LONDON — Keir Starmer is off to China to try to lock in some economic wins he can shout about back home. But some of the trickiest trade issues are already being placed firmly in the “too difficult” box. The U.K.’s trade ministry quietly dispatched several delegations to Beijing over the fall to hash out deals with the Chinese commerce ministry and lay the groundwork for the British prime minister’s visit, which gets going in earnest Wednesday. But the visit comes as Britain faces growing pressure from its Western allies to combat Chinese industrial overproduction — and just weeks after Starmer handed his trade chief new powers to move faster in imposing tariffs on cheap, subsidized imports from countries like China. For now, then, the aim is to secure progress in areas that are seen as less sensitive. Starmer’s delegation of CEOs and chairs will split their time between Beijing and Shanghai, with executives representing City giants and high-profile British brands including HSBC, Standard Chartered, Schroders, and the London Stock Exchange Group, alongside AstraZeneca, Jaguar Land Rover, Octopus Energy, and Brompton filling out the cast list. Starmer will be flanked on his visit by Trade Secretary Peter Kyle and City Minister Lucy Rigby. Despite the weighty delegation, ministers insist the approach is deliberately narrow. “We have a very clear-eyed approach when it comes to China,” Security Minister Dan Jarvis said Monday. “Where it is in our national interest to cooperate and work closely with [China], then we will do so. But when it’s our national security interest to safeguard against the threats that [they] pose, we will absolutely do that.” Starmer’s wishlist will be carefully calibrated not to rock the boat. Drumming up Chinese cash for heavy energy infrastructure, including sensitive wind turbine technology, is off the table. Instead, the U.K. has been pushing for lower whisky tariffs, improved market access for services firms, recognition of professional qualifications, banking and insurance licences for British companies operating in China, easier cross-border investment, and visa-free travel for short stays. With China fiercely protective of its domestic market, some of those asks will be easier said than done. Here’s POLITICO’s pro guide to where it could get bumpy. CHAMPIONING THE CITY OF LONDON Britain’s share of China’s services market was a modest 2.7 percent in 2024 — and U.K. firms are itching for more work in the country. British officials have been pushing for recognition of professional qualifications for accountants, designers and architects — which would allow professionals to practice in China without re-licensing locally — and visa-free travel for short stays. Vocational accreditation is a “long-standing issue” in the bilateral relationship, with “little movement” so far on persuading Beijing to recognize U.K. professional credentials as equivalent to its own, according to a senior industry representative familiar with the talks, who, like others in this report, was granted anonymity to speak freely. But while the U.K.’s allies in the European Union and the U.S. have imposed tariffs on Chinese EVs, the U.K. has resisted pressure to do so. | Jessica Lee/EPA Britain is one of the few developed countries still missing from China’s visa-free list, which now includes France, Germany, Italy, Spain, the Netherlands, Switzerland, Australia, New Zealand, Japan, Saudi Arabia, Russia and Sweden.  Starmer is hoping to mirror a deal struck by Canadian PM Mark Carney, whose own China visit unlocked visa-free travel for Canadians.  The hope is that easier business travel will reduce friction and make it easier for people to travel and explore opportunities on the ground — it would allow visa-free travel for British citizens, giving them the ability to travel for tourism, attend business conferences, visit friends and family, and participate in short exchange activities.  SMOOTHING FINANCIAL FLOWS The Financial Conduct Authority’s Chair Ashley Alder is also flying out to Beijing, hoping to secure closer alignment between the two countries’ capital markets. He’ll represent Britain’s financial watchdog at the inaugural U.K-China Financial Working Group in Beijing — and bang the drum for better market connectivity between the U.K. and China. Expect emphasis on the cross-border investments mechanism known as the Shanghai-London and Shenzhen-London Stock Connect, plus data sovereignty issues associated with Chinese companies jointly listing on the London Stock Exchange, two figures familiar with the planning said. The Stock Connect opened up both markets to investors in 2019 which, according to FCA Chair Ashley Alder, led to listings worth almost $6 billion. “Technical obstacles have so far prevented us from realizing Stock Connect’s full potential,” Alder said in a speech last year. Alder pointed to a memorandum of understanding being drawn up between the FCA and China’s National Financial Regulatory Administration, which