the luxury of completely creating a bespoke regime. It can do, but essentially, no one’s going to care.” AMERICAN PUSH For a Labour government intent on deregulating for growth, aligning with the U.S. was immediately a more attractive proposition.  Warnings came from the City of London, Britain’s financial powerhouse, that the government would need to embrace crypto and stablecoin for the U.K. to become a global player. Domestic financial services firms wrote to the government calling for it to align its regime with the U.S., talking up “once-in-a-generation opportunity” to establish the future rules for digital assets.   “Securities are getting tokenized,” said one former Treasury official, now working in the private sector. “Bank deposits are getting tokenized. If we don’t build a regime that is permissive enough [to make the U.K. attractive], then the City’s relevance will diminish as a consequence.”  For the pro-crypto brigade, the BoE has been the main hurdle in achieving a U.S.-style, free-market stablecoin rulebook. Reform UK leader Nigel Farage, whose party is currently leading in the polls, accused Bailey of behaving like a “dinosaur.  For the pro-crypto brigade, the BoE has been the main hurdle in achieving a U.S.-style, free-market stablecoin rulebook. | Niklas Helle’n/AFP via Getty Images “The Bank’s really got itself into a twist on this one. From what I understand from people who have been at the Bank, this is coming from the top,” said the former BoE employee quoted above.  “Andrew Bailey has made it publicly clear for some many months now that he is sceptical about the two new alternative forms of money, which is stablecoins and central bank digital currencies,” said a financial services firm CEO.  In recent weeks, however, Bailey and his colleagues have softened their rhetoric as well as indicating a relaxed policy is forthcoming.  Sarah Breeden, Bailey’s deputy governor for financial stability, has repeatedly said any limits on stablecoin will be temporary, and recent reports suggest there will be carve-outs for certain firms. Other BoE officials have also backed away from tougher rules on the assets which must be used to underpin the value of a stablecoin.  A second former BoE employee, who now works in the fintech industry, said Bailey was “under a huge amount of pressure, from the government and the industry. He is worried about looking like he is just anti-innovation.”  The BoE declined to comment. The Treasury did not respond to a request for comment. US interest  A state visit by Trump to the U.K. this fall appeared to help shift the debate.   In late September, the Trump administration and the British government agreed to explore ways to collaborate on digital asset rules.  Treasury Secretary Scott Bessent and Reeves announced that financial regulators and officials from the U.S. and U.K. would convene a “Transatlantic Taskforce for Markets of the Future.”  During Trump’s visit, Bessent held a financial services roundtable in London with key figures from industry. “There was a steady slate of crypto attendees there, and the discussion predominantly focused on stablecoins,” said the former Treasury official.  “Rachel Reeves met Scott Bessent and seems to have been told, actually, we’d like you to be much more supportive of … digital assets,” the financial services CEO added.   The U.K. Treasury has been “pretty proactive” in taking meetings with crypto firms and traditional finance firms interested in crypto, in the New York consulate and British embassy in Washington, added the former Treasury official.   The BoE too met with the crypto industry and U.S. politicians, with Breeden at the helm of discussions while she was in the U.S. in October for IMF-World Bank meetings, in an effort to better understand U.S. stablecoin rules.  Last month saw a major olive branch.  A Bailey-penned op-ed in the Financial Times saw the Bank chief recognize stablecoins’ “potential in driving innovation in payments systems both at home and across borders.”   Going further still, Breeden told a crypto conference just this month that synchronization between the U.S. and the U.K. on stablecoin marks a “fabulous opportunity.”  She has heavily indicated there will be more than a slight American influence when she announces the proposals on Nov. 10. “It’s a fabulous opportunity, to reengineer the financial system with these new technologies,” Breeden told the Nov. 5 crypto conference.  “I think a lot of people have observed that it was the U.S. crypto firms that really pushed the dial on getting political will, whereas British firms haven’t been able to secure that,” the former Treasury official said.

