even tougher winter next year as natural gas stocks are used up and as new supplies to replace Russian gas, including increased shipments from the United States or Qatar, are slow to come online, the International Energy Agency said in its annual World Energy Outlook, released last week.

Europe’s activity appears to be accelerating a global transition toward cleaner technologies, the I.E.A. added, as countries respond to Russia’s invasion of Ukraine by embracing hydrogen fuels, electric vehicles, heat pumps and other green energies.

But in the short term, countries will be burning more fossil fuels in response to the natural gas shortages.

gas fields in Groningen, which had been slated to be sealed because of earthquakes triggered by the extraction of the fuel.

Eleven countries, including Germany, Finland and Estonia, are now building or expanding a total of 18 offshore terminals to process liquid gas shipped in from other countries. Other projects in Latvia and Lithuania are under consideration.

Nuclear power is winning new support in countries that had previously decided to abandon it, including Germany and Belgium. Finland is planning to extend the lifetime of one reactor, while Poland and Romania plan to build new nuclear power plants.

European Commission blueprint, are voluntary and rely on buy-ins from individuals and businesses whose utility bills may be subsidized by their governments.

Energy use dropped in September in several countries, although it is hard to know for sure if the cause was balmy weather, high prices or voluntary conservation efforts inspired by a sense of civic duty. But there are signs that businesses, organizations and the public are responding. In Sweden, for example, the Lund diocese said it planned to partially or fully close 150 out of 540 churches this winter to conserve energy.

Germany and France have issued sweeping guidance, which includes lowering heating in all homes, businesses and public buildings, using appliances at off-peak hours and unplugging electronic devices when not in use.

Denmark wants households to shun dryers and use clotheslines. Slovakia is urging citizens to use microwaves instead of stoves and brush their teeth with a single glass of water.

website. “Short showers,” wrote one homeowner; another announced: “18 solar panels coming to the roof in October.”

“In the coming winter, efforts to save electricity and schedule the consumption of electricity may be the key to avoiding electricity shortages,” Fingrad, the main grid operator, said.

Businesses are being asked to do even more, and most governments have set targets for retailers, manufacturers and offices to find ways to ratchet down their energy use by at least 10 percent in the coming months.

Governments, themselves huge users of energy, are reducing heating, curbing streetlight use and closing municipal swimming pools. In France, where the state operates a third of all buildings, the government plans to cut energy use by two terawatt-hours, the amount used by a midsize city.

Whether the campaigns succeed is far from clear, said Daniel Gros, director of the Centre for European Policy Studies, a European think tank. Because the recommendations are voluntary, there may be little incentive for people to follow suit — especially if governments are subsidizing energy bills.

In countries like Germany, where the government aims to spend up to €200 billion to help households and businesses offset rising energy prices starting next year, skyrocketing gas prices are hitting consumers now. “That is useful in getting them to lower their energy use,” he said. But when countries fund a large part of the bill, “there is zero incentive to save on energy,” he said.

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New PM Rishi Sunak pledges to lead Britain out of economic crisis

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  • Sunak meets King Charles on Tuesday morning
  • Vows to rebuild trust in the country
  • Expected to start forming a cabinet
  • Sunak faces huge challenge to rebuild stability

LONDON, Oct 25 (Reuters) – Rishi Sunak became Britain’s third prime minister in two months on Tuesday and pledged to lead the country out of a profound economic crisis and rebuild trust in politics.

Sunak quickly reappointed Jeremy Hunt as his finance minister in a move designed to calm markets that had balked at his predecessor’s debt-fuelled economic plans.

The former hedge fund boss said he would unite the country and was expected to name a cabinet drawn from all wings of the party to end infighting and abrupt policy changes that have horrified investors and alarmed international allies.

Speaking outside his official Downing Street residence, Sunak praised the ambition of his predecessor Liz Truss to reignite economic growth but acknowledged mistakes had been made.

“I have been elected as leader of my party and your prime minister, in part to fix them,” said Sunak, who broke with the tradition of standing beside his family and cheering political supporters.

“I understand, too, that I have work to do to restore trust, after all that has happened. All I can say is that I am not daunted. I know the high office I have accepted and I hope to live up to its demands.”

Sunak said difficult decisions lay ahead as he looks to cut public spending. Hunt, who Truss appointed to calm markets roiled by her dash for growth, has been preparing a new budget alongside borrowing and growth forecasts due out on Monday, and repeated his warning on Tuesday that “it is going to be tough”.

