LONDON — Victory is finally in sight for the Bank of England. But rate cuts aren’t. It’s taken Britain’s central bank longer to bring inflation under control than any of its peers on the global stage, but on Thursday economists expect forecasts to show that inflation in the U.K. will return to the government’s 2 percent target within the next two years, having overshot it for almost all of the last four. The pound surged to its highest level against the dollar in five years last month, as global confidence in the anchor of the world’s financial system appeared to fray due to the news flow out of the U.S. But there will be little else to set the pulse racing: Financial market participants are almost unanimous in expecting no change in the Bank rate from its current 3.75 percent. Even the extraordinary events of January, which saw the U.S. seize Venezuelan leader Nicolas Maduro and U.S. President Donald Trump threaten military force against his NATO allies over Greenland, seem unlikely to induce a shift in the Bank’s communication about the U.K.’s economic outlook. Extrapolating how these seismic events will translate into the U.K. economy has been hard. One of the more hawkish members of the Bank’s Monetary Policy Committee, Megan Greene, argued in a speech last month that while a stronger pound should help keep the cost of imports down, it could easily be offset by other factors, especially if the U.S. Federal Reserve were to be pressured by the White House into cutting U.S. interest rates more aggressively. Greene argued the MPC should focus on what is in its power to control. Here, the Bank is facing a familiar conundrum: growth is sluggish and unemployment is trending higher, but inflation is coming down — even if painfully slowly — and most business surveys suggest wage growth will continue to outstrip what is justified by productivity. Headline inflation ticked up again in December to 3.4 percent, still far above the 2 percent target. The latest data suggest that the economy is still more or less ticking along, growing at an annual rate of 1.4 percent in the three months through November. STILL ‘GRADUAL AND CAUTIOUS’ The narrow vote by the MPC to cut the Bank rate to 3.75 percent from 4 percent at its last meeting in December — and the unwavering message from the Bank that it will take a “gradual and cautious” approach to easing policy — means the committee will stay put on Thursday, according to Deutsche Bank economist Sanjay Raja. UBS economist Anna Titareva, meanwhile, reckons the vote will be split, with both Governor Andrew Bailey and Deputy Governor Sarah Breeden capable of voting again for a cut alongside Alan Taylor and Swati Dhingra, the two external members most concerned about the risks of a slowdown and an accompanying rise in joblessness. But that scenario would still leave Bailey in the minority against the remaining five of nine members in the committee. Most analysts still expect the Bank to cut interest rates twice this year. Inflation is set to fall from April as Chancellor Rachel Reeves’ decision to strip green levies off energy bills causes a drop in final prices for electricity. Deutsche’s Raja expects cuts in March and again in June, but says rates are unlikely to fall any further after that.

Europe is laying the foundation for renewed economic growth. Regulatory simplification is gaining traction. Public investment is accelerating in technology, energy and defense. Private capital is supplementing these efforts. These are meaningful steps, which, in the eyes of many, are long overdue and still need to gain pace. But an additional ingredient is required.  Our new research finds that closing the continent’s competitiveness gap requires Europe’s major companies to place a new emphasis on entrepreneurial courage: that is, the increased willingness to embrace uncertainty and take calculated risks in service of renewal and growth. Corporate leaders willing to make bold investments and engage in modern public-private collaborations, much like their American and Asian peers, stand to reap the rewards for acting decisively and with greater urgency.   Europe’s global competitiveness is ultimately a function of individual companies making a material difference, particularly large corporations and dynamic scale-ups. And it doesn’t require many acting boldly to have a disproportionate impact. In examining a sample representing about 15 percent of the U.S. economy, the McKinsey Global Institute found that more than two-thirds of productivity growth between 2011 and 2019 was driven by just 44 ‘standout’ companies. Meanwhile, 13 standout companies drove a similar proportion of the German sample’s productivity growth during the same period. These highly valued ‘outliers’, together with differences in growth and return on invested capital, underpin much of the valuation gap between European companies and their international peers, as highlighted in research we conducted on UK capital markets.   The status quo is not tenable.  Since the global financial crisis, Europe has endured a prolonged slump in private investment that has been especially pronounced in future-shaping industries. In the past five years alone, our analysis found that companies with headquarters in the United States have invested €2 trillion more in digital technologies such as artificial intelligence (AI) than their European peers. And in traditional manufacturing industries, China is out-investing Europe at a rate of 3:1.  > This investment gap not only stifles European economic growth, but prevents > the continent from inventing, developing and deploying the technologies it > needs to increase productivity and drive prosperity.  