Germany's gas storage refill still has a long way to go. Not only has last winter ended with storages critically low, but gas consumption in 2025 is up almost 10% y/y. Although supply is running at a multi-year high, siren calls to restart Russian pipeline will intensify.

One step forward, two steps back for Germany's industry. With US tariff front running having run its course, industrial production dropped in June to the lowest level since the pandemic. The govt stimulus can't come soon enough.

The EU still gets around 20% of its gas imports from Russia (most of it LNG now)🫣. Together with a carve-out for Russia's pipeline oil and nuclear fuel, plausible the EU pays a lot more to Russia for energy than India.

"It will be classified as defence spending". A taster of how the higher NATO spending target will be met in many countries. For Italy, €13.5bln is 0.6% of GDP (spread over several years but cost overruns almost guaranteed, if it actually goes ahead).

Looks like small Luxembourg took it upon itself to plug the eye watering fiscal deficit in the US. Alas, its dutiable value of exports was only $50mln in June. The recently announced 15% tariff on cars (down from 25%) will be welcome by car-heavy Slovakia, Hungary or Sweden.

With the latest revisions, 🇩🇪 is now the worst performing economy in Europe since pre-Covid. It is basically the same size as 6 years ago, although population grew a lot since. Supply chain, energy, China, and US trade shocks all playing out. The new govt needs to deliver growth.

What makes it even more depressing is that you don't need much sun to generate electricity from solar at scale as the Netherlands, where it supplied almost 20% in 2024, shows. Plus the cost of solar panels keeps dropping & needed infrastructure is much cheaper than offshore wind.

Eurozone inflation bang on target of 2% in July again. The @ecb has a dilemma: higher US and lower EU tariffs will be disinflationary. But lowering rates will spill over into demand for Chinese goods, which need a new global outlet, and hence not help the Eurozone economy much.

Europe always had more bureaucracy, regulation and higher energy prices. What's changed is Europe's industry now competes directly across a growing range of products with giant China, as it moved up the value chain on the back of a hugely unbalanced mercantilist growth model.

What did Macron do to signal strength to 🇺🇸?. As soon as @EU_Commission published a list of products to retaliate against, 🇫🇷 lobbied to remove ones sensitive for it. When 🇺🇸 saw 🇪🇺 politicians had no stomach for a fight, the goal was wide open. Actions matter more than words.

China has been grabbing export market share from advanced economies in general with the Eurozone being the most severely impacted. Reflects direct competition across increasingly more advanced manufactured goods products and China's generous state support that Europe can't match.

European politicians have no stomach for risking a trade war with the US, as since just before Covid, the largest economies (🇩🇪🇫🇷🇮🇹🇬🇧) saw very low growth but often large increases in public debt. Not a good starting point. 🇺🇸 saw high growth in debt, but also high GDP growth.

Spain's economy keeps defying gravity with quarterly growth accelerating in Q2. Improving growth composition from govt consumption & services exports to broad-based rise in fixed investment & private consumption. Best performing major advanced (not just EU) economy by far. 🇪🇸🚀

Great to join @cnni to talk about the US-EU framework deal. Pointed out it's important to look at the bigger picture not just trade and accept the low risk tolerance / pain threshold for EU politicians, even those that complain about the deal the most. What is their alternative?

There are different interpretations of EU-US deal (including by those in charge). Key uncertainty is around tariffs on pharma, chemicals and aircrafts; and potential quotas for select metals and products. In any case, US tariffs are going up by a lot.

Those disappointed in the EU rolling over for Trump (1) overestimate the EU's leverage (2) underestimate the extent of EU's dependence on US (trade, energy, tech, security) (3) misjudge pain thresholds for EU politicians (4) ignore broader context & realistic options given above.

With pharma still exempt (?), the effective tariff will be ~10%. Tariff on cars coming down to 15% from 25% previously (win for Germany, CEE, Sweden & edge over US import-heavy cars). No retaliation means a negative demand shock (disinflation) in EU. More @ecb rate cuts coming.

Two key points on EU-US trade (1) Most of EU surplus is pharma (still no clarity on US tariffs) due to transfer pricing of US multinationals (2) US large surplus in services trade is its mirror image. Big distortions in EU-US trade but tariffs are a blunt tool (US tax code key).

Alternatives are 1) retaliate and risk a China-style escalatory dynamic with the US security umbrella thrown in the mix 2) not retaliate, negotiate the lowest blanket tariff and sectoral exemptions that will be a floor for future deals. EU can ill afford a full blown trade war. .

Mildly positive data on private sector credit flow from the Eurozone today. Together with a small improvement in the PMIs yesterday, German Ifo today, and rumours of a US-EU framework deal that could act as a floor and lower uncertainty, growth may firm up later in the year.