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Exxon’s Darren Woods, Chevron’s Mike Wirth spoke last year about combining their companies in what could be among the largest corporate mergers ever

The chief executives of Exxon Mobil Corp. XOM -2.65% and Chevron Corp. CVX -4.29% spoke about combining the oil giants after the pandemic shook the world last year, according to people familiar with the talks, testing the waters for what could be one of the largest corporate mergers ever.

Chevron Chief Executive Mike Wirth and Exxon CEO Darren Woods discussed a merger following the outbreak of the new coronavirus, which decimated oil and gas demand and put enormous financial strain on both companies, the people said. The discussions were described as preliminary and aren’t ongoing but could come back in the future, the people said.

Such a deal would reunite the two largest descendants of John D. Rockefeller’s Standard Oil monopoly, which was broken up by U.S. regulators in 1911, and reshape the oil industry.

A combined company’s market value could top $350 billion. Exxon has a market value of $190 billion, while Chevron’s is $164 billion. Together, they would likely form the world’s second largest oil company by market capitalization and production, producing about 7 million barrels of oil and gas a day, based on pre-pandemic levels, second only in both measures to Saudi Aramco.

But a merger of the two largest American oil companies could encounter regulatory and antitrust challenges under the Biden administration. President Biden has said climate change is one of the biggest crises the country faces. In October, he said he would push the country to “transition away from the oil industry.” He hasn’t been as vocal about antitrust matters, and the administration has yet to nominate the Justice Department’s head of that division.

One of the people familiar with the talks said the sides may have missed an opportunity to consummate the deal under former President Donald Trump, whose administration was seen as more friendly to the industry.

A handful of sizable oil and gas deals were completed last year, including Chevron’s $5 billion takeover of Noble Energy Inc. and ConocoPhillips COP -2.63% ’ roughly $10 billion takeover of Concho Resources Inc., but nothing close to the scale of combining San Ramon, Calif.-based Chevron and Irving, Texas-based Exxon.

Such a deal would significantly surpass in size the mega-oil-mergers of the late 1990s and early 2000s, which included the combination of Exxon and Mobil and Chevron and Texaco Inc.

It also could be the largest corporate tie-up ever, depending on its structure. That distinction currently belongs to the roughly $181 billion purchase of German conglomerate Mannesmann AG by Vodafone AirTouch PLC in 2000, according to Dealogic.

Many investors, analysts and energy executives have called for consolidation in the beleaguered oil-and-gas industry, arguing that cutting costs and improving operational efficiencies would help companies weather the pandemic-induced downturn and prepare for an uncertain future as many countries seek to reduce their dependence on fossil fuels to combat climate change.

In an interview discussing Chevron’s earnings Friday, Mr. Wirth, who like Mr. Woods also serves as his company’s board chairman, said that consolidation could make the industry more efficient. He was speaking generally and not about a possible Exxon-Chevron merger.

“As for larger scale things, it’s happened before,” Mr. Wirth said, referring to the 1990s and early-2000s megamergers. “Time will tell.”

Paul Sankey, an independent analyst who hypothesized a merger of Chevron and Exxon in October, estimated at the time that the combined company would have a market capitalization of about $300 billion and $100 billion in debt. A merger would allow them to cut a combined $15 billion in administrative expenses and $10 billion in annual capital expenditures, he wrote.

Exxon was America’s most valuable company seven years ago, with a market value of more than $400 billion, nearly double Chevron’s. But Exxon has fallen from its heights following a series of strategic missteps, which were further exacerbated by the pandemic. It has been eclipsed as a profit engine by tech giants such as Apple Inc. AAPL -3.74% and Amazon.com Inc., AMZN -0.97% in recent years and was removed from the Dow Jones Industrial Average last year for the first time since it was added as Standard Oil of New Jersey in 1928.

Its market capitalization is now about one-quarter of that of electric-car maker Tesla Inc., which has a market value of about $752 billion.

Exxon’s shares have fallen nearly 29% over the last year, while Chevron’s are down about 20%. Chevron briefly topped Exxon in market capitalization in the fall.

Exxon endured one of its worst financial performances ever in 2020. It is expected to report a fourth consecutive quarterly loss for the first time in modern history on Tuesday and already has posted more than $2 billion in losses through the first three quarters of 2020.

