Good morning and welcome to the Euro Express.

Today is the day of the EU summit. One of the important issues on the leaders’ agenda is the fear that Russia may invade Ukraine. Leaders are not expected to discuss specific measures they might take when they re-launch aggression, but we will consider some of the options under consideration.

Although this will be the first EU summit for the new German Chancellor, his Dutch Prime Minister Mark Rutte It has been a member of the European Council since 2010. Now that he will begin his fourth term, we will introduce Rutte’s latest political incarnation-as the leader of the most progressive coalition government to date.

At the same time, the European Central Bank held a management committee meeting in Frankfurt.Many people are most concerned about the topic of acceleration inflation, We will look at where the European Central Bank thinks it will go next.

Marathon Summit

The EU leaders returned to Brussels today for the last gathering before the winter vacation, writing Sam Fleming, Henry Foy and Valentina PopeIn view of the fact that several leaders had already participated in the Eastern Partnership Summit in the city yesterday, the organizers insisted on keeping the European Council at 10 o’clock in the morning.

Given the breadth and depth of the topics to be discussed, officials expect the meeting to continue into the night. One of the most intense discussions will be discussions about Russia and its forces assembled on the Ukrainian border. Diplomats hope that leaders will put their phones aside and have a frank conversation during lunch on how to respond to Vladimir Putin’s provocation.

The European Commission has been discussing with member states Allies including the United States Because it considers how to prevent Russia from escalating the situation. Brussels has prepared an options document containing a wide range of potential sanctions that can be deployed.

However, given the general uncertainty about what Putin will do next, diplomats are not expected to discuss specific measures in detail today. In order to punish Putin’s actions, capitals of various countries also have differences in how much economic pain they are willing to endure.

Possible sanctions According to people familiar with the matter, the scope of Brussels’ exploration ranges from the most extreme, such as disconnecting Russian banks from the Swift global network, to sanctions against Russian private sector banks.

Other options include restricting the export of certain technologies to Russia and more familiar steps, such as imposing individual sanctions on more oligarchs. (These options are consistent with Washington’s practice consider.) The committee declined to comment.

Kiev fears that Europeans have missed the point of deterrence. President Volodymyr Zelensky, who met with EU leaders yesterday, said that the EU needs to fully explain the consequences of the attack to Putin, rather than punish him afterwards.

“For us, it is important to apply them before the conflict and not after the conflict… This basically makes them meaningless,” he told reporters last night. “We have been fighting for eight years. We understand that they can only become a preventive mechanism if sanctions are imposed before an armed conflict.”

Ukraine is just one of many topics that leaders will discuss in Brussels. Here are some others:

• Epidemic restrictions: Leaders are expected to discuss the surge in Covid-19 infections and the latest measures taken against Omicron variants. On the eve of the summit, Italy did not notify in advance of the new measures requiring even vaccinated travelers to be tested for the new coronavirus before entering the country, which angered member states and the committee.

• Energy and carbon market: Leaders will again discuss rising energy prices and the committee’s latest proposals-including Long-term prohibition Natural gas contracts-and the suspicion of market manipulation, this is also related to the EU’s emissions trading system.

• inflation: The Eurozone dinner with ECB President Christine Lagarde may see leaders lingering on the topic of rising inflation (see more below). Reforms of the banking union, capital market union, and eurozone fiscal rules are also on the agenda-and there is no consensus on any of them.

Root, reincarnation

Mark Rutte attended this morning’s EU leaders’ summit and touted a new domestic alliance that would provide the Dutch leader with something he rarely enjoyed: an open pro-EU, progressive majority, wrote Merlin Khan In Brussels.

The government is called “Rutte IV” and consists of the four political parties that formed the previous coalition. But the latest incarnation marks a decisive breakthrough in years of stinginess and obsession with small countries, and even opens the door to greater EU federalism.

This is FT take In the 50-page alliance agreement, the Netherlands pledged to invest tens of billions of dollars in climate, housing, and defense policies to expand the country’s borrowing and budget deficits.

This is completely different from the previous iteration of the thrifty government led by Rutte and consolidated the 54-year-old reputation As an extraordinary political deformer.