The new prime minister also restored Dominic Raab to the post of deputy prime minister, a role he lost in Truss’s 44 days in office, but reappointed James Cleverly as foreign minister and Ben Wallace at defence.

Penny Mordaunt, who ended her bid to win a leadership contest against Sunak on Monday, also retained her position as leader of the House of Commons, a role that organises the government’s business in the lower house of parliament.

Sources had said she wanted to become foreign minister.

With his new appointments, Sunak was seen to be drawing ministers from across the Conservative Party while leaving others in post – a move that should ease concerns that Sunak might appoint loyalists rather than try to unify the party.

TOUGH DECISIONS

Sunak, one of the richest men in parliament, is expected to slash spending to plug an estimated 40 billion pound ($45 billion) hole in the public finances created by an economic slowdown, higher borrowing costs and an energy support scheme.

He will now need to review all spending, including on politically sensitive areas such as health, education, defence, welfare and pensions. But with his party’s popularity in freefall, he will face growing calls for an election if he ditches too many of the promises that the Conservatives win election in 2019.

Economists and investors have welcomed Sunak’s appointment – Ryanair boss Michael O’Leary said the adults had taken charge again – but they warn he has few options to fix the country’s finances when millions are battling a cost of living crunch.

Sunak, who ran the Treasury during the COVID-19 pandemic, promised to put economic stability and confidence at the heart of the agenda. “This will mean difficult decisions to come,” he said, shortly after he accepted King Charles’s request to form a government.

Sunak also vowed to put the public’s need above politics, in recognition of the growing anger at Britain’s political class and the ideological battles that have raged ever since the historic 2016 vote to leave the European Union.

Workers heading towards London’s financial district said Sunak, at 42 Britain’s youngest prime minister for more than 200 years and its first leader of colour, appeared to be the best of a bad bunch.

“I think he was competent, and that’s really what we should hope for at the moment,” said management consultant, James Eastbook, 43.

With two prime ministers appointed in two months without a popular vote, some called for a general election now but others hoped Sunak would stay until the next scheduled election, due by January 2025.

POLITICAL MACHINATIONS

Sunak, a Goldman Sachs analyst who only entered parliament in 2015, faces a challenge ending the factional infighting that has brought his party low. Many Conservatives remain angry with him for quitting as finance minister in July and triggering a wider rebellion that ended Boris Johnson’s premiership.

Others question how a multi millionaire can lead the country when millions of people are struggling with surging food and energy bills.

“I think this decision sinks us as a party for the next election,” one Conservative lawmaker told Reuters.

Historian and political biographer Anthony Seldon said Sunak would also be constrained by the mistakes of his immediate predecessor.

“There is no leeway on him being anything other than extraordinarily conservative and cautious,” he told Reuters.

Many politicians and officials abroad, having watched as a country once seen as a pillar of economic and political stability descended into brutal infighting, welcomed Sunak’s appointment.

Sunak, a Hindu, also becomes Britain’s first prime minister of Indian origin.

U.S. President Joe Biden described it as a “groundbreaking milestone”, while leaders from India and elsewhere welcomed the news. Sunak’s billionaire father-in-law, N.R. Narayana Murthy, said he would serve the United Kingdom well.

“We are proud of him and we wish him success,” the founder of software giant Infosys said in a statement.

($1 = 0.8864 pounds)

Writing by by Kate Holton and Elizabeth Piper; Editing by Hugh Lawson and Jon Boyle

Our Standards: The Thomson Reuters Trust Principles.

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U.K. Live Updates: Rishi Sunak Will Become the U.K.’s Next Prime Minister on Tuesday

Rishi Sunak already has experience steering Britain’s public finances through a crisis, but that is unlikely to make tackling the country’s economic challenges any less daunting.

As chancellor of the Exchequer from February 2020 to July this year, Mr. Sunak spent heavily to shield households and businesses from some of the economic fallout from the coronavirus pandemic. Back then, inflation was low and the Bank of England was buying government debt, helping keep interest rates low as borrowing ballooned to pay for the large increase in spending.

Now, Mr. Sunak, who is set to be Britain’s next prime minister after being named leader of the Conservative Party on Monday, will face a very different economic backdrop: The inflation rate has topped 10 percent, the highest in 40 years and, like many countries, the economy is slowing down and at risk of falling into a recession. Meanwhile, the Bank of England is continuing to raise interest rates to curb inflation, and won’t be there to purchase government debt because starting next month it is planning to slowly sell its holdings of bonds. That means the government will rely more on investors, who have been demanding higher interest rates, than the central bank to buy bonds.

