It will be accompanied by an independent assessment of the fiscal and economic impact of the policies by the Office for Budget Responsibility, a government watchdog.

While markets have cheered the government’s promise to have its policies independently reviewed, questions remain about how the gap in the public finances can be closed. Economists say there is very little room in stretched department budgets to make cuts. That has led to concerns of a return to austerity measures, reminiscent of the spending cuts after the 2008 financial crisis.

There is a danger,” Mr. Chadha said, “that we end up with tighter fiscal policy than actually is appropriate given the shock that many households are suffering.” This could make it harder to support people suffering amid rising food and energy prices. But Mr. Chadha argues that it’s clear what needs to happen next: a complete elimination of unfunded tax cuts and careful planning on how to support vulnerable households.

The chancellor could also end up having a lot more autonomy over fiscal policy than the prime minister, he added.

“The best outcome for markets would be a rapid rallying of the parliamentary Conservative Party around a single candidate” who would validate Mr. Hunt’s approach and the timing of the Oct. 31 report, Trevor Greetham, a portfolio manager at Royal London Asset Management, said in a written comment.

Three days after the fiscal statement, on Nov. 3, Bank of England policymakers will announce their next interest rate decisions.

Bond investors are trying to parse how the central bank will react to the rapidly changing fiscal news. On Thursday, before Ms. Truss’s resignation, Ben Broadbent, a member of the central bank’s rate-setting committee, indicated that policymakers might not need to raise interest rates as much as markets currently expect. Traders are betting that the bank will raise rates above 5 percent next year, from 2.25 percent.

The bank could raise rates less than expected next year partly because the economy is forecast to shrink over the year. The International Monetary Fund predicted that the British economy would go from 3.6 percent growth this year to a 0.3 percent contraction next year.

That’s a mild recession compared with some other forecasts, but it would only compound the longstanding economic problems that Britain faced, including weak investment, low productivity growth and businesses’ inability to find employees with the right skills. These were among the challenges that Ms. Truss said she would resolve by shaking up the status quo and targeting economic growth of 2.5 percent a year.

Most economists didn’t believe that “Trussonomics,” as her policies were called, would deliver this economic growth. Instead, they predicted the policies would prolong the country’s inflation problem.

Despite the change in leadership, analysts don’t expect a big rally in Britain’s financial markets. The nation’s international standing could take a long time to recover.

“It takes years to build a reputation and one day to undo it,” Mr. Bouvet said, adding, “Investors will come progressively back to the U.K.,” but it won’t be quickly.

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U.K. Live Updates: Liz Truss Resigns as Prime Minister

LONDON — For Liz Truss, the end came on Thursday in a midday meeting with grandees of the Conservative Party. But Ms. Truss’s fate as prime minister was all but sealed three weeks earlier when currency and bond traders reacted to her new fiscal program by torpedoing the pound and other British financial assets.

The market’s swift, withering verdict on Ms. Truss’s tax-cutting agenda shattered her credibility, degraded Britain’s reputation with investors, drove up home mortgage rates, pushed the pound down to near parity with the American dollar, and forced the Bank of England to intervene to prop up British bonds.

That repudiation, measured in the second-by-second fluctuations of bond yields and exchange rates, mattered more than the noisy departures of Ms. Truss’s cabinet ministers or the hothouse anxieties of Conservative lawmakers that ultimately made her position untenable.

For that reason, world leaders, buffeted by economic challenges, are watching the turmoil in Britain with anything but relish, concerned about the stability of Britain itself. Interest rates, energy costs and inflation are rising around the world. Labor unrest is proliferating across borders. Non-British pension funds potentially face the same financial stresses that afflicted those in Britain. The last thing leaders want is for Ms. Truss’s woes to be a harbinger for other countries.

President Emmanuel Macron of France, who recently mended fences with Ms. Truss after she refused last summer to characterize him as a friend or foe, said: “I wish in any case that Great Britain will find stability again and moves on, as soon as possible. It’s good for us, and it’s good for our Europe.”

Credit…Henry Nicholls/Reuters

Ms. Truss, economists said, is correct to argue that markets are driven by global trends broader than her tax cuts. Central banks worldwide are raising rates to battle inflation, which has been fueled by a surge in demand as the coronavirus pandemic ebbed and a spike in gas prices driven by Russia’s war in Ukraine.

“The problems are by no means all Truss’s doing but she should have known that getting blamed for everything comes with the territory,” said Kenneth Rogoff, a professor of economics at Harvard and a scholar of financial upheavals.

“What is really worrisome now,” he said, is that the situation in Britain “might be the canary in the coal mine as global interest rates keep soaring, especially as they do not seem likely to come down anytime soon.”

Ms. Truss long cultivated a reputation as a disrupter and a free-market evangelist in the tradition of Margaret Thatcher and Ronald Reagan. Her tax cut proposals made her an outlier among leaders of big economies fighting inflation. But she made no apologies for offending either economic orthodoxy or the expectations of financial markets in pursuit of her vision of a “low-tax, high growth” Britain.

“Not everyone will be in favor of change,” a defiant Ms. Truss said a week ago at the annual meeting of the Conservative Party, even though one of her planned tax cuts, for high-earning people, had already been reversed. “But everyone will benefit from the result: a growing economy and a better future.”

The prime minister’s fatal miscalculation, experts said, was to believe that Britain could defy the gravity of the markets by passing sweeping tax cuts, without corresponding spending cuts, at a time when inflation is running in double digits and interest rates were rising.

“It was the combination of the wrong fiscal policy at the wrong time — borrowing when rates were rising rather than, as in 2010s, when they were low,” said Jonathan Portes, a professor of economics and public policy at Kings College London.

He cited what he called Ms. Truss’s “institutional vandalism,’’ in particular the way she and her ousted chancellor of the Exchequer, Kwasi Kwarteng, broke with custom by announcing sweeping tax cuts without subjecting them to the scrutiny of the government’s fiscal watchdog, the Office of Budget Responsibility.

In that sense, he said, Ms. Truss was following in the footsteps of her predecessor, Boris Johnson, who resigned as prime minister barely three months earlier after a series of scandals prompted a wholesale walkout of his ministers.