SOFIA — The euro is more than just a currency: it’s a geopolitical insurance policy in a fragmenting world. That was the message the EU’s most senior economic leaders sent to a skeptical Bulgarian public during a pro-euro charm offensive in Sofia on Tuesday. Bulgaria is due to adopt the euro on Jan. 1, 2026, but only about half the population supports joining the single currency. Fears about inflation and centralization of power in Brussels and Frankfurt — exacerbated by alleged Russian disinformation campaigns — have turned many against the project. In a push to ease these concerns, Economy Commissioner Valdis Dombrovskis and European Central Bank President Christine Lagarde each stressed the geopolitical benefits of joining the euro. “Bulgaria is joining the euro … at a point when there is more volatility, at a time when we have more shocks, one after the other, compounded, and at a time where the global order, as we have known it, is more fragmented, and when friends are probably fewer,” said Lagarde, adding: “It’s important to close ranks and to be together.” Lagarde said that during the financial crisis, the single currency had proved a defensive shield against shocks and depreciation. Dombrovkis said that, in itself, the adoption of the euro could help Bulgaria compensate for growing geopolitical risks in investors’ eyes. “In Baltic countries, despite being geopolitically exposed, the borrowing costs were lower than in Poland, and to a large extent investors assessed that [the euro] is a stabilizing factor,” he said. Bulgaria’s accession to the euro has been planned for more than a decade, but as the date got nearer, it has spawned conspiracy theories and populist politics, alongside more justified concerns about the currency changeover. Investigative reports have identified Russian-funded social media campaigns to undermine support for the euro. Last April, the far-right party Revival, which arranged several anti-euro protests over the last year, signed a deal with Vladimir Putin’s Russia United. The percentage of Bulgarians who support the euro has slightly increased in the last few months. | Nikolay Doychinov/Getty Images Asked about Russian influence on public opinion about the euro, Dombrovskis said: “It is not a secret that Russia is waging a hybrid war against Europe and European member states. It is provocation, acts of sabotage, violation of European airspace, meddling in political processes in the European Union, also in other countries, and it is spreading disinformation.” The percentage of Bulgarians who support the euro has slightly increased in the last few months, reaching 51 percent according to a survey cited by Finance Minister Temenuzhka Petkova — up from 45 percent earlier in the year. European Stability Mechanism chief Pierre Gramegna highlighted risks coming from Washington’s new approach to monetary policy and cryptocurrencies: “The U.S. administration is changing its position on so many topics, including on finance and currency, that being part of a large bloc is a huge advantage,” he said, adding people in Bulgaria are not fully conscious of this. “The risk entailed in the digital currencies can be faced better if we are in the euro area,” he said.

Nearly two years ago, Argentina’s newly appointed punk-haired President Javier Milei stood up on a podium in front of global elites in Davos and accused them of letting their societies drift into socialism and poverty. He went on to argue that the “main leaders of the Western world have abandoned the model of freedom for different versions of what we call collectivism,” and that all market failures were by-products of state intervention. This week, however, Davos had the last laugh: U.S. Treasury Secretary Scott Bessent threw Milei a $20 billion lifeline to help Argentina defend a currency that is collapsing despite nearly two years of shock therapy programs that had had supply-side economists and investors in raptures. “Argentina faces a moment of acute illiquidity,” Bessent posted on X. “The international community — including the IMF — is unified behind Argentina and its prudent fiscal strategy, but only the United States can act swiftly. And act we will.” The rescue act, which many have described as a country-to-country bailout, is an abrupt departure from the usual playbook of international financial diplomacy, an unusually direct intervention in a sphere normally reserved for multilateral institutions. In a strong signal that this was the result of political will, rather than financial apparatchiks just trying to keep the system stable, the money will be directly extended by the Treasury, rather than by the Federal Reserve, in the form of a currency swap. It stands to entangle the fate of the U.S. economy intimately with that of resource-rich Argentina, and tie the Trump administration directly to Milei’s shock therapy programs. At the same time, it reasserts U.S. influence in a region that China has increasingly penetrated through growing trade ties. For Europe, the corollary is that access to dollar liquidity, the essential backstop of the world financial system for nearly a century, is being politicized, and may increasingly depend on how closely its policies align with those of the U.S. “Europe should be concerned about the politicization of the swaps,” one former New York Federal Reserve official told