Business

France threatens to cut UK and Jersey energy supply in fishing row

The EU could hit Britain and Jersey’s energy supply over the UK’s failure to provide sufficient fishing licences to French fishers, France’s EU affairs minister has said.

Clément Beaune, who is a close ally of the French president, Emmanuel Macron, said action would be decided on within days and discussions were already in motion.

France’s prime minister, Jean Castex, echoed the sentiment, telling the national assembly that the EU had to be firmer with the UK. “The [European] Commission is moving, it must do more”, he said.

France has been consistently pushing the EU to take a stronger stance against the UK over its concerns that Boris Johnson’s government is acting in breach of its obligations over fishing access to Channel waters.

Last week a third of French boats applying to fish in Jersey’s waters were turned down by the island’s government. The previous week the UK government provided only 12 of 47 French vessels with permits for its coastal waters. The UK and Jersey authorities have said the vessels that had been turned down had failed to provide evidence of operating in the relevant waters.

Beaune said France “would not stand for it”. He said: “Enough already, we have an agreement negotiated by France, by Michel Barnier, and it should be applied 100%. It isn’t being. In the next few days – and I talked to my European counterparts on this subject yesterday – we will take measures at the European level or nationally to apply pressure on the United Kingdom.”

He added: “We defend our interests. We do it nicely, and diplomatically, but when that doesn’t work we take measures. The Channel Islands, the UK, are dependent on us for their energy supply. They think they can live on their own and badmouth Europe as well. And because it doesn’t work, they indulge in one-upmanship, and in an aggressive way.”

The UK is a net importer of energy from French nuclear power stations. Paris has previously suggested it could cut the supply to Jersey, whose energy it provides through undersea cables under a commercial contract between the French company EDF and the Jersey Electricity Company.

Under the post-Brexit trade and cooperation agreement struck on Christmas Eve, in case of a dispute with Jersey the EU can take unilateral measures “proportionate to the alleged failure by the respondent party and the economic and societal impact thereof”.

Unilateral measures affecting the energy supply to the rest of the UK would also theoretically be possible. But France would need to gain the consent of other member states in both cases and the action would need to be proportionate, as the UK would have the right to take the EU to arbitration after any such move.

Castex, talking to the French parliament, suggested that his government would be likely to instead take the option of appealing to an arbitration tribunal in the first instance, an easier sell to the fellow EU member states, or go it alone in suspending bilateral agreements with the UK.

He said: “We will use the arbitration panel of the agreement to force the British to respect their word. We will question all the conditions for the more comprehensive implementation of the agreements concluded under the aegis of the European Union, but also, if necessary, the bilateral cooperation that we have with the United Kingdom in many areas.”

The trade and cooperation agreement also creates a link between continued EU access to British waters until 30 June 2026 and the UK’s access to the bloc’s electrical grid and gas network.

The energy part of the agreement allows the UK virtually unchanged access but that expires on the same date as the deal on access, raising the spectre that this could be used as leverage. The level of fishing quota will be decided by annual negotiations after 2026.

A commission spokesperson sought to play down the row, adding that officials in Brussels were in “constant contact with the UK authorities to ensure that all licence applications are dealt with as soon as possible”.

The spokesperson said: “We took note of last week’s announcements, but regret that with the number of licences granted it still has not been possible to bring this issue to an end now.

“The UK has published their methodology and we are now discussing the differences with the British and Jersey authorities regarding the rights of the boats involved. On our side we will continue to engage in the interest of our fishermen and women so that further licences will be provided.”

Business

UK’s Truss defends economic plan that sent pound tumbling

British Prime Minister Liz Truss on Thursday defended her economic plan and shrugged off the negative reaction from financial markets, saying she’s willing to make “difficult decisions” to get the economy growing.

In her first public comments since the government’s announcement of billions in uncosted tax cuts roiled markets and drove the pound to record lows, Truss said Britain was facing “very, very difficult economic times.” But she said the problems were global and spurred by Russia’s invasion of Ukraine.