Credit…Oli Scarff/Agence France-Presse — Getty Images

Mr. Kwarteng’s budget maneuvering led many in the markets to suspect the government was engaged in a kind of fiscal sleight of hand, which would inevitably require massive borrowing to cover a hole in the budget estimated at 72 billion pounds ($81.5 billion).

Mr. Kwarteng, who studied the history of financial crises as a doctoral student at Cambridge University, brushed off the blowback in financial markets as a temporary phenomenon. Like Ms. Truss, he is a believer in disruptive change. Together, they were among the authors of “Britannia Unchained,” a manifesto for a Thatcher-style, free-market revolution in post-Brexit Britain. Among other things, the authors described Britons as “among the worst idlers in the world.”

When, or even whether, Britain can fully recover from this period of political and economic turbulence is not yet clear. On Thursday, as news of Ms. Truss’s resignation broke, the pound rose against the dollar and yields on British government bonds fell.

Virtually all the government’s planned tax cuts have been reversed, and the next prime minister, regardless of his or her politics, will have little choice but to pursue a policy of spending cuts and strict fiscal discipline. Some fear a return to the bleak austerity of Prime Minister David Cameron in the years after the 2008 financial crisis.

“Rishi or another can steady the ship and calm the markets,” Professor Portes said, referring to Rishi Sunak, a former chancellor who ran unsuccessfully against Ms. Truss and may seek to succeed her. “But it’s hard to see how, given the state of the Conservatives, any Tory prime minister can repair the longer-term damage.”

Much of that damage is to Britain’s once-sterling reputation in the markets. Economists have begun mentioning Britain in the same breath as fiscally wayward countries like Italy and Greece. Lawrence H. Summers, the former U.S. Treasury secretary, told Bloomberg News, “It makes me very sorry to say, but I think the U.K. is behaving a bit like an emerging market turning itself into a submerging market.”

That is a humbling comedown for a country that in 2009 announced a $1.1 trillion emergency fund to bail out the global economy.

“If you’re an American fund manager, you’re not going to put Britain in the super-safe category you might have earlier,” said Jonathan Powell, who served as chief of staff to Prime Minister Tony Blair. “It’s not about Britain’s standing in the world, but what category we’ve put ourselves in.”

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As UK’s Truss fights for job, new finance minister says she made mistakes

  • Truss sacked finance minister on Friday
  • New chancellor Hunt warns of tough decisions
  • ‘I’ve listened, I get it’, Truss says
  • BoE’s Bailey says agrees with Hunt on need to fix finances
  • Some Conservative lawmakers say Truss will be ousted

LONDON, Oct 15 (Reuters) – Britain’s new finance minister Jeremy Hunt said on Saturday some taxes would go up and tough spending decisions were needed, saying Prime Minister Liz Truss had made mistakes as she battles to keep her job just over a month into her term.

In an attempt to appease financial markets that have been in turmoil for three weeks, Truss fired Kwasi Kwarteng as her chancellor of the exchequer on Friday and scrapped parts of their controversial economic package.

With opinion poll ratings dire for both the ruling Conservative Party and the prime minister personally, and many of her own lawmakers asking, not if, but how Truss should be removed, Truss is relying on Hunt to help salvage her premiership less than 40 days after taking office.

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In an article for the Sun newspaper published late on Saturday, Truss admitted the plans had gone “further and faster than the markets were expecting”.

“I’ve listened, I get it,” she wrote. “We cannot pave the way to a low-tax, high-growth economy without maintaining the confidence of the markets in our commitment to sound money.”

She said Hunt would lay out at the end of the month the plan to get national debt down “over the medium term”.

But, the speculation about her future shows no sign of diminishing, with Sunday’s newspapers rife with stories that allies of Rishi Sunak, another former finance minister who she beat to become leader last month, were plotting to force her out within weeks.

On a tour of TV and radio studios, Hunt gave a blunt assessment of the situation the country faced, saying Truss and Kwarteng had made mistakes and further changes to her plans were possible.

“We will have some very difficult decisions ahead,” he said.”The thing that people want, the markets want, the country needs now, is stability.”

The Sunday Times said Hunt would rip up more of Truss’s original package by delaying a planned cut to the basic rate of income tax as part of a desperate bid to balance the books.

According to the newspaper, Britain’s independent fiscal watchdog had said in a draft forecast there could be a 72 billion pound ($80 billion) black hole in public finances by 2027/28, worse than economists had forecast.

Truss had won the leadership contest to replace Boris Johnson on a platform of big tax cuts to stimulate growth, which Kwarteng duly announced last month. But the absence of any details of how the cuts would be funded sent the markets into meltdown.

She has already ditched plans to cut tax for high earners, and said a levy on business would increase, abandoning her proposal to keep it at current levels. But a slump in bond prices after her news conference on Friday still suggested she had not gone far enough.

‘MEETING OF MINDS’

Kwarteng’s Sept. 23 fiscal statement prompted a backlash in financial markets that was so ferocious the Bank of England (BoE) had to intervene to prevent pension funds being caught up in the chaos as borrowing costs surged.

BoE Governor Andrew Bailey said he had spoken to Hunt and they had agreed on the need to repair the public finances.

“There was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that,” Bailey said in Washington on Saturday. “Of course, there was an important measure taken yesterday.”

He also warned that inflation pressures might require a bigger interest rate rise than previously thought due to the government’s huge energy subsidies for homes and businesses, and its tax cut plans.

Hunt is due to announce the government’s medium-term budget plans on Oct. 31, in what will be a key test of its ability to show it can restore its economic policy credibility.

He cautioned spending would not rise by as much as people would like and all government departments were going to have to find more efficiencies than they were planning.

“Some taxes will not be cut as quickly as people want, and some taxes will go up. So it’s going to be difficult,” he said. He met Treasury officials on Saturday and will hold talks with Truss on Sunday to go through the plans.

‘MISTAKES MADE’

Hunt, an experienced minister and viewed by many in his party as a safe pair of hands, said he agreed with Truss’s fundamental strategy of kickstarting economic growth, but he added that their approach had not worked.

“There were some mistakes made in the last few weeks. That’s why I’m sitting here. It was a mistake to cut the top rate of tax at a period when we’re asking everyone to make sacrifices,” he said.