In these circumstances, Mr. Sunak has several urgent issues to resolve. One is how to support households squeezed by rising energy costs, after Russia’s war in Ukraine introduced huge volatility into global energy markets. As things stand, household bills have been frozen from this month through to April at an average of 2,500 pounds ($2,826) a year, but after that the government is expected to develop a cheaper policy to help the most vulnerable households. A similar policy is in place to help businesses for six months.

After setting aside tens of billions of pounds to keep energy bills down, the government is also under pressure to show how it will keep borrowing in check, in an effort to restore Britain’s fiscal credibility in markets. Jeremy Hunt, the finance minister recently installed by Liz Truss but a supporter of Mr. Sunak, is scheduled to deliver a fiscal statement on Oct. 31 that he said would show Britain’s debt falling as a share of national income over the medium term.

To bring down debt levels, “decisions of eye-watering difficulty” on spending and tax will need to be made, Mr. Hunt has said. He said he will be asking every government department to find ways to save money despite their already stretched budgets. At the same time, Mr. Hunt said taxes are likely to rise as well. Mr. Sunak, however, is not obligated to keep Mr. Hunt as chancellor or stick to the current timetable for the fiscal statement, though many analysts expect him to.

“The United Kingdom is a great country, but there is no doubt we face a profound economic challenge,” Mr. Sunak said on Monday in a short speech. “We now need stability and unity.”

At this stage, Mr. Sunak hasn’t revealed details about his economic plan as prime minister but investors appear to be taking the prospect of his premiership in their stride.

The pound is trading at about $1.13, a little higher than it was on Sept. 22 before the tax-cutting plan by Ms. Truss that roiled markets, pushing the pound steeply lower and borrowing costs higher. Government bonds yields have fallen from their recent highs. On Monday afternoon, the yield on 10-year bonds was at about 3.75 percent, after closing at 4 percent on Friday. It’s the lowest level since the fiscal statement by Ms. Truss’s government in September.

Lower interest rates will be a comfort to Mr. Sunak. For one, lower rates will shrink the amount of money the Treasury will need to set aside for interest rate payments, which could ease spending cuts and tax increases. But there are other reminders of the economic difficulties Britain faces.

On Monday, a measure of economic activity in Britain dropped, as the services industry posted its worst monthly decline since January 2021, according to the Purchasing Managers’ Index which measures economic trends. The index for both services and manufacturing activity fell to 47.2 points. A reading below 50 means a contraction in activity.

The data showed that the pace of economic decline was gathering momentum, said Chris Williamson, an economist at S&P Global Market Intelligence.

And on Friday, the credit ratings agency Moody’s changed its outlook on Britain to negative, from stable, while reaffirming the country’s current Aa3 investment grade rating. A lower credit rating tends to lead to higher government borrowing costs.

Moody’s said the outlook was changed to negative because of the “heightened unpredictability in policymaking amid weaker growth prospects and high inflation.” There was also a risk that increased borrowing would challenge Britain’s debt affordability, especially if there was a “sustained weakening in policy credibility.”

These are just the latest in a laundry list of the government’s economic concerns. They include supporting low-income households against the rising cost of living, encouraging investment to improve weak productivity growth, smoothing Britain’s trading relationship with the European Union and growing the labor market to ensure businesses can find people with the right skills.

“We need a clear long-term vision of how the new prime minister will deal with the challenges ahead,” Shevaun Haviland, the director general of the British Chambers of Commerce, said in a statement, “and create the business conditions that allow firms, and the communities that rely on them, to thrive.” 

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U.K. Borrowers React to Soaring Interest Rates in Mortgage Market

LOUGHTON, England — After nearly two decades of renting in one of the world’s most expensive cities, the Szostek family began the week almost certain that they would finally own a home.

Transplants to London who fell in love as housemates, Laetitia Anne, an operations manager from France and her husband, Maciej Szostek, a chef from Poland, had long dreamed of being homeowners. They had waited out the uncertain pandemic years and worked overtime shifts to save up for the deposit for a mortgage on a three-bedroom apartment in a neighborhood outside London. Their 13-year-old twins were excited they could finally paint the walls.

That was before British financial markets were upended, with the pound briefly hitting a record low against the dollar on Monday and interest rates soaring so rapidly that the Bank of England was forced to intervene to restore order. The economic situation was so volatile that some mortgage lenders temporarily withdrew many products.