he said is “critical” to allow information to be shared quickly and for firms to be supervised across borders. But that raises its own concerns about Chinese use of data. “The goods wins are easier,” said a senior British business representative briefed on the talks. “Some of the service ones are more difficult.” TAPPING INTO CHINA’S BIOTECH BOOM Pharma executives, including AstraZeneca’s CEO Pascal Soriot, are among those heading to China, as Britain tries to burnish its credentials as a global life sciences hub — and attract foreign direct investment. China, once known mainly for generics — cheaper versions of branded medicine that deliver the same treatment — has rapidly emerged as a pharma powerhouse. According to ING Bank’s global healthcare lead, Stephen Farrelly, the country has “effectively replaced Europe” as a center of innovation. ING data shows China’s share of global innovative drug approvals jumped from just 4 percent in 2014 to 27 percent in 2024. Pharma executives, including AstraZeneca’s CEO Pascal Soriot, are among those heading to China, as Britain tries to burnish its credentials as a global life sciences hub — and attract foreign direct investment. | John G. Mabanglo/EPA Several blockbuster drug patents are set to expire in the coming years, opening the door for cheaper generic competitors. To refill thinning pipelines, drugmakers are increasingly turning to biotech companies. British pharma giant GSK signed a licensing deal with Chinese biotech firm Hengrui Pharma last July. “Because of the increasing relevance of China, the big pharma industry and the U.K. by definition is now looking to China as a source of those new innovative therapies,” Farrelly said. There are already signs of progress. Science Minister Patrick Vallance said late last year that the U.K. and China are ready to work together in “uncontroversial” areas, including health, after talks with his Chinese counterpart. AstraZeneca, the University of Cambridge and Beijing municipal parties have already signed a partnership to share expertise. And earlier this year, the U.K. announced plans to become a “global first choice for clinical trials.” “The U.K. can really help China with the trust gap” when it comes to getting drugs onto the market, said Quin Wills, CEO of Ochre, a biotech company operating in New York, Oxford and Taiwan. “The U.K. could become a global gold stamp for China. We could be like a regulatory bridgehead where [healthcare regulator] MHRA, now separate from the EU since Brexit, can do its own thing and can maybe offer a 150-day streamlined clinical approval process for China as part of a broader agreement.” SLASHING WHISKY TARIFFS  The U.K. has also been pushing for lowered tariffs on whisky alongside wider agri-food market access, according to two of the industry figures familiar with the planning cited earlier. Talks at the end of 2024 between then-Trade Secretary Jonathan Reynolds and his Chinese counterpart ended Covid-era restrictions on exports, reopening pork market access. But in February 2025 China doubled its import tariffs on brandy and whisky, removing its provisional 5 percent tariff and applying the 10 percent most-favored-nation rate. “The whisky and brandy issue became China leverage,” said the senior British business representative briefed on the talks. “I think that they’re probably going to get rid of the tariff.”  It’s not yet clear how China would lower whisky tariffs without breaching World Trade Organization rules, which say it would have to lower its tariffs to all other countries too. INDUSTRIAL TENSIONS The trip comes as the U.K. faces growing international pressure to take a tougher line on Chinese industrial overproduction, particularly of steel and electric cars. But in February 2025 China doubled its import tariffs on brandy and whisky, removing its provisional 5 percent tariff and applying the 10 percent most-favored-nation rate. | Yonhap/EPA But while the U.K.’s allies in the European Union and the U.S. have imposed tariffs on Chinese EVs, the U.K. has resisted pressure to do so. There’s a deal “in the works” between Chinese EV maker and Jaguar Land Rover, said the senior British business representative briefed on the talks quoted higher, where the two are “looking for a big investment announcement. But nothing has been agreed.” The deal would see the Chinese EV maker use JLR’s factory in the U.K. to build cars in Britain, the FT reported last week. “Chinese companies are increasingly focused on localising their operations,” said another business representative familiar with the talks, noting Chinese EV makers are “realising that just flaunting their products overseas won’t be a sustainable long term model.” It’s unlikely Starmer will land a deal on heavy energy infrastructure, including wind turbine technology, that could leave Britain vulnerable to China. The U.K. has still not decided whether to let Ming Yang, a Chinese firm, invest £1.5 billion in a wind farm off the coast of Scotland.

