Andrei Sterescu

Two European officials said that the frozen assets section of the Ukraine peace agreement was one of the most alarming since it implies authority over assets that are mostly immobilised in European institutions.

One said it was almost as if the text had been drawn up as “a deliberate provocation”.

On 26 October, US and Malaysia signed a legally binding so-called Agreement on Reciprocal Trade, which is not a broad FTA but a package on tariffs and general rules with an unusually muscular Economic and National Security chapter. A thread 🧵 on #geoeconomics

Around that, there’s the usual trade deliverables. Malaysia commits to some market access for US goods, while the US applies a 19% “reciprocal” tariff to Malaysian goods with zero tariff exceptions for specified products, commitments on digital trade, rare earths, etc.

Lastly, Malaysia commits to align with all unilateral US export controls, cooperate on U.S. sanctions lists and explore a national security investment-screening regime. The US says it may take such cooperation into account when administering its own export control and investment review laws.

Malaysia also undertakes to adopt measures (again, with equivalent restrictive effect) that encourage shipbuilding and shipping by “market-economy” countries, echoing US efforts to de-risk strategic logistics from state-directed rivals (read China).

The agreement targets circumvention channels. Malaysia promises to police “unfair practices” by third country-owned firms operating on its soil that export below market price goods to the US or displace US exports.

The big novelty is the addition of mirroring clause if the US restricts a third country’s goods or services for economic or national security reasons, Malaysia must adopt a measure with equivalent restrictive effect.

On 26 October, US and Malaysia signed a legally binding so-called Agreement on Reciprocal Trade, which is not a broad FTA but a package on tariffs and general rules with an unusually muscular Economic and National Security chapter. A thread 🧵 on #geoeconomics

3. Delgado-Vega, Álvaro, and @bartonelee2.bsky.social. 2024. ‘When Growth Leads to Zero-Sum Conflict’. t.co/MjBZ9BUCI3

Germany's Merz criticises US' fundamental shift from following rules German Chancellor Friedrich Merz criticised the United States on Friday for no longer following the rules, part of what he called a fundamental shift in Europe's transatlantic partner.

1/This is Transatlantic leadership! In historic move, German Chancellor Merz calls out US: “democracy is under pressure, freedom of expression is being questioned, and the independence of the judiciary is being repressed“.
www.reuters.com/technology/g...

The authors are agnostic about the origins of trade imbalances and rather ask what they do inside gravity models when tradables have external economies of scale, but also conclude that persistent trade imbalances are beggar-thy-neighbour.

…by suppressing household income and boosting saving/investment at home and pushing their excess production and capital abroad. Trade partners then absorb the demand shortfall via higher debt/un employment or by shrinking their tradables base.

What we get wrong about China An interview with Michael Pettis

The most recent discussion between @martinsandbu.ft.com and @michaelpettis.bsky.social also explains this distributional mechanism i.e. surpluses redistribute income and jobs toward surplus economies and away from deficit ones…

on.ft.com/4nSEjAk What we get wrong about China

Trade deficits on the other hand push resources toward local non-tradables, shrinking the traded base and dragging on productivity. Sectorally, that means export-oriented manufacturing and tradable services tend to expand in surplus economies and contract in deficit ones.

The main channel is that surpluses pull workers and capital into tradables (manufacturing and other exportable activities), which scales up those industries and lifts productivity and income.

A new IMF study shows trade surpluses tend to raise incomes in surplus countries and lower them in deficit countries.

doi.org/10.5089/9798...

🇫🇷's debt/GDP ratio is not "soaring." It is <lower> than in 2020, & it's borrowing costs are lower than in 2023.

I know that The Narrative™️ cannot fail & everyone has their own political preferences over arbitrary debt levels (bsky.app/profile/mcop...), but don't print lies in the newspapers, etc.

The hard right’s plans for Europe’s economy It has moderated, but offers little hope of growth-boosting reform

For a (healthy?) dose of Euro-pessism, here is an interesting look by @codendahl.bsky.social on the economic policies of the far/hard right and what their increasing access to power might mean for Europe:

The EU's strategic foresight report 2025 is out and it rings the bell for a "change in the global order"

"We're witnessing the erosion of the rules-based international order & fracturing of the global landscape... a return to the previous status quo seems increasingly unlikely"

Not sure that some in Germany understood that more issuance of their own would imply more market discipline on France.

Not sure some in France fully realised that Germany's big fiscal experiment also has sharp downsides for them.

Developing countries swap out of dollar debt to cut borrowing costs Sovereign borrowers are turning to lower interest rates in currencies such as the Chinese renminbi and Swiss franc

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FT: "Developing countries are moving out of dollar debts and turning to currencies with rock bottom interest rates such as the Chinese renminbi and Swiss franc."
www.ft.com/content/36f8...

Germany’s pensions crisis: can €10 a month change how people invest? Europe’s largest economy offers the young a subsidy to invest in equities as public retirement scheme creaks

German households hold €3.4 trillion in cash and low-interest bank deposits.
www.ft.com/content/f1cb...

Overall, the EU-financed/EU-coordinated fiscal policy yields larger and more even GDP and convergence effects than nationally financed/managed variants precisely because it moves resources to where multipliers are highest and chooses projects whose payoffs don’t stop at the border.

Shared EU financing implicitly equalises across countries (richer members shoulder more of the bill), which boosts the overall macro impact and helps poorer regions catch up. EU-level coordination also internalises cross-border spillovers.

Authors simulate fiscal interventions under different “who-pays/ who-coordinates” setups over a 20-year horizon for a portfolio of cohesion policy-type investments (EU-wide financing vs. each country pays its own bill and EU-level allocation that internalises spillovers vs. national allocation).

Fiscal federalism and Cohesion Policy in the European Union NUTS-2 regions We contribute to the debate on the implementation of fiscal policy in a supranational federation by examining the role of financing mechanisms and int…

Does fiscal policy deliver more growth and convergence when it is financed and coordinated at the EU level, as opposed to being paid for and run nationally?

www.sciencedirect.com/science/arti...

Germany inscribed austerity in its constitution. The “debt brake” is so rigid that The Economist has called it an instrument of “self harm”. Reform is overdue.

I’m honored to be appointed by the Finance Ministry to serve on the expert commission in charge of fiscal rules.

Europe negotiated the EU-US deal from weakness—and it shows.

The 15% tariff was already the de facto rate for the past few months (10% Liberation Day tariffs + ~5% MFN). It beats 25% on key sectors.

But locking it in permanently? What was unthinkable a year ago is now the new baseline.

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I think European leaders - both national and in the EU - are underestimating what it will do to their publics to be humilated by Trump.

Like the NATO summit and Rutte's 'Daddy' strategy, mabye the outcome could have been worse. But losing pride and being humilated is also a price that is paid.

The EU should have been in a position to extract more meaningful concessions. If it never probes the limits of its strength it will never discover where they truly lie and it will continue to be outmaneuvered on the international stage.