By Tuesday evening, the Szostek family learned the bad news: The loan that they were close to securing had fallen through. Suddenly, they were scrambling to find another lender as interest rates climb higher.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

Rising home prices and income inequality priced many out of the market, but for strivers who aspired to homeownership, the latest ruptures to the economy hit hard. The release of the new government’s sweeping plan for debt-funded tax cuts led to a big uptick in interest rates this week that roiled the mortgage market. Many homeowners are calculating their potential future mortgage payments with alarm, amid soaring energy and food prices and a general cost-of-living crisis.

Before they were informed they were no longer eligible, the family had been in the final stages of applying for a five-year fixed-rate mortgage on an apartment priced at £519,000, or around $576,000, in the leafy parish of Loughton, a town about 40 minutes north of London by train where the streets fill with students in the afternoon and the properties span from lower-end apartments to million-pound mansions.

according to the Financial Conduct Authority. And more than a third of all mortgages are on fixed rates that expire within the next two years, most likely exposing those borrowers to higher rates, too. By contrast, the vast majority of mortgages in the United States are locked in for 30-year fixed terms.

And the abrupt surge in interest rates could threaten to set off a housing market crisis, analysts at Oxford Economics wrote in a note on Friday, adding that if mortgage rates stayed at the levels now being offered, that would suggest that house prices were around 30 percent overvalued “based on the affordability of mortgage payment.”

“This just adds a significant further strain to finances in the order of hundreds of pounds a month,” said David Sturrock, a senior research economist at the Institute for Fiscal Studies, adding that the squeeze on household budgets will affect the broader economy.

Uncertainty and even panic was clear this week, with many homeowners seeking financial advice. Mortgage brokers said they were receiving a higher volume of inquiries than normal from people stressed about refinancing their loans.

“You can feel the fear in people’s voices,” said Caroline Opie, a mortgage broker working with Ms. Anne who said she had not seen this level of worry in a long time. One couple this week even called her the morning of their wedding, she said, to set an appointment to refinance their mortgage next week.

the war in Ukraine. “Something has got to give,” he said. “Prices are too high anyway.”

To save for the deposit, Mr. Szostek, 37, picked up construction shifts and cleaning jobs when restaurants closed during Covid-19 lockdowns. A £5,000 inheritance from Ms. Anne’s grandfather went into their deposit fund. At a 3.99 percent interest rate, the mortgage repayments were set to be about £2,200 a month.

“I wanted to feel at home for real,” said Ms. Anne, adding she would have been the first in her family to own a property. Mr. Szostek called it “a lifelong dream.”

On Wednesday night, that dream still seemed in reach: The mortgage dealer Ms. Opie had found another loan, which they rushed to apply for.

The higher interest rate — 4.6 percent — will mean their new monthly mortgage payment will be £2,400, the upper limit of what the Szostek family can afford. Still, they felt lucky to secure anything at all, hoping it will mean their promises to their children — of bigger bedrooms, more space, freedom to decorate how they like — will materialize.

They would wait to celebrate, Mr. Szostek said, until they had the keys in hand.

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Bank Of England Raises Rates But Avoids Bolder Hike Like Fed

By Associated Press
September 22, 2022

Surging inflation is a worry for central banks because it saps economic growth by eroding people’s purchasing power.

The Bank of England raised its key interest rate Thursday by another half-percentage point to the highest level in 14 years, but despite facing inflation that outpaces other major economies, it avoided more aggressive hikes made by the U.S. Federal Reserve and other central banks.

It is the Bank of England’s seventh straight move to increase borrowing costs as rising food and energy prices fuel a cost-of-living crisis that is considered the worst in a generation. Despite facing a slumping currency, tight labor market and inflation near its highest level in four decades, officials held off on acting more boldly as they predicted a second consecutive drop in economic output this quarter, an informal definition of recession.

The bank matched its half-point increase last month — the biggest in 27 years — to bring its benchmark rate to 2.25%. The decision was delayed for a week as the United Kingdom mourned Queen Elizabeth II and comes after new Prime Minister Liz Truss’ government unveiled a massive relief package aimed at helping consumers and businesses cope with skyrocketing energy bills.

The new measures have eased uncertainty over energy costs and are “likely to limit significantly further increases” in consumer prices, the bank’s policymakers said. They expected inflation — now at 9.9% — to peak at 11% in October, lower than previously forecast.

“Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back,” the monetary policy committee said.

