Discussions on a digital euro heated up this year because the EU is now keen to reduce its dependence on other countries

International News via Reuters:

European Union finance ministers on Friday agreed on a roadmap for launching a digital euro currency that aims to become an alternative to the now dominant U.S.-based Visa and Mastercard systems.

Discussions on a digital euro, essentially an electronic wallet backed by the European Central Bank, heated up this year because the EU is now keen to reduce its dependence on other countries in key areas like energy, finance and defence.

The ECB has pitched the digital euro as a way to cut Europe’s reliance on U.S. credit cards and as a response to U.S. President Donald Trump’s global push for stablecoins pegged to the U.S. dollar.

But the ECB, the main sponsor of the project, has failed so far to secure legislative approval for it, with lawmakers and bankers complaining it may hollow out banks’ coffers, cost too much or curtail privacy.

In a sign of progress, EU finance ministers gathering with ECB President Christine Lagarde and European Commissioner Valdis Dombrovskis in Copenhagen on Friday reached an agreement on the next steps.

This will give EU finance ministers a say on whether a digital currency is issued and how many such euros each resident will be able to hold, which is seen as crucial for assuaging fears of a run on bank deposits.

“The compromise that we reached is that before the ECB makes a final decision in relation to issuance…there would be an opportunity for a discussion in the Council of Ministers,” Paschal Donohoe, who chairs meetings of finance ministers, told a joint press conference.

Donohoe, Lagarde and Dombrovskis also celebrated a compromise on the procedure for setting the holding limit although they didn’t give details.

A participant at the meeting told Reuters the ECB will also submit a proposed holding limit for approval by the European Council of Finance Ministers.

DELAYS TO LEGISLATION

Though the European Commission proposed digital euro legislation in June 2023, the other two institutions that have to sign off on it, the European Parliament and the European Council, have yet to do so.

The European Council aims to wrap up its side of the work by the end of the year.

The ECB hopes to have the legislation in place by June, after which it will need around two-and-a-half to three years to actually launch the digital euro.

Some EU countries have their own national digital payments systems, but none that would be accepted across the 27-nation bloc. 

“The digital Europe is not just a means of payment, it is also a political statement concerning the sovereignty of Europe and its capacity to handle payment, including on a cross-border basis, with a European infrastructure and solution,” Lagarde said at the press conference.

Writing by Francesco Canepa; Editing by Aidan Lewis and Sharon Singleton

Volkswagen, Europe’s largest carmaker, said it would take a 5.1 billion euro ($5.99 billion) hit from the far-reaching product overhaul at its subsidiary

International News via Reuters:

Porsche AG on Friday dialled back plans for its electric vehicle rollout due to weaker demand, pressure in key market China and higher U.S. tariffs, causing the luxury sportscar maker and its parent Volkswagen to slash their 2025 profit outlooks.

Volkswagen, Europe’s largest carmaker, said it would take a 5.1 billion euro ($5.99 billion) hit from the far-reaching product overhaul at its subsidiary.

The changes are a major shift for the Stuttgart-based maker of the iconic 911 model, and are expected to hit Porsche’s operating profit by up to 1.8 billion euros this year.

Porsche’s Frankfurt-listed shares were down 3.1 at 1731 GMT, while Volkswagen’s shares we 3.4% lower.

“Due to the delayed ramp-up of electromobility, the market launch of certain all-electric vehicle models is planned to take place at a later date,” the company said.

It added that the new sports utility vehicle above the Cayenne model will initially not be offered as an all-electric vehicle, but with combustion-engine and hybrid models.

“In addition, the production period of currently available vehicle models with combustion and hybrid drivetrain will be extended,” Porsche said.

Holding company Porsche SE, Volkswagen’s biggest shareholder, which also owns a 12.1% stake in Porsche AG, cut its outlook for profit after tax as well.

Porsche AG expects its automotive EBITDA margin to come in between 10.5% and 12.5%, versus 14.5% to 16.5% previously.

VW announced it now sees its 2025 operating return on sales in the range of 2% to 3%, with a previous forecast of 4 to 5%.

($1 = 0.8510 euros)

Reporting Christoph Steitz in Frankfurt and Thomas Seythal in Berlin; additional reporting by Simon Ferdinand Eibach and Paolo Laudani in Gdansk; Editing by Jan Harvey

History shows outright wealth taxes rarely generate much revenue and often miss their main targets, tax experts and economists say

International News via Reuters:

Cash-strapped European governments looking to tax the rich harder to plug holes in public finances and redress rising inequality may find that direct wealth levies are not the most effective solution.

History shows outright wealth taxes rarely generate much revenue and often miss their main targets, tax experts and economists say. They point to a menu of options that work better, including greater scrutiny of capital gains, inheritance taxes and exit fees for those trying to switch to a tax haven.

“Concerns about wealth inequality do not imply that governments should use net wealth taxes,” the IMF said in a recent guide to governments. “Improving capital income taxes tends to be both more equitable and more efficient.”

MODEST REVENUES

In Europe, Switzerland, Spain and Norway have varying forms of a wealth tax on holders of assets above a certain level, and France and Britain are debating the idea to reduce their budget deficits.

The average top income tax rate across the 38 countries in the Organisation for Economic Co-operation and Development fell from 66% in 1980 to 43% currently.