Listen on * Spotify * Apple Music * Amazon Music Donald Trump nutzt seine Rede beim World Economic Forum in Davos für eine klare America-First-Botschaft. Weniger eskalierend als befürchtet, aber ohne Zugeständnisse an Europa. Die zentrale Frage: Was folgt daraus für die transatlantischen Beziehungen – und was ist Europas Antwort? Gordon Repinski mit der Einordnung von Trumps Auftritt, die Erwartungen an Friedrich Merz und der wachsende Handlungsdruck auf Europa. Dazu im Gespräch: Jonathan Martin von POLITICO in Washington. Er ordnet ein nach welchen Mustern Trump agiert und warum Börsen und Märkte dabei eine größere Rolle spielen als diplomatische Appelle. Im 200-Sekunden-Interview spricht die stellvertretende SPD-Fraktionsvorsitzenden Siemtje Möller über Grönland, europäische Souveränität und die Frage, ob Europa mehr tut als nur zu reagieren.  Anschließend richtet sich mit Hans von der Burchard der Blick nach Brüssel: Beim EU-Sondergipfel treffen die Staats- und Regierungschefs aufeinander, um über Zölle, Sicherheitspolitik und die durch das EU-Parlament abgelehnte Mercosur-Ratifizierung zu beraten. Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. Jetzt kostenlos abonnieren. Mehr von Host und POLITICO Executive Editor Gordon Repinski: Instagram: @gordon.repinski | X: @GordonRepinski. POLITICO Deutschland – ein Angebot der Axel Springer Deutschland GmbH Axel-Springer-Straße 65, 10888 Berlin Tel: +49 (30) 2591 0 information@axelspringer.de Sitz: Amtsgericht Berlin-Charlottenburg, HRB 196159 B USt-IdNr: DE 214 852 390 Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna

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.

One trillion US dollars of gross domestic product (GDP) has been surpassed. Poland has entered the ranks of the world’s 20 largest economies, symbolically ending a phase of chasing the West that has lasted more than three decades. The Polish Development Fund’s (PFR) new strategy seeks to address the challenge of avoiding the medium-level development trap and transitioning from the role of subcontractor to that of investor. This year marks a turning point in Polish economic history. After years of transformation, reforms and overcoming civilizational deficits, Poland has reached a point that the generation of ‘89 could only dream of. GDP crossed the symbolic barrier of US$1 trillion, and we proudly enter the exclusive club of the world’s 20 largest economies. Diversified Polish exports are breaking records, and innovative companies are conquering global markets. Sound like a happy ending? Not necessarily. Via PFR Investing for future generations Poland’s past success invites tougher challenges in a brutal world. The cheap labor growth model is dead; demographics are relentless. PFR analyses highlight declining employment as a core issue — without bold changes, stagnation looms. Piotr Matczuk, PFR president, says Poland needs an impetus for resilience, innovation and growth. PFR’s 2026-2030 strategy is that roadmap, urging a shift to high gear. On Dec. 10, it unveiled investments for future generations. Geopolitics enters the balance sheet PFR’s strategy marks a paradigm shift: integrating economics with security. Business now anchors state security, with “economic and defence resilience” as a core pillar — viewing security spending as essential insurance, not cost. > The PFR’s strategy is clear: the competitiveness of the Polish economy depends > directly on access to cheap and clean energy. PFR has invested in WB Electronics, Poland’s defense leader in command systems and drones. It expands beyond arms via dual-use tech: algorithms, encrypted communications and autonomous drones often from civilian startups. This spring’s PFR Deep Tech program backs venture capital (VC) for scaling these firms; IDA targets innovations for logistics, cybersecurity and future defense. The focus is Poland’s technological sovereignty. Controlling key security links — from ammo to artificial intelligence — ensures economic maturity resilient to geopolitical shocks. > Poland needs a boost to our resilience, innovation and growth rate. That is > why the new strategy emphasizes investment in new technologies, infrastructure > and the financial security of Poles. We want the PFR to be a catalyst for > change and a partner of choice — an institution that invests for future > generations, sets quality standards in development financing and supports > Polish entrepreneurs in boosting their international presence. > > Piotr Matczuk, President, PFR Piotr Matczuk, President, PFR / Via PFR Energy: to be or not to be for the industry If defense is the shield, then energy is the bloodstream. The PFR’s strategy is clear: the competitiveness of the Polish economy depends directly on access to cheap and clean energy. Without accelerating the transformation, Polish companies, instead of increasing their share in foreign markets, may lose their position. This is why the fund wants to enter the game as an investor where the risks are high, but the stakes are even higher — into an investment gap that the commercial market alone will not fill.  