Chevron also has struggled, reporting nearly $5.5 billion in 2020 losses Friday. But investors have expressed more faith in Chevron because it entered the downturn with a stronger balance sheet—in part because it walked away from its $33 billion bid to buy Anadarko Petroleum Corp. before the pandemic, having been outbid by Occidental Petroleum Corp. OXY -4.25% in 2019.

Exxon has about $69 billion in debt as of September, while Chevron has around $35 billion, according to S&P Global Market Intelligence.

Some investors have grown increasingly concerned about Exxon’s direction under Mr. Woods as the company faces a rapidly changing energy industry and growing global consciousness about climate change. Some are also worried that Exxon may have to cut its hefty dividend, which costs it about $15 billion annually, due to its high debt levels. Many individual investors count on the payments as a source of income.

Mr. Woods embarked on an ambitious plan in 2018 to spend $230 billion to pump an additional one million barrels of oil and gas a day by 2025. But before the pandemic, production was up only slightly and Exxon’s financial flexibility was diminished. In November, Exxon retreated from the plan and said it would cut billions of dollars from its capital spending every year through 2025 and focus on investing in only the most promising assets.

Meanwhile, the company’s woes have helped draw the attention of activist investors. One of them, Engine No. 1 LLC, has argued that the company should focus more on investments in clean energy while cutting costs elsewhere to preserve its dividend. The firm nominated four directors to Exxon’s board Wednesday and called for it to make strategic changes to its business plan.

Exxon also has been in talks with another activist, D.E. Shaw Group, and is preparing to announce one or more new board members, additional spending cuts and investments in new technologies to help it reduce its carbon emissions.

Rivals such as BP BP -2.80% PLC and Royal Dutch Shell RDS.A -3.53% PLC have embarked on bold strategies to remake their business as regulatory and investor pressure to reduce carbon emissions mounts. Both have said they will invest heavily in renewable energy—a strategy that their investors so far haven’t rewarded.

Exxon and Chevron haven’t invested substantially in renewables, instead choosing to double down on oil and gas. Both companies have argued that the world will need vast amounts of fossil fuels for decades to come, and that they can capitalize on current underinvestment in oil production.

Policymakers must also foster a pro-business climate to attract new flotations

Unloved, undervalued and behind the times — there seems little to recommend the UK stock market. The coronavirus crisis and uncertainty over Brexit have fuelled a sell-off in London-listed stocks in the past 12 months. The heavy weighting of the flagship FTSE 100 index towards the shares of companies hit hard by the pandemic — financial services, energy and travel — has compounded the pain for investors. The index fell more than 14 per cent last year, its biggest decline since 2008, making it the worst performer of the large international stock indices.

The reality is that the London market was in need of an overhaul even before Brexit started to dominate domestic politics. The market’s reputation for gold-standard corporate governance has been tarnished by a succession of scandals, in particular several controversial flotations by miners controlled by foreign tycoons. In addition, UK equity markets have been shrinking faster than other European exchanges. The number of listed companies has fallen by a fifth since 2012. 

A review into the UK listings regime, led by the former European commissioner Jonathan Hill, offers an opportunity to reverse these trends. The London market has few significant high-growth technology companies to boast of compared with rivals such as New York. If the government wants to make good on its promise to turn Britain into an attractive place for the next crop of technology and life science start-ups, flexibility will be needed on some of the market’s rules.

One share, one vote, has long been one of the London market’s principles. It is time to recognise there is value in a diversity of corporate forms and that dual-class shares have a role to play. The US, which embraced the practice during the 1980s, has become the destination of choice for technology companies. Facebook remains the standout example. Founders, rightly, want to retain a stake in their business in the early years after going public. There are also benefits to dual-class structures that can help to protect the purpose of a corporation; Europe’s Novo Nordisk is an example of the benefits of long-term stewardship.

It makes sense, therefore, for London to consider dual-class structures for new listings of innovative companies. Allowing dual class shares for premium listings also deserves consideration, even though many big investors will be opposed to such a move. Safeguards such as imposing time limits or restrictions on what the shares can vote on will be vital.

A trickier issue concerns the current requirement that start-ups, often owned by a founder or a small group of investors, sell a minimum of 25 per cent of their company in a listing. Some owners have complained this acts as a discouragement as many are reluctant to sell too much of their business. Lowering the bar makes sense but there still needs to be a significant free float to stop minority investors becoming nothing more than an afterthought.

