GERMANY: Bundesbank Debt Brake Proposal Would Follow Up 2022 Paper
Bundesbank President Nagel said Wednesday the Bundesbank is set to publish a debt brake proposal after the German parliamentary elections on February 23, Bloomberg reports. All mainstream parties except the pro-business FDP have signaled at least some readiness for reforms following the vote.
- A qualified majority would be needed for Bundestag passage.
- While any actual adjustments will come down to the political process, the Bundesbank might try to provide some input for the ongoing debate on the topic, and indeed, it already had published a debt brake review proposal in April 2022 - some key excerpts from that below:
- A proposed change on the cyclical adjustment of the net issuance allowance would allow "more time to adjust in the event of revisions to expected economic developments and tax revenue forecast errors. This would make it easier to stabilise budgetary policy and avoid procyclical stimuli."
- Some additional adjustments would make sure that "in contrast to the increasingly flexible manner in which the debt brake is being used [it was suspended four consecutive years 2020-23], such reforms could reinforce its binding effect. Specifically, budgetary developments could be stabilised by recording interest expenditure on an accruals basis. In addition, credit balances on the control account resulting from not borrowing up to the borrowing limit could be netted against emergency loans."
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US: Biden's Final Foreign Policy Speech Underway Shortly
US President Joe Biden is shortly due to deliver the final foreign policy address of his presidency. A livestream of the speech, taking place at the State Department, is available here.
- The speech kicks off Biden's farewell week to US politics: On Tuesday, he’ll deliver White House remarks on conservation; on Wednesday he will deliver his final Oval Office address; on Thursday, he will attend a final event at the Department of Defence; and on Friday, he will address the US Council of Mayors.
- A senior administration official told reporters: “[Biden] will describe how we reclaimed America’s global leadership as a force of stability, put our adversaries in a position of weakness, effectively navigated turbulence around the world and made America stronger at every step… He will discuss how we have dealt with the challenges and threats America faces and ensured that America — not our adversaries — are in the driver’s seat, best positioned to shape our future, and how he will hand the next administration a stronger hand than he inherited.”
- Biden is unlikely to speak in detail on the withdrawal from Afghanistan or the situation in Gaza – two foreign policy issues that undermined his bid for a second presidential term.
- A second Biden administration official told reporters, on Biden’s Oval Office speech: “It’ll be … really very rooted in the moment we’re in and where we go from here. It’ll be his last big chance to communicate with the country.”
STIR: FED Reverse Repo Operation
RRP usage inches up to $183.669B this afternoon from $178.800B on Friday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties rises to 51 from 48.
US: NATO Approval Of US Leadership Fragile Despite Biden's Multilateralism
A new survey from Gallup has found that the reputation of US leadership remains fragile, across NATO member countries, despite US President Joe Biden’s attempt to shore up the transatlantic partnership.
- Gallup: “In the last year of Biden’s presidency, the median approval of U.S. leadership across NATO’s 30 member countries was 35%, the lowest of his term. Median disapproval was 51%, the highest of his term.
- “Historically, these ratings were still relatively better than those under Trump or during George W. Bush’s last two years in office. However, ratings under Biden were worse than those during most of the Barack Obama administration, when approval averaged 46% and disapproval averaged 26%.”
- The survey suggests, ahead of Trump's return to the White House on January 20, that Biden's focus on multilateral foreign policy has not wholly repaired tensions within NATO, particularly regarding disagreements in policy towards the Middle East and Ukraine.
- The alliance will be tested further in the coming weeks, with Trump previewing a return to his hardline first-term rhetoric on alliance contributions, calling on NATO members to hit 5% of GDP in defence spending - more than double the current benchmark target.
Figure 1: Approval of the Leadership of the United States, NATO Member Countries
Source: Gallup