The concept of local content, in other words the participation of domestic companies in the supply chain, is key to the new strategy. This is where the circle closes. The Baltic Hub is not just a container terminal. Investment in the T5 installation terminal is the foundation, as the Polish offshore will not be built with the appropriate participation of a domestic port. This is a classic example of how the PFR works: building ‘hard’ infrastructure that becomes a springboard for a whole new sector of the economy.  The end of being a subcontractor: capital emancipation Taking inspiration from, among others, France’s Tibi Initiative, in mid-November 2025 the Polish minister of finance and economy, Andrzej Domański, announced the Innovate Poland program. The PFR plays a leading role in what will be the largest initiative in the history of the Polish economy to invest in innovative projects. Thanks to cooperation with Bank Gospodarstwa Krajowego (BGK), PZU and the European Investment Fund, Innovate Poland is already worth 4 billion złoty, and the program multiplier may reach as much as 3-4. The combined development and private capital will be invested by experienced VC and private equity funds. The aim is to further Poland’s economic development — driven by innovative companies that make a profit. In the first phase, it is expected to finance up to 250 companies at various stages of development. Via PFR The expansion of Polish companies abroad is also part of the effort for advancement in the global hierarchy. Their support is one of the pillars of the new PFR strategy. For three decades, Poland has played the role of the assembly plant of Europe — solid, cheap and hard-working. However, the highest margins, flowing from having a global brand and market control, went overseas. Polish companies need to stop being anonymous subcontractors and become owners of assets in foreign markets.  Here, the PFR acts as financial leverage. The support for the Trend Group is a prime example of this maturing process. This is a transaction with a symbolic dimension: it reverses the investment vector of the 1990s, when German capital was consolidating Polish assets. Today, it is Polish entities that are increasingly becoming leaders in offering industrial solutions in the European Union. > Polish companies need to stop being anonymous subcontractors and become owners > of assets in foreign markets. However, these ambitions extend beyond the Western direction. The strategy strongly emphasizes Poland’s role in the future reconstruction of Ukraine and the consolidation of the Central and Eastern European region. The involvement of the PFR in the operations of the Euvic Group on the Ukrainian IT market is a good example. In the digital world, big players have more power, and the PFR strives to ensure that the decision-making centers of those growing giants remain in Poland. Most importantly, Polish businesses are no longer alone in this struggle. The strategy institutionalizes the concept of ‘Team Poland’. In this initiative, the PFR provides capital; BGK, a state development bank, offers debt solutions; the KUKE, an insurance company, insures the risk; and the Polish Investment and Trade Agency provides promotional support. Acting like a one-stop shop, all these institutions enable Polish capital to compete as a partner in the global league. This is part of the Polish government’s modern economic diplomacy strategy, led by Domański. Capital for generations. From an employee to a stakeholder in the economy  All grand plans need fuel. Mature economies like the Netherlands and the United Kingdom harness citizens’ savings via capital markets. PFR’s strategy boldly demands Poland’s success create generational wealth: turning the average Kowalski from an employee into a stakeholder. Diagnosis is brutal: Poles save little (6.38 percent compared with the EU’s 14.32 percent in Q1 2024) and inefficiently, favoring low-interest deposits. Employee Capital Plans (PPK) drive cultural change. Hard data demonstrate this: 67 percent average returns over five years crush traditional savings. It’s a virtuous cycle — PPK capital feeds stock