It was also a mistake, Hunt said, to “fly blind” and produce the tax plans without allowing the independent fiscal watchdog, the Office for Budget Responsibility, to check the figures.

The fact that Hunt is Britain’s fourth finance minister in four months is testament to a political crisis that has gripped Britain since Johnson was ousted following a series of scandals.

Hunt said Truss should be judged at an election and on her performance over the next 18 months – not the last 18 days.

However, she might not get that chance. During the leadership contest, Truss won support from less than a third of Conservative lawmakers and has appointed her backers since taking office – alienating those who supported her rivals.

The appointment of Hunt, who ran to be leader himself and then backed Sunak, has been seen as a sign of her reaching out, but the move did little to placate some of her party critics.

“It’s over for her,” one Conservative lawmaker told Reuters after Friday’s events.

($1 = 0.8953 pounds)

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Reporting by Michael Holden, Alistair Smout and William Schomberg
Editing by Emelia Sithole-Matarise, Helen Popper, Ros Russell and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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Bank of England governor has ‘meeting of minds’ with Hunt

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  • Bailey says he talked to new finance minister on Friday
  • ‘Very clear and immediate meeting of minds’ on fiscal challenge
  • Rates likely to rise by more than thought in August – Bailey
  • Recent bond-buying not about targeting yields

WASHINGTON, Oct 15 (Reuters) – Bank of England Governor Andrew Bailey said there was an “immediate meeting of minds” when he spoke with finance minister Jeremy Hunt about the need to fix the public finances after the tax cut plans of Hunt’s predecessor unleashed market turmoil.

Bailey, speaking in Washington where British officials attending International Monetary Fund meetings have been put on the spot about the crisis engulfing the country, said he had spoken to Hunt on Friday after he replaced Kwasi Kwarteng.

“I can tell you that there was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that,” Bailey said.

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“Of course there was an important measure taken yesterday,” he said at an event where he also hinted at a big interest rate rise by the central bank next month.

Prime Minister Liz Truss, seeking to save her term in office which is barely a month old, said on Friday that Britain’s corporation tax rate would increase, reversing a key pledge made during her bid for Downing Street.

Hunt said earlier on Saturday that some taxes might have to rise and others might not fall as much as planned, signalling a further shift away from Truss’s original plans.

Bailey, speaking at an event organised by the Group of Thirty, which comprises financiers and academics, welcomed the role that Britain’s independent budget watchdog would have in assessing the budget plan that Hunt will publish on Oct. 31.

The Office for Budget Responsibility was not tasked with weighing up the impact of Kwarteng’s “mini-budget” which set off a slump in the value of the pound and government bonds when he announced it on Sept. 23.

“Flying blind is not a way to achieve sustainability,” Bailey said.

Truss criticised the BoE during her leadership campaign, saying she wanted to set a “clear direction of travel” for the central bank. BoE officials pushed back at those comments saying their independence was key to managing the economy.

‘STRONGER RESPONSE’ WITH RATES

Bailey said the BoE might raise interest rates by more than it previously thought because of the government’s huge energy bill support – which could lower inflation in the short term but push it up further ahead – and whatever it decides to do on tax cuts and spending.

“We will not hesitate to raise interest rates to meet the inflation target,” Bailey said. “And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August.”

The BoE raised rates by half a percentage point in August – at the time its biggest increase in 27 years – and then did so again in September with inflation around 10%, far above the BoE’s target of 2%.

It is due to announce its next decision on Nov. 3 and many investors think it will either raise them from their current level of 2.25% to 3% or possibly 3.25%.

In the shorter term, the BoE will be keeping a close eye on how financial markets behave on Monday after it ended its emergency bond-buying programme on Friday.

Bailey said the now-completed intervention was “not about steering market yields towards some particular level, but rather preventing them from being distorted by market dysfunction”.

He said the BoE had acted after the violent market moves which exposed the “flaws in the strategy and structure” of a lot of pension funds.

The intervention was different to the much bigger and longer-running bond-buying that the BoE undertook during the coronavirus pandemic and earlier as a monetary policy tool.

“In these difficult times, we need to be very clear on this framework of intervention,” Bailey said.

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Reporting by Howard Schneider in Washington and William Schomberg in London; Additional reporting by Michael Holden in London; Editing by David Clarke

Our Standards: The Thomson Reuters Trust Principles.

Howard Schneider

Thomson Reuters

Covers the U.S. Federal Reserve, monetary policy and the economy, a graduate of the University of Maryland and Johns Hopkins University with previous experience as a foreign correspondent, economics reporter and on the local staff of the Washington Post.

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Amazon Labor Union, With Renewed Momentum, Faces Next Test

The Amazon Labor Union has built momentum leading up to an election this week at an 800-person warehouse near Albany, N.Y.

A federal labor official recently endorsed the union’s election victory at a Staten Island warehouse in April, which Amazon has challenged, while workers’ frustrations over pay and safety have created an opportunity to add supporters and pressure the company to bargain.

But the union faces questions about whether it can translate such opportunities into lasting gains. For months after its victory at the 8,000-person warehouse on Staten Island, the union appeared to be out of its depths. It nearly buckled under a crush of international media attention and lost a vote at a second Staten Island warehouse in May.

At times, it has neglected organizing inside the original warehouse, known as JFK8, where high turnover means the union must do constant outreach just to maintain support — to say nothing of expanding. Christian Smalls, the union’s president and a former JFK8 employee, seemed distracted as he traveled widely. There was burnout and infighting in the group, and several core members left or were pushed out.

attempt to overturn its victory, which consumed time and resources, as supporters and leaders testified in hearings that dragged across 24 business days beginning in mid-June. The union delayed plans to train more workers as organizers. A national organizing call was put on hold.

a party in Hollywood and decided that the Amazon Labor Union “understood where we were coming from,” she recalled in an interview.

could spend years appealing the election result on Staten Island, and the company still has enormous power over JFK8 workers. After workers protested Amazon’s response to a fire at the site last week, the company suspended more than 60 of them with pay while, it said, it investigated what had occurred. The union filed unfair-labor-practice charges over the suspensions; Amazon said most of the workers had returned to work.

unusually high injury rates, among other safety issues. The facility was evacuated after a cardboard compactor caught fire last week, two days after the JFK8 fire, which was similar.