Above all, policymakers should recognise that regulations need to be capable of flexibility. There are clear downsides from Britain’s departure from the EU, but one advantage is the leeway for regulators to act unilaterally. A revamp of the listing regime, however, will only go so far. The government also needs to foster homegrown start-ups and a general climate where high-tech businesses can thrive. Venture capital seed funding, and the regulatory freedom for big investors to back it, has an important role to play. All of this and more needs to be considered. The London market may be down but with the right reforms it has every chance of bouncing back.

How a plant that hurts so good became the heart and soul of Mexican culture.

Growing up in Mexico, my family would compete over who could eat the spiciest food. This typically ended with my mother, grandmother and all of my aunts and uncles getting gastritis. Just like my fellow countrymen, part of my identity is built around the adrenaline kick you get from eating capsaicin, the stuff that makes chillies hot.

In Mexico, we eat spicy food until we cry. Spicy sweets, spicy meals and spicy sauces – like Salsa Valentina, an artificial neon-orange hot sauce that shapes Mexican palates from birth. Our love for spicy food – our shared masochism – is perhaps one of the only tangible things that unites Mexicans across the world.

The Mexican diet is based on a few staples: beans, corn and the crops we grow in the milpas, small fields temporarily cleared from the jungle, like squash, sweet potatoes and avocados. But more than anything, we’re known for our chillies.

At least 100 types of chilli plant have been domesticated in Mexico from the species Capsicum annum, and most of them are highly regional. “Chilli peppers are like our birth certificate,” says chef Irad Santacruz, a self-proclaimed ambassador of the indigenous Tlaxcaltec cuisine. “From the type of chilli someone eats, you can identify where they were born, where they’re from.”

For Mexicans, chilli is a fruit, a vegetable, a condiment, a medicine, a spiritual protector. But there’s a reason why lots of people find eating chilli peppers quite painful. Unlike other traditional flavours – bitter, sweet, salty and acidic – spiciness is not perceived by our taste buds, but by our pain receptors. That’s why it’s not technically considered a flavour – it wasn’t even added to the list after umami made the cut.

It seems counterintuitive to eat something that hurts, but scientists have found our body releases endorphins after we eat capsicum. This neurotransmitter generates feelings of happiness and is perceived by our brain in a similar way to addictive substances like opioids.

Despite its ambiguous culinary status, humans have loved the sharp burn of chilli since ancient times. Chilli pepper plants, native to the American continent, have been cultivated and traded for over 6,000 years. Botanist Araceli Aguilar-Meléndez, who began researching chilli peppers 20 years ago, says many indigenous communities don’t use chilli as a condiment – they smoke them during funeral rites, or use them to rid their homes of bad energies or even to keep snakes and mice away. And the tradition of using chilli peppers as spiritual protectors also continues in Mexican society, with home cooks making the corn-based dish tamales often placing a cross-shaped chilli pepper at the bottom of the pot to protect their loved ones from the evil eye.

In Mexico, we say chilli peppers cure everything – from hangovers to skin blemishes. We say they have anti-carcinogenic, analgesic and antimicrobial properties, and that they help clear your airways. “People think they have to eat chillies because they’re good for your health,” says Aguilar-Meléndez. “But it’s more sentimental than physiological. They want to remember the taste of home, and if it tastes like chilli, they think that flavour will cure them.”

Aguilar-Meléndez became fascinated with chilli peppers after finding out they’re the only plant or fungus that produces capsaicin. She says some beliefs about the health benefits of chilli peppers are actually backed by science. For example, chillies can help to regulate our appetite and have been shown to kill the bacteria in our food that could otherwise make us sick. That’s why chilli peppers are eaten all over the world, especially in warmer climates where food pathogens proliferate. Some research suggests chilli peppers might even help us live longer.

According to chef Santacruz, spiciness is crucial to Mexican food because the capsaicin helps you digest the high-fat content typical to the cuisine. “There is a collaboration between the chilli and the rest of the dish, a perfect marriage,” he says.

But eating chillies is much more than a gastronomic choice – it’s seen as an act of strength and bravery. For example, in some towns in Mexico, it’s tradition that the family of a bride-to-be prepare an extremely spicy sauce for the groom, to test whether he’ll be able to eat it without crying. According to Aguilar-Meléndez and Santacruz, being able to stomach hot food is also associated with a sense of national pride, a sort of “stomach superiority” over any other nation and their weaker bowls. As Mexican author and journalist Juan Villoro wrote in his book Accidental Safari: “We have made diarrhoea into a sort of patriotism.”

