Yikes. Insofar as tariffs are bringing in revenue for the US government, this will burn all the gains. “The Pentagon said on Thursday it had asked Congress for another $200bn to fund the war effort, roughly equivalent to the combined budget for the departments of education, health and housing.”

There seem to be two possible outcomes for Hungary’s election: - Orban loses, refuses to accept defeat, and Trump backs him, threatening retaliation if he does not stay in power - Orban wins thanks to Russian and US interference I hope the EU is prepared www.washingtonpost.com/world/2026/0...

You'd hope the populist international would struggle now their figurehead is responsible for a global supply shock. But their greatest (only?) strength is evading accountability and scrutiny.

Not a particularly original point, but a meaningful one. As I told the NYT, the UK is particularly vulnurable to the downstream fiscal effects from the unfolding global energy crisis. 1/2

This cover has aged very well - except that the jerry can ended up being empty, to the president’s great surprise.

“Europeans have little to gain from supporting the US-Israeli war of aggression against Iran. Their responsibility to their voters is to minimise the harm from what Trump has described as “a short-term excursion” in Iran, but which is already beginning to look more like a prolonged nightmare.“

On the US-Israeli war on Iran, @thomasmaddock.bsky.social & I look at winners & losers. Spoiler: the US isn't a winner. I'm reminded of Croesus, King of Lydia: the Oracle told him if he made war on Persia he wd destroy a great empire, so he attacked - & the Lydian empire was destroyed.

My last estimates were before the May 2025 summit, so they didn't include the energy agreements (which add a about 0.1%) or a time-limited, capped youth mobility scheme (I went for 50,000 places, limited to 2 years - low - and 4 years - high estimate).

The Peston show asked me to update my back-of-the-envelope estimates of the benefits of the UK-EU reset. Take a look

You do have to give it to President Trump, though. There is nothing like triggering a global energy crisis and inflation wave to kill a period of European and EM overperformance - since both are more exposed. Shame it also hurts Americans but at least you win in relative terms! America first.

Some reflections in the New York Times today, in a good tour-de-force on the global macroeconomic ripple effects of Trump’s Iran war. Can Europe afford deploying fiscal measures to buttress the Hormuz energy shock? It’s painful but by and large yes. 1/

Our third and final panel 'Asserting Europe's economic power' at our CER Brussels conference today with Hendrik Bourgeois, Maria Demertzis, @fraghi.bsky.social, Denis Redonnet and @sandertordoir.bsky.social

A shoutout in Alan Beattie‘s trade secret for James and my dive into Chinese FDI in Europe. Something that Europe at the same time fears too much and expects too much from. In case of interest the paper is here: www.cer.eu/insights/eur...

Oh those crazy greenies. Well, it turns out that solar and wind need not pass the Hormuz strait. Strategic autonomy in action. The most self-destructive thing Europe could do now is abandon the green transition. And that’s only on geopolitical grounds. www.bloomberg.com/news/article...

A “full-blown energy shock” from a lengthy Iran conflict could “choke all the long-term competitiveness debates,” said @sandertordoir.bsky.social, the chief economist at the @centreeuropeanref.bsky.social. buff.ly/CTn3G30

The E6 format, championed by the German finance minister, delivering. I am sceptical until a new format produces tangible EU policy outcomes, so this is a positive sign. E6 will have to translate CMU action to the whole EU market. So it’s multi-speed as much as a locomotive.

Chinese exports to the EU grew ~25% YTD. Meanwhile, Chinese FDI in Europe is tiny, suggesting Chinese firms have little incentive to localise production to meet EU demand. As we argue in our new piece, the EU’s investment conditionalities on China will fail as a policy tool in isolation.

Polls have closed in the first of this year's five German state elections, in prosperous Baden-Württemberg. It's looking like a remarkable win-from-behind by the Greens under @oezdemir.de. Full results over the course of the evening.

The numbers are even more brutal than I thought.

Germanys self-destructive nuclear phase-out hurts again as a new Iran gas shock looms. JPM: “Had Germany not phased out nuclear power, it would have generated 50% less electricity from fossil fuels, 84% less electricity from natural gas in 2024. Electricity prices would have been 25% lower.” 1/

Following a wave of takeovers of European semiconductor companies, Europe strengthened its investment screening mechanisms. Now, Europe must tackle new challenges. 🇨🇳 🇪🇺 New @centreeuropeanref.bsky.social insight by @sandertordoir.bsky.social & @james-r-green.bsky.social. Read here: buff.ly/JTsL3yP

EU foreign policy is a mess because the Lisbon Treaty is a mess. Hence EU “high rep” title not EU “foreign minister.” Member states want the EU to be strong and speak with one voice but hesitate to make the trade: control (sovereignty) for strength. And the end result is they get neither.

Very interesting analysis of screening of Chinese FDI in Europe. Also, follow James, who's the new CER tech expert.

Good debate between Nils and Shahin!