“The timeline to fix things is before something tragic happens,” Ms. Goodall said.

She accused Amazon of running an aggressive anti-union campaign, including regular meetings with employees in which it questions the union’s credibility and suggests that workers could end up worse off if they unionize.

Mr. Flaningan, the company spokesman, said that while injuries increased as Amazon trained hundreds of thousands of new workers in 2021, the company believed that its safety record surpassed that of other retailers over a broader period.

“Like many other companies, we hold these meetings because it’s important that everyone understands the facts about joining a union and the election process itself,” he said, adding that the decision to unionize is up to employees.

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A Strong Dollar Is Wreaking Havoc on Emerging Markets. A Debt Crisis Could Be Next.

The average household in Ghana is paying two-thirds more than it did last year for diesel, flour and other necessities. In Egypt, wheat is so expensive that the government has fallen half a billion dollars short of its budget for a bread subsidy it provides to its citizens. And Sri Lanka, already struggling to control a political crisis, is running out of fuel, food and medical supplies.

A strong dollar is making the problems worse.

Compared with other currencies, the U.S. dollar is the strongest it has been in two decades. It is rising because the Federal Reserve has increased interest rates sharply to combat inflation and because America’s economic health is better than most. Together, these factors have attracted investors from all over the world. Sometimes they simply buy dollars, but even if investors buy other assets, like government bonds, they need dollars to do so — in each case pushing up the currency’s value.

That strength has become much of the world’s weakness. The dollar is the de facto currency for global trade, and its steep rise is squeezing dozens of lower-income nations, chiefly those that rely heavily on imports of food and oil and borrow in dollars to fund them.

But much of the damage is already behind us.

  • Discordant Views: Some investors just don’t see how the Federal Reserve can lower inflation without risking high unemployment. The Fed appears more optimistic.
  • Weathering the Storm: The rout in the stock and bond markets has been especially rough on people paying for college, retirement or a new home. Here is some advice.
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  • “We are in a fragile situation,” Mr. El-Erian said. “Country after country is flashing amber, and some are already flashing red.”

    Many lower-income countries were already struggling during the pandemic.

    Roughly 22 million people in Ghana, or a third of its population, reported a decline in their income between April 2020 and May 2021, according to a survey from the World Bank and Unicef. Adults in almost half of the households with children surveyed said they were skipping a meal because they didn’t have enough money. Almost three-quarters said the prices of major food items had increased.

    Then came Russia’s invasion of Ukraine. The war between two of the world’s largest exporters of food and energy led to a big surge in prices, especially for importers like Ghana. Consumer prices have gone up 30 percent for the year through June, according to data from the research firm Moody’s Analytics. For household essentials, annual inflation has reached 60 percent or more this year, the S&P data shows.

    To illustrate this, consider the price of a barrel of oil in dollars versus the Ghanaian cedi. At the beginning of October last year, the price of oil stood at $78.52 per barrel, rising to nearly $130 per barrel in March before falling back to $87.96 at the beginning of this month, a one-year increase of 12 percent in dollar terms. Over the same period, the Ghanaian cedi has weakened over 40 percent against the dollar, meaning that the same barrel of oil that cost roughly 475 cedi a year ago now costs over 900 cedi, almost twice as much.

    Adding to the problem are large state-funded subsidies, some taken on or increased through the pandemic, that are now weighing on government finances.

    Ghana’s president cut fuel taxes in November 2021, losing roughly $22 million in projected revenue for the government — the latest available numbers.

    In Egypt, spending on what the government refers to as “supply commodities,” almost all of which is wheat for its long-running bread subsidy, is expected to come in at around 7 percent of all government spending this year, 12 percent higher — or more than half a billion dollars — than the government budgeted.

    As costs ballooned throughout the pandemic, governments took on more debt. Ghana’s public debt grew to nearly $60 billion from roughly $40 billion at the end of 2019, or to nearly 80 percent of its gross domestic product from around 63 percent, according to Moody’s.

    It’s one of four countries listed by S&P, alongside Pakistan, Nigeria and Sri Lanka, where interest payments alone account for more than half of the government’s revenues.

    “We can’t forget that this is happening on the back end of a once-in-a-century pandemic in which governments, to try and support families as best they could, did borrow more,” said Frank Gill, an analyst at S&P. “This is a shock following up on another shock.”

    In May, Sri Lanka defaulted on its government debt for the first time in its history. Over the past month, the governments of Egypt, Pakistan and Ghana have all reached out to the International Monetary Fund for a bailout as they struggle to meet their debt financing needs, no longer able to turn to international investors for more money.

    “I don’t think there is a lot of appetite to lend money to some of these countries,” said Brian Weinstein, co-head of credit trading at Bank of America. “They are incredibly vulnerable at the moment.”

    That vulnerability is already reflected in the bond market.

    In 2016, Ghana borrowed $1 billion for 10 years, paying an interest rate of just over 8 percent. As the country’s financial position has worsened and investors have backed away, the yield — indicative of what it would now cost Ghana to borrow money until 2026 — has risen to above 35 percent.

    It’s an untenable cost of debt for a country in Ghana’s situation. And Ghana is not alone. For bonds that also mature in 2026, yields for Pakistan have reached almost 40 percent.

    “We have concerns where any country has yields that calls into question their ability to refinance in public markets,” said Charles Cohen, deputy division chief of monetary and capital market departments at IMF.

    The risk of a sovereign debt crisis in some emerging markets is “very, very high,” said Jesse Rogers, an economist at Moody’s Analytics. Mr. Rogers likened the current situation to the debt crises that crushed Latin America in the 1980s — the last time the Fed sought to quell soaring inflation.

    Already this year, more than $80 billion has been withdrawn from mutual funds and exchange-traded funds — two popular types of investment products — that buy emerging market bonds, according to EPFR Global, a data provider. As investors sell, the United States is often the beneficiary, further strengthening the dollar.

    “It’s by far the worst year for outflows the market has ever seen,” said Pramol Dhawan, head of emerging markets at Pimco.

    Even citizens in some of these countries are trying to exchange their money for dollars, fearful of what’s to come and of further currency depreciation — yet inadvertently also contributing to it.