The former Unilever executive took office in 2010 as an extremely individualistic and pro-market climate change skeptic. The definition of Rutte IV is likely to be large-scale social spending on childcare and housing, a higher minimum wage, and aggressive emission reduction ambitions. The motto of the new alliance is “Take care of each other and look forward to the future.”

This agreement has the obvious characteristics of the pro-EU Liberal Democratic Party D66, which made great progress in the March elections and is the second largest party after Rutte’s VVD. The spending plan will mean that for the first time since the eurozone crisis, the Netherlands will exceed the 60% ceiling of EU debt to GDP.

After being a thrifty chief of the EU for a few years after Brexit, the government has made some surprising interventions in EU affairs. They support giving the European Parliament greater powers to fire individual members. Just a few years ago, Rutte regarded parliament as a talking place.

This change will please Brussels and the capitals of the southern European Union, which are head-to-head with the Netherlands in terms of euro zone reforms, EU budget and recovery fund spending.

But the major test of the government’s pro-EU qualifications will lie in its personnel changes.

There are 20 ministerial positions available for competition, and the Ministry of Finance is being contested by the conservative Christian Democrats and D66. If it changes hands from the hawkish current Wopke Hoekstra to the progressive former diplomat Sigrid Kaag, the dramatic changes in Dutch politics are likely to live up to expectations.

Inflation forecast

When Christine Lagarde presented the results of the European Central Bank Meeting Today, investors and economists will be particularly interested in a number: its first inflation forecast for 2024, writes Martin Arnold In Frankfurt.

Economists expect the European Central Bank to forecast an inflation rate of 1.8% in 2024.

Cynics might say that this number is too convenient. If it is much higher, the “hawks” will argue that it is on track to achieve its 2% target and that the central bank should stop buying bonds and raise interest rates as soon as possible. If it is much lower, the “doves” will argue that it needs to buy more bonds to push inflation to its target, which is difficult to explain after the eurozone inflation rate rose to 4.9% in November-this is from the euro The record since its launch 23 years ago.

But most economists agree with Lagarde’s prediction that inflation will follow a “hump” trajectory-falling below the ECB target in the next few years-proving that it will maintain bond purchases and bonds for at least another year or two. Negative interest rates are reasonable.

Christian Odendal, chief economist of the European Reform Center, said: “Policy makers should continue to relax on inflation and don’t look away from the recovery.” “The real risk of high energy prices is weak consumption and 2022. And 2023 the economy may weaken, not inflation.”

However, rising prices have caused political worries—especially those from the new German Chancellor Olaf Scholz (Olaf Scholz). Say Recently, if the country’s inflation rate has not fallen, his government will “have to do something”. recent A 30-year high of 6%.

A recent survey conducted by the Bundesbank of German households showed that consumers expect prices to rise. The survey found that the proportion of inflation expected to “significantly rise” in the next 12 months has more than doubled in the past year, reaching 40%. %.

Other central banks-including the Federal Reserve and the Bank of England-are preparing extract Their stimulus policies. But Lagarde said that Europe is different because its economic recovery is still fragile and wages have almost no signs of rising.

Lagarde can expect that EU leaders, who know that voters are feeling the pressure of rising prices, will raise more questions about inflation at dinner when they attend the summit tonight.

What to watch today

1. EU leaders hold their last summit of the year in Brussels

2. The European Central Bank convenes its board of directors in Frankfurt

Noteworthy

Obviously, such actions as the location of the murder in Tiergarten [the Germany-Russia] Exchange under heavy pressure

• Berlin-Moscow stimulus: German court Convicted A Russian man was sentenced to life imprisonment for the murder of an exiled Chechen rebel leader in Berlin Park in 2019 at the order of the Kremlin. The new German Foreign Minister Annalena Balbok called the murder a “serious violation of German law and German sovereignty.”

• Brazilian beef, out: Several European and British supermarkets, including Delhaize and Sainsbury, are removing certain Brazilians Beef products After an investigation traced retailers’ deforestation-related products, they took them off the shelves.

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