Morning Briefing

Humongous Deficits

Guess who’s making a rare appearance in Berlin today? Vladimir Putin. The Russian president is meeting with Chancellor Angela Merkel to discuss the Ukraine crisis. No one expects a breakthrough, but his willingness to even talk about the divisive issue with Cold War potential signals progress, however minute. As Henry Kissinger, the German-born former U.S. Secretary of State once commented, you need to condense problems to solve them – because the extract is manageable.

Small isn’t always beautiful, especially when it comes to E.U. decision-making. Trade ministers wanted to fast-track a free trade agreement between Europe and Canada on Tuesday. But the tiny French-speaking Wallonia region of Belgium, which represents just 0.7 percent of the E.U. population, managed to torpedo the deal known as CETA. The bloc’s principle of unanimous voting has become an obstacle to much-needed European reform.

So much for promises. European leaders pledged to reduce borrowing in the wake of the financial crisis but their budget plans for 2017 tell a different story. Total debt in the euro zone will rise to an unprecedented €10 trillion, or $11 trillion, next year, according to plans submitted to the European Commission for review. For Europe, the stability pact is apparently less important than Mark Twain’s life principle: “I could never use money I had not made honestly — I could only lend it.’’

Relations between Angela Merkel and Bavarian ally-cum-nemesis Horst Seehofer remain in a deep freeze. For the first time in more than a decade, the chancellor isn’t invited to the Bavarian party’s big convention.  Which is no surprise really given that Seehofer seems to get his kicks wailing on her open-door refugee policies. At last year’s event, Seehofer left her out to dry on stage as party loyalists hooted and hollered. So Merkel will be spared the root channel without anesthetic this year.

VW CEO Matthias Müller can breathe a sigh of relief. Yesterday, U.S. District Judge Charles Breyer said he was  “strongly inclined” to approve a record $10 billion deal for VW to buy back and compensate American owners of its Dieselgate vehicles. Breyer will make a final decision next Tuesday. But Müller may want to hold off on the big celebration: Lawsuits by 17 U.S. states are still awaiting their day in court.


Image of the Day

A passenger aircraft passes over a residential house as it prepares to land at London Heathrow Airport. Britain’s government is considering whether to approve a third runway at Heathrow. Source: AFP
Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.