UKRAINE: Zelenskyy Tries To Rally Support For Financial Backing Ahead Of EUCO
Ahead of the 18 December European Council summit in Brussels, Reuters reports comments from Ukrainian President Volodymyr Zelenskyy, who will attend the event in person. Zelenskyy: "Moscow shows clearly [that] it is ready for war in 2026...Russia will undermine diplomatic efforts to end the war...Ukraine counts on the courage of its allies to stand against Russia." Zelenskyy says, "The US says Russia wants to end the war, Moscow sends opposite signals".
- One of the major decisions intended to be taken at the EUCO is on using frozen Russian assets held in the EU to fund Ukraine, or agreeing on another form of support such as joint debt issuance. Zelesnkyy "calls on partners to approve political and financial decisions to stop Russia". Says the summit "should show that there is no point for Russia in continuing the war, because Ukraine will have the financial means to defend itself."
- There still appears to be no consensus within the EU on how to fund Ukraine. Some member states support using the frozen assets held at Belgium's Euroclear to fund 'reparations loans', but the Belgian gov't fears being financially exposed if the ~EUR140bln are seized without cast-iron legal guarantees. Politico reports Belgium's permanent representative saying earlier today the talks on frozen assets were "going backward."
- Another option is joint debt issuance. This is likely to run into opposition from Germany and other 'frugal' states. In her speech to the European Parliament plenary earlier today, Commission President Ursula von der Leyen talked of both options, whereas previously she had come down strongly on the side of using the frozen assets.
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ITALY AUCTION PREVIEW: MEF announces buyback auction for Wednesday 19 November
The MEF has announced a buyback auction for Wednesday 19 November for up to E5.0bln. It will look to buyback:
- the 3.50% Jan-26 BTP (ISIN: IT0005514473)
- the 0% Apr-26 BTP (ISIN: IT0005437147)
- the 3.80% Apr-26 BTP (ISIN: IT0005538597)
- the 3.85% Sep-26 BTP (ISIN: IT0005556011)
- the Apr-26 CCTeu (ISIN: IT0005428617)
FRANCE: PM Echoes Econ Min: 'Need To Pass 2026 Budget, But Not At Any Price'
Speaking at the 'Choose France' trade fair, PM Sebastien Lecornu has lamented that some planned tax cuts will never be implemented, and that the budget deficit risks rising to 6% of GDP, rather than being reduced below 5% as planned under his original fiscal programme. Lecornu claimed he would not enact a budget that damages France's business environment, saying, "I will not do just anything. I will not endorse just anything. The danger that weighs on the French economy is the lack of a budget. With all the economic, financial, and political uncertainty that comes with it."
- In attempting to assuage the concerns of business representatives at the conference, Lecornu downplayed the prospect of some tax hikes coming into force, saying, "We are currently scaring a part of the country with taxes that will never be implemented because they are unconstitutional and lack a tax base. [...] The notion of compromise now is about avoiding the worst tomorrow [...] There's a last-ditch effort in everything I'm trying to do: the business world needs to be aware of that."
- Lecornu's comments are similar to those from Economy Minister Roland Lescure, who said in a 16 Nov Le Figaro editorial, "Political uncertainty generates economic uncertainty. To remove this uncertainty, we need to adopt a 2026 budget ... But not at any price,"
- Discussion on the draft end-of-management bill (PLFG), a "technical" text adjusting the 2025 finances, is set to resume at 21:30CET, with the National Assembly due to vote on the state budget by midnight on Sunday, 23 November.
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Nov19 $1.1700(E1.1bln), $1.1800(E1.6bln); Nov20 $1.1500(E2.0bln), $1.1630(E1.2bln), $1.1675-80(E1.5bln); Nov21 $1.1500(E1.4bln), $1.1675-80(E1.2bln)
- USD/JPY: Nov20 Y150.00($1.3bln), Y155.00($1.3bln)
- AUD/USD: Nov20 $0.6550(A$2.3bln)
- USD/CAD: Nov21 C$1.3950-70($1.3bln)
- USD/CNY: Nov20 Cny7.1080-89($2.0bln)
