Disparities in Material Welfare Across Europe Highlighted by Key Indicator

Published

3 days ago

January 5, 2025

RTX

A key indicator of household material welfare, Actual Individual Consumption (AIC) per capita, reveals significant variations across Europe. Expressed in Purchasing Power Standards (PPS), AIC measures all goods and services used by households, whether purchased directly or provided by the government or nonprofit organizations. As a result, it offers valuable insight into living standards across the continent.

In 2023, Luxembourg ranked at the top of the list, with AIC per capita 36% above the EU average, at 136% of the EU’s benchmark. In contrast, Bulgaria and Hungary recorded some of the lowest material welfare levels in the European Union, with AIC per capita at just 70% of the EU average. The overall EU average, which encompasses 27 member states, is set at 100.

Nine EU countries recorded AIC levels above the EU average. In addition to Luxembourg, these countries include Germany (119%), the Netherlands (119%), Austria (114%), Belgium (113%), Denmark (108%), France (106%), Sweden (106%), and Finland (105%). Among the EU’s largest economies, Germany and the Netherlands performed the best, followed by France, where welfare was 6% above the EU average. Meanwhile, Italy’s material welfare matched the EU average, and Spain, at 91%, ranked the lowest among the “Big Four.”

On the opposite end of the spectrum, Central and Eastern European countries, along with several EU candidate nations, generally reported lower AIC per capita. Latvia, Estonia, Croatia, and Slovakia follow Hungary and Bulgaria in showing more than 20% lower material welfare than the EU average.

Outside the EU, the European Free Trade Association (EFTA) countries reported higher material welfare levels than the EU. Norway and Switzerland exceeded the EU average, with Norway at 24% above and Switzerland 16% higher. In contrast, all six EU candidate countries fell below the EU average, with Turkey, at 84%, performing better than nine EU countries, including Poland (83%) and Greece (80%).

While Nordic and Western European nations consistently show higher AIC per capita, reflecting better material welfare, Central and Eastern Europe, along with EU candidate countries, exhibit lower AIC figures. This disparity highlights notable regional differences in living standards across Europe.

Over the past three years, several countries experienced shifts in material welfare. Denmark saw the most significant decline, dropping from 120% of the EU average in 2020 to 108% in 2023. Meanwhile, Ireland, Bulgaria, and Spain reported significant increases in AIC per capita, with Turkey recording the most substantial rise among EU candidates, moving from 64% to 84%.

Eurostat explains that AIC is a comprehensive measure of household material well-being, accounting for all household expenditures, including those for food, clothing, housing, and healthcare. This indicator offers a more equitable way to compare living standards across different regions and countries, adjusting for variations in price levels.

Business

European Defence Stocks Surge as Trump Reaffirms NATO Spending Demands and Discusses Greenland’s Strategic Importance

Published

34 minutes ago

January 8, 2025

RTX

European defence stocks saw significant gains on Wednesday following comments made by US President-elect Donald Trump, in which he reiterated his calls for higher NATO spending and emphasized Greenland’s strategic importance. The rally came after Trump’s remarks during a press conference at his Mar-a-Lago residence on Tuesday, sparking speculation that his stance could pressure European nations to significantly increase their defence budgets.

Shares of key European defence companies surged during midday trading. Leonardo SpA rose by 4.8%, Rheinmetall AG jumped 6.1%, SAAB AB gained 3.8%, and Kongsberg Gruppen ASA climbed 2.9%. Investors responded positively to Trump’s comments, which were seen as a renewed push for Europe to shoulder a larger portion of NATO’s financial burden.

Trump Calls for Increased NATO Spending

In his press conference, Trump doubled down on his long-standing criticism of NATO allies for not contributing enough to the alliance’s financial needs. He reiterated that NATO’s current spending target of 2% of GDP was insufficient, suggesting that the benchmark should be raised to 5% to ensure better military readiness and fairer financial contributions among member states. “At that point, it was 2%, it should be 5%… not 2%,” Trump said, underscoring the need for a higher investment in military readiness across the alliance.