markets, finances company growth and loops profits back to future pensioners. An architect, not a firefighter  The new PFR strategy for 2026-30 is a clear signal of a paradigm shift. The company, which many Polish entrepreneurs still see as a firefighter extinguishing the flames of the pandemic with billions from the Anti-Covid Financial Shields, is definitively taking off its helmet and putting on an engineer’s hard hat. It is shifting from interventionist to creator mode, abandoning the role of ‘night watchman’ of the Polish economy to that of its ‘chief architect’. This is an ambitious attempt to establish an institution in Poland that not only provides capital, but also actively shapes the country’s economic landscape, setting the direction for development for decades to come.

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

When Goldman Sachs boss David Solomon met with Chancellor Rachel Reeves in October, he was given a list of prepared talking points by colleagues to discuss with Britain’s top finance minister. With only one thing on his mind, he ripped up the notes and warned her: Don’t hike bank taxes in the budget. Six weeks on, after Reeves delivered her second fiscal statement on Nov. 26 with no such tax increases, he needn’t have worried too much. Taxing Britain’s mammoth lenders could have raised £8 billion for the exchequer, a huge amount which would have gone a long way to plug the £30 billion hole Reeves needed to fill to stabilize the U.K.’s finances. But while some in the ruling Labour Party would have loved to see financial institutions taxed more, Reeves was never actually going to pull the trigger. Publicly and privately, the lobbying efforts by banks were intense. The CEOs of Lloyds, HSBC, and NatWest all spoke out openly against the suggestion, while other leaders, such as Solomon, issued their warnings behind closed doors. Banks couldn’t rule out a tax hike, particularly after a leaked memo revealed that former Deputy Prime Minister Angela Rayner had urged Reeves to raise the bank surcharge, an extra tax paid by banks on top of corporation tax. Certain think tanks, too, called on Reeves to go big on fat cats. But behind closed doors, as the budget approached, City figures weren’t so concerned. Many cautioned against believing stories that a bank tax was imminent, while others said they simply hadn’t been told either way — therefore weren’t expecting a surprise in the budget. Ultimately, they believed their lobbying was hugely successful toward a government intent on achieving growth and fearful of sending wealth out of the country. One senior bank executive, granted anonymity to speak freely, said bank chiefs “care about two things: How easy is it to hire and fire people in the U.K, and how much tax do we pay in this country?” For banks, their winning arguments were twofold: One, lenders pay £43.3 billion in tax every year at a 46.4 percent tax rate, higher than any other global financial center, according to data from lobby group UK Finance. Two, Reeves has been on a mission of financial deregulation since her party entered No. 10 last year. Banks argued that giving with one hand, by loosening rules, but taking away with the other, by hiking taxes, was contradictory and wouldn’t achieve the growth she so desperately wants. “Reeves has been consistent with her messaging during her tenure,” said Benjamin Toms, bank analyst at RBC Capital Markets. “The government wants to stimulate growth, and Reeves realizes that U.K. banks are the conduit for that growth.” MOVING MARKETS The message appeared to get through to Reeves, even though she declined to publicly rule out hiking bank taxes. That left rumors to intensify over the summer. Two think tanks, Positive Money and IPPR, issued reports backing a tax hike, with both recommending a windfall-style levy on bank profits. The former delivered a petition with 68,749 signatures calling for the move to the chancellor earlier this week. The IPPR report, published at the end of August, was the most impactful, knocking £8 billion off the share prices of FTSE 100 banks the day it was published, with NatWest losing £2.5 billion alone in market cap. The Treasury worked hard to separate itself from the report, with a spokesperson saying afterward that “the chancellor has been clear that the financial services sector is at the heart of our plans to grow the economy,” but it wasn’t enough to quell rumors. “Ultimately, negative press around banks slamming a bank tax and its effect on growth is considered more damaging to the economy than the taxes collected from the banks would bring in,” said Niklas