And the need to boost investments is growing: when the landmark Draghi report on European competitiveness was released in 2024, it estimated that an additional €800 billion needed to be mobilized annually to start closing the continent’s competitiveness gap. With the required additional investment in defense, that figure is now estimated to be €1.2 trillion annually for the next five years.  Of course, the regulatory landscape is also important. The positive news over the past year is that the European Commission has implemented dozens of initiatives, from regulatory simplification to streamlining and enhancing funding and market-creation mechanisms, as well as preparing to propose a ‘28th regime’ to make it easier for companies to scale across its 27 member states. Governments are also stepping up, with growth in strategic public investment in technology, energy and defense capabilities creating tailwinds for private investment. For instance, Germany amended its constitution to exempt defense spending above 1 percent of GDP from its debt brake and established a €500 billion fund to support infrastructure and climate-neutral investment. Similar programs are taking shape in France, Italy, the Netherlands and the Nordics.  But, while private sector activity shows some signs of acceleration, more is needed. Driving Europe’s economic vitality requires the emergence of standout companies, acting both individually and in close collaboration with the public sector. Without it, Europe risks another decade of ‘secular stagnation’: sluggish real GDP growth of around 1 percent annually as excess savings and a dearth of investment depress aggregate demand and push interest rates back to near zero.  > So, what does it take to show more entrepreneurial courage? Informed by our > global research and what we see standout firms doing, our research highlights > a range of actions leaders could explore.  One example is making broader ecosystem plays, such as semiconductor company ASML joining with the Dutch government and regional partners to launch Project Beethoven, a €2.5 billion public-private investment to ensure ASML’s continued presence and expansion of the broader microchip cluster in Eindhoven. Another is re-inventing potential stranded assets to position them for the industries of the future, illustrated by the range of European utilities converting or marketing former coal and gas power plant sites for hyperscale data centers. And a clear one is radical adoption of AI and automation technologies, which MGI’s research shows could add up to 3.4 percentage points to annual productivity growth globally through 2040.  > Europe has an opportunity to take steps to decisively alter its competitive > trajectory.  But while public sector leaders can lay the foundations necessary to accelerate investment and growth, the continent’s leading companies are distinctly positioned to amplify this and make a critical contribution to the continent’s prosperity, security and strategic autonomy. There’s growing consensus on what needs to be done. What’s now needed is a hefty dose of entrepreneurial courage to act.

FRANKFURT — No one saw this coming. Eurozone finance ministers on Monday picked Croatia’s central bank governor, Boris Vujčić, as the European Central Bank’s next vice president — defying all expectations and the European Parliament’s calls for someone else. Ministers chose Vujčić over his Finnish counterpart Olli Rehn, the favorite to win, in the third and final round of voting after seeing off other heavyweight contenders in Portugal’s Mário Centeno and Latvia’s Mārtiņš Kazāks — the Parliament’s preferred picks for the job. Estonia’s Madis Müller and Lithuania’s Rimantas Šadžius lost out in the first round. At a time when the U.S. administration is putting extreme pressure on the Federal Reserve to lower interest rates, the choice of Vujčić — a technocrat with no obvious partisan backing — is a strong signal of the EU’s desire to keep the ECB independent of direct political influence. Barring any last-minute surprises, EU leaders will formally present Vujčić to succeed incumbent Vice President Luis de Guindos when the Spaniard ends his eight-year term on May 31. “Crazy,” was all one diplomat could muster after the vote. Others were more understanding. “He is the most senior central banker of them all,” a second said on the condition of anonymity. Vujčić needed 16 votes from ministers who represent 65 percent of the eurozone’s population, meaning he had the support of the euroclub’s largest members to clinch victory. Germany, France and Spain will all have been thinking strategically ahead of Monday’s vote, which kicks off a game of musical chairs for a place at the ECB’s coveted six-person Executive Board over the next two years. The vice presidency is the first of four board vacancies, including the presidency, that will come up in that time. All are important positions for the eurozone’s biggest economic powerhouses. By tapping Vujčić for the no. 2 job, capitals have kept the playing field wide open — especially when it comes to finding a successor for ECB President Christine Lagarde once her term ends on Oct. 31, 2027. Vujčić now faces an awkward hearing in Parliament, whose non-binding preference for the post was completely ignored by finance ministers. The 61-year-old will need to bring Parliament onside to avoid MEPs voting against his victory in a symbolic, but politically embarrassing, ballot — a similar fate to when Luxembourg’s governor, Yves Mersch, joined the ECB’s highest echelon in 2012. DARK HORSE Vujčić has vast experience as a central banker, having led the Croatian National Bank since 2012, and is highly regarded among fellow rate-setters. But his appointment will still come as a massive surprise to ECB watchers who have long bet on Rehn. Rehn’s dual experience in Brussels politics and monetary policy had widely been seen as giving him an edge over his five rivals. Croatia’s chances were seen