The bank signaled it is prepared to respond more forcefully at its November meeting if needed. Its decision comes during a busy week for central bank action marked by much more aggressive moves to bring down soaring consumer prices.

The U.S. Federal Reserve hiked rates Wednesday by three-quarters of a point for the third consecutive time and forecast that more large increases were ahead. Also Thursday, the Swiss central bank enacted its biggest-ever hike to its key interest rate.

Three of the British bank’s nine committee members wanted a similar three-quarter-point raise but were outvoted by five who preferred a half-point and one who voted for a quarter-point.

The decision “suggests the Bank of England is concerned about the U.K.’s economic deteriorating outlook amid the looming threat of recession,” said Victoria Scholar, head of investment at interactive investor. “The timid increase will do little to stem the slide in sterling but may avoid inadvertently inducing unnecessary pain for the economy which is already grappling with slowing demand and deteriorating confidence.”

Surging inflation is a worry for central banks because it saps economic growth by eroding people’s purchasing power. Raising interest rates — the traditional tool to combat inflation — reduces demand and therefore prices by making it more expensive to borrow money for big purchases like cars and homes.

Inflation in the United Kingdom hit 9.9% in August, close to its highest level since 1982 and five times higher than the Bank of England’s 2% target. The British pound is at its weakest against the dollar in 37 years, contributing to imported inflation.

To ease the crunch, Truss’ government announced it would cap energy bills for households and businesses that have soared as Russia’s war in Ukraine drives up the price of natural gas needed for heating.

The Treasury is expected to publish a “mini-budget” Friday with more economic stimulus measures, and the bank said it won’t be able to assess how they will affect inflation until its November meeting..

The Bank of England expects gross domestic product to fall by 0.1% in the third quarter, below its August projection of 0.4% growth. That would be a second quarterly decline after official estimates showed output fell by 0.1% in the previous three-month period.

The weakness partly reflects a smaller-than-expected rebound after an extra June holiday to celebrate the queen’s 70 years on the throne and the impact of another public holiday Monday for her funeral, officials said.

The bank avoided pressure to go bigger even as other banks around the world take aggressive action against inflation fueled by the global economy’s recovery from the COVID-19 pandemic and then the war in Ukraine.

This month, Sweden’s central bank raised its key interest rate by a full percentage point, while the European Central Bank delivered its largest-ever rate increase with a three-quarter point hike for the 19 countries that use the euro currency.

But British policymakers signaled they will “respond forcefully, as necessary” if there are signs that inflationary pressure is more persistent than expected, “including from stronger demand.”

The bank said it’s also moving ahead with plans to trim its bond holdings built up under a stimulus program, selling off 80 billion pounds ($90 billion) worth of assets over the next year to bring its portfolio down to 758 billion pounds.

Additional reporting by The Associated Press.

Source: newsy.com

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Shock Waves Hit the Global Economy, Posing Grave Risk to Europe

Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.

The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.

While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”

eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.

China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.

refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.

“The global economy is undoubtedly slowing,” said Gregory Daco, chief economist at the global consulting firm EY- Parthenon, but it’s “happening at different speeds.”

In other parts of the world, countries that are able to supply vital materials and goods — particularly energy producers in the Middle East and North Africa — are seeing windfall gains.

And India and Indonesia are growing at unexpectedly fast paces as domestic demand increases and multinational companies look to vary their supply chains. Vietnam, too, is benefiting as manufacturers switch operations to its shores.

head-spinning energy bills this winter ratcheted up this week after Gazprom, Russia’s state-owned energy company, declared it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.

Daily average electricity prices in Western Europe have reached record levels, according to Rystad Energy, surging past 600 euros ($599) per megawatt-hour in Germany and €700 in France, with peak-hour rates as high as €1,500.

In the Czech Republic, roughly 70,000 angry protesters, many with links to far-right groups, gathered in Wenceslas Square in Prague this past weekend to demonstrate against soaring energy bills.

The German, French and Finnish governments have already stepped in to save domestic power companies from bankruptcy. Even so, Uniper, which is based in Germany and one of Europe’s largest natural gas buyers and suppliers, said last week that it was losing more than €100 million a day because of the rise in prices.

International Monetary Fund this week to issue a proposal to reform the European Union’s framework for government public spending and deficits.

caps blunt the incentive to reduce energy consumption — the chief goal in a world of shortages.

Central banks in the West are expected to keep raising interest rates to make borrowing more expensive and force down inflation. On Thursday, the European Central Bank raised interest rates by three-quarters of a point, matching its biggest increase ever. The U.S. Federal Reserve is likely to do the same when it meets this month. The Bank of England has taken a similar position.