Kammer, equity analyst at Morningstar. Later, it emerged that Reeves “ripped into” members of the think tank after the report was published, per one person in the room at the time. She told the IPPR to think before they publish a report next time, in front of dozens of attendees at a meeting in No. 11 Downing Street in September. While it seemed that gossip around a surcharge hike quietened down after the summer, it was immediately thrust back into the spotlight after the chancellor’s decision to rule out any income tax hikes in the budget, as Reeves began searching around for sources of income to pad her fiscal headroom. Lobbying efforts intensified after the news on income tax broke, causing banks to panic that the move would be back on the table and warn that they’d move business elsewhere. “We suggested in our conversation with government that if the surcharge was to go up, we might be able to move things to the EU,” added the bank executive. After Brexit, banks have been forced to move more of their operations to the continent, buying new offices and hiring further staff, leaving greater possibilities to shift operations away from the U.K. “It’s much easier to move at the margins now than it would have been just five years ago,” they said. But the possibility of raising taxes on banks in Britain was officially ruled out after reports circulated in the days leading up to the budget that Reeves would let them off the hook — if they praise the chancellor’s decisions. Will Howlett, financials analyst at Quilter Cheviot, said it would be a “stretch” to see banks showering the budget with praise given the other tax rises that Reeves did pursue in the fiscal event, along with the cuts to cash ISA limits. But Toms said it was likely “more accurate” that the government was requesting banks not criticize the budget rather than actively praise it. For banks reeling from a huge win, staying quiet won’t be too hard.

EU countries must back plans that would strip them of their powers to police stock exchanges and other key institutions if they are serious about building a U.S.-style financial market, the EU’s finance chief told POLITICO. “If we don’t do anything different from the past, we will hardly get to any different result,” Financial Services Commissioner Maria Luís Albuquerque told POLITICO in an interview. “So if there is support, well, let’s walk the talk then.” The Portuguese commissioner’s challenge to the rest of the EU could fall flat. EU treasuries are already up in arms over the controversial power grab, which would shift supervision of large, cross-border financial services companies, such as stock exchanges and crypto companies, from the national level to the EU’s securities regulator in Paris. “It’s going to be a difficult discussion, of course, but these are the ones worth having, right?” Albuquerque said. “What I have been hearing since I arrived is tremendous support for the savings and investments union. Well, this is about delivering it.” The European Commission is primed to propose a sweeping package of financial markets reforms on Dec. 3, including the supervision plans, in a bid to revive Brussels’ faltering decade-long campaign to create a U.S.-style capital market. According to plans first reported by POLITICO, as well as draft documents outlining the proposal, the supervision plan would considerably strengthen the European Securities and Markets Authority (ESMA) to police the likes of Nasdaq Europe and Euronext. The draft also proposes making the future watchdog independent of meddling EU capitals. Although the main aim of a single watchdog is to boost the EU’s economy by making it easier for finance firms to operate and invest across the EU’s 27 countries, having money flowing so freely around the bloc would also create new risks without strong oversight. In the event of a meltdown of a firm, such as a clearinghouse, that operates across multiple countries, an EU watchdog could be quicker to jump on the problem than a group of national supervisors acting independently. The focus on boosting Europe’s capital markets has gathered pace since the pandemic’s bruising impact on national budgets, compounded by the EU’s desperate bid to keep pace with the economic powerhouses of the U.S. and China. With strained public finances in the EU’s member countries and the loss of London as the bloc’s financial center post-Brexit, policymakers are trying to unlock €11 trillion in cash savings held by EU citizens in their bank accounts to turbocharge the economy. Having a vibrant capital market would also offer EU startups the chance to raise cash from risk-minded