as slim from the outset, as it only joined the eurozone in 2023, placing it toward the back of the queue for a seat at the Executive Board. None of the three Baltic states, which adopted the euro roughly a decade earlier than Croatia, have yet had a representative serve on the Board. While generally considered a moderate hawk, Vujčić defies the usual northern-hawk-versus-southern-dove classification that has historically dominated debates when politicians haggle over coveted positions at the ECB. His appointment is thus unlikely to change the probability of either a northern heavyweight such as Germany or the Netherlands, or a southern contender such as Spain, securing the presidency. Current front-runners for the top job include former Dutch central bank chief Klaas Knot and Bank for International Settlements head Pablo Hernández de Cos. But in European politics, two years is an eternity. Lagarde herself only emerged as a serious candidate late in the process to name a successor for Mario Draghi, showing how fast the ECB’s leadership race can turn.

LONDON — Prime Minister Keir Starmer usually goes out of his way not to annoy Donald Trump. So he better hope the windmill-hating U.S. president doesn’t notice what the U.K. just did. In a fillip for the global offshore wind industry, Starmer’s government on Wednesday announced its biggest-ever down payment on the technology. It agreed to price guarantees, funded by billpayers to the tune of up to £1.8 billion (€2.08 billion) a year, for eight major projects in England, Scotland and Wales. The schemes have the capacity to generate 8.4 gigawatts of electricity, the U.K. energy department said — enough to power 12 million homes. It represented the biggest “wind auction in Europe to date,” said industry group WindEurope. It’s also an energy strategy that could have been tailor-made to rankle Trump. The U.S. president has repeatedly expressed a profound loathing for wind turbines and has tried to use his powers to halt construction on projects already underway in the U.S. — sending shockwaves across the global industry. Even when appearing alongside Starmer at press conferences, Trump has been unable to hide his disgust at the very sight of windmills. “You are paying in Scotland and in the U.K. … to have these ugly monsters all over the place,” he said, sitting next to Starmer during a visit to his Turnberry golf course last year. The spinning blades, Trump complained, would “kill all your birds.” At the time, the prime minister explained meekly that the U.K. was seeking a “mix” of energy sources. But this week’s investments speak far louder about his government’s priorities. The U.K.’s strategy — part of a plan to run the British power grid on 95 percent clean electricity by 2030 — is a clear signal that for all Starmer’s attempts to appease Trump, the U.K. will not heed Washington’s assertions that fossil fuels are the only way to deliver affordable bills and secure supply. “With these results, Britain is taking back control of our energy sovereignty,” said Starmer’s Energy Secretary Ed Miliband, a former leader of the Labour party. “With these results, Britain is taking back control of our energy sovereignty,” said Energy Secretary Ed Miliband. | Pool photo by Justin Tallis via Getty Images While not mentioning Trump or the U.S., he said the U.K. wanted to “stand on our two feet” and not depend on “markets controlled by petrostates and dictators.” WIND VS. GAS The goal of the U.K.’s offshore wind drive is to reduce reliance on gas for electricity generation. One of the most gas-dependent countries in Europe, the U.K. was hit hard in 2022 by the regional gas price spike that followed Russia’s invasion of Ukraine. The government ended up spending tens of billions of pounds to pay a portion of every household energy bill in the country to fend off widespread hardship. It’s a scenario that Miliband and Starmer want to avoid in future by focusing on producing electricity from domestic sources like offshore wind that are not subject to the ups and downs of global fossil fuel markets. Trump, by contrast, wants to keep Europe hooked on gas — specifically, American gas. The U.S. National Security Strategy, updated late last year, states Trump’s desire to use American fossil fuel exports to “project power.” Trump has already strong-armed the European Union into committing to buy $750 billion worth of American liquefied natural gas (LNG) as a quid pro quo for tariff relief. No one in Starmer’s government explicitly named Trump or the U.S. on Wednesday. But Chris Stark, a senior official in Miliband’s energy department tasked with delivering the 2030 goal, noted that “every megawatt of offshore wind that we’re bringing on is a few more metric tons of LNG that we don’t need to import.” The U.K.’s investment in offshore wind also provides welcome relief to a global industry that has been seriously shaken both by soaring inflation and interest rates — and more recently by a Trump-inspired backlash against net zero and clean energy. “It’s a relief for the offshore sector … It’s a relief generally, that the U.K. government is able to lean into very large positive investment stories in U.K. infrastructure,” said Tom Glover, U.K. country chair of the German energy firm RWE, which was the biggest winner in the latest offshore wind investment, securing contracts for 6.9 gigawatts of capacity. A second energy industry figure, granted anonymity because they were not authorized to speak on the record, said the U.K.’s plans were a “great signal for the global offshore wind sector” after a difficult few years — “not least the stuff in the U.S.” The other big winner was British firm SSE, which has plans to build one of the world’s largest-ever offshore wind projects, Berwick Bank — off the coast of Donald Trump’s beloved Scotland.