POLITICO. The episode “underscores the need for the rest of the world to prepare for dealing with a dollar crunch without the Fed[to turn to],” added the official, who was granted anonymity to speak freely. CHAINSAW ECONOMIC MASSACRE Milei was explicitly elected in 2023 on the promise that he would take a chainsaw to Argentine government excesses. Positioning himself as the defender of freedom, once in office, he initiated a bold economic agenda focused on radical deregulation, welfare cuts, and liberalization. Within months, the country’s welfare bill had been slashed by nearly half, with the government balancing the books (before interest payments) for the first time since 2008. But it was Milei’s initial move in December 2023 to devalue the official peso exchange rate by nearly 50 percent that rocked markets the most. The hope was to better align the peso with its black market (i.e., real) rate before slowly introducing a floating exchange rate, with sliding bands. Throughout, the International Monetary Fund, the world’s lender of last resort for countries, championed Milei’s policies, which allowed Argentina to return to capital markets earlier than expected. “The agreed ambitious stabilization plan is centered on the establishment of a strong fiscal anchor that ends all central bank financing of the government,” the lender cooed in January 2024. EGG ON THE IMF’S FACE? Except things didn’t go exactly as planned. Rather than stabilize, the peso just kept depreciating, especially after Trump’s tariff announcement in April destabilized global markets. The declines threatened to make imports more expensive for ordinary Argentinians just as Milei’s disinflationary successes were beginning to become entrenched. The road to that point evolved predictably enough. In the immediate aftermath of Milei’s great devaluation, inflation hit 25.5 percent, spiking to 276 percent by February 2025. But, as social welfare cuts began to bite, inflation predictably turned into disinflation. By June 2024, monthly price rises had slowed to 5 percent, and by July-August, inflation had hit single digits for the first time in years. The International Monetary Fund (IMF) and independent observers were quick to credit Milei’s strict fiscal surplus, monetary tightening, and peso stabilization. But by April, the peso’s soft float was proving increasingly challenging to defend. Trump’s “Liberation Day” tariffs, which set a baseline rate of 10 percent for all countries, had hit Argentina’s export-dependent economy hard. Capital started to flow out amid fears that a global slowdown would crush demand for its agricultural and mineral exports. The Argentinian central bank moved to defend the peso, burning through scarce dollar reserves. Markets began to doubt that Milei’s agenda would survive, fearing that a sharp, uncontrolled depreciation would rekindle inflation just as prices were calming down. To avert a currency crisis, Argentina turned to the IMF and was granted $20 billion through the agency’s Extended Fund Facility (EFF). But despite an initial positive impact on the peso, the depreciation picked up speed again. From the perspective of both the IMF and the U.S., the failure of Milei’s reforms stood not just to unravel Argentina once again, but to delegitimize the ideological foundations of the free-market system he had touted as infallible if deployed correctly. PROXY ECONOMIC WAR WITH CHINA As confidence in Milei’s program faltered, focus shifted to whether the U.S. would make dollar support conditional on the cancellation of a pre-existing $18 billion swap line with Beijing. U.S. Special Envoy for Latin America Mauricio Claver-Carone publicly dubbed the facility “extortionate.” In September, Bessent confirmed negotiations between the U.S. and Argentina for a direct dollar swap line, reinforcing speculation that the U.S. was trying to supplant Chinese influence in the region. The news had an immediate positive effect on the peso, breaking its fall. After peaking at over 1,475 pesos, the dollar was back at 1,421 by late Friday in Europe, helped by news that a dollar-support package from Washington was imminent. How long-lasting that effect will be is yet to be determined. For now, Bessent and the IMF appear resolute that it’s just a matter of time until Milei’s policies will deliver the stability they’ve been promising. Rather than framing the U.S. swapline as a bailout, Bessent is treating the intervention as a trading play. “This is not a bailout at all, there’s no money being transferred,” he told Fox News on Thursday. Under a swap line, two parties agree to exchange up to a certain amount of their currencies, on the understanding that it will be reversed at some time in the future. “The ESF has never lost money, it’s not going to lose money here,” Bessent went on, arguing that the peso is “undervalued”. He added that Milei remains a great U.S. ally who is committed to getting China out of Latin America, and said the U.S. was going “to use Argentina as an example.” Not everyone is convinced that Milei’s policies will deliver the goods. “They’ve done this over and over and over again,” said Steve Hanke, a professor at Johns Hopkins University and a veteran of various currency reform and stabilization packages. He argued that the package will provide “a little bit of a temporary band aid, but it won’t last very long.”