    “For pockets of emerging markets, this is a really challenging backdrop and one of the most challenging backdrops we have faced for many years,” Mr. Dhawan said.

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    On Portugal’s ‘Bitcoin Beach,’ Crypto Optimism Still Reigns

    LAGOS, Portugal — The Bam Bam Beach Bitcoin bar, on an uncrowded beach in southwestern Portugal, is the meeting place.

    To get there, you drive past a boat harbor, oceanside hotels and apartment buildings, then park near a sleepy seafood restaurant and walk down a wooden path that cuts through a sand dune. Yellow Bitcoin flags blow in the wind. The conversations about cryptocurrencies and a decentralized future flow.

    “People always doubt when to buy, when to sell,” said Didi Taihuttu, a Dutch investor who moved to town this summer and is one of Bam Bam’s owners. “We solve that by being all in.”

    melted down, and crypto companies like the experimental bank Celsius Network declared bankruptcy as fears over the global economy yanked down values of the risky assets. Thousands of investors were hurt by the crash. The price of Bitcoin, which peaked at more than $68,000 last year, remains off by more than 70 percent.

    But in this Portuguese seaside idyll, confidence in cryptocurrencies is undimmed. Every Friday, 20 or so visitors from Europe and beyond gather at Bam Bam to share their unwavering faith in digital currencies. Their buoyancy and cheer endure across Portugal and in other crypto hubs around the world, such as Puerto Rico and Cyprus.

    Sifted.eu.)

    In beach towns like Ericeira and Lagos, shops and restaurants show their acceptance of digital currencies by taking Bitcoin as payment. Lisbon, the capital, has become a hub for crypto-related start-ups such as Utrust, a cryptocurrency payment platform, and Immunefi, a company that identifies security vulnerabilities in decentralized networks.

    “Portugal should be the Silicon Valley of Bitcoin,” Mr. Taihuttu said. “It has all the ingredients.”

    news outlets covered his family’s story, Mr. Taihuttu’s social media following swelled, turning him into an influencer and a source of investment advice. A documentary film crew has followed him on and off for the past 18 months. This summer, he settled in Portugal and quickly became something of an ambassador for its crypto scene.

    He has goals to turn Meia Praia, the beach where Bam Bam is located, into “Bitcoin Beach.” He is shopping for property to create a community nearby for fellow believers.

    “You prove that it is possible to run some part of the world, even if it’s just one,” said Mr. Taihuttu, with a Jack Daniel’s and Coke in hand. He has shoulder-length black hair and wore a tank top that showcased his tan and tattoos (including one on his forearm of the Bitcoin symbol).

    Ms. Bestandig was among those who Mr. Taihuttu drew to Portugal.

    collapse of Mt. Gox, a Tokyo-based virtual currency exchange that declared bankruptcy in 2014 after huge, unexplained losses of Bitcoin.

    If cryptocurrency prices do not recover, “a lot of them will have to go back to work again,” Clinton Donnelly, an American tax lawyer specializing in cryptocurrencies, said of some of those gathered at Bam Bam.

    Even so, Mr. Donnelly and other bar regulars said their belief in crypto remained unshaken.

    Thomas Roessler, wearing a black Bitcoin shirt and drinking a beer “inspired by” the currency, said he had come with his wife and two young children to decide whether to move to Portugal from Germany. He first invested in Bitcoin in 2014 and, more recently, sold a small rental apartment in Germany to invest even more.

    Mr. Roessler was concerned about the drop in crypto values but said he was convinced the market would rebound. Moving to Portugal could lower his taxes and give his family the chance to buy affordable property in a warm climate, he said. They had come to the bar to learn from others who had made the move.

    “We have not met a lot of people who live this way,” Mr. Roessler said. Then he bought another round of drinks and paid for them with Bitcoin.

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    CorpHousing Group Inc. Announces 2022 Second Quarter Financial Results

    MIAMI–(BUSINESS WIRE)–CorpHousing Group Inc. (“CorpHousing,” “CHG”, or the “Company”) (Nasdaq: CHG), which utilizes a long-term lease, asset-light business model to acquire and manage a growing portfolio of short-term rental properties in major metropolitan cities, today announced financial results for the second quarter (“Q2 2022”) and six months ended June 30, 2022.

    2022 Second Quarter Financial Overview Compared to 2021 Second Quarter

    2022 Six Months Financial Overview Compared to 2021 Six Months

    Operational Highlights

    “We are excited to announce our Q2 results, which we believe reflect the success of our asset-light business model, the vibrancy of our target markers, and the opportunities inherent in our industry,” said Brian Ferdinand, Chairman and Chief Executive Officer of CorpHousing Group. “Q2 2022 net rental revenue increased by 144%, gross profit increased 19-fold, net income improved by $1.9 million, and EBITDA for the quarter was $2.1 million. Our available units for rent increased quarter over quarter, occupancy rates improved as the effects of COVID pandemic wane, and we realized certain efficiencies from scale.

    “We currently operate hotels under long-term lease agreements in Boston, Denver, Los Angeles, greater Miami, New York City, Washington, DC, and Seattle, and will commence operations in New Orleans in mid-October.

    We are in various stages of negotiation with a variety of potential partners that represent thousands of additional hotel units in destination locations across the United States and Europe. We believe that we are creating win-win opportunities by providing property owners the ability to create stable cash flow streams to maximize returns on their properties, which have been significantly impacted by restrictions on travel and leisure activities due to the COVID-19 pandemic. CHG then markets these units under our customer facing LuxUrbanTM brand to increase occupancy rates and drive operational efficiencies, thus creating the opportunity to generate high margin, recurring and predictable revenue streams. Supported by a strengthened balance sheet and seasoned team of executives, we believe that are well positioned to advance our highly scalable, predictable, and profitable business model and look forward to our future with confidence.”

    Q2 2022 Overview

    Net rental revenue in Q2 2022 increased 144% to $10.2 million from $4.2 million in the second quarter ended June 30, 2021 (“Q2 2021”), driven primarily by an increase in average units available to rent from 376 in Q2 2021 to 565 at Q2 2022, as well as better occupancy rates and average daily rates (“ADRs”) over this period.