Donald Trump will be the major draw at this year’s World Economic Forum in Davos, Switzerland, even as the U.S. president’s policies continue to undermine the spirit of global cooperation the elite gathering has championed in the past. “We’re pleased to welcome back President Trump to Davos, and he’s bringing the largest U.S. delegation ever,” WEF chief executive Børge Brende said at a press conference Tuesday. The U.S. president will bring “five secretaries and also other key players,” including a bipartisan delegation from the U.S. Congress, Brende said. The World Economic Forum, which takes place next week in the Alpine ski resort, comes as the world hangs on Trump’s words. Since the start of the month, Trump has captured Venezuelan dictator Nicolás Maduro, threatened to invade Greenland, hinted he could take action in Iran over violent crackdowns on protesters, announced a temporary cap on credit card interest rates that has stoked fears of a credit crunch, and opened a criminal investigation into Jerome Powell, chair of the U.S. Federal Reserve. Brende said the meeting will take place “against the most complex geopolitical backdrop since 1945.” According to the WEF, Trump will be joined by Canadian PM Mark Carney, China’s Vice-Premier He Lifeng, Ukrainian President Volodymyr Zelenskyy and leaders from Israel and Palestine. From Europe, European Commission President Ursula von der Leyen will attend along with leaders from Germany, Spain, Belgium, Finland, Greece, Ireland, the Netherlands, Poland and Serbia. NATO Secretary-General Mark Rutte will also join. The informal grouping of countries supporting Ukraine, known as the “coalition of the willing,” are expected to meet with Trump and Zelenskyy on the sidelines of the WEF to seek U.S. backing for security guarantees for Ukraine, the Financial Times reported. Business leaders, including the head of AI giant Nvidia Jensen Huang and top executives from Microsoft, Meta, Palantir, Anthropic and OpenAI, will join senior leaders from JPMorgan, Goldman Sachs, BlackRock and other major finance players in Davos. International organizations, which have seen their standing and funding rocked by Trump’s administration — including last week’s U.S. withdrawal from dozens of international organizations and the world’s overarching climate change treaty — will also attend. The heads of the United Nations, the World Trade Organization, the World Bank, the International Monetary Fund, the World Health Organization and the Organisation for Economic Co-operation and Development will take part. Celebrities and artists including David Beckham, Yo-Yo Ma, Marina Abramović, Matt Damon and will.i.am will also attend. The theme of the gathering will be “A Spirit of Dialogue.” “We do hope that a spirit of dialogue can also lead to areas where the leaders can find overlaps in interests,” Brende said.