France is in shambles. The crisis that kicked off the week — the resignation of Prime Minister Sébastien Lecornu and his newly appointed ministers after just 14 hours — is still in motion, with Macron set to name a replacement for Lecornu on Friday, according to his office. But bigger questions remain about what comes next. Should Lecornu’s successor also fail, it will force Macron to consider some very unpalatable options. He could yet resign, two years before the end of his term — a move he has repeatedly rejected. Or, he could dissolve parliament and call for a snap round of elections, which could well vault the far right closer to power than ever before. Here’s what to know as the drama continues to unfold. WHAT SPARKED THIS LATEST POLITICAL CRISIS? Honestly, it might’ve been a tweet. It’s a running joke in Parisian political circles right now, but there’s a bit of truth to the gallows humor. On Sunday evening, key ministers in Lecornu’s cabinet were unveiled, and most of them were holdovers from his predecessor’s government — which was toppled last month — and the two most prominent new faces had previously held ministerial posts during Macron’s tenure. Opposition parties who had expressed openness to working with Lecornu on a budget for next year and potential minority coalition partners were furious. They had made it clear they were looking for signals that Lecornu would be doing things differently after he promised a “break” from Macron’s previous governments. Bruno Retailleau, who leads a conservative party that was a key coalition partner of recent minority governments, expressed his displeasure in a post on X and said his party would be charting a path forward the next morning. The next morning, Macron’s office announced that he had accepted the resignation of Lecornu and his government after a grand total of 14 hours on the job. WHAT DOES THIS MEAN FOR THE NATIONALIST FAR-RIGHT? Let’s start with Marine Le Pen and her far-right party, the National Rally, because they’re sitting pretty right now. Le Pen has long embraced a Trumpian refrain that the mainstream political parties are inept and out of touch, so a situation like this helps prove her point. The National Rally continues to climb in the polls and should be considered a frontrunner for any potential snap elections or the next presidential election in 2027, which Macron is constitutionally barred from running in. To understand the dynamics at play, you’ve got to rewind to June 9, 2024, when Macron’s centrist camp was drubbed at the hands of the far right in European elections. Call it eternal optimism, call it hubris, call it dogged determination, but whatever it is, it’s driven Emmanuel Macron’s political fortunes into the gutter. | Kristian Tuxen Ladegaard Berg/Getty Images European votes are sort of like the U.S. midterms. They don’t draw high turnout and often serve as a protest vote. Plus, polling had predicted a National Rally victory. The victory wasn’t a surprise. Macron’s response was. He announced that evening he would dissolve parliament and call new snap elections as quickly as possible, gambling that a high-stakes domestic vote would block the far right’s seemingly unstoppable rise. What he ended up with was a hung parliament roughly divided into three equal blocks. Most have proven willing to engage in the type of coalition-building exercises common in other European countries like Italy and Germany, despite repeated calls from Macron to do so. The first prime minister to try to navigate the fractured legislature, Michel Barnier, lasted about three months before being kicked to the curb over his plans to slash the budget by billions to rein in runaway public spending. His predecessor, François Bayrou, lasted nine months but got the boot over his own unpopular budget, which included plans to ax two public holidays. Lecornu took over for Bayrou in early September, and now here we are. WHY ARE THE MARKETS SPOOKED? Markets are concerned that France, the eurozone’s second largest economy, has become so ungovernable that it can’t even pay its bills. France borrowed heavily during the pandemic and is now sitting on €3.4 trillion worth of debt and looking at a projected budget deficit of 5.4 percent of gross domestic product this year. Everyone agrees the current path isn’t sustainable, but cutting spending is particularly difficult in France, where people remain deeply attached to the country’s generous social welfare system. Paris is also committed to spending on reindustrialization, transitioning to green energy and rebuilding its military capabilities in the wake of Russia’s invasion of Ukraine and fears of American military retrenchment. Something’s gotta give. The two prime ministers who preceded Lecornu both proposed shaving billions off the budget to balance the books, and — to make a long story short — each were shown the door for their troubles. Lecornu came into office prioritizing the budget and, during his 27-day-long tenure, did not find enough common ground for a budget compromise before his resignation. WHY DOES THIS POSE A THREAT BEYOND FRANCE’S BORDERS? Remember about 15 years ago when everyone in Europe was freaking out over sovereign debt crises in Greece and Portugal? That would be child’s play compared to France, the world’s seventh-largest economy, collapsing under the weight of its own debt. The concern now, as it was in 2010, is that because all these countries share a common currency, the euro, the risk of financial contagion is high. Most economists agree Paris has a better handle on its financial affairs than