    Cost of revenue, which includes rental expenses for available units to rent, rose to $7.3 million in Q2 2022 from $4.0 million in Q2 2021, due primarily to the increase in size of CHG’s rental unit portfolio, as well as related increases in furniture rentals, cleaning costs, cable / WIFI costs and credit card processing fees.

    Gross profit improved to $2.9 million, or 28% of net rental revenue, from $0.1 million, or 3.5% of net rental revenue. Higher gross profit and gross margin was primarily attributable to a reduction in the impact of COVID-19 on our operations, higher unit counts and better occupancy rates and ADRs.

    Total general and administrative expenses in Q2 2022 increased to $0.9 million, or 9% of net rental revenue, from $0.7 million, or 18% of net rental revenue, in Q2 2021, attributable to an increased number of units in operation.

    Income before provision for income taxes improved to $1.5 million from a loss of $(1.1) million, reflecting a significant increase in net rental revenue in Q2 2022 compared to Q2 2021 and the benefits of scale-driven operating efficiencies.

    Net income improved to $0.8 million, or $0.04 per diluted share, compared to a net loss of $(1.1) million.

    EBITDA rose to $2.1 million, or 21% of net rental revenue, in Q2 2022 compared to negative EBITDA of $(0.6) million.

    For a discussion of the financial measures presented herein which are not calculated or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), see “Note Regarding Use of Non-GAAP Financial Measures” below and the schedules to this press release for additional information and reconciliations of non-GAAP financial measures. The company presents non-GAAP measures such as EBITDA to assist in an analysis of its business. These non-GAAP measures should not be considered an alternative to GAAP measures as an indicator of the company’s operating performance.

    Conference Call and Webcast

    The Company will host a conference call on Tuesday, September 27, 2022 at 9:00 am Eastern Time to discuss the results.

    Investors interested in participating in the live call can dial:

    A webcast of the event may be accessed via the following link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=ltKz5SSV.

    CorpHousing Group Inc.

    CorpHousing Group (CHG) utilizes a long-term lease, asset-light business model to acquire and manage a growing portfolio of short-term rental properties in major metropolitan cities. The Company’s future growth focuses primarily on seeking to create “win-win” opportunities for owners of dislocated hotels, including those impacted by COVID-19 travel restrictions, while providing CHG favorable operating margins. CHG operates these properties in a cost-effective manner by leveraging technology to identify, acquire, manage, and market them globally to business and vacation travelers through dozens of third-party sales and distribution channels, and the Company’s own online portal. Guests at the Company’s properties are provided Heroic Service™ under CHG’s consumer brands, including LuxUrban. CHG’s Heroic ServiceTM provides guests a hassle-free experience which exceeds their expectations with “Heroes” who respond to any issue in a timely, thoughtful, and thorough manner.

    Forward Looking Statements

    This press release contains forward-looking statements, including with respect to the expected closing of noted lease transactions and continued closing on additional leases for properties in the Company’s pipeline, as well the Company’s anticipated ability to commercialize efficiently and profitably the properties it leases and will lease in the future. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those set forth under the caption “Risk Factors” in the prospectus forming part of the Company’s effective Registration Statement on Form S-1 (File No. 333-262114). Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. Forward-looking information may relate to anticipated events or results including, but not limited to business strategy, leasing terms, high-level occupancy rates, and sales and growth plans. The financial projection provided herein are based on certain assumptions and existing and anticipated market, travel and public health conditions, all of which may change. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.

    The Company seeks to achieve profitable, long-term growth by monitoring and analyzing key operating metrics, including EBITDA. The Company defines EBITDA as net income before interest, taxes, and depreciation. The Company’s management uses this non-GAAP financial metric and related computations to evaluate and manage the business and to plan and make near and long-term operating and strategic decisions. The management team believes this non-GAAP financial metric is useful to investors to provide supplemental information in addition to the GAAP financial results. Management reviews the use of its primary key operating metrics from time-to-time. EBITDA is not intended to be a substitute for any GAAP financial measure and as calculated, may not be comparable to similarly titled measures of performance of other companies in other industries or within the same industry. The Company’s management team believes it is useful to provide investors with the same financial information that it uses internally to make comparisons of historical operating results, identify trends in underlying operating results, and evaluate its business.

    A reconciliation of net income to EBITDA will be provided in the company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2022 to be filed on September 26, 2022, under the section thereof entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Reconciliation of Unaudited Historical Results to EBITDA.”

    Condensed Consolidated Balance Sheet

    (Unaudited)

     

     

     

    (unaudited)

     

     

     

     

    June 30,

     

    December 31,

     

     

    2022

     

    2021

    ASSETS

     

     

     

     

     

     

    Current Assets

     

     

     

     

     

     

    Cash

     

    $

    556

     

     

    $

    6,998

     

    Processor retained funds

     

     

    4,616,255

     

     

     

    56,864

     

    Prepaid expenses and other current assets

     

     

    512,939

     

     

     

    166,667

     

    Deferred offering costs

     

     

    1,234,500

     

     

     

    771,954

     

    Security deposits – current

     

     

    276,943

     

     

     

    276,943

     

    Total Current Assets

     

    $

    6,641,193

     

     

    $

    1,279,426

     

    Other Assets

     

     

     

     

     

     

    Furniture and equipment, net

     

     

    8,944

     

     

     

    11,500

     

    Restricted cash

     

     

    1,100,000

     

     

     

    1,100,000

     

    Security deposits – noncurrent

     

     

    4,108,010

     

     

     

    1,377,010

     

    Operating lease right-of-use asset, net

     

     

    49,941,971

     

     

     

     

    Total Other Assets

     

     

    55,158,925

     

     

     

    2,488,510

     

    Total Assets

     

    $

    61,800,118

     

     

    $

    3,767,936

     

    LIABILITIES AND STOCKHOLDERS’ DEFICIT

     

     

     

     

     

     

    Current Liabilities

     

     

     

     

     

     

    Accounts payable and accrued expenses

     

    $

    5,301,053

     

     

    $

    4,209,366

     

    Rents received in advance

     

     

    4,071,095

     

     

     

    1,819,943

     

    Merchant cash advances – net of unamortized costs of $0 and $57,768, respectively