When I was born, in 1986, a chilli pepper named Pique (sting) was made the mascot of that year’s FIFA World Cup in Mexico. The pepper sported a moustache and a sombrero, and carried a football. For Mexicans, chilli peppers are more than food – they’re the representation of our character. Eating them is just as dramatic and fun as mariachi bands and telenovelas. Once the world is a little more back to normal, the next time you see a Mexican suffering at the restaurant table next to yours, don’t feel bad – they’re crying tears of joy.

Firm owned by hedge-fund billionaire Ken Griffin executes orders for Robinhood customers

Small investors banding together online to pump up stocks like GameStop Corp. say they are defying Wall Street. But one of the biggest players in global markets stands to benefit from their frenetic trading.

Citadel Securities, the electronic-trading firm owned by hedge-fund billionaire Ken Griffin, has played a quiet but critical role in the frenzy of the last two weeks.

The firm—an affiliate of Mr. Griffin’s hedge fund, Citadel—executes orders placed by customers of Robinhood Markets Inc., TD Ameritrade and other online brokerages that have enjoyed surging volumes during the coronavirus pandemic.

Citadel Securities makes money by selling stocks or options for slightly more than it’s willing to buy them. The difference is often just a fraction of a penny per share. But repeated millions of times a day, it adds up to serious money.

Last year, net trading revenue at Citadel Securities was $6.7 billion, almost double the previous high in 2018, a person familiar with the matter said.

Among the forces propelling that growth was an influx of newbie traders, many stuck at home due to Covid-19 lockdowns. Lured by easy-to-use trading apps and an industry shift toward zero-commission trades, individual investors opened more than 10 million new brokerage accounts in 2020, JMP Securities estimates.

Meanwhile, a thriving subculture of day traders grew in corners of the internet like Reddit’s WallStreetBets forum, setting the stage for last week’s manic trading in GameStop, AMC Entertainment Holdings Inc. and several other popular stocks.

“This is the market that Ken Griffin and Citadel Securities have been waiting for,” said Christopher Nagy, a former TD Ameritrade executive who is now a director of Healthy Markets Association, an investor group. “The last time the environment was this good for retail market-makers was back in the dot-com bubble.”

The firm drew scrutiny last week when its majority owner, Mr. Griffin, participated in a $2.75 billion emergency cash infusion into Melvin Capital Management, a short seller that was facing steep losses due to the huge rally in GameStop’s stock.

Announced Monday, the deal meant Citadel, the hedge-fund firm, was propping up a fund that had bet against GameStop stock, while Citadel Securities had been profiting from the order flow of small investors placing bullish bets on GameStop.

Citadel Securities says it’s separately managed from the hedge-fund side of Mr. Griffin’s business. The firm also released data showing that during the past week, retail orders pouring into its systems for GameStop were roughly balanced between buyers and sellers, casting doubt on the popular narrative that small investors drove the stock to its record close of $347.51 on Wednesday.

The data showed that 29% of GameStop trading volume Monday through Thursday was handled by Citadel Securities, underlining its huge role in the market for stocks popular with individual investors. Overall, about 41% of U.S. retail stock-trading volume goes through Citadel Securities, while the next-biggest player in the business, Virtu Financial Inc., has a market share of around 32%, the firms say.

“We witnessed an extraordinary level of retail trading last week,” a Citadel Securities spokesperson said. “At many times over the course of the week, the large brokerage firms depended upon our capabilities to handle the deluge of orders.”

Citadel Securities also accounts for a large chunk of trading volume on public markets like the New York Stock Exchange as well as in options, futures, Treasurys and many markets overseas. Founded in 2002, the firm became a dominant player in electronic trading due to its technological prowess, quantitative skills and a hard-driving company culture. Rivals say it has grown increasingly tough to compete with Citadel Securities’ scale and efficiency.

“They’re really trying to take an Amazon approach to trading, where they try to squeeze out everyone else who’s not on their scale,” said Scott Knudsen, a former executive at rival trading firm IMC Financial Markets who now leads Cove Markets, a cryptocurrency-trading startup.

Citadel Securities’ retail business has repeatedly drawn controversy. Like Virtu and other market makers, Citadel Securities pays brokerages for the right to trade against individual investors’ orders. During the first three quarters of 2020, the firm made over $700 million in such payments to major online brokerages, according to Piper Sandler.

