FirstFT: Outlooks for EU growth and inflation worsen as energy crisis hits


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Brussels is set to cut its growth forecasts further and lift its inflation outlook as the energy crisis triggered by Russia’s invasion of Ukraine exacts its toll on the EU economy.

Both the EU and euro area are forecast to expand 2.7 per cent this year, well shy of the previous expectation of 4 per cent, according to draft European Commission forecasts to be published today. Growth is tipped to be 2.3 per cent in 2023.

Inflation is expected to surge above 6 per cent in the EU and euro area this year, with some central and eastern European countries likely to see double-digit price rises in 2022.

Eurozone inflation is set to fall to 2.7 per cent in 2023. But the figure remains above the European Central Bank’s target of 2 per cent, underscoring the delicate balancing act policymakers face amid tepid growth and soaring prices.

Last week, ECB president Christine Lagarde signalled that she would support raising the main interest rate in July, paving the way for the first increase in more than a decade. The commission previously projected inflation would fall back below the bank’s target next year.

Thanks for reading FirstFT Europe/Africa. Here’s the rest of the day’s news — George

The latest on the war in Ukraine

  • Nato expansion: In a momentous day for the Nordic nations, Finland said yesterday it would formally apply for Nato membership in the coming days, while Sweden’s ruling Social Democrats said they would follow suit.

  • Energy: Sanctions against Russia and Covid-19 lockdowns in China have reduced freight volumes in Rotterdam, Europe’s busiest seaport. But one cargo is booming as the EU tries to cut its reliance on Russia: liquefied natural gas.

  • Opinion: The US thinks Vladimir Putin would authorise the use of nuclear weapons only if he perceived an existential threat to Russia. But what would qualify as such a threat, asks Malcolm Chalmers of the Royal United Services Institute.

  • Wheat: The G7 is urgently seeking alternative routes to export Ukrainian grain being blockaded by Russian forces, as concerns grew about the risk of a global “hunger crisis” after India banned wheat exports.

1. UK bosses focus on retraining to fill workforce gaps UK employers are increasingly planning to train existing staff rather than raise wages to lure new recruits, according to a quarterly survey that suggested pay pressures may be easing. About two-thirds of employers expect to have difficulties filling vacancies over the next six months.

2. UK manufacturers ‘reshore’ supply chains British manufacturers are bringing back production to the UK in a “reshoring” push in response to the supply chain chaos caused by the coronavirus pandemic and Brexit. Three-quarters of companies have increased their number of British suppliers in the past two years, according to a survey by Make UK.

3. Harrow Beijing loses British branding A Beijing school affiliated with 450-year-old English public school Harrow has been forced to drop its famous brand name as China tightens controls on education providers. A Harrow representative said the change was due to national rules on the naming of private schools that teach Chinese nationals.

4. Credit Suisse nears deal with West Virginia governor’s group Credit Suisse and West Virginia governor Jim Justice are close to a settlement over $690mn his mining company owes the Swiss bank’s client. Bluestone Resources borrowed heavily from Greensill Capital, the failed UK supply chain finance firm that relied on some of Credit Suisse’s wealthiest clients.

5. Bitcoin has no future as payments network, says FTX chief Bitcoin’s inefficiency and environmental toll prevent the cryptocurrency from being an effective means of payment, according to Sam Bankman-Fried, the billionaire founder of digital asset exchange FTX, who said the system of validating blockchain transactions can’t be scaled up.

  • More on crypto: Over Lunch with the FT, Bankman-Fried discusses whether crypto is a Ponzi scheme. The collapse of a hyped stablecoin has sparked serious questions about the entire market.

Sam Bankman-Fried, founder and chief executive of FTX
Sam Bankman-Fried, founder and chief executive of FTX, believes Bitcoin has no future as a payments network © Lam Yik/Bloomberg

The day ahead

Economic data The EU releases March trade figures, while Rightmove issues monthly UK house price information. Canada has manufacturing and wholesale trade data.

Corporate earnings UK bakery chain Greggs releases a first-quarter trading update and Ryanair releases its full-year figures. BuzzFeed and Tencent also report.

Northern Ireland Boris Johnson will visit Belfast to try to persuade Democratic Unionists to rejoin the power-sharing executive in Stormont, but the UK prime minister will face opposition over plans to unilaterally scrap parts of the post-Brexit treaty.

Biden meets Greek PM US president Joe Biden welcomes Greek prime minister Kyriakos Mitsotakis at the White House.

Sign-up to the Week Ahead newsletter for a guide to what’s coming up. Sent every Sunday, it previews the economic, political and corporate agenda around the world.

What else we’re reading

North Sea producer seeks ‘fiscal stability’ The head of a North Sea energy company that is betting on another 30 years of UK oil and gas production has appealed for “fiscal stability” as it looks to spend $3bn reviving projects. Profits could be “very high” but losses “very significant”, Ithaca Energy’s Gilad Myerson said.

How a professor moved his research — and lab — to a new country Boxes of equipment and instruments lie around Roel Dullens’s physical chemistry laboratory at Radboud University Nijmegen. Six months after his research group started dismantling its workspace in Oxford, the lab is undergoing a slow renaissance 500km away in the Netherlands.

Male UK managers block gender balance efforts Male managers are blocking efforts to improve the gender balance at UK companies, according to research by the Chartered Management Institute that found passive, and even active, resistance to gender equality from male bosses.

Bonuses are outdated in the age of knowledge work The idea of paying for performance is deeply ingrained. But what if the concept is flawed? Two studies suggest it is, Pilita Clark writes, given that work is more complex and collaborative than ever. Offering bonuses can even backfire.

The tech stock crash may be far from over Richard Waters writes that there are reasons to expect more pain to come for investors in technology companies. He says if you value the sector on multiples of revenue, a favourite gauge of growth investors, there is ample room for further declines.

Read the FT’s newest column: a behind the scenes look into the work of Rutherford Hall, communications strategist

Frieze New York 2022

As the art fair prepares to return to The Shed in Manhattan, the FT speaks to festival director Christine Messineo, who has designed a more intimate experience for participants.

Frieze New York at The Shed in 2021
Frieze New York at The Shed in 2021 © Casey Kelbaugh/Frieze

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