Europe

Euro-area inflation slowed more than initially reported in February, strengthening arguments for the European Central Bank to keep cutting interest rates, Bloomberg News reported. Consumer prices rose an annual 2.3% — less than the 2.4% Eurostat first flagged. Wednesday’s revision follows an unexpected drop in Germany’s inflation rate. With the outlook for economic expansion and inflation in Europe clouded by uncertainty, ECB officials debating whether to pause or lower borrowing costs again next month may be tempted to focus on the clear progress in reaching their 2% target.

Ireland’s economy would suffer a significant blow and could even risk recession if U.S. President Trump targeted the country with higher tariffs or changed tax rules, the Central Bank of Ireland said Wednesday, the Wall Street Journal reported. In a quarterly report, the central bank lowered its growth forecasts for this year and next, citing the impact of uncertainty about Trump’s future actions on investment and exports. It now expects gross domestic product to grow by 4% in both 2025 and 2026, having previously forecast an expansion of 4.2% this year and 4.5% next.

The Bank of France reported a widening loss in 2024 after booking one-off gains the previous year and as it continues to digest rapid changes in the European Central Bank’s monetary policy in recent years, Bloomberg News reported. Like other central banks in the euro-area network, France’s is squeezed between servicing deposits at the high interest rates imposed on the economy to fight inflation and only small income flows from bonds purchased when borrowing costs were low.

Trade uncertainty is weighing on the European economy and any boost from investment in defense will take time, meaning the European Central Bank may need to keep cutting rates, rate setter Olli Rehn said, the Wall Street Journal reported. “As regards trade policy, the effect is fairly immediate because of pervasive uncertainty,” said Rehn, governor of the Finnish central bank, in a livestream hosted by MNI on Tuesday.

Weaknesses in the capital regime for the Swiss banking sector still need to be addressed after the 2023 collapse of Credit Suisse, the Swiss National Bank said on Tuesday, backing government efforts to make the industry more robust, Reuters reported. Switzerland has pledged to introduce stricter banking regulations in response to the demise of Credit Suisse, which was subsequently taken over by its old rival UBS. At the centre of proposals set out by the government last year is that UBS should hold more capital to make it more robust and prevent a repeat of the Credit Suisse meltdown.

The UK Labour government announced it would save billions of pounds a year by slashing welfare spending, unveiling controversial reforms which have provoked criticism from disability campaigners and divided Prime Minister Keir Starmer’s governing party, Bloomberg News reported. The government will toughen the criteria that sick and disabled people must meet to qualify for Personal Independence Payments (PIPs), a key benefit aimed at helping people with disabilities go about their daily lives, Work and Pensions Secretary Liz Kendall told the House of Commons on Tuesday.

Appeal judges have approved emergency funding allowing Thames Water to access as much as £3 billion ($3.9 billion) and stave off temporary nationalization, Bloomberg News reported. The UK’s Court of Appeal dismissed a challenge to the proposed loan after a three-day hearing last week. The decision should give the beleaguered utility access to much needed funds and prevent a messy insolvency while it seeks a long term fix for its financial woes. The debt will be provided by a group of senior creditors — including Elliott Management, Silver Point and Pimco.

Germany is witnessing a significant rise in corporate bankruptcies, with 2024 marking a 22.4% increase in insolvency filings compared to the previous year, the Munich Eye reported. This surge has raised concerns among experts, with predictions of an impending wave of insolvencies in 2025 potentially surpassing those seen during the financial crisis of 2009. According to the Federal Statistical Office, February alone saw a 12.1% increase in bankruptcy filings compared to the same month in the previous year.