Critics say this practice, called payment for order flow, skews brokers’ incentives so they seek to maximize revenues rather than ensure customers get the best price. The practice is banned in some overseas markets, like the U.K. Earlier this month, former U.S. Sen. Carl Levin published an op-ed piece in the Financial Times urging the incoming Biden administration to ban payment for order flow, calling it “a conflicted practice that siphons billions out of U.S. investors’ funds each year.”

Brokers and trading firms, including Citadel Securities, say payment for order flow benefits investors, because they get a better deal than if the orders were sent to the NYSE or the Nasdaq Stock Market. Citadel Securities says it saved individual investors a total of $1.3 billion last year by executing their orders at better prices than those available on exchanges.

The argument is that, in fact, both sides win: Citadel Securities can offer individual investors better prices on stocks than it would on an exchange, because it knows it’s trading against a player too small to move the market. In contrast, when Citadel Securities trades on an exchange, it may end up trading with a fund manager that is driving a stock up or down with institutional-size purchases or sales—a situation that could result in losses for Citadel Securities.

Still, regulatory penalties have fueled suspicion about the firm’s handing of individual investors’ orders. In 2017, Citadel Securities paid $22.6 million to settle Securities and Exchange Commission charges that it misled customers about providing the best price on investors’ trades. Last year, the firm paid $700,000 to resolve claims by the Financial Industry Regulatory Authority that it traded ahead of customer orders in over-the-counter securities. In both cases, Citadel Securities didn’t admit wrongdoing.

NEW YORK TIMES

Saturday

• The reaction from automakers and oil companies to GM’s announcement it will pivot to electric vehicles has been muted, but some see it as a calculated move to burnish the company’s reputation as the Biden administration prepares new fuel-economy standards.

• With nearly eight million people, or 11.7 percent of the population, having received their first coronavirus vaccine, Britain’s pace is the fastest of any large nation in the world, with only Israel and the United Arab Emirates moving quicker.

• When combined with the $900B in pandemic aid agreed to in December, the Biden administration’s proposed stimulus plan would be a bigger surge of spending in absolute terms and relative to the nation’s economic hole than any in modern American history.

• New York governor Andrew Cuomo announced that Indoor dining will resume with limited capacity starting February 14, more than a month after he banned it to combat a second wave of the coronavirus.

• American airstrikes and Iraqi forces killed the top Islamic State leader in Iraq in an attack aimed at stemming the group’s resurgence and at retaliating for a double-suicide bombing in Baghdad last week.

• Former US climate leaders are pressing President Biden on deforestation of the Amazon rainforest happening under the leadership of Brazilian president Jair Bolsonaro, who says the country won’t brook any interference.

• A New York judge ordered Trump’s family business and several associates, to give state investigators documents in a civil inquiry into whether the Trump Organization misstated the value of assets to receive bank loans and tax benefits.

• TSLA chief Elon Musk inserted himself into the battle between Wall Street and retail investors about GME, with a tweet that took a jab at hedge funds and supported the day traders who are shaking up the market.

• The unions representing the nation’s health care workers have emerged as increasingly powerful voices during the pandemic amid what they say are missteps on the part of hospitals and government agencies managing the crisis and providing supplies.

• The US now requires a negative coronavirus test for all arriving international travelers, prompting hotels to add testing suites and airlines to enhance mobile apps as they seek to manage the latest challenge to their comeback attempts.

• Major automakers are increasingly betting that millions of new cars and trucks over the next decade will be plugged into electrical outlets, not fueled up at gas stations, but the nation’s power grid may not be ready to handle the surge.

• Affluent investors increasingly see cryptocurrencies the way they see high-risk assets such as private equity and venture capital, raising the question of how a modern but volatile asset can fit into legal structures that date back a century or more.

• As governments and pharmaceutical companies rushed to develop coronavirus vaccines, promising drugs that could stop the disease early, called antivirals, were neglected because of a lack of funding or difficulties finding patients for trials.

• During year’s racial justice protests, the Trump administration directed law enforcement to focus on the antifa movement, diverting key resources when the threat of far-right groups, such as those involved in the Capitol siege, was growing substantially.

• A consortium of some of Canada’s largest companies has launched a rapid Covid testing program with the goal of protecting their 350,000 employees and publishing a playbook for businesses across the country on how to reopen safely.

