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Belgian politician set to be appointed as incumbent Margrethe Vestager targets top job at European Investment Bank

The European Commission is to appoint Belgium’s Didier Reynders as the EU’s competition chief, as incumbent commissioner Margrethe Vestager takes a leave of absence to run for the top job at the European Investment Bank.

Officials are preparing to announce on Tuesday that Reynders, the current justice commissioner, will also take on one of Brussels’ most powerful roles, according to four people with knowledge of the decision. 

Like Vestager, a Danish former economy minister who has become one of Brussels’ most prominent figures, Reynders belongs to Renew Europe, the centrist liberal political group whose members also include French president Emmanuel Macron.

As competition commissioner, Reynders will have a pivotal role in approving Europe’s biggest proposed mergers. The commission has intensified scrutiny of the tech sector, recently blocking Illumina’s acquisition of cancer screening company Grail and preparing to veto Booking’s proposed purchase of travel group Etraveli.

Reynders responsibilities will also extend to market abuse cases — including open investigations into Spotify and Meta — and the policing of state aid across the EU, making recommendations on individual cases as well as any revisions to rules curbing public support to companies.

Vestager is expected to take unpaid leave from the commission, allowing her to potentially return to her old role in Brussels if her application to take the top job at the EIB is unsuccessful.

A veteran of Belgian politics, Reynders has played a prominent role in the commission’s continuing tussle with Poland and Hungary over the two countries’ alleged breaches of EU rules governing the rule of law. He has also taken a tough line regarding Warsaw’s new tribunal to investigate alleged Russian influence, which Brussels fears could be used as a political tool.

Vestager’s bid to run the EIB, the EU’s lending arm, is set to be decided by EU finance ministers in the next few weeks. The winner of the contest will decide the fate of tens of billions of euros of investment and determine the future strategy of a critical element of the continent’s green transition.

Spanish economy minister Nadia Calviño is widely seen by EU diplomats as the frontrunner for the top job at the Luxembourg-based bank, which is tasked with boosting the EU’s influence on economic growth. She is well known to her fellow finance ministers and is expected to have a good chance of securing support from big member states including France.

Calviño, a former director-general of the European Commission’s budget department, will also have the advantage of chairing the meeting of finance ministers next month in Santiago de Compostela because of Spain’s current rotating presidency of the Council of the EU.

Vestager was initially a favourite for the role but her chances of securing the appointment were set back by the controversy over her appointment of an American to be the EU’s chief economist, which Macron successfully overturned.

The EIB, which is the world’s largest multilateral lender with a balance sheet of about €550bn, has stepped up its financing of climate-friendly investments in recent years and is expected to play an oversized role in helping fund Ukraine’s postwar reconstruction.

Biggest UK local authority blames cost of settling equal pay claims

Birmingham city council, the largest local authority in Europe, has declared itself in effect bankrupt, becoming the latest UK local government body to announce it cannot balance the books this year.

The Labour-run council for the UK’s second city, which serves more than 1mn people, said on Tuesday that it had issued a section 114 notice owing to “unprecedented financial challenges”.

It blamed its predicament largely on the need to settle historic equal pay claims worth up to £760mn, more than its annual budget for services.

The council added that it had implemented “rigorous spending controls in July” and that the 114 notice was now “a necessary step as we seek to get our city back on a sound financial footing”.

Councils across England and Wales are under severe financial stress as a result of rising social care costs, soaring inflation and reduced income.

The total funding gap for local authorities in England and Wales is expected to grow to £2bn or more this financial year, according to the Local Government Association.

In July, the representative body warned that councils were struggling to meet growing demand for the basic services they are legally required to deliver while also fulfilling a legal obligation to balance the books.

Birmingham announced last month that it was facing budget shortfalls of £87.4mn for 2023-24, rising to £164.8mn in 2024-25. 

By issuing a section 114 notice, the city council has committed to strip spending back to all but essential services in return for help from the UK government in stabilising the financial outlook. Other councils, including Thurrock and Woking, have in recent months been forced to make the same move.

“Like local authorities across the country, it is clear that Birmingham city council faces unprecedented financial challenges, from huge increases in adult social care demand and dramatic reductions in business rates income, to the impact of rampant inflation,” council leader John Cotton said in a joint statement with his deputy, Sharon Thompson.

The city council is under additional strain as a result of the settlement it made after the Supreme Court ruled in 2012 that it had discriminated against hundreds of women employees who missed out on bonuses awarded to their counterparts in traditionally male-dominated roles.

