POLITICAL RISK: Meloni's Favourability On The Rise As Starmer & Merz Plummet
End-of-year favourability ratings from YouGov shows most major European heads of gov't/state struggling with negative public perceptions, although some have seen a more significant deterioration in the past year than others.
- Italian PM Giorgia Meloni's net favourability is the only leader to have seen her favourability improve over the year, finishing at -21 in December (the best among her peers), a marginal increase on the -25 recorded in March. The next general election is not due until December 2027 at the latest, but Meloni's relatively strong favourability at the midpoint of her term lends credence to the prospect of her being the first post-war Italian PM to serve out a full parliamentary term.
- At the other end of the scale are French President Emmanuel Macron and British PM Sir Keir Starmer, with net ratings of -63 and -59, respectively. While Macron, approaching the final full year of his second term, has recorded low favourability ratings all year, Starmer has seen his plummet from -26 in March amid rising public concerns about the state of the economy, prices, and immigration.
- Danish PM Mette Frederiksen's -29 net favourability is still strong by regional standards, but the decline from -3 in April could be a cause for concern with the next general election having to be held by 31 Oct at the latest.
- German Chancellor Friedrich Merz does not face any direct electoral challenge in 2026, but the decline in his favourability from -14 shortly after taking office in June, to -44 in Dec comes with parties of his governing 'grand coalition' facing challenges from the far-right Alternative for Germany in various state elections in 2026.
- Spanish PM Pedro Sanchez holds a net favourability of -36, a relatively robust rating as he enters his ninth year in office amid sexual misconduct and corruption scandals affecting his centre-left PSOE.
Chart 1. Favourability Rating: Do you have a favourable or unfavourable opinion of the following? [Leader of respondent country] Net favourability
Source: YouGov. Latest fieldwork 1-16 Dec.
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STIR: Implied ECB Cuts Haven't Fully Unwound Yet, Q1 Services Inflation Key
Improving Eurozone growth and somewhat sticky inflation data has dampened expectations for another ECB cut this cycle. However, markets have been hesitant to fully unwind implied easing expectations, as there remains some uncertainty around how tolerant the Governing Council will be of a sub-2% inflation rate – even if this would be in line with ECB projections.
- Services-driven downside inflation surprises in Q1 could be enough to see rate cut premium build back up the front of the EUR curve, with meeting-dated OIS currently pricing just 6bps of easing through September. A reminder that the December decision will include an updated set of forecasts.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Dec-25 | 1.928 | 0.3 |
| Feb-26 | 1.923 | -0.2 |
| Mar-26 | 1.902 | -2.4 |
| Apr-26 | 1.897 | -2.8 |
| Jun-26 | 1.869 | -5.6 |
| Jul-26 | 1.868 | -5.7 |
| Sep-26 | 1.867 | -5.8 |
| Oct-26 | 1.874 | -5.1 |
| Source: MNI/Bloomberg Finance L.P. | ||
SOFR OPTIONS: BLOCK: Mar'26 SOFR Call Spread Buyer
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FED: US TSY 13W AUCTION: NON-COMP BIDS $1.747 BLN FROM $86.000 BLN TOTAL
- US TSY 13W AUCTION: NON-COMP BIDS $1.747 BLN FROM $86.000 BLN TOTAL