Croatia, Estonia, Finland, Latvia, Lithuania and Portugal will face off for the European Central Bank’s No. 2 job, according to a statement from the Council of the EU. The crowded race for the vice presidency kickstarts a wider battle for a seat on the ECB’s coveted six-person executive board, the eurozone’s most powerful forum for economic and monetary policy. Four of the seats, including the presidency itself, will become vacant over the next two years. Competition will be fierce, as the eurozone’s largest economies will seek to maintain their influence on the board, leaving smaller countries with fewer seats to fight over. Eurozone finance ministers are set to pick the winner behind closed doors in a secret ballot when they meet in Brussels for this month’s Eurogroup meeting on Jan. 19. The winner will need at least 16 votes from the 21 ministers, representing around 65 percent of the eurozone’s population. Eurozone leaders formally propose the candidate to succeed the outgoing vice president, Luis de Guindos, whose eight-year term ends on May 31. The European Parliament and the ECB are entitled to an opinion about the final pick. Northern European applicants make up the bulk of the contenders, with Finland’s central banker, Olli Rehn, facing competition from Baltic neighbors. These include his central banking peers, Estonia’s Madis Müller and Latvia’s Mārtiņš Kazāks. Lithuania’s former finance minister, Rimantas Šadžius, completes the Baltic round-up. The other two applicants come from Southern Europe: Portugal’s ex-Eurogroup president, Mário Centeno, and the Croatian central bank governor, Boris Vujčić. The candidates are tentatively scheduled to face questions from MEPs behind closed doors before finance ministers meet on Jan. 19.

The European Central Bank kept its key interest rate unchanged at 2 percent on Thursday as fresh staff projections painted a brighter future ahead for the eurozone economy after a rollercoaster year. The Bank revised up its forecast for growth this year to 1.4 percent from 1.2 percent three months ago, reflecting the fact that the destructive trade war with the U.S. that many feared six months ago hasn’t materialized. It also expects the economy to grow 1.2 and 1.4 percent over the two coming years, up from 1.0 percent and 1.3 percent previously. The ECB’s first-ever projections for 2028 put growth at 1.4 percent. The new numbers are likely to lock in the view that the ECB — which has now left rates unchanged for the fourth meeting in a row — is heading for an extended period on the sidelines. Most economists and investors now expect borrowing costs to remain unchanged throughout 2026, barring a major economic shock. “Economic growth is expected to be stronger than in the September projections, driven especially by domestic demand,” the ECB said in its statement, repeating again that it will respond to any material changes if incoming economic data demand it. The ECB has become gradually more upbeat since the EU decided not to escalate trade tensions with the U.S., and since the risk of a regional conflict in the Middle East receded. That helped the economy to grow by a stronger-than-expected 0.3 percent in the third quarter, and business surveys suggest that it has continued to expand through the year-end. The ECB also updated its inflation forecasts for the next two years, and now sees inflation at 1.9 percent in 2026 and 1.8 percent in 2027. That is little changed from 1.7 and 1.9 percent respectively three months ago. The first inflation forecast for 2028 sees prices right back at the 2 percent level that the ECB considers to represent price stability. While the new forecasts will likely have secured broad backing for today’s decision, Governing Council members have diverging views on the years ahead. Executive Board member Isabel Schnabel said last week she believes the next move is likely to be up, while Finland’s central bank governor Olli Rehn kept the door to further easing ajar, warning that downside risks to the inflation outlook still dominate. ECB President Christine Lagarde will hold her regular press conference at 14:45 CET, and will likely give a sense of where she stands on that debate.

The Bank of England is set to cut interest rates on Thursday, after lower-than-expected inflation figures and signs of a weakening jobs market. Headline inflation slowed to 3.2 percent in November, from 3.6 in October, the Office for National Statistics said on Wednesday. That was the lowest since March and a much clearer drop than predicted by analysts, who had forecast a rate of 3.5 percent. “A cut tomorrow should be a no-brainer, with another to follow in February,” Peel Hunt chief economist Kallum Pickering said via social media, pointing to “No growth since summer, a labor market that is rapidly cooling, and a big downside surprise to inflation across the board in November.” The news comes only a day after labor market data from the ONS showed the unemployment rate rising to its highest level in over four years in October. The economy has struggled for growth in the second half of this year, after a sugar rush in the first quarter in which exporters rushed to get their goods to the U.S. before President Donald Trump could impose trade tariffs. The hangover from that — and the lingering uncertainty over the global economic outlook caused by Trump’s trade policy — has been severe. But at the same time, an unwelcome rise in inflation has stopped the Bank of England from cutting interest rates more quickly to support the economy. A raft of hikes in government- controlled prices such as energy bills and rail fares meant that inflation was rising for much of the year, leading it to peak at 3.8 percent in September. That was also partly due to companies passing on increases in labor costs due to a 6.7 percent hike in the National Living Wage and an increase in employers’ National Insurance contributions. Panmure Liberum chief economist Simon French said the wide range of goods and services now showing softening price trends showed that demand is now so weak that companies are having to absorb those price increases themselves instead. The government will be particularly relieved to have seen politically sensitive food prices, which have been a constant bugbear for the last couple of years, making the biggest contribution to the slowdown in inflation in November. Prices for clothing and footwear and for discretionary services such as restaurants and hotels also fell slightly. “As Christmas gifts go, this is a most welcome one,” said Danni Hewson, head of financial analysis at AJ Bell. “It’s the time of year when people put a few more things in their supermarket trolley, so news that food and alcohol inflation has fallen will be a boon for cash-strapped families.” The Bank has consistently said that inflation would fall once those factors passed out of the annual calculations, given that the underlying weakness of the economy. However, with the worst bout of inflation in half a century still fresh in everyone’s minds, it has been forced to keep the pace of policy easing “gradual and cautious”. Peel Hunt’s Pickering said that the scale of the slowdown could be enough to have some members of the Monetary Policy Committee voting for a half-point cut in the Bank Rate to 3.5 percent on Thursday. However, the consensus remains for a quarter-point cut to 3.75 percent. The pound still fell over half a cent against the dollar in response to the numbers, as traders penciled in more scope for easing next year, while the government’s borrowing costs in the bond market also fell.