She spoke after the Bank of England took emergency action Wednesday to stabilize U.K. financial markets and head off a crisis in the broader economy after the government spooked investors with a program of unfunded tax cuts, sending the pound tumbling and the cost of government debt soaring.

Truss told BBC local radio that “we had to take urgent action to get our economy growing, get Britain moving and also deal with inflation.”

“Of course lots of measures we have announced won’t happen overnight. We won’t see growth come through overnight,” she said. “What is important is that we are putting this country on a better trajectory for the long term.”

In a series of interviews, Truss said her government’s decision to cap energy bills for households and businesses would help tame inflation and help millions of people facing a cost of living crisis.

But it was not that decision that alarmed the markets. It was the government’s announcement on Friday of an economic stimulus program that included 45 billion pounds ($48 billion) of tax cuts and no spending reductions — without an independent economic assessment of the cost and impact.

The Bank of England warned that crumbling confidence in the economy posed a “material risk to U.K. financial stability,” and said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets.

The bank’s former governor, Mark Carney said that the government and the central bank appeared to be pulling in different directions.

“Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the Bank — has led to quite dramatic moves in financial markets,” he told the BBC.

The pound traded at around $1.08 on Thursday, above its record low of $1.0373 on Monday. It has lost some 4% of its value since Friday.

Business

Stimulus Packages Provided During Pandemic Triggered Inflation- CBN

The Central Bank of Nigeria (CBN) has attributed the rising inflationary rates to the stimulus packages provided to citizens during and after the pandemic.

It added that although this increased spending, it also created global supply challenges.

CBN’s director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.

The Monetary Policy Committee had on Tuesday, unanimously voted to increase interest rate to 15.5 per cent.

“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.

“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices go up,’’ he said.

Mahmoud also blamed the Russian-Ukraine war, as well as the resurgence of COVID-19 in China for the rise in global inflationary trend.

“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply. The war resulted in some shortages which made prices go up.

“Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he added.

Business

China’s yuan slides to 14-year low against US dollar

China’s yuan fell to a 14-year low against the dollar Wednesday despite US central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns.

A weaker yuan helps Chinese exporters by making their goods cheaper abroad, but it encourages capital to flow out of the economy. That raises costs for Chinese borrowers and sets back the ruling Communist Party’s efforts to boost weak economic growth.

The yuan fell to 7.2301 to the dollar, its lowest level since January 2008. One yuan was worth about 13.8 cents, down 15% from its March high.

The yuan has exceeded expectations it might fall to 7 to the dollar after the Federal Reserve started aggressive rate hikes to cool inflation that is at a four-decade high. The Fed has raised rates five times this year and says more increases are likely.

By contrast, the People’s Bank of China has cut interest rates to boost growth that fell to 2.2% over a year earlier in the first six months of 2022 — less than half the official 5.5% target.

The yuan is allowed to fluctuate up or down 2% from its starting price each day in tightly controlled trading. That prevents big daily swings, but down days can add up to a big change over time.

To shore up the exchange rate, Beijing cut the amount of foreign currency deposits Chinese banks are required to hold as reserves to 6% from 8% as of Sept. 15. That increases the amount of dollars and other foreign currency available to buy yuan, which should push up the exchange rate.

Still, that reserve cut is unlikely to stop a slide that is driven by “a strong U.S. dollar and the expectation of more Federal Reserve hikes,” said Iris Pang of ING in a report.

“Less aggressive rate hike talk” might help the yuan rally, but it might weaken further “if the Fed maintains its very hawkish tone” into next year, Pang wrote.

Chinese officials have previously promised to avoid “competitive devaluation” to gain an advantage in trade.

The yuan sank in 2019 during trade tension with then-President Donald Trump. That prompted suggestions Beijing was trying to reduce the impact of U.S. tariff hikes, but there was no official confirmation. The currency later strengthened.

Other governments also are struggling to manage capital flows under pressure from Fed rate hikes. On Friday, Vietnam’s central bank raised a key interest rate in what economists said appeared to be an effort to stop an outflow of money in search of higher returns.