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

LONDON — Keir Starmer’s keeping Britain out of the war in Iran — but he can’t duck the conflict’s grave economic consequences. In a sign of growing fears about the impact of the war on Britain, the prime minister chaired a rare meeting of the government’s emergency COBRA committee Monday night, joined by senior ministers and Governor of the Bank of England Andrew Bailey. Starmer’s top finance minister, Rachel Reeves, will update the House of Commons on the economic picture Tuesday, as an already-unpopular administration worries that chaos in the Middle East is shredding plans to lower the cost of living and get the British economy growing. For Starmer’s government — headed for potentially brutal local elections in May — the crisis in the Gulf risks a nightmare combination of a rise in energy prices, interest rates, inflation and the cost of government borrowing that threatens to undermine everything he’s done since winning office. Economists are now warning that even if Donald Trump’s promise of a “complete and total resolution of hostilities” with Iran were to bear fruit, the effects on the British economy could still last for months. Already there are signs of a split within Starmer’s party over how to respond. Labour MPs want the government to think seriously about action to protect households — but Starmer and Reeves have long talked up the need for fiscal responsibility, and economics are warning that there’s little room for maneuver. Fuel prices displayed at a Shell garage in Southam, Warwickshire on March 23, 2026. | Jacob King/PA Images via Getty Images Jim O’Neill, a former Treasury minister who served as an adviser to Reeves, told POLITICO the government should “not get sucked into reacting to every external shock” and “concentrate on boosting our underlying growth trend.” WHY THE UK IS SO HARD HIT Just before the outbreak of war, there was reason for Starmer and Reeves to feel quietly optimistic about the long-stagnant British economy. The Bank of England had expected inflation to fall back sustainably toward its two percent target for the first time in five years, giving the central bank the space to carry on cutting interest rates.  With the Iran war in full flow, it was forced to rewrite those forecasts at the Monetary Policy Committee’s meeting last week — and now sees inflation at around 3.5 percent by the summer. The U.K. is a big net importer of energy and also needs constant imports of foreign capital to fund its budget and current account deficits. That’s made it one of first targets in the financial markets’ crosshairs. The government’s cost of borrowing has risen by more than half a percentage point over the last month. That threatens both the real economy and Reeves’ painstakingly-negotiated budget arithmetic. Higher inflation means higher interest rates and a higher bill for servicing the government’s debt: fiscal watchdog the Office for Budget Responsibility estimates a one-point increase in inflation would add £7.3 billion to debt servicing costs in 2026-2027 alone. The effect on businesses and home owners is also likely to be chilling. Britain’s banks are already repricing their most popular mortgages, which are tied to the two-year gilt rate. Hundreds of mortgage products were pulled in a hurry after the MPC meeting last week, something that will hit the housing market and depress Reeves’ intake from both stamp duty and capital gains. Duncan Weldon, an economist and author, said: “Even if this were to stop tomorrow, the inflation numbers and growth numbers are going to look materially worse throughout 2026. “If this continues for longer… it’s an awful lot more challenging and you end up with a much tougher budget this autumn than the government would have been hoping to unveil.” DECISION TIME The U.K.’s economic plight presents an acute political headache for Starmer, as he faces a mismatch between his own party’s expectations about the government’s ability to help people and his own scarce resources. Energy Secretary Ed Miliband has promised to keep looking at different options for some form of assistance to bill-payers hit by an energy price shock. A pain point is looming in July, when a regulated cap on energy costs is due to expire and bills could jump significantly. One left-leaning Labour MP, granted anonymity to speak frankly, said: “They [ministers] need to be treating this like a financial crisis. They need plans for multiple scenarios with clear triggers for government support.” A second MP from the 2024 intake said “it’s right that a Labour government steps in, particularly to help the most vulnerable.” Foreign Secretary Yvette Cooper and Chancellor of the Exchequer Rachel Reeves at the first cabinet meeting of the new year at No. 10 Downing St. on Jan. 6, 2026 in London, England. | Pool photo by Richard Pohle via Getty Images This demand for action is being felt in the upper echelons of the party too, as Culture Secretary Lisa Nandy recently argued Reeves’ fiscal rules — seen as crucial in the Treasury to reassure the markets — may need to be reconsidered if prices continue to rise and a major support package is needed.  One Labour official said there are clear disagreements with Labour over how to go about drawing up help and warned “the fiscal approach is going to be a massive dividing line at any leadership election.” The same official pointed to recent comments by former Starmer deputy — and likely leadership contender — Angela Rayner about the OBR, with Rayner accusing the watchdog of ignoring the “social benefit” of government spending. Despite the pressure, ministers have so far restricted themselves to criticizing petrol retailers for alleged profiteering, and have been flirting with new powers for markets watchdog the Competition and Markets Authority. The government said Reeves would on Tuesday set out steps to “help protect working people from unfair price rises,” including a new “anti-profiteering framework” to “root out price gouging.” But Starmer signaled strongly in an appearance before a Commons committee Monday evening that he was not about to unveil any wide-ranging bailout package, telling MPs he was “acutely aware” of what it had cost when then-Prime Minister Liz Truss launched her own universal energy price guarantee in 2022.  O’Neill backed this approach, saying: “I don’t think they should do much… They can’t afford it anyhow. The nation can’t keep shielding people from external shocks.” Weldon predicted, however, that as the May elections approach and the energy cap deadline draws nearer, the pressure will prove too much and ministers could be forced to step in. The furlough scheme rolled out during the pandemic to project jobs and Truss’s 2022 intervention helped create “the expectation that the government should be helping households,” he said. “But it’s incredibly difficult. Britain’s growth has been blown off-course an awful lot in the last 15 years by these sorts of shocks.” Geoffrey Smith, Dan Bloom, Andrew McDonald and Sam Francis contributed to this report.