The worry is that the vigorous push to bring down prices will plunge economies into recessions. Higher interest rates alone won’t bring down the price of oil and gas — except by crashing economies so much that demand is severely reduced. Many analysts are already predicting a recession in Germany, Italy and the rest of the eurozone before the end of the year. For poor and emerging countries, higher interest rates mean more debt and less money to spend on the most vulnerable.

“I think we’re living through the biggest development disaster in history, with more people being pushed more quickly into dire poverty than has every happened before,” said Mr. Goldin, the Oxford professor. “It’s a particularly perilous time for the world economy.”

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Energy Standoff With Russia Leaves Millions Unable To Afford Heating

By Luke Hanrahan
September 7, 2022

In Britain, businesses are on the brink, and parents are already skipping meals to pay their electricity bills due to high energy costs.

Fish and chips — a delicious British staple — was relatively cheap to produce until now.  

A reduction in Russian gas supplied to Europe has caused energy bills for restaurant owner Harri Niaza, who owns Olley’s Fish Experience, to be twice as expensive. Inflation has caused the cost of potatoes and fish to double.   

“Gas and electricity is affecting every single person and that’s our issue. I need to re-think how we operate. Cut hours down to make it leaner? Just open two hours in the evening, you know ‘queue up get your food – bye bye’. But how are my staff going to survive?” said Niaza. 

Russia is to blame for the increase in energy costs because of soaring prices of wholesale natural gas after Russia sharply cut its supplies to Europe.  

The UK relies heavily on gas to generate electricity, and bills have already increased by 50%.  

Millions of people are already struggling to cope as energy and food prices skyrocket during the country’s worst cost-of-living crisis in a generation. The energy increases, together with rapidly rising food costs, are expected to trigger a recession later this year. 

People are desperate for answers as to how they’re going to go about paying their bills this winter. 

“Prices have increased two fold and I wonder how people are going to cope. I’m finding it difficult. I hope not many people are finding it as difficult as I am,” said Victor Yobo, a UK resident.   

“This is the hardest that I’ve ever known it, it’s really difficult. Particularly post COVID. It’s a real struggle just staying afloat really,” said Michael Dombey, a UK resident. 

“I’m worried for my son and the younger people, I don’t know? We’re in trouble — we’re in trouble,” said Carol Edwards, another UK resident.   

For Michael O’Keeffe and his wife Eileen, the cost of making a cup of tea has tripled.

There’s only one harder time they can remember.

“We got through the war and the rationing, and we will get through it. But I think for the next six, eight, nine months it’s going to be very, very difficult,” said Eileen.  

Britain is not alone in its battle to control rocketing costs, with millions being forced into poverty across the continent as Europeans suffer the consequences of Russia’s war in Ukraine; and the knock effect of gas supplies from east to west being switched off. 

Source: newsy.com

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U.K. Leader Liz Truss Vows Energy Relief, Rules Out Windfall Tax

By Associated Press
September 7, 2022

Truss rebuffed opposition calls for a new windfall tax, but refrained from explaining how she’d fund a plan meant to help the public pay energy bills.

Newly installed U.K. Prime Minister Liz Truss told Parliament on Wednesday that she would tackle Britain’s “very serious” energy crisis while still slashing taxes, ruling out imposing a windfall levy on oil companies to pay for her plans to offset the soaring cost of heating and electricity.

Truss rebuffed opposition calls for a new windfall tax, even as she refrained from explaining how she would fund a plan meant to help the public pay energy bills skyrocketing because of Russia’s invasion of Ukraine and the economic aftershocks of COVID-19 and Brexit.

She said during her first session of prime minister’s questions that she would set out a plan on Thursday to help with the immediate prices crisis so that people “are able to get through this winter,” as well as measures to bolster Britain’s long-term energy security.

But she added: “I am against a windfall tax. I believe it is the wrong thing to be putting companies off investing in the United Kingdom just when we need to be growing the economy.

“This country will not be able to tax its way to growth,” she said, to thunderous cheers from Conservative lawmakers in a packed House of Commons.

Truss’s spokesman said she wouldn’t cancel a windfall tax imposed in May by former Treasury chief Rishi Sunak, her defeated Conservative leadership rival, but wouldn’t bring in a new one. She is also scrapping a previously announced increase in corporation tax from 19% to 25%.