This article is also available in French and German. President Donald Trump denounced Europe as a “decaying” group of nations led by “weak” people in an interview with POLITICO, belittling the traditional U.S. allies for failing to control migration and end the Russia-Ukraine war, and signaling that he would endorse European political candidates aligned with his own vision for the continent. The broadside attack against European political leadership represents the president’s most virulent denunciation to date of these Western democracies, threatening a decisive rupture with countries like France and Germany that already have deeply strained relations with the Trump administration. “I think they’re weak,” Trump said of Europe’s political leaders. “But I also think that they want to be so politically correct.” “I think they don’t know what to do,” he added. “Europe doesn’t know what to do.” Trump matched that blunt, even abrasive, candor on European affairs with a sequence of stark pronouncements on matters closer to home: He said he would make support for immediately slashing interest rates a litmus test in his choice of a new Federal Reserve chair. He said he could extend anti-drug military operations to Mexico and Colombia. And Trump urged conservative Supreme Court Justices Samuel Alito and Clarence Thomas, both in their 70s, to stay on the bench. Trump’s comments about Europe come at an especially precarious moment in the negotiations to end Russia’s war in Ukraine, as European leaders express intensifying alarm that Trump may abandon Ukraine and its continental allies to Russian aggression. In the interview, Trump offered no reassurance to Europeans on that score and declared that Russia was obviously in a stronger position than Ukraine. Trump spoke on Monday at the White House with POLITICO’s Dasha Burns for a special episode of The Conversation. POLITICO on Tuesday named Trump the most influential figure shaping European politics in the year ahead, a recognition previously conferred on leaders including Ukrainian President Volodymyr Zelenskyy, Italian Prime Minister Giorgia Meloni and Hungarian Prime Minister Viktor Orbán. Trump’s confident commentary on Europe presented a sharp contrast with some of his remarks on domestic matters in the interview. The president and his party have faced a series of electoral setbacks and spiraling dysfunction in Congress this fall as voters rebel against the high cost of living. Trump has struggled to deliver a message to meet that new reality: In the interview, he graded the economy’s performance as an “A-plus-plus-plus-plus-plus,” insisted that prices were falling across the board and declined to outline a specific remedy for imminent spikes in health care premiums. Even amid growing turbulence at home, however, Trump remains a singular figure in international politics. In recent days, European capitals have shuddered with dismay at the release of Trump’s new National Security Strategy document, a highly provocative manifesto that cast the Trump administration in opposition to the mainstream European political establishment and vowed to “cultivate resistance” to the European status quo on immigration and other politically volatile issues. In the interview, Trump amplified that worldview, describing cities like London and Paris as creaking under the burden of migration from the Middle East and Africa. Without a change in border policy, Trump said, some European states “will not be viable countries any longer.” Using highly incendiary language, Trump singled out London’s left-wing mayor, Sadiq Khan, the son of Pakistani immigrants and the city’s first Muslim mayor, as a “disaster” and blamed his election on immigration: “He gets elected because so many people have come in. They vote for him now.” The president of the European Council, António Costa, on Monday rebuked the Trump administration for the national security document and urged the White House to respect Europe’s sovereignty and right to self-government. “Allies do not threaten to interfere in the democratic life or the domestic political choices of these allies,” Costa said. “They respect them.” Speaking with POLITICO, Trump flouted those boundaries and said he would continue to back favorite candidates in European elections, even at the risk of offending local sensitivities. “I’d endorse,” Trump said. “I’ve endorsed people, but I’ve endorsed people that a lot of Europeans don’t like. I’ve endorsed Viktor Orbán,” the hard-right Hungarian prime minister Trump said he admired for his border-control policies. It was the Russia-Ukraine war, rather than electoral politics, that Trump appeared most immediately focused on. He claimed on Monday that he had offered a new draft of a peace plan that some Ukrainian officials liked, but that Zelenskyy himself had not reviewed yet. “It would be nice if he would read it,” Trump said. Zelenskyy met with leaders of France, Germany and the United Kingdom on