LONDON — War in the Middle East has put Keir Starmer in a tight spot.  The U.K. government can’t afford to spend big on protecting voters from looming energy bill hikes. But politically, the British prime minister has little choice.  Starmer said Monday that his “first instinct” in responding to the Iran conflict — and the global energy price shock it has triggered — is protecting the household finances of ordinary voters.  “It’s moments like this that tell you what a government is about,” Starmer said, addressing yet another hastily-arranged Downing Street press conference.   “My answer is clear. Whatever the challenges that lie ahead, this government will always support working people.”  He was announcing £53 million in state support for low-income families already hit by a sharp rise in the cost of heating oil, a fuel that warms around one in 20 U.K. homes.    But much bigger, much pricier policy choices are coming down the track.    STRAITENED FINANCES A regulated cap on energy costs is keeping a lid on most people’s household bills. But the current cap expires in July — at which point, without intervention, bills could jump significantly. Wholesale gas prices, which significantly influence household bills, have nearly doubled since the crisis began. Starmer’s Energy Secretary Ed Miliband told The Mirror newspaper he would “keep looking at how we can do more” to protect consumers. The government must decide how big they go with any support package.  But the Institute for Fiscal Studies think tank has already sounded the alarm over the government’s fiscal wiggle room. “The public finances are in a more strained position than they were [in 2022] at the start of the Russia-Ukraine war, and a sustained increase in energy prices is likely to worsen them further,” the think tank said last week. Starmer sought to contrast the situation now with that faced by Liz Truss’s Conservative government in 2022, and her multi-billion pound energy bailout.  The policy reduced the energy bills of every family in the country. It also, coupled with sweeping tax cuts, led sterling to crash, borrowing costs to soar, and forced Truss out of her job days later.  His Labour government, Starmer said, had “brought stability back to our public finances, stability that I will never put at risk.”  Now he faces the challenge of meeting that pledge on stability, while standing by his cost-of-living guarantee to the British people.   TO TARGET To help people most exposed to rising bills, while avoiding Truss’s fate, the obvious option for Starmer is to make a targeted intervention on energy bills come July.  The heating oil policy follows this approach, aimed squarely at “people who need it most,” Chancellor Rachel Reeves said Monday. The Treasury is similarly looking at “targeted options” for any future energy support package, she told The Times at the weekend.  Starmer himself said on Monday “we’re not ruling anything out.” But the signals are that a universal offer like Truss’s — which ended up costing an eye-watering £23 billion — is unlikely.   Among Labour MPs, the penny is already dropping that not all households will benefit from government largesse.   “It’s right that the government steps in at a time of national crisis and supports those that are struggling,” Suffolk Coastal MP Jenny Riddell-Carpenter told the BBC on Monday. “But it’s complex,” she added. “There isn’t a limitless pot of money.”   And targeting the right people for help will not be straightforward. In 2022, government lacked the data required to know which households should be targeted, Reeves told MPs on the Treasury committee last week.    Work on this inside government is now “more advanced,” she insisted. But officials still lack the targeting data needed, said Ben Westerman, director of policy at the energy campaign group Electrify Britain.    Officials simply “haven’t moved on” with targeting data since the last energy crisis, Westerman said, adding: “That is a failure of governments plural to learn the lessons from last time.”   Energy companies, pushing ministers over the issue, have grown frustrated.   “Industry has called for government to provide the data so that we can target support [to] those who need it. And there’s just been little to no progress on this,” Caitlin Berridge-Dunn, head of external affairs at energy supplier Utilita, said.  NEW AND OLD IDEAS  One option, separate from bills, would be to maintain a longstanding, five pence per liter tax relief on gasoline and diesel, a fuel duty cut which expires in September. The oil price shock has driven up costs at the pump by more than eight pence per liter for gasoline and more than 18 pence for diesel. Another approach officials could opt for, according to Westerman, and reported in The Times Monday, is to expand the existing Warm Homes Discount, a one-off payment to reduce bills for the poorest households, as a vehicle for getting more support to people who need it most.  But that approach, he cautioned, would not catch the “squeezed middle” of households.   Another option is to repeat a trick Starmer and Reeves pulled off at last year’s budget — shifting green and other levies currently added to energy bills into general taxation.   Miliband hailed that move at the time — which saved around £150 on the average energy bills — as a way of “asking some of the wealthiest in our society” to subsidize everyone’s bills.  There is enthusiasm for the principle in Whitehall, even if no decisions have yet been made. A government official, granted anonymity because they were not authorized to speak on the record, said the £150 cut could be “the beginning of a big principled move” of the burden of energy costs from consumers onto tax.     A study by the industry group the MCS Foundation found that moving all such levies onto taxation could cut bills by up to £410 a year. But that, of course, would put taxpayers on the hook. MCS Foundation estimated it would cost £5.7 billion per year. The most important difference from the Truss era, argued Sam Alvis, a former Labour adviser and now a director of energy security and environment at the influential IPPR think tank, is that Starmer cannot hang around.  The government should be planning any intervention now and not allow prices to rise in July, he argued, avoiding a repeat of the last Conservative government’s mis-step, when it waited until the fall to act.  “I think the public tolerance for [energy bill] increases will be a lot lower than it was in 2022, when Liz Truss waited from February to September to react,” Alvis said. “I just don’t think we’ll have that same time.” 

LONDON — The European Commission has referred disgraced British politician Peter Mandelson to fraud investigators over his links to the convicted sex offender Jeffrey Epstein. The Commission is assessing whether Mandelson, a former EU trade commissioner, broke the bloc’s rules after recently released files suggested he gave Epstein information about a €500 billion bailout to save the euro in 2010.  A spokesperson for the European Commission told POLITICO: “Given the circumstances, and the significant amount of documents made available publicly, the European Commission also asked OLAF [the European anti-fraud office] on 18 February to look into the matter. Pending the ongoing assessment, we are not in a position to comment further.” Mandelson’s lawyers did not immediately respond to a request for comment. He has previously said he was wrong to have continued his association with Epstein, who died in 2019, and apologized “unequivocally” to Epstein’s victims. Mandelson has said none of the Epstein emails released by the U.S. Department of Justice “indicate wrongdoing or misdemeanor on my part.” Mandelson served as a European commissioner between 2004 and 2008 and is now at the center of a scandal that has rocked the government of Keir Starmer in Britain. Police arrested Mandelson on suspicion of misconduct in public office on Monday, before releasing him on bail. Mandelson’s lawyers have previously said he is cooperating with the U.K. police investigation, and that his overriding priority is to “clear his name.” Recently published files suggest Mandelson helped provide Epstein with information about a €500 billion bailout to save the euro in 2010.  Mandelson was a senior British minister at the time and Epstein a financier. The Commission has previously said that former Commissioners remain bound by rules on ethical conduct.