And at the very pinnacle of society, the top 0.0001% of earners can pay hardly any taxes at all in countries such as France and the Netherlands because they can park their assets in holding companies, according to research by Paris School of Economics professor Gabriel Zucman.

He was behind a proposal for a 2% wealth tax on France’s richest 0.01% in the 2026 budget, now being debated by politicians.

“We need to ensure that billionaires pay at least as much as other social groups,” Zucman told Reuters. “It is a basic question of justice and respect for the fundamental principles of tax fairness.”

But taxing a person’s stock of assets isn’t the only or perhaps even the best way to get there.

These taxes typically generate modest revenues of just a few decimal points of gross domestic product. This is because taxpayers, particularly the ultra-rich, can easily shield their assets by placing them in businesses or trusts, in exempted or hard-to-value items such as antiques, or even siphon them off to tax havens.

CAPITAL GETS BETTER DEAL

In addition, a wealth tax is generally levied on all types of wealth at the same rate – effectively penalising those who own lower-yielding assets.

By contrast, a tax on the income derived from capital – such as dividends and capital gains, which are profits made when an asset is sold – is levied on actual returns.

As these are generally subject to lower tax than labour income, proponents of taxes on the wealthy see room for change.

“The favourable tax treatment of gains is a significant driver of low effective tax rates among high-net-worth individuals,” the OECD said in a report published earlier this year.

Income from capital gains and dividends is taxed at a low, flat rate in countries including France, Germany, Italy, South Korea and Japan.

Some economists argue low taxes on capital encourage savings, investment and entrepreneurship, although OECD research shows those aims could be achieved in other ways, such as targeted relief.

Fixes include removing exemptions for capital gains, such as on some real estate, and making sure these are taxed, at the latest, when assets are inherited or a taxpayer leaves the country, especially for a tax haven, according to OECD and IMF research.

DEATH TAX MAY GIVE ECONOMY NEW LIFE

Inheritance tax, sometimes disparagingly called a “death tax”, is both fair and efficient, according to the OECD.

Its researchers argue it has advantages over a wealth tax, such as not discouraging people from saving for their old age or, if the right exemptions are in place, from making a nest for their children.

Detractors say inherited assets have already been taxed when income was earned. They point to the fact that the top 1% of earners are already the biggest contributor to the state’s coffers in most major countries.

While most developed economies do tax inherited wealth, not all make full use of that tool.

Most do not tax unrealised capital gains, and provide generous allowances for business assets.

In Italy, Poland and, up to a threshold, South Korea, heirs don’t pay any levy on a business they inherit. In Ireland, Spain and Germany there are very high exemptions.

In a competitive global environment, policymakers need to strike a balance in raising tax revenue without sending the wealthy to other jurisdictions, tax experts say. Yet tax activist group the Tax Justice Network argues everyone would benefit from a narrower wealth gap.

“One of the things that undermines social outcomes for everybody, including the wealthiest, is inequality… High inequalities undermine economic growth. They undermine life expectancy across the board,” said the Tax Justice Network’s Chief Executive Alex Cobham.

Additional reporting by Leigh Thomas in Madrid, Toby Sterling in Amsterdam, Giselda Vagnoni in Rome, Leftheris Papadimas in Athens, Charlie Devereux in Madrid and Simon Johnson in Stockholm; Editing by Susan Fenton

According to traders, low stock prices have triggered speculation about possible mergers or acquisitions, sending shares up

International News via Reuters:

The Ferragamo family said on Friday it was not interested in any kind of “extraordinary transactions” involving the eponymous luxury company.

According to traders, low stock prices have triggered speculation about possible mergers or acquisitions, sending shares up.

“The family has already clearly stated in the past that it is not interested in any extraordinary transactions involving the company and reiterates this today”, they said in a statement to Reuters.

Reporting by Elisa Anzolin, editing by Gavin Jones

The U.N. is streamlining as it copes with the fallout from U.S. foreign aid cuts under President Donald Trump that have gutted humanitarian agencies

International News via Reuters:

The United Nations agency focusing on the HIV/AIDS pandemic could close by the end of next year as the U.N. restructures in the face of a funding crisis, according to a U.N. document published online.

UNAIDS will “sunset” by the end of 2026, the document published on Thursday reads, part of a set of proposals from the U.N. to member states which they will have to decide on. It adds that UNAIDS’ expertise should be shifted into the wider U.N. system in the following year.

The U.N. is streamlining as it copes with the fallout from U.S. foreign aid cuts under President Donald Trump that have gutted humanitarian agencies.

UNAIDS said in a statement in response to the document that it already had a transition plan in place which would see a 55% reduction in staff in the short term and a review in 2027 that would ultimately lead to its closure.

It said any accelerated timeline as outlined in the U.N. document, which was drafted by the Secretary General, would have to be approved by the UNAIDS board.

UNAIDS began operating in 1996. Since the first cases of HIV were reported more than 40 years ago, 88 million people have become infected and 42 million have died from AIDS-related illnesses, it said.

The organisation said the rollout of new life-saving treatments and better access to care saw AIDS-related deaths halve from 1.3 million in 2010 to 630,000 in 2023. But it warned nearly one quarter of those living with HIV do not have access to those treatments and new infections are rising in some regions.

“AIDS is not over; the global AIDS response has been upended in recent months,” the UNAIDS statement said, adding much more needed to be done if the world wanted to achieve the goal of ending AIDS by 2030.

Reporting by Jennifer Rigby in London; Editing by Alexandra Hudson