A sequel of good news: #Meloni lost her referendum, #Orban is out, carrying #Vance into the defeat, the gulf between MAGA and European right-wing populists is broadening, and the #Pope speaks for many. Right-wing populists are still a big threat, but they are not invincible.
🌍 Italy and Europe
📉 Slow growth, high debt and the paradox of Giorgia Meloni
🔴 In this episode of The Sound of Economics, @rebeccawire.bsky.social talks about the economy & politics of Italy with Bruegel’s @manumourlon.bsky.social & @francz.bsky.social.
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The striking down of the tariffs by the US Supreme Court makes it unlikely that the tariff edifice will last 7 to 20 years, as the pessimists thought, even if new ways to impose them have been found. I maintain that the tariff shelf-life is much shorter.
Until morale improves.
#Lagarde gives a long list of one-hand/on-the-other-hand considerations, with little indication of what the net is. Maybe this is inevitable in current conditions.
#Trump is: reducing good supply, through tariffs; reducing labour supply, through immigration; increasing aggregate demand, with fiscal policy; welcoming a weak dollar; weakening FED's resolve to fight inflation, with continuous calls to reduce rates. How can this not lead to inflation?
Is what #Trump did with #Venezuela a harbinger of what he could do with #Greenland? Unlikely but not impossible. The EU should be ready for the unlikely event.
One controversial thought: the clearer #Trump (the US?) is in his despise for Europe, the better. Even the most convinced Atlanticist will be convinced that we must now all become Gaullists.
Bruegel recently republished an essay written with Leonardo Cadamuro: www.bruegel.org/external-pub.... We try to dispel the despondency too often affecting Europeans and sapping their actions.
The EU has been hit in the last few decades by 3 raw material shocks: oil in the 1970s, gas in 2022 and now rare earths. They overcame the 2nd shock faster than the 1st one. Is the 3rd one more similar to the 1st or the 2nd? How do the 3 shocks compare in size and substitutability?
I see similarities between the weaponisation of the $ by the US and the weaponisation of rare earths by China: both are effective in the short to medium run, both incentivise alternatives, weakening their effect, in the medium to long run. Would be interesting to see which effect will fade faster.
⏳ How long will the #tariff madness last?
🤔 With discussion turning away from changing the US' tariffs towards predicting how long they will last, are there grounds for optimism?
🖊️ By @francz.bsky.social
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#EconSky
With the tariff agreement with the US and now with the Trump-Putin meeting on Ukraine, the EU is suffering unavoidable but painful humiliations. This is the precondition for understanding that we must further our unity and strengthen our independence. Humiliations can provide strong incentives.
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1 Tariffs worsen growth and inflation;
2 Increasing tariffs is contrary to the long trend towards free trade;
3 All commentary considers the increased level of tariffs as persistent.
3 is not consistent with 1 and 2.
Can the mid-term elections, or the next presidential election, reduce tariffs?
Two optimistic, maybe wrong, interpretations. 1. An extreme political shock favoured the US's traditional populist soul against its liberal one, and Roth's Plot Against America has become real, but will not last. 2. Europe is forced to surpass colonialism and the two World Wars and become an adult.
#Lagarde is very confident that inflation is stabilizing at 2.0%
#Lagarde confirms that tariffs negatively affect growth and push inflation lower, so no stagflation, unlike in the US.
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There is a common feature in French, Canadian, Australian and Romanian elections: confronted with a possible win by an extreme right party, electors choose the candidate best able to defeat it. Unfortunate exceptions are: Italy, Hungary, Israel.
🔍 The ECB’s Digital Euro and new operational framework: is there an overlap?
📅 2 June 2025 12:30-13:45 CEST
Join @rebeccawire.bsky.social , Ulrich Bindseil & Imène Rahmouni-Rousseau of @ecb.europa.eu , @francz.bsky.social & Alberto Franco Pozzolo for this conversation!
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🤝 UK-EU relations
With the London Summit approaching, on the agenda so far for a post-Brexit reset are defence, trade, and a possible youth mobility scheme.
🪙 Time to add finance?
🖊️ Jesper Berg, @rebeccawire.bsky.social @hansgeeroms.bsky.social @francz.bsky.social
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#EconSky
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I sensed a tension in #Lagarde's press conference today:
-It is clear that tariffs are imparting a negative demand shock, while there is no clear inflation impact
-Monetary policy will remain meeting by meeting without a clear path.
An indication of a downward path would have been justified.
The most important message in #Trump's backdown on tariffs is not that he suspended some of them but that the market can force a change. I expect more of this going forward, also regarding China, as both Xi and Trump must reckon with market consequences.