Trump also reflected on his previous efforts to secure increased NATO funding, claiming credit for raising over $680 billion by threatening to withhold protection unless NATO members met their financial obligations. “As soon as I said that, the money came pouring in,” he stated.

NATO Members Meet Defence Spending Goals

According to NATO’s latest report, 2024 marked a record year for military spending compliance, with 23 out of 31 NATO members meeting the 2% GDP target. Poland led the European bloc with military expenditures at 4.1% of GDP, followed by Estonia at 3.4% and Latvia at 3.1%. However, some countries, including Italy, Portugal, Spain, and Belgium, remain below the target.

Despite the progress, only Belgium failed to meet NATO’s equipment spending guideline, which requires members to allocate at least 20% of their defence budgets toward equipment.

Greenland’s Strategic Importance

In his remarks, Trump also drew attention to Greenland’s significance for US national security, citing rising Russian and Chinese military activity in the Arctic. “We need Greenland for national security purposes,” he declared, suggesting that Denmark should relinquish its sovereignty over the territory if negotiations over its status stalled. While Trump did not present specific proposals, he hinted at the possibility of imposing tariffs on Denmark if the issue remained unresolved. In response, Denmark reaffirmed its sovereignty over Greenland, with King Frederik updating the royal coat of arms to prominently feature the territory.

Trump’s Criticism of the Russia-Ukraine Conflict

Trump also commented on the ongoing Russia-Ukraine war, blaming its escalation on the Biden administration’s handling of the situation. “Russia would have never, ever gone in,” he said, calling the conflict “a disaster” and expressing concern over the immense human toll. He also criticized Europe’s financial contribution to Ukraine, asserting that the United States had provided a far larger share of the funding.

As the war continues, Trump’s remarks signal his intention to push for a reassessment of Europe’s role in global defence and security alliances, particularly in terms of financial contributions.

Business

Eurozone Inflation Rises to 2.4% in December, Markets Still Expect ECB Rate Cuts in 2025

Published

1 day ago

January 7, 2025

RTX

Inflation in the eurozone rose to 2.4% year-on-year in December, up from 2.2% in November, according to preliminary data from Eurostat. While the increase matched economists’ forecasts, it highlighted ongoing inflationary pressures in the region, complicating efforts by the European Central Bank (ECB) to meet its 2% target.

On a monthly basis, consumer prices rose by 0.4%, reversing the 0.3% decline seen in November. Core inflation, which excludes volatile items like food and energy, remained steady at 2.7%, in line with expectations. Despite the stable core inflation, the persistent inflationary challenges are expected to keep the ECB focused on further action.

Among the key contributors to inflation, services remained the leading category, with an annual rate of 4%, slightly up from 3.9% in November. Food, alcohol, and tobacco prices stayed steady at 2.7%, while non-energy industrial goods saw a slight decrease in inflation, easing to 0.5% from 0.6%. Energy prices rebounded significantly, rising 0.1% year-on-year after a -2% drop in November, reflecting higher fuel costs in some eurozone countries.

Kyle Chapman, an analyst at Ballinger Group, suggested that the inflation rise was unlikely to alter the ECB’s course. “This figure does close to nothing in terms of altering the path for the ECB,” Chapman said. He noted that Frankfurt had been anticipating a temporary rise in inflation and is likely to overlook it for now.

Regional Variations in Inflation

Inflation rates varied widely across eurozone countries. Croatia led with the highest annual rate at 4.5%, followed by Belgium at 4.4%. Other significant readings included Germany at 2.8%, Greece at 2.9%, and Spain at 2.8%. In Belgium and Germany, monthly inflation rose by 0.7%, the second-highest across member states.

