German borrowing spree could complicate defence spending in remainder of EU | Invesloan.com

Today’s agenda: Trump “pissed off” at Putin; China’s WTO disputes; Big Read on Iran; UBS’s “deal of the year” sours; and Pilita Clark on the WhatsAppification of work

Good morning. We start the working week with a look at how Germany’s defence spending spree is affecting financial markets across the EU.

What’s happening: Germany’s shift from its historic reluctance to borrow to a “whatever it takes” plan for military and infrastructure spending has helped boost 10-year Bund yields to nearly 3 per cent this month — levels last seen in 2023. That has in turn driven up bond yields in other countries, such as France and Italy, thanks to German debt’s role as the de facto benchmark for the bloc’s market.

Why it matters: Investors have warned about the impact on the finances of more heavily indebted EU economies. With more fiscal strains, spreads — the additional borrowing costs countries pay relative to Germany — could widen. This would make it much harder for some countries to mount borrowing campaigns of their own, experts said, affecting their ability to increase defence spending.

Here’s more analysis on how the Eurozone could be affected, and we have more on European defence spending below.

• Norway: The country’s two main opposition parties say its sovereign wealth fund, the world’s biggest, should be allowed to invest in defence companies.

• Netherlands: Dutch pension funds are set to plough tens of billions of euros into risky assets in Europe, in a boost to the defence sector.

• Portugal: Lisbon will not let rearmament costs threaten its budget surplus secured after years of austerity, its finance minister said.

• Niche minerals: Prices of materials for bullets and fighter jets are now surging as defence spending booms, writes Argus Media’s Ellie Saklatvala.

And here’s what else we’re keeping tabs on today:

• Myanmar earthquake: About 1,700 people have been killed as international efforts to get aid into the country intensify.

• Economic data: Germany reports its March consumer price index while Italy issues its provisional CPI for the same month.

• EU energy: A scheme to reduce gas consumption by 15 per cent, designed to cut reliance on Russian power across the bloc, ends today.

• Marine Le Pen: The far-right leader could be banned from running for the French presidency as judges issue their verdict in an EU fraud case today.

Five more top stories

1. Donald Trump has threatened secondary tariffs on buyers of Russian oil if no deal over Ukraine emerges. In a shift in tone, the US president said he was “pissed off” with Russian President Vladimir Putin for foot-dragging in talks over a ceasefire with Ukraine. Here’s more from Trump’s outburst at Moscow.

• EU sanctions: A senior German politician has said curbs against Moscow are hurting Europe more than Putin, and that his country should consider easing them.

• Tariff realpolitik: Trump’s trade policy is about power and security, not economics, writes Rana Foroohar.

2. Deloitte is emerging as the biggest early loser from Trump’s spending clampdown on consultants, ahead of a deadline today for the companies to offer price cuts and other concessions. The administration said that 10 companies, including Accenture and IBM, are on course to collectively bill the federal government $65bn in fees in 2025 and future years.

3. China was targeted by a record number of disputes at the World Trade Organization last year as the country’s booming exports swamped international markets and triggered objections from its commercial partners. New research showed Beijing accounted for nearly half of all disputes lodged at the global trade body in 2024.

• More on China: Four of the country’s biggest banks will raise a combined $72bn through share sales to investors, including the Ministry of Finance, as Beijing seeks to boost lending against pressing economic woes.

4. Europe needs to act urgently or risk having all its technology companies list on US stock markets, Sweden’s prime minister has warned, after losing homegrown tech companies such as Spotify and Klarna to New York. Ulf Kristersson told the Financial Times that there was “a lot of homework to do” for Europe.

5. Trump has said he is “not joking” about serving a third term, adding that there are “methods” by which he could bypass the constitutional prohibition on US presidents being elected three times. Trump, who is 78, told local media: “A lot of people want me to do it.”

The Big Read

Seven years ago, Trump tore up an accord with Iran that strictly limited its nuclear activities and had the buy-in of Europe, Russia and China. Now back in the White House, the president is confronting the repercussions, as Tehran has aggressively expanded its nuclear activity and is now locked on a collision course with the west that is set to come to a head this year.

We’re also reading . . . 

• Elon Musk and Wisconsin: The billionaire’s move to spend $22mn on the state’s supreme court election has made it the most expensive judicial race in US history.

• UBS: Two years on, the Swiss bank’s integration of Credit Suisse is going well. So why is the “deal of the century” starting to sour?

• UK economy: Fiscal tweaks won’t solve Britain’s growth problem, writes Martin Wolf, who says the UK needs a more radical programme of structural reforms.

• US immigration: Visitors have suffered hostile treatment at the hands of border guards, including a German tourist who was shackled and jailed for 16 days.

Chart of the day

Weak oil prices are adding to pressure on Saudi Arabia’s vast spending programme as Riyadh prepares to unwind crude production cuts starting tomorrow, which is likely to push prices lower. The squeeze comes as the kingdom pursues ambitious projects expected to cost hundreds of billions of dollars.

Take a break from the news . . . 

The pandemic accelerated a rise in the use of messaging apps such as WhatsApp between colleagues — and also bred new levels of informality at work, writes Pilita Clark. The Trump administration’s recent Signalgate scandal underscores the consequences of the WhatsAppification of work.