either Lisbon or Athens did, and won’t need a bailout in the imminent future. France can still borrow from financial markets at reasonable, albeit increasingly higher, rates, and is not in immediate danger of being unable to pay its debts. Marine Le Pen has long embraced a Trumpian refrain that the mainstream political parties are inept and out of touch. | Alain Jocard/Getty Images There’s also a precedent issue in Brussels. European Union rules require member states to keep budget deficits below 3 percent of GDP, a limit France continues to run afoul of. Paris has submitted a plan to Brussels to get back on track by 2029, but it’s highly unlikely lawmakers will pass a budget in time this year to stick to that timeline. If France continues to flout the 3 percent figure themselves, other EU member states might start having second thoughts about playing by the rules themselves. HOW MUCH OF THIS TURMOIL IS ABOUT MACRON, AND WHAT DOES IT MEAN FOR HIS POLITICAL FUTURE? This is squarely about Macron. He’s spent the 15 months since the snap election trying to defy parliamentary arithmetic by appointing prime ministers from a minority coalition made up of centrists and conservatives. The odds never seemed good, but Macron kept trying. His office said this evening that he’ll choose Lecornu’s replacement in the next 48 hours, and who he picks will be telling. It’s helpful to know a bit about Macron’s personality here. People close to the French president like to describe him as the gambler who leaves the casino with his pockets empty but convinced he’ll beat the house on the next try. Call it eternal optimism, call it hubris, call it dogged determination, but whatever it is, it’s driven Macron’s political fortunes into the gutter. And key allies are starting to jump ship, including three previous prime ministers. One, presidential candidate Edouard Phillipe, called on him to resign. Gabriel Attal, who now heads Macron’s political party, said he “no longer understands” what the president is doing. A third, Elisabeth Borne, called for the suspension of his flagship law raising the retirement age — despite having rammed the law through the legislature during her tenure leading the government. A centrist politician known to have their finger on the pulse told my colleague Anthony Lattier that many lawmakers from Macron’s camp think he’s trying to sow chaos so Le Pen’s National Rally can come to power — which would offer him the chance to swoop in as a savior who could take down the far-right during the presidential election in 2032. (Macron can’t run in the next election in 2027 because he’s barred from standing in more than two consecutive elections, but there’s nothing stopping him after that.)

The EU’s big three in the G7 — Germany, France and Italy — are urging Japan and the U.S. to use frozen Russian assets to help Ukraine, just as Europe is now seeking to do. The European Central Bank fears using Russian assets could undermine the global credibility of the euro — but that concern could be allayed if heavyweights such as Washington and Tokyo were to take similar action. Three officials briefed on a virtual meeting of G7 finance ministers on Wednesday said the EU trio had urged the whole group of world leading economies to act in unison on the assets. But the final communiqué stopped short of pledging joint action. Instead, it said that using Russian assets was one of the options under consideration. The G7 ministers said they were “developing a wide range of options to address Ukraine’s financing needs,” which “amongst others … include using, in a coordinated way, the full value of the [Russian sovereign assets] immobilized in our jurisdictions to end the war.” The EU’s plan, not yet accepted by all member countries, would be to deploy €140 billion of frozen Russian assets as a zero-interest “reparations loan” to Kyiv. The White House is pressuring the EU to make use of its stock of Russian central bank reserves, but has yet to say whether it will do the same with the some $7 billion it holds domestically. Japan is also cautious about issuing a reparations loan to Ukraine using its own frozen Russian assets. That said, Japan is expected to follow Washington’s lead. “It’s unclear what the Americans are going to do,” one official briefed on the G7 call said on the condition of anonymity to speak freely. The next G7 meeting among finance ministers is scheduled for Oct. 15 in Washington, where policymakers will head for the International Monetary Fund’s annual meeting. The U.K. said last month that it’s considering using billions of pounds worth of sanctioned Russian cash to finance new loans to Kyiv. Canada is also “very aligned” with the EU’s initiative, its finance minister told POLITICO on Sept. 20. Most of Russia’s frozen assets, however, reside in the EU, leaving Europe carrying most of the legal and reputational risk. The European Central Bank is concerned about any seizure and on Tuesday again called on the European Commission, during a virtual meeting of deputy finance ministers, to demonstrate how the reparations loan will not damage the euro’s credibility, two diplomats on the call said. The Commission is confident that national guarantees from EU countries against the €140 billion loan will be enough to allay any legal concerns. That way, the money would be repaid to Moscow immediately if the Kremlin ends its war against Ukraine and pays reparations. To reassure its allies, Brussels even plans to set aside €45 billion of Russian cash to repay a previous G7 loan to Ukraine, agreed in 2023 and almost paid out.