Monday and continued to voice opposition to ceding Ukrainian territory to Russia as part of a peace deal. The president said he put little stock in the role of European leaders in seeking to end the war: “They talk, but they don’t produce, and the war just keeps going on and on.” In a fresh challenge to Zelenskyy, who appears politically weakened in Ukraine due to a corruption scandal, Trump renewed his call for Ukraine to hold new elections. “They haven’t had an election in a long time,” Trump said. “You know, they talk about a democracy, but it gets to a point where it’s not a democracy anymore.” Latin America Even as he said he is pursuing a peace agenda overseas, Trump said he might further broaden the military actions his administration has taken in Latin America against targets it claims are linked to the drug trade. Trump has deployed a massive military force to the Caribbean to strike alleged drug runners and pressure the authoritarian regime in Venezuela. In the interview, Trump repeatedly declined to rule out putting American troops into Venezuela as part of an effort to bring down the strongman ruler Nicolás Maduro, whom Trump blames for exporting drugs and dangerous people to the United States. Some leaders on the American right have warned Trump that a ground invasion of Venezuela would be a red line for conservatives who voted for him in part to end foreign wars. “I don’t want to rule in or out. I don’t talk about it,” Trump said of deploying ground troops, adding: “I don’t want to talk to you about military strategy.” But the president said he would consider using force against targets in other countries where the drug trade is highly active, including Mexico and Colombia. “Sure, I would,” he said. Trump scarcely defended some of his most controversial actions in Latin America, including his recent pardon of the former Honduran President Juan Orlando Hernández, who was serving a decades-long sentence in an American prison after being convicted in a massive drug-trafficking conspiracy. Trump said he knew “very little” about Hernández except that he’d been told by “very good people” that the former Honduran president had been targeted unfairly by political opponents. “They asked me to do it and I said, I’ll do it,” Trump acknowledged, without naming the people who sought the pardon for Hernández. HEALTH CARE AND THE ECONOMY Asked to grade the economy under his watch, Trump rated it an overwhelming success: “A-plus-plus-plus-plus-plus.” To the extent voters are frustrated about prices, Trump said the Biden administration was at fault: “I inherited a mess. I inherited a total mess.” The president is facing a forbidding political environment because of voters’ struggles with affordability, with about half of voters overall and nearly 4 in 10 people who voted for Trump in 2024 saying in a recent POLITICO Poll that the cost of living was as bad as it had ever been in their lives. Trump said he could make additional changes to tariff policy to help lower the price of some goods, as he has already done, but he insisted overall that the trend on costs was in the right direction. “Prices are all coming down,” Trump said, adding: “Everything is coming down.” Prices rose 3 percent over the 12 months ending in September, according to the most recent Consumer Price Index. Trump’s political struggles are shadowing his upcoming decision on a nominee to chair the Federal Reserve, a post that will shape the economic environment for the balance of Trump’s term. Asked if he was making support for slashing interest rates a litmus test for his Fed nominee, Trump answered with a quick “yes.” The most immediate threat to the cost of living for many Americans is the expiration of enhanced health insurance subsidies for Obamacare exchange plans that were enacted by Democrats under former President Joe Biden and are set to expire at the end of this year. Health insurance premiums are expected to spike in 2026, and medical charities are already experiencing a marked rise in requests for aid even before subsidies expire. Trump has been largely absent from health policy negotiations in Washington, while Democrats and some Republicans supportive of a compromise on subsidies have run into a wall of opposition on the right. Reaching a deal — and marshaling support from enough Republicans to pass it — would likely require direct intervention from the president. Yet asked if he would support a temporary extension of Obamacare subsidies while he works out a large-scale plan with lawmakers, Trump was noncommittal. “I don’t know. I’m gonna have to see,” he said, pivoting to an attack on Democrats for being too generous with insurance companies in the Affordable Care Act. A cloud of uncertainty surrounds the administration’s intentions on health care policy. In late November, the White House planned to unveil a proposal to temporarily extend Obamacare subsidies only to postpone the announcement. Trump has promised on