The council has already paid out roughly £1.1bn as a result of the ruling, but said in June that it had uncovered an extra bill of between £650mn and £760mn.

With ongoing liabilities related to the claims growing at a monthly rate of between £5mn and £14mn, it would be unable to cover the costs from existing resources, including reserves, it said.

The council has in recent years presided over a vast regeneration plan. Financed through public and private investment, the project has reintegrated old industrial wastelands with the city centre, fuelling a boom in the tech sector, among others.

In the process, Birmingham had become one of the best-performing city economies in the country.

But Robert Alden, Conservative leader of the opposition on the council, said that the “golden decade” of opportunity heralded by the city last year would be undermined by its fresh financial woes.

He said overspending by the Labour leadership and failure to address the historic pay claims more urgently had “created this mess where residents will now lose valuable services and investment”.

Jonathan Carr-West, chief executive of the Local Government Information Unit think-tank, said Birmingham’s predicament was a “sobering moment” and that the council’s decision-making should be scrutinised.

“Questions should also be asked about an inconsistent, fragmented and short-term funding system that is driving dozens of councils across the country to financial ruin,” he said.

Prolonged reductions likely to raise tensions with White House

Oil prices rose above $90 a barrel for the first time in 2023 on Tuesday as Saudi Arabia and Russia said they would extend their voluntary production and export cuts until the end of the year.

Saudi Arabia, which leads the expanded Opec+ cartel with Russia, has cut an additional 1mn barrels a day from the global market since July, in what had been originally billed as a temporary measure.

But having already extended the cut through September, on Tuesday Saudi Arabia’s state media reported the kingdom would keep its 1mn b/d reduction in place until the end of December, citing the Ministry of Energy.

Russia has added its own voluntary export cuts in recent months, with deputy prime minister Alexander Novak adding on Tuesday that its 300,000 b/d export reduction would stay in place until the end of the year.

The move, which threatens to reignite inflation concerns globally, is the latest effort by two of the world’s largest oil producers to boost prices despite much of the world grappling with higher energy costs.

Bob McNally, president of Rapidan Energy and a former energy adviser to the White House, said the cuts appeared designed to demonstrate Saudi Arabia and Russia’s “unity” on oil policy and to limit the risk of a slowdown in world economic growth weighing on the crude price.

“Barring a sharp economic downturn, these supply cuts will drive deep deficits into global oil balances and should propel crude oil prices well above $90 per barrel,” McNally added.

Brent crude, the international benchmark, reversed early losses on Tuesday after the announcement to climb almost 2 per cent to $90.75 a barrel, its highest level this year. US benchmark West Texas Intermediate rose 2.2 per cent to $87.42 a barrel.

The prolonged cut by Saudi Arabia is likely to raise tensions with the White House, which has criticised the kingdom for collaborating closely with Russia, despite the invasion of Ukraine and Moscow’s weaponisation of natural gas supplies to Europe.

The Biden administration is keen to keep pump prices in check ahead of the presidential election next year, where inflation and fuel costs are likely to be areas of attack for the Republican party.

Industry figures fear Russian president Vladimir Putin may attempt to use oil supplies to influence the election, as potential candidates such as former president Donald Trump have suggested they will try to make Ukraine negotiate with Moscow.

Saudi Arabia also had a close relationship with Trump, who made the kingdom his first overseas visit in 2017 ahead of scrapping the Iran nuclear deal. The kingdom’s de facto leader, Crown Prince Mohammed bin Salman, also wants a higher oil price to help fund his economic reform programme.

His half-brother, Prince Abdulaziz bin Salman, is Saudi Arabia’s energy minister and has put the kingdom’s oil policy on a more assertive footing, despite pressure from the US to raise production to help cool inflation.

Dan Pickering, chief investment officer at Pickering Energy Partners, said Saudi Arabia was clearly “committed” to a higher price and wanted to make sure crude did not slip back. Brent is up about 15 per cent since the cuts took effect at the start of August.

“The extension of this cut to me proves that Saudi is serious,” Pickering said. “The floor price for crude . . . is moving higher.”

Saudi Arabia’s state media said the decision would still be reviewed monthly, but emphasised output could be revised up or down, indicating the kingdom had not ruled out further production cuts.

Its output has been reduced from about 10.5mn b/d in April to around 9mn b/d, through a combination of Opec+ mandated production targets and its voluntary cuts.

The latest announcement means Saudi Arabia’s oil output is likely to remain at 9mn b/d until the end of December, 25 per cent lower than its maximum capacity of 12mn b/d

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