• The European Union early Saturday abruptly reversed an attempt to restrict vaccine exports from the bloc into Britain via Northern Ireland, the latest stumble in the continent’s faltering vaccine rollout.

• China announced it would no longer recognize certain British travel documents, in retaliation for Britain’s decision last year to grant potentially millions of Hong Kong residents visas and eventually a path to citizenship.

WALL STREET JOURNAL

• “Americans’ incomes climbed for the first time in three months in December as a new round of government-aid efforts kicked in, priming the economy for stronger growth this year.”

• Story profiles Keith Gill, the Boston investor who helped push a horde of online followers on Reddit’s WallStreetBets forum to buy GME, sparking a bizarre market rally that made and lost fortunes from one day to the next.

• With Democratic majorities in Congress, lawmakers from New York and New Jersey want a repeal of the $10,000 cap on the state and local tax deduction as part of a pandemic-relief bill, but the Biden administration has yet to take any action, and may wait until later this year to do so.

• Investigators probing a massive hack of the US government and businesses say they have found concrete evidence the suspected Russian espionage operation went far beyond the compromise of SWI, initially considered the main target.

• In a bid to control its global image, China’s Communist Party is increasingly jailing Chinese citizens, many of them ordinary people with little influence, who use foreign social media to criticize Chinese leader Xi Jinping and his government.

• The trading mania around companies such as GME presents a dilemma for Gary Gensler, likely to be the next head of the SEC, who will have to balance a trend of broader investor participation in the market with risks that could potentially spread.

• The tech industry has long stood out for lavish perks, many of which increased during the pandemic as people worked at home, but as companies figure out new hybrid work models, they’re also revising which perks should stay and which should go.

• H.O.T.S.: Golf got a boost from the pandemic because it was easy for players to socially distance, and changing demographic trends could maintain the trend; CVX’s careful strategy has helped it stay off the radar of activist investors and regulators; Wall Street may have been disappointed by JNJ’s coronavirus vaccine results, but the shot will still play a key role in battling the pandemic.

FINANCIAL TIMES

Weekend

• “US regulators and prominent political figures have leapt to the defense of an audacious band of amateur share traders at the end of a tumultuous week that challenged the old guard of Wall Street.”

• The arrest of Russian opposition leader Alexei Navalny “clearly touched a nerve among Russians fed up with slumping living standards, the Kremlin’s patchy coronavirus response, and entrenched corruption” under president Vladimir Putin.

• Chinese military aircraft simulated missile attacks on a nearby US aircraft carrier during an incursion into Taiwan’s air defense zone three days after Joe Biden’s inauguration, a sign of growing tension between Beijing and Washington around Taiwan. • Big Read story about India says that “With the rate of coronavirus infections falling sharply, the country might be at an early stage of herd immunity that could allow the economy to rebound quickly, but health experts warn against complacency.”

• Hedge funds are turning their sights from corporate reports and data spreadsheets to online message boards in a bid to stay ahead of day traders who have started to beat them at their own game.

• Lex Column: Robinhood is failing to live up to its claim to democratize trading—and may not always have the balance sheet to back up its philosophy; Bloomsbury Publishing, which gave the world Harry Potter, is benefiting from the pandemic as people find shelter in books; Retail investors in Asia are getting in on the GME trend, buying stocks shorted by investment funds.

• Comment: “The financial industry will hope that the new energy of the locked-up retail investors doesn’t last beyond the first Covid jab,” says Merryn Somerset Webb. “But it might be better for the rest of us—and for capitalism—if the energy is sustained, and used in better ways.

Shallow and fragmented capital markets are holding EU companies back

Many competing motives are at work when the EU ramps up its determination to assert control over US internet giants. One is anger that they abuse their market dominance. Another is fear that they threaten the health of Europe’s democracies.

But as often as not, the strongest motivation is the feeling that Europe is falling badly behind in the race to build a 21st-century digital economy and so needs a better digital industrial policy.

The feeling is warranted. Europeans are no laggards in the use of digital technology, but the US and increasingly China have been leading innovation in the tech sector. This should not lead to “Google envy”. To be satisfied with massive high-tech rent extractors and manipulators, so long as they are European ones, would be a poor goal. Instead, the EU should aim to make it easy for its tech innovators to scale up to pan-European level, without stifling the growth of those that come after.

