SPAIN: Sanchez - We Will Boost Defence & Security w/o Touching Social Spending
Speaking to the Congress of Deputies regarding EU plans to increase defence spending, Prime Minister Pedro Sanchez has said that "We are going to make this effort in security and defence without touching a cent of social spending." Sanchez says that his gov't "will start a plan to develop defence by the summer".
- The PM cannot get agreement within his minority coalition on boosting defence spending. Moreover, the gov't has yet to present a 2025 budget due to a lack of clear support. Without the step of presenting a budget, there are significant limits to what can be done to boost defence spending.
- Sanchez says that at the EU level he "will fight" for the planned E150bln in loans under ReArm Europe to be altered to become grants. MNI's Policy team has previously highlighted the EU fractures on how to fund major defence spending increases (see 'MNI: EU Split As Some Push To Keep Joint Borrowing Option Open', 20 March).
- As has been increasingly noted, as US pressure on European NATO countries to boost defence spending rises, Spain is the biggest laggard of all 32 NATO members. In 2024 it spent just 1.28% of GDP on defence (see chart below).
Chart .1 Defence expenditure as a share of GDP (%)
Source: NATO
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MNI: GERMANY FEB IFO BUSINESS CLIMATE INDEX 85.2
- MNI: GERMANY FEB IFO BUSINESS CLIMATE INDEX 85.2
SWITZERLAND DATA: Labour Market Softens On Demand Side But Remains Solid
Swiss employment (excl. agriculture) rose +0.9% Y/Y and +0.1% Q/Q in Q4 2024. The slight sequential increase was based on employment rising both in the tertiary sector, as well as in industry and construction, by 0.1%.
- While the data suggests some labour market softening on the demand side, the figures overall underpin the narrative that the Swiss economy remains on a solid enough footing, meaning little requirement for the SNB to move policy into accommodative territory from a business cycle perspective.
- "Enterprises reported 17.1% fewer vacancies than a year earlier. Difficulties recruiting personnel have declined slightly. In addition, the employment outlook remained positive despite enterprises' cautious estimates", the Swiss statistics agency adds.
- Considering Q4's season- and sports event-adjusted real GDP growth of 0.4%, the sequential employment figures suggest rising productivity last quarter in Switzerland.
ECB: Wunsch WSJ Interview Broadly In Line With FT Rhetoric
Initial headlines from Wunsch appear broadly in line with his rhetoric to the FT this morning.
- "*ECB's Wunsch: May Have to Lower Key Rate to Level That Stimulates Economy" DJ
- "*ECB's Wunsch: Might Have to Be 'A Bit Supportive' if Economic Weakness Persists" DJ
- "*ECB's Wunsch: Key Rate May No Longer Be Restrictive After Cut to 2.5%" DJ
Relevant excerpts from the FT article:
- "Wunsch pointed to mounting uncertainty over the appropriate level of interest rates, stressing that he was "not even sure" if rates were still at a level that was restricting growth and inflation".
- "Wunsch said he felt "relatively comfortable" with the market expectation of 2 per cent rates by the end of the year "give or take 50 basis points". He also said it was "even possible that we will go below 2 per cent" by then, depending on the wider economic environment, external shocks and price pressure".