BRUSSELS — Disgraced British politician Peter Mandelson is facing demands to be stripped of his pension as a former European commissioner if investigators found he broke EU rules over his contact with convicted sex offender Jeffrey Epstein.  Mandelson served as a European commissioner between 2004 and 2008 and is now at the center of a spiraling scandal in Britain. Newly released files showed how Mandelson, who was a senior British minister at the time, helped provide Epstein, then a financier, with information about a €500 billion bailout to save the euro in 2010.  The European Commission is looking into whether Mandelson broke its rules, which apply even after commissioners have left office, though ethics campaigners have called for a full fraud inquiry by independent investigators. Mandelson should lose the commissioner’s pension to which he is entitled if he’s found to have breached the rules, the campaigners said.  “Given the severity of allegations concerning Peter Mandelson’s deplorable relationship with Jeffrey Epstein, the European Commission and European Anti-Fraud Office must pursue an immediate investigation to establish any potential misconduct both during and beyond his tenure as European Commissioner,” Nick Aiossa, director at Transparency International, a leading anti-corruption campaign group, told POLITICO. “Should it do so, Mandelson must be stripped of his Commissioner’s pension.” Daniel Freund, a Green MEP from Germany, condemned the lack of action and investigations against “the most powerful people on earth” over their links to the disgraced financier. “That EU commissioners were somehow involved with this universe is just outrageous,” he told POLITICO. “Taking away the pension would be justified if he broke any EU rules.” Mandelson, 72, was entitled to an inflation-linked pension reportedly worth £31,000 a year when he turned 65 for his four years as a European commissioner. This is on top of other any pensions from his time as an elected politician in the U.K. and in other roles. Mandelson did not immediately respond to a request for comment. He has previously said he was wrong to have continued his association with Epstein and apologized “unequivocally” to Epstein’s victims. In a statement, the EU’s anti-fraud office, known as OLAF, said: “We cannot provide details regarding cases which OLAF may or may not be treating. This is to protect the confidentiality of any possible investigations and of possible ensuing judicial proceedings, as well as to ensure respect for personal data and procedural rights.” In London, Britain’s Health Secretary Wes Streeting said Mandelson should lose the severance payment he was entitled to when his career as U.K. ambassador to the United States ended over the Epstein scandal. Speaking to Times Radio, Streeting also suggested Mandelson could potentially be stripped of related pension entitlements. The opposition Reform UK party said Mandelson should lose the pension he’s entitled to receive as a former government minister. Noah Keate contributed to this report.

LONDON — The European Commission is looking into whether former British politician Peter Mandelson broke EU rules over his contact with sex offender Jeffrey Epstein. Even though the U.K. left the EU six years ago, Mandelson remains bound by obligations that he signed up to during his time as a commissioner, from 2004 to 2008. Newly released files suggest Mandelson in 2010, while he was a senior minister in the U.K. government, may have given Epstein advance notice of a €500 billion bailout to save the euro at the height of the spiraling Greek debt crisis. European finance ministers agreed the deal overnight amid fears that the failing Greek economy could trigger a wider crisis across the eurozone. According to the files released in the U.S., Epstein, who was a financier, sent Mandelson an email the previous night saying: “Sources tell me 500 b euro bailout , almost complete.” Mandelson replied: “Sd be announced tonight.” The cabinet minister then said he was just leaving 10 Downing Street and “will call.” The British government decided not to take part in the bailout for the euro but was part of the talks that paved the way for the emergency measure, so would have known how events were progressing. On Tuesday, Balazs Ujvari, a spokesperson for the Commission said: “We have rules in place emanating from the treaty and the code of conduct that commissioners, including former commissioners, have to follow.” When there is an indication that the rules may not have been followed, the Commission looks into any potential breaches, he said. “We will be assessing if, in light of these newly available documents, there might be breaches of the respective rules with regard to Peter Mandelson.” Mandelson did not immediately respond to a request for comment. He has previously said he was wrong to have continued his association with Epstein and apologized “unequivocally” to Epstein’s victims.

LONDON — If there’s one thing Keir Starmer has mastered in office, it’s changing his mind. The PM has been pushed by his backbenchers toward a flurry of about-turns since entering Downing Street just 18 months ago.  Starmer’s vast parliamentary majority hasn’t stopped him feeling the pressure — and has meant mischievous MPs are less worried their antics will topple the government.  POLITICO recaps 7 occasions MPs mounted objections to the government’s agenda — and forced the PM into a spin. Expect this list to get a few more updates… PUB BUSINESS RATES  Getting on the wrong side of your local watering hole is never a good idea. Many Labour MPs realized that the hard way. Chancellor Rachel Reeves used her budget last year to slash a pandemic-era discount on business rates — taxes levied on firms — from 75 percent to 40 percent. Cue uproar from publicans. Labour MPs were barred from numerous boozers in protest at a sharp bill increase afflicting an already struggling hospitality sector. A £300 million lifeline for pubs, watering down some of the changes, is now being prepped. At least Treasury officials should now have a few more places to drown their sorrows. Time to U-turn: 43 days (Nov. 26, 2025 — Jan. 8, 2026). FARMERS’ INHERITANCE TAX  Part of Labour’s electoral success came from winning dozens of rural constituencies. But Britain’s farmers soon fell out of love with the government.  