Opposition Labour Party leader Keir Starmer said that amounted to handing billions to energy firms that have pocketed hefty profits because of high energy prices. Instead, the cost of price relief will have to be paid by British taxpayers, he said, branding Truss’s economic plans a “Tory fantasy.”

British news media have reported that Truss plans to cap energy bills. The cost to taxpayers of that step could reach 100 billion pounds ($116 billion).

“The prime minister knows she has now choice but to back an energy price freeze, but it won’t be cheap and the real choice, the political choice is who is going to pay,” Starmer said. “Is she really telling us that she is going to leave (energy companies’) vast excess profits on the table and make working people foot the bill for decades to come?”

In her energy plan Truss also is likely to greenlight more oil and gas exploration in the North Sea and could lift a ban on fracking — both ideas that have been condemned by environmentalists.

Earlier Wednesday, Truss led the first meeting for her new Cabinet — a government diverse in race and gender and united in its support for the new leader’s staunchly free-market views.

Truss, 47, was appointed prime minister by Queen Elizabeth II on Tuesday after winning an internal Conservative Party election to lead the Tories. The former foreign secretary is Britain’s third female prime minister after Margaret Thatcher and Theresa May. All three have been Conservatives.

She immediately put her stamp on the government, clearing out many ministers from the administration of former Prime Minister Boris Johnson — notably those who had backed Sunak in the Conservative leadership contest.

She made Kwasi Kwarteng her Treasury chief, a key role for a Cabinet whose inbox is dominated by the energy crisis triggered by Russia’s invasion of Ukraine, which threatens to push energy bills to unaffordable levels, shuttering businesses and leaving the nation’s poorest people shivering at home this winter. Kwarteng is the first Black holder of the job whose formal title is Chancellor of the Exchequer.

Truss ally Therese Coffey becomes Britain’s first female deputy prime minister and also leads the health ministry as the state-funded National Health Service grapples with soaring demand and depleted resources in the wake of COVID-19.

For the first time, none of the U.K.’s “great offices of state” – prime minister, chancellor, foreign secretary and home secretary – is held by a white man. James Cleverly, whose mother is from Sierra Leone, is foreign secretary and Suella Braverman, who has Indian heritage, has been named home secretary, responsible for immigration and law and order.

In her first speech as prime minister on Tuesday, Truss said she would cut taxes to spur economic growth, bolster the NHS and “deal hands on” with the energy crisis.

“We shouldn’t be daunted by the challenges we face,” Truss said in her speech. “As strong as the storm may be, I know the British people are stronger.”

Additional reporting by The Associated Press.

Source: newsy.com

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Putin Says He Will Meet With Xi and Insists Russia ‘Has Not Lost Anything’

Since fighting broke out in Ukraine nearly seven months ago, Russia and Europe have been waging an economic war over energy, one that could have dire consequences for millions of households and businesses across the continent.

Last year, nearly 40 percent of the natural gas used to heat homes and power businesses throughout the European Union came from Russia, one of the continent’s largest and most important trading partners for energy.

Now barely half that amount enters Europe, government statistics show, stoking fears of shortages this winter.

As part of a wide-ranging effort to cripple Russia’s economy, which is largely propelled by the sale of fossil fuels, the European Union has imposed huge sanctions and has vowed to eventually stop buying Russian gas.

But with Europe still dependent on Russia in the meantime, Russia has retaliated by severely restricting the flow of energy to Europe, forcing governments to try to find alternatives.

President Vladimir V. Putin of Russia “is using energy as a weapon by cutting supply and manipulating our energy markets,” Ursula von der Leyen, the president of the European Commission, wrote on Twitter.

This battle has proved costly for both sides.

Alternative buyers of Russia’s oil and gas, including China and India, are taking advantage of the situation and pushing for steep discounts. That is limiting the revenue that Moscow needs to power its economy, as well as to build pipelines and ports to supply energy to Asia more regularly.

European governments are paying high prices to stock up on the fuel, asking citizens and companies to save energy and unveiling sweeping emergency packages to cap energy bills and bail out struggling businesses.

Even countries that don’t import Russian gas are suffering, because electricity prices are closely linked to gas. The benchmark wholesale price of natural gas in Europe, which has been incredibly volatile since the war in Ukraine began, is roughly four times what it was a year ago.

The average European household is facing a monthly energy bill of 500 euros ($494) next year, triple the amount in 2021, according to estimates by analysts at Goldman Sachs. Applied to all energy users, that implies a €2 trillion increase in spending on heat and electricity.