and off for years to unveil a comprehensive plan for replacing Obamacare but has never done so. That did not change in the interview. “I want to give the people better health insurance for less money,” Trump said. “The people will get the money, and they’re going to buy the health insurance that they want.” Reminded that Americans are currently buying holiday gifts and drawing up household budgets for 2026 amid uncertainty around premiums, Trump shot back: “Don’t be dramatic. Don’t be dramatic.” SUPREME COURT Large swaths of Trump’s domestic agenda currently sit before the Supreme Court, with a generally sympathetic 6-3 conservative majority that has nevertheless thrown up some obstacles to the most brazen versions of executive power Trump has attempted to wield. Trump spoke with POLITICO several days after the high court agreed to hear arguments concerning the constitutionality of birthright citizenship, the automatic conferral of citizenship on people born in the United States. Trump is attempting to roll back that right and said it would be “devastating” if the court blocked him from doing so. If the court rules in his favor, Trump said, he had not yet considered whether he would try to strip citizenship from people who were born as citizens under current law. Trump broke with some members of his party who have been hoping that the court’s two oldest conservatives, Clarence Thomas and Samuel Alito, might consider retiring before the midterm elections so that Trump can nominate another conservative while Republicans are guaranteed to control the Senate. The president said he’d rather Alito, 75, and Thomas, 77, the court’s most reliable conservative jurists, remain in place: “I hope they stay,” he said, “’cause I think they’re fantastic.”

LONDON — Financial markets gave a cautious welcome to Chancellor Rachel Reeves’ budget — to the extent that they could make sense of it. The presentation of the U.K. government’s fiscal plans for the next year was badly disrupted when the Office for Budget Responsibility accidentally published its analysis of the bill before Reeves had even announced it in parliament. That forced investors into a frantic search for its key details. As the initial uncertainties lifted, the pound rose by 0.2 percent against the dollar and a little more against the euro, on the key takeaway that the annual tax take will rise by £26 billion by the 2029-2030 fiscal year. That will squeeze the budget deficit and give Reeves more room for maneuver in the event of a fresh downturn. “The Chancellor more than doubled her fiscal headroom from around £10 billion to just under £22 billion,” Deutsche Bank analyst Sanjay Raja said in a note to clients. Such considerations should reduce the U.K.’s vulnerability to swings in global financial markets, which has been exposed more than once in a year when U.S. President Donald Trump has upended the global trading order. Investors had worried all year that a global economic slowdown could push Britain in the direction of a debt crisis. But Reeves now estimates the budget deficit will fall to 1.9 percent of GDP by 2030, from 4.5 percent of GDP in the current year. That will stabilize the debt ratio well below 100 percent of GDP, but at a cost. By freezing income tax thresholds for the rest of this parliament, and by a host of smaller measures, Reeves will raise the overall tax take to a record 38 percent of gross domestic product, according to the OBR. The new debt trajectory generated a measure of relief in bond markets, visible in a drop of 0.05 percentage points in the government’s key 10-year borrowing cost to 4.44 percent by 2 p.m. in London. That was the lowest since the leak of Reeves abandoning her planned increase in income tax rates two weeks ago. It also fed through into slightly stronger expectations of interest rate cuts from the Bank of England. The two-year gilt yield, which closely tracks expectations of the Bank Rate, fell 0.03 percentage points to a 15-month low of 3.74 percent. Reeves was careful to avoid the mistakes of her last budget which, by raising regulated prices sharply, drove headline inflation back to 4 percent over the summer. In her statement on Tuesday, she went in the other direction, freezing rail and bus fares and removing some of the government-directed charges on energy bills. The OBR said these measures would take 0.4 percent off the rate of inflation over the next year. “I have cut the cost of living with money off bills and prices frozen,” Reeves said. Deutsche’s Raja said the measures would have a “modest but meaningful” impact on inflation, making the Bank’s job “slightly easier” for the next 12 months. The Bank of England held off from cutting the key Bank Rate at its latest Monetary Policy Committee meeting this month, despite increasingly signs of the job market weakening. Most analysts had said at the time they would expect a cut in December, as long as the budget didn’t add to inflationary pressures.