investors, rather than approaching the bank with a cap in hand. “We need a single market,” Albuquerque said. “We need the scale, the opportunities that that brings, because that’s the only thing that can deliver on our ambitions.” TROUBLE AHEAD Political negotiations on the proposal are set to be fraught. Smaller countries that depend on their financial services industries, like Ireland and Luxembourg, oppose the plans as they fear ceding oversight or finance firms relocating to be closer to ESMA — an added boon for the French. Others argue that the move for an EU watchdog will distract from the bigger picture of encouraging savers to invest in the markets. “If the European Commission wants to be successful in this aspect of enlarging the pool of investable capital, this is what you need to do,” Swedish Finance Minister Niklas Wykman told POLITICO. “If we’re stuck in a never-ending discussion about how to organize supervision … that will not take us closer to our objective.”  Sensing the challenges ahead, Albuquerque said she was open to compromise to ensure the proposals don’t land dead on arrival. “I’m not saying that we will have to find an agreement which is exactly like the Commission proposal,” she said, adding that “if there is a better alternative, I’m all for it.” CORRECTION: This article was updated on Nov. 17 to clarify that policymakers are specifically targeting the €11 trillion held in bank accounts in cash.

BUSAN, South Korea — President Donald Trump on Thursday said he had “an amazing meeting” with Chinese leader Xi Jinping, appearing to tamp down tensions that had been building for months. “Zero, to 10, with 10 being the best, I’d say the meeting was a 12,” Trump told reporters aboard Air Force One, shortly after he left South Korea on his way back to Washington. “A lot of decisions were made … and we’ve come to a conclusion on very many important points.” The agreement, according to Trump, includes a commitment from China to purchase soybeans from American farmers, curb the flow of fentanyl and postpone its export restrictions on rare earths, which are used in everything from iPhones to military equipment. “There is no road block at all on rare earth,” Trump said. “Hopefully, that will disappear from our vocabulary for a little while.” Trump said he intended to immediately lower tariffs on Chinese exports to 47 percent from 57 percent. The result pulls the two nations back from the brink and should induce a significant sigh of relief from capital markets around the world. Details remain sparse and there have been false starts and resets before, but Trump said he could sign an agreement “pretty soon” and that few stumbling blocks remained. Trump also said he plans to visit China in April and that Xi would travel to the United States after that. This was Trump and Xi’s first face-to-face meeting since the G20 summit in Osaka, Japan in June 2019, when the two countries were also in the middle of a trade war. Thursday’s summit in South Korea followed months of renewed tensions that have impeded trade between the two countries, despite several announced truces. While Trump has ratcheted up tariffs on China — at one point as high as 145 percent — and tightened export controls on high-tech goods, Beijing has responded with its own devastating pressure campaign. That includes reducing purchases of American farm goods, which fell by more than 50 percent in the first seven months of 2025. U.S. soybeans farmers, who exported a record $18 billion worth of their crop to China in 2022, have been hit particularly, with just $2.4 billion in shipments to China in January through July. Beijing also imposed new export controls on rare earth materials. Earlier this month, China added five more rare earth elements to its control list and, much more controversially, outlined a plan requiring foreign companies that use even tiny amounts of Chinese-sourced rare earths to obtain a license from Beijing to export their finished products. U.S. officials described that move as an intolerable attempt by China to control global supply chains, and Trump threatened new 100 percent tariffs to take effect on Nov. 1. But it appears both sides wanted to avoid that kind of escalation. During the weekend, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, after meeting with Chinese Vice Premier He Lifeng in Malaysia, said they believed Beijing was prepared to delay its rare earth restrictions for a year, make “substantial” purchases of American farm goods and attempt to curb shipments of fentanyl precursor chemicals to the U.S.

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.”