Ireland recorded the lowest annual inflation rate at 1%, but saw a notable monthly spike of 0.9%. In contrast, Italy, with one of the lowest annual rates at 1.4%, had only a 0.1% monthly rise. France’s inflation increased to 1.8%, the highest since August, while Spain saw a 2.8% inflation rate, the highest since July 2024.

Market Reactions

Despite the inflation data aligning with expectations, financial markets reacted mildly. Shorter-dated eurozone bond yields, which had spiked following Germany’s surprise inflation report on Monday, edged lower. The two-year Schatz yield fell 3 basis points to 2.18%, while the benchmark 10-year Bund yield held steady at 2.45%.

The euro continued its upward trend, rising 0.4% to $1.0430, as market expectations remain focused on future ECB rate cuts. Traders are anticipating a 25 basis-point cut at the ECB’s meeting on January 30, with over 100 basis points of cumulative cuts expected throughout 2025.

European equity indices traded slightly higher, with the Euro STOXX 50 and STOXX 600 up 0.2%. Germany’s DAX also gained 0.2%, while France’s CAC 40 outperformed, rising 0.4%. Italy’s FTSE MIB lagged, slipping 0.1%.

Sector-wise, luxury and consumer goods stocks outperformed, with Adidas rising 2.2%, while banks underperformed, with the Euro STOXX Banks Index down 1.1%. Notable declines were seen in Deutsche Bank, which fell 1.6%, and Ireland’s AIB Group, which dropped 1.8%.

Business

Italy in Talks for €1.5bn Deal with SpaceX Amid Local Opposition

Published

2 days ago

January 6, 2025

RTX

The Italian government is advancing negotiations for a €1.5 billion telecommunications security services contract with SpaceX, according to reports. The proposed deal, which includes encryption services for telephone and internet communications for Italy’s government and military, has been under review since mid-2023 but has faced opposition from local telecommunications providers.

The potential five-year agreement follows a visit by Italian Prime Minister Giorgia Meloni to President-elect Donald Trump in Florida, sparking speculation that Musk’s support for Trump may help expedite the deal. The Italian Intelligence Services and Defence Ministry are reported to have approved the project, which would enhance the security of critical communications across the country.

SpaceX’s services could include encrypted communication solutions for the Italian government and military, designed to enhance national security. However, the deal has faced significant resistance from local telecommunication operators, who argue that SpaceX’s business model could undermine the domestic market.

In November 2023, the lobbying group Assetel called for a review of regulations governing low-orbit satellite broadband services, particularly in regard to SpaceX’s Starlink network. The group raised concerns that SpaceX’s direct-to-consumer sales approach bypasses existing regulations, potentially circumventing rules on data storage and creating unfair competition with local telecom companies.

Italian telecom operators have been struggling with mounting debts and intense price competition. Telecom Italia reported €8 billion in net debt for the third quarter of 2023, despite selling its network to US private equity firm KKR in a €22 billion government-backed deal. Meanwhile, Swisscom’s acquisition of Vodafone Italia in December, for €8 billion, was another sign of financial strain in the Italian telecom sector.

Italy is also facing pressure to meet its broadband network expansion targets under the EU-funded Recovery and Resilience Facility (RRF). Despite receiving €113.5 billion in recovery funds, Italy is behind schedule in rolling out high-speed internet, a key part of its economic revitalization plan. Only a third of the 3.4 million buildings targeted by the €3.4 billion plan have been connected to broadband, leading the government to consider using Starlink to make up for delays.

SpaceX, which has expanded its global footprint significantly, has launched over 6,700 active satellites, serving more than four million customers across 100 countries. Starlink’s services have reached approximately 55,000 customers in Italy, and with new satellites launched in December 2024, SpaceX aims to broaden its global coverage even further.

The negotiations between SpaceX and Italy continue amid local opposition and challenges in Italy’s broadband expansion efforts, with the final decision expected to have far-reaching implications for both domestic telecommunications and international relations.