After months of wrangling and an epic list of delays, the Commission has finally released its Industrial Accelerator Act. This could turn into one of the EU’s most consequential industrial policy files in years - and the proposal is honestly not a bad place to start. Some quick thoughts:

Sharp analysis by @sandertordoir.bsky.social @james-r-green.bsky.social on how Chinese tech investment in Europe is shifting and EU policy struggling to keep up. Plenty of lessons for EU policymakers as they revisit FDI screening and ask themselves some tricky questions about Europe's openness.

Fascinating stuff: confirms Chinese investment now mainly target new EV/battery factories in EU. Described as “low tech transfer” supply hubs these are mostly aimed at assembly, not adding much local value, that sidestep EU duties. CATL in Spain promises tech sharing, but hard evidence is scarce.

Great thread from James on our new paper. James is the CERs new tech fellow, bringing key transatlantic experience from his years on Capitol Hill. Do give him a follow if you’re interested in European tech, competition and innovation policy.

New piece on Chinese tech investment in Europe — fittingly out the day the Commission publishes the Industrial Accelerator Act, kicking off months of legislative wrangling. A look at the data and recent cases shows Europe has learned to block Chinese takeovers of tech & semiconductor assets. 1/

Europe has made real progress in protecting its technological base from Chinese takeovers. The risk is that China will now invest in EU countries with weak oversight like Hungary, argue @sandertordoir.bsky.social and @james-r-green.bsky.social Read here: buff.ly/JTsL3yP

Just a wee bit of pressure on global stocks this morning.

The contrast between the US SecDef belittling European allies and the French president outlining a forward-deterrent scheme for Europe today is quite something.

Looking forward to exchanging with the European committee of the Bundestag this Wednesday on the EUs growth agenda - alongside @lucasguttenberg.bsky.social

Strategically it’s incredibly clever the EU is eroding the key levers of the green transition. As a net oil and gas importer being susceptible to repeated geopolitical supply and terms of trade shocks is just such a great place to be.

Chancellor Merz much more bold than his predecessors in tabling China's imbalances and distortions. He's asking for the right kind of market adjustment. China will ignore his request but important for the Chancellor to signal what Germany needs to diplomatically cover countermeasures. From NYT

German firms are running out of chip supply as the AI memory demand spike creates scarcity. German firms have few stockpiles and resupply wait time surges to 1y. Why are German firms always the first to run into supply chain crunches? hbapp.handelsblatt.com/cmsid/100201...

Follows from the EUs long standing policy that tax policy is a national competence. Not loftiness. Thus all EU MS have to agree to a change to the EUs own resources (read: tax revenue equivalent). In this case Hungary has to formally agree to change EU Own Resource Decision to backstop loan.

Great data and smart identification in this one. 👇

Orban has reneged on his commitment. Hungary now blocks the EUR 90bn EU loan for Ukraine. The EU might be forced to go back to lending against Russias frozen assets. So I’m re-upping Paduano and my December piece on the ins and outs of this EU reparations loan. www.cer.eu/insights/ukr...

Inviting like-minded allies into the supply-chain tent is one way that Europe can play industrial-policy Tinder, as economist @sandertordoir.bsky.social recently put it, rather than stay celibate. www.bloomberg.com/opinion/arti...

Well, here is a crazy number. $100 billion in Chinese FX intervention - in a single month. Paging triple M. Chancellor Merz, surely worried about renminbi undervaluation accelerating the China shock to German industry. Meloni - in the same boat. An Macron - Mr global imbalances G7. 1/

I agree. The ECBs EUREP reform is a big deal - and one of the few concrete strategic autonomy moves that’s real and not just chatter.

European and emerging market exceptionalism? US equities at the bottom of the barrel in 2026.

😂

Huge Supreme Court setback for Trump. Ruling upends two type of Trump tariffs: 1. One is country-by-country “reciprocal” tariffs, stooled on IEEPA (ranging from 34% for China - 10% for rest of the world). 2. Th fentanyl tariffs (25% on some goods from MEX, CAN, CHN). www.ft.com/content/d00d...

Interesting thread

‼️ Joint piece with @sandertordoir.bsky.social on the #ECB #geopolitical tools and how it advances the role of the #euro 👇 #CER #ThinIceMacro

important piece by my colleague @sandertordoir.bsky.social & @thinicemacro.bsky.social - geopolitical power and the currency go together, and as the dollar's domination is shaken, there is an opportunity for the euro, and Europe, to play a bigger role.

We advance the moderate bull case for the international role of the euro. But of course, euro internationalsation faces clear limits. The euro’s Achilles heel is the lack of a deep capital market. The world also cannot simply convert existing dollar reserves into euros. 1/

New piece with former fellow ECB hand @thinicemacro.bsky.social. At the Munich Security Conference, the ECB made its geopolitical move, opening repo lines to central banks globally. It was probably the most consequential policy announcement at the conference. 1/ www.cer.eu/insights/ecb...