The squeeze is particularly acute in Germany, Europe’s largest economy, which relies on Russia as its biggest supplier of gas. The bulk of it flows through Nord Stream 1, a 760-mile passageway that connects the two countries via the Baltic Sea.

Since the war, the Russian-controlled operator of the pipeline, Gazprom, has twice reduced the amount of gas it sends to Germany and twice shut the pipeline down for maintenance. After the most recent shutdown last week, Gazprom postponed a planned restart, citing faulty equipment, and provided no timeline for reopening, with officials in the Kremlin blaming sanctions for delaying repairs.

Critics suggested that last week’s move was a cynical response by Russia after finance ministers for the Group of 7 countries said they had agreed to impose a price cap mechanism on Russian oil in a bid to choke off some of the revenue Moscow still generates from Europe.

The indefinite shutdown nonetheless raised fears that it could become permanent. A complete cutoff from Russian gas would push Europeans’ energy bills even higher and hit the region’s economy even harder, with experts projecting a potentially deep recession in the most exposed countries. A shutdown would subtract nearly 3 percent from Germany’s economy next year, economists at the International Monetary Fund have estimated.

“In our view, the market continues to underestimate the depth, the breadth and the structural repercussions of the crisis,” the Goldman Sachs analysts wrote. “We believe these will be even deeper than the 1970s oil crisis.”

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Liz Truss Becomes Britain’s New Prime Minister

By Associated Press
September 6, 2022

Queen Elizabeth II formally asked her to form a new government in a traditional ceremony at Balmoral Castle in Scotland.

Liz Truss became U.K. prime minister on Tuesday and immediately confronted the enormous task ahead of her amid increasing pressure to curb soaring prices, ease labor unrest and fix a health care system burdened by long waiting lists and staff shortages.

At the top of her inbox is the energy crisis triggered by Russia’s invasion of Ukraine, which threatens to push energy bills to unaffordable levels, shuttering businesses and leaving the nation’s poorest people shivering in icy homes this winter.

Truss, who refused to spell out her energy strategy during the two-month campaign to succeed Boris Johnson, now plans to cap energy bills at a cost to taxpayers of as much as $116 billion, British news media reported Tuesday. She is expected to unveil her plan on Thursday.

“You must know about the cost of living crisis in England, which is really quite bad at the moment,” Rebecca Macdougal, 55, who works in law enforcement, said outside the Houses of Parliament.

“She’s making promises for that, as she says she’s going to deliver, deliver, deliver,” she said. “But we will see in, hopefully, the next few weeks there’ll be some announcements which will help the normal working person.”

Truss took office Tuesday afternoon at Balmoral Castle in Scotland, when Queen Elizabeth II formally asked her to form a new government in a carefully choreographed ceremony dictated by centuries of tradition. Johnson, who announced his intention to step down two months ago, formally resigned during his own audience with the queen a short time earlier.

It was the first time in the queen’s 70-year reign that the handover of power took place at Balmoral, rather than at Buckingham Palace in London. The ceremony was moved to Scotland to provide certainty about the schedule because the 96-year-old queen has experienced problems getting around that have forced palace officials to make decisions about her travel on a day-to-day basis.

Truss, 47, took office a day after the ruling Conservative Party chose her as its leader in an election where the party’s 172,000 dues-paying members were the only voters. As party leader, Truss automatically became prime minister without the need for a general election because the Conservatives still have a majority in the House of Commons.

But as a prime minister selected by less than 0.5% of British adults, Truss is under pressure to show quick results.

Ed Davey, leader of the opposition Liberal Democrats, on Tuesday called for an early election in October.

“I’ve listened to Liz Truss during the Tory leadership (campaign) and I was looking for a plan to help people with their skyrocketing energy bills, with the NHS crisis and so on, and I heard no plan at all,” he told the BBC.

“Given people are really worried, given people are losing sleep over their energy bills, businesses aren’t investing because of the crisis, I think that’s really wrong,” Davey said.

Johnson took note of the strains facing Britain as he left the prime minister’s official residence at No. 10 Downing Street for the last time, saying his policies had left the government with the economic strength to help people weather the energy crisis.

While many observers expect Johnson to attempt a political comeback, he backed Truss and compared himself to Cincinnatus, the Roman dictator who relinquished power and returned to his farm to live in peace.

“Like Cincinnatus, I am returning to my plow,” he said. “And I will be offering this government nothing but the most fervent support.”

Additional reporting by the Associated Press.

Source: newsy.com

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