Reeves’ first budget slapped inheritance tax on farming estates worth more than £1 million from April 2026. Farmers drive tractors near Westminster ahead of a protest against inheritance tax rules on Nov. 19, 2024. | Ben Stansall/AFP via Getty Images Aimed at closing loopholes wealthy individuals use to avoid coughing up to the exchequer, the decision generated uproar from opposition parties (calling the measure the “family farm tax”) and farmers themselves, who drove tractors around Westminster playing “Baby Shark.”  Campaigners including TV presenter and newfound farmer Jeremy Clarkson joined the fight by highlighting that many farmers are asset rich but cash poor — so can’t fund increased inheritance taxes without flogging off their estates altogether. A mounting rebellion by rural Labour MPs (including Cumbria’s Markus Campbell-Savours, who lost the whip for voting against the budget resolution on inheritance tax) saw the government sneak out a threshold hike to £2.5 million just two days before Christmas, lowering the number of affected estates from 375 to 185. Why ever could that have been?  Time to U-turn: 419 days (Oct. 30, 2024 — Dec. 23, 2025). WINTER FUEL PAYMENTS  Labour’s election honeymoon ended abruptly just three and a half weeks into power after Reeves made an economic move no chancellor before her dared to take.  Reeves significantly tightened eligibility for winter fuel payments, a previously universal benefit helping the older generation with heating costs in the colder months.  Given pensioners are the cohort most likely to vote, the policy was seen as a big electoral gamble. It wasn’t previewed in Labour’s manifesto and made many newly elected MPs angsty.  After a battering in the subsequent local elections, the government swiftly confirmed all pensioners earning up to £35,000 would now be eligible for the cash. That’s one way of trying to bag the grey vote. Time until U-turn: 315 days (July 29, 2024 — June 9, 2025).  WELFARE REFORM Labour wanted to rein in Britain’s spiraling welfare bill, which never fully recovered from the Covid-19 pandemic.  The government vowed to save around £5 billion by tightening eligibility for Personal Independence Payment (PIP), a benefit helping people in and out of work with long term health issues. It also said other health related benefits would be cut. However, Labour MPs worried about the impact on the most vulnerable (and nervously eyeing their inboxes) weren’t impressed. More than 100 signed an amendment that would have torpedoed the proposed reforms.  The government vowed to save around £5 billion by tightening eligibility for Personal Independence Payment. | Vuk Valcic via SOPA Images/LightRocket/Getty Images In an initial concession, the government said existing PIP claimants wouldn’t be affected by any eligibility cuts. It wasn’t enough: Welfare Minister Stephen Timms was forced to confirm in the House of Commons during an actual, ongoing welfare debate that eligibility changes for future claimants would be delayed until a review was completed.  What started as £5 billion of savings didn’t reduce welfare costs whatsoever.  Time to U-turn: 101 days (Mar. 18, 2025 — June 27, 2025).  GROOMING GANGS INQUIRY  The widescale abuse of girls across Britain over decades reentered the political spotlight in early 2025 after numerous tweets from X owner Elon Musk. It led to calls for a specific national inquiry into the scandal. Starmer initially rejected this request, pointing to recommendations left unimplemented from a previous inquiry into child sexual abuse and arguing for a local approach. Starmer accused those critical of his stance (aka Musk) of spreading “lies and misinformation” and “amplifying what the far-right is saying.” Yet less than six months later, a rapid review from crossbench peer Louise Casey called for … a national inquiry. Starmer soon confirmed one would happen. Time to U-turn: 159 days (Jan. 6, 2025 — June 14, 2025).  ‘ISLAND OF STRANGERS’ Immigration is a hot-button issue in the U.K. — especially with Reform UK Leader Nigel Farage breathing down Starmer’s neck. The PM tried reflecting this in a speech last May, warning that Britain risked becoming an “island of strangers” without government action to curb migration. That triggered some of Starmer’s own MPs, who drew parallels with the notorious 1968 “rivers of blood” speech by politician Enoch Powell. The PM conceded he’d put a foot wrong month later, giving an Observer interview where he claimed to not be aware of the Powell connection. “I deeply regret using” the term, he said. Time to U-turn: 46 days (May 12, 2025 — June 27, 2025).  Immigration is a hot-button issue in the U.K. — especially with Reform UK Leader Nigel Farage breathing down Starmer’s neck. | Tolga Akmen/EPA TWO-CHILD BENEFIT CAP  Here’s the U-turn that took the longest to arrive — but left Labour MPs the happiest. Introduced by the previous Conservative government, a two-child welfare cap meant parents could only claim social security payments such as Universal Credit or tax credits for their first two children. Many Labour MPs saw it as a relic of the Tory austerity era. Yet just weeks into government, seven Labour MPs lost the whip for backing an amendment calling for it to be scrapped, highlighting Reeves’ preference for fiscal caution over easy wins.  A year and a half later, that disappeared out the window. Reeves embracing its removal in her budget last fall as a child poverty-busty measure got plenty of cheers from Labour MPs — though the cap’s continued popularity with some voters may open up a fresh vulnerability. Time until U-turn: 491 days (July 23, 2024 — Nov. 26, 2025).

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.

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.)