     

     

    575,489

     

     

     

    1,386,008

     

    Loans payable – current portion

     

     

    2,780,054

     

     

     

    1,267,004

     

    Loans payable – SBA – PPP Loan – current portion

     

     

    815,183

     

     

     

    815,183

     

    Convertible loans payable – related parties – current portion

     

     

    2,596,865

     

     

     

     

    Loans payable – related parties – current portion

     

     

    1,071,128

     

     

     

    22,221

     

    Operating lease liability – current

     

     

    7,182,381

     

     

     

     

    Income taxes payable

     

     

    750,000

     

     

     

     

    Total Current Liabilities

     

     

    25,143,248

     

     

     

    9,519,725

     

    Long-Term Liabilities

     

     

     

     

     

     

    Loans payable

     

     

    545,789

     

     

     

    925,114

     

    Loans payable – SBA – EIDL Loan

     

     

    800,000

     

     

     

    800,000

     

    Loans payable – related parties

     

     

     

     

     

    496,500

     

    Convertible loans payable – related parties

     

     

    700,195

     

     

     

    2,608,860

     

    Line of credit

     

     

    94,975

     

     

     

    94,975

     

    Deferred rent

     

     

     

     

     

    536,812

     

    Operating lease liability

     

     

    43,962,492

     

     

     

     

    Total Long-term Liabilities

     

     

    46,103,451

     

     

     

    5,462,261

     

    Total Liabilities

     

     

    71,246,699

     

     

     

    14,981,986

     

    Commitments and Contingencies

     

     

     

     

     

     

    Stockholders’ Deficit

     

     

     

     

     

     

    Members’ Deficit

     

     

     

     

     

    (11,214,050

    )

    Common stock (shares authorized, issued and outstanding – 90,000,000; 21,675,001; 21,675,001; respectively)

     

     

    216

     

     

     

     

    Accumulated deficit

     

     

    (9,446,797

    )

     

     

     

    Total Stockholders’ Deficit

     

     

    (9,446,581

    )

     

     

    (11,214,050

    )

    Total Liabilities and Stockholders’ Deficit

     

    $

    61,800,118

     

     

    $

    3,767,936

     

    Condensed Consolidated Statement of Operations

    (Unaudited)

     

     

     

    For the Three Months Ended

     

    For the Six Months Ended

     

     

    June 30, 2022

     

    June 30, 2021

     

    June 30, 2022

     

    June 30, 2021

    Rental Revenue

     

    $

    12,656,540

     

     

    $

    6,728,686

     

     

    $

    24,419,439

     

     

    $

    11,688,873

     

    Refunds and Allowances

     

     

    2,455,202

     

     

     

    2,545,820

     

     

     

    5,118,676

     

     

     

    4,199,978

     

    Net Rental Revenue

     

     

    10,201,338

     

     

     

    4,182,866

     

     

     

    19,300,763

     

     

     

    7,488,895

     

    Cost of Revenue

     

     

    7,344,720

     

     

     

    4,035,238

     

     

     

    13,930,882

     

     

     

    7,920,531

     

    Gross Profit (Loss)

     

     

    2,856,618

     

     

     

    147,628

     

     

     

    5,369,881

     

     

     

    (431,636

    )

    General and Administrative Expenses

     

     

     

     

     

     

     

     

     

     

     

     

    Administrative and other

     

     

    809,121

     

     

     

    701,040

     

     

     

    1,559,742

     

     

     

    1,258,458

     

    Professional fees

     

     

    76,500

     

     

     

    37,390

     

     

     

    305,485

     

     

     

    90,404

     

    Total General and Administrative Expenses

     

     

    885,621

     

     

     

    738,430

     

     

     

    1,865,227

     

     

     

    1,348,862

     

    Net Income (Loss) Before Other Income (Expense)

     

     

    1,970,997

     

     

     

    (590,802

    )

     

     

    3,504,654

     

     

     

    (1,780,498

    )

    Other Income (Expense)

     

     

     

     

     

     

     

     

     

     

     

     

    Other income

     

     

    137,154

     

     

     

    434

     

     

     

    587,067

     

     

     

    467

     

    Interest and financing costs

     

     

    (595,742

    )

     

     

    (542,764

    )

     

     

    (1,159,879

    )

     

     

    (660,007

    )

    Total Other Expenses

     

     

    (458,588

    )

     

     

    (542,330

    )

     

     

    (572,812

    )

     

     

    (659,540

    )

    Income (Loss) Before Provision for Income Taxes

     

     

    1,512,409

     

     

     

    (1,133,132

    )

     

     

    2,931,842

     

     

     

    (2,440,038

    )

    Provision for Income Taxes

     

     

     

     

     

     

     

     

     

     

     

     

    Current

     

     

    750,000

     

     

     

     

     

     

    750,000

     

     

     

     

    Net Income (Loss)

     

    $

    762,409

     

     

    $

    (1,133,132

    )

     

    $

    2,181,842

     

     

    $

    (2,440,038

    )

    Basic and diluted earnings per common share

     

    $

    0.04

     

     

    $

     

     

    $

    0.10

     

     

    $

     

    Basic and diluted weighted average number of common shares outstanding

     

     

    21,675,001

     

     

     

     

     

     

    21,315,747

     

     

     

     

    Non-GAAP Financial Measures

    To supplement the condensed consolidate financial statements, which are prepared in accordance with GAAP, we use EBITDA as a non-GAAP financial measure.

    The following table provides reconciliation of net income (loss) to EBITDA:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Three Months Ended June 30, (unaudited)

     

    Six Months Ended June 30, (unaudited)

     

     

    2022

     

    2021

     

    2022

     

    2021

    Net Income (loss)

     

    $

    762,409

     

    $

    (1,133,132

    )

     

    $

    2,181,842

     

    $

    (2,440,038

    )

    Provision for Income Taxes

     

    $

    750,000

     

    $

     

     

    $

    750,000

     

    $

     

    Interest and Financing cost

     

    $

    595,742

     

    $

    542,764

     

     

    $

    1,159,879

     

    $

    660,007

     

    Depreciation Expense

     

    $

     

    $

     

     

    $

    2,556

     

    $

     

    EBITDA

     

    $

    2,108,151

     

    $

    (590,368

    )

     

    $

    4,094,277

     

    $

    (1,780,031

    )

    EBITDA is defined as net income or loss before the impact of interest, taxes and depreciation and amortization. EBITDA is a key measure of our financial performance and measures our efficiency and operating cash flow before financing costs, taxes and working capital needs. We utilize EBITDA because it provides us with an operating metric closely tied to the operations of the business.

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    Europe Looks at Italy’s Giorgia Meloni With Caution and Trepidation

    BRUSSELS — The victory in Italian elections of the far-right and Euroskeptic leader Giorgia Meloni, who once wanted to ditch the euro currency, sent a tremor on Monday through a European establishment worried about a new right-wing shift in Europe.

    European Union leaders are now watching her coalition’s comfortable victory in Italy, one of its founding members, with caution and some trepidation, despite reassurances from Ms. Meloni, who would be the first far-right nationalist to govern Italy since Mussolini, that she has moderated her views.

    But it is hard for them to escape a degree of dread. Even given the bloc’s successes in recent years to agree on a groundbreaking pandemic recovery fund and to confront Russia’s aggression in Ukraine, the appeal of nationalists and populists remains strong — and is spreading, a potential threat to European ideals and cohesion.

    said in a Twitter message: “In these difficult times, we need more than ever friends who share a common vision and approach to Europe’s challenges.”

    Europe’s concerns are less about policy toward Ukraine. Ms. Meloni has said she supports NATO and Ukraine and has no great warmth for President Vladimir V. Putin of Russia, as her junior coalition partners, Matteo Salvini and Silvio Berlusconi, have evinced.

    Still, Mr. Berlusconi said last week that Mr. Putin “was pushed by the Russian population, by his party, by his ministers to invent this special operation.” The plan, he said, was for Russian troops to enter “in a week to replace Zelensky’s government with a government of decent people.”

    Italian popular opinion is traditionally sympathetic toward Moscow, with about a third of seats in the new Parliament going to parties with an ambiguous stance on Russia, sanctions, and military aid to Ukraine. As the war proceeds, with all its domestic economic costs, Ms. Meloni may take a less firm view than Mr. Draghi has.

    Mr. Kupchan expects “the balance of power in Europe will tilt more toward diplomacy and a bit less toward continuing the fight.” That is a view more popular with the populist right than with parties in the mainstream, but it has prominent adherents in Germany and France, too.

    “These elections are another sign that all is not well with mainstream parties,” said Mark Leonard, director of the European Council on Foreign Relations, and spell a complicated period for the European Union.

    Even the victory a year ago of Olaf Scholz in Germany, a man of the center left, was ensured by the collapse of the center-right Christian Democrats, who had their worst showing in their history, while in April, France’s long-dominant center-right Republicans fell to under 5 percent of the vote.

    “People in Brussels are extremely anxious about Meloni becoming an E.U. prime minister,” Mr. Leonard said. “They’ve seen how disruptive Orban can be from a small country with no systemic role in the E.U. Meloni says she won’t immediately upend the consensus on Ukraine, but she could be a force for a much more virulent form of Euroskepticism in council meetings.”

    One or two troublemakers can do a lot of a damage to E.U. decision-making, he said, “but if it’s five or six,” it becomes very hard to obtain coherence or consensus.

    When the leftist, populist Five Star Movement led Italy from 2018 to early 2021, before Mr. Draghi, it created major fights inside Brussels on immigration and asylum issues. Ms. Meloni is expected to concentrate on topics like immigration, identity issues (she despises what she calls “woke ideology”), and future E.U. rules covering debt and fiscal discipline, to replace the outdated growth and stability pact.

    But analysts think she will pick her fights carefully, given Italy’s debt mountain — over 150 percent of gross domestic product — and the large sums that Brussels has promised Rome as part of the Covid recovery fund. For this year, the amount is 19 billion euros, or about $18.4 billion, nearly 1 percent of Italy’s G.D.P., said Mujtaba Rahman, Europe director for the Eurasia Group, with a total over the next few years of some 10.5 percent of G.D.P.

    “Draghi has already implemented tough reforms to satisfy Brussels, so there is no reason for her to come in and mess it up and agitate the market,” Mr. Rahman said. But for the future, there are worries that she will push for an expansionist budget, looser fiscal rules and thereby make the more frugal countries of northern Europe less willing to compromise.

    For Mr. Rahman, the bigger risk for Europe is the loss of influence Italy exercised under Mr. Draghi. He and President Emmanuel Macron of France, “were beginning to create an alternative axis to compete with the vacuum of leadership now in Germany, and all that will be lost,” Mr. Rahman said. Italy will go from a country that leads to one that Europe watches anxiously, he said.

    There was a sign of that anxiety just before the election, when Ursula von der Leyen, the president of the European Commission, warned that Brussels had “the tools” to deal with Italy if things went in a “difficult direction.” It was seen as a hint that the European Commission could cut funds to Italy if it were deemed to be violating the bloc’s democratic standards.

    Mr. Salvini, seeing an opportunity, immediately responded: “What is this, a threat? This is shameful arrogance,” and asked Ms. von der Leyen to “respect the free, democratic and sovereign vote of the Italian people” and resist “institutional bullying.”

    Instead, Mr. Stefanini, the former diplomat, urged Brussels to be patient and to engage with Ms. Meloni. “The new government should be judged on facts, on what it does when in power,” he said. “The real risk is that by exaggerated overreactions the E.U. makes legitimate concerns self-fulfilling prophecies.

    “If she’s made to feel rejected, she’ll be pushed into a corner — where she’ll find Orban and other soulmates waiting for her, and she’ll team up with them,” he continued. “But if she’s greeted as a legitimate leader, democratically elected, it will be possible for the E.U. to do business with her.”

    Luuk van Middelaar, a historian of the bloc, also urges caution. European leaders know two things about Italian prime ministers, he said. First, “they are not very powerful at home, and two, they tend not to last very long” — since World War II, an average of about 18 months.

    “So they will wait and see and not be blown away,” Mr. van Middelaar said. If she lasts longer, however, she could energize other far-right Euroskeptics in other big countries like France, he said, “and that would make a real difference.”

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