EU tech regulation is moving in the right direction. It rightly focuses on open technology markets, portability and data sharing, and restraints on gatekeepers. All could be reinforced. But there is a risk of confusing ends and means. Even if digital industrial policy needs supportive regulation to succeed, the two main reasons why EU tech companies struggle harder than US competitors to scale up have little to do with the digital sector itself.

One is missing capital. Financing in the EU is dominated by bank loans, which are ill-suited for the entrepreneurial risk involved in tech start-ups and their growth. Markets in risk-taking equity are much shallower and more fragmented than in the US or the UK.

The second is that markets for goods and especially services are still not integrated enough. A US tech start-up that succeeds in its local market can almost effortlessly scale up to continental size. This in turn is a good base from which to conquer the world.

Not so in the EU’s aspirationally named single market. For the most part, this is not because of deficient digital rules. Rather, fragmented “old” markets in Europe make it harder for tech innovators to create new, cheaper ways to deliver, across borders and at scale, music, retail finance, legal services or even direct sales of physical goods.

A strong European tech sector requires solutions to these two non-digital problems. The first requires EU-wide equity markets for businesses of all sizes. The second is best achieved via simple pan-EU regulatory regimes alongside existing national ones, if the latter are hard to harmonise. This would allow more companies to sell their services across the EU from the start.

To pave the way for a thriving European digital economy, deeper capital markets and a fully functioning single market could be complemented by two other elements.

First, a programmable digital euro could be set up. It would open up opportunities for fintech innovators to develop new services around smart contract execution. This could transform insurance, securities trading, clearing and settlement, and a host of consumer-facing services that we can only begin to imagine. The companies that can do this in their home market first will have a global head start. There is a huge first-mover advantage to be snatched.

Second, demand could be boosted for native tech products suited to European conditions and preferences through development prizes, standard-setting, judicious subsidies and public procurement. For example, the EU’s privacy rules have largely been seen as a burden. But this should have been turned into an opportunity for European tech firms to develop user-friendly methods of privacy management. Europe needs a tailored policy to match tech regulations with intelligent standards and specifications for products, alongside public sector purchase commitments or other financial incentives.

Another path to pursue would be “public options” for apps that effectively create marketplaces. Given the controversies around Uber, why not commission a rival ride-hailing app that any European city could voluntarily adopt? It could be designed to plug into local tax, labour and licensing rules, charging only enough to recoup the public funding for its development.

A third case in point: worldwide web inventor Tim Berners-Lee’s Solid project with the Massachusetts Institute of Technology to develop privacy-friendly protocols for the social internet. The EU should aim to fund equally ambitious projects in Europe.

Such challenges are about preparing the old economy to make the most of what new technology can bring. Paradoxically, Europe’s digital success depends on upping its analogue game.

Package is third the size of Biden plan and strips out measures such as minimum wage rise

A group of Republican senators has asked to meet US president Joe Biden to discuss an alternative $600bn Covid-19 relief package — a less ambitious economic injection which they claim could gain bipartisan support.

The proposal from the ten-strong group, which includes moderates Susan Collins and Mitt Romney, falls far short of Mr Biden’s own $1.9tn economic relief package. Democrats are considering trying to pass that plan through a congressional procedure which would allow them to bypass Republicans, who consider it too costly.

“Our proposal reflects many of your stated priorities, and with your support, we believe that this plan could be approved quickly by Congress with bipartisan support,” the lawmakers wrote in a letter to Mr Biden, adding they would unveil details on Monday.

The Republican group claimed parts of its proposal matched Mr Biden’s plan, including $160bn to help distribute the vaccine and boost public health capabilities to address the pandemic.

But Bill Cassidy, another of the senators behind the proposal, told Fox News Sunday that the lower price tag was “very targeted”, reducing what he called “extraneous” measures including some that would have helped public schools reopen. The offer includes a round of $1,000 payments to a smaller segment of families in need, instead of broader $1,400 paychecks under the Biden plan, he said.

The Republican proposal also included some additional unemployment benefit extensions plus support for childcare and small businesses. But it falls well short of the outlay the Democratic party says is needed to support families struggling with the economic fallout from the year-long pandemic.

Mr Biden has promised to make reaching across the aisle a theme of his presidency. But he has indicated he could pass his package even without bipartisan support in order to address his top legislative priority.

“I support passing Covid relief with support from Republicans if we can get it, but the Covid relief has to pass. There’s no ifs, and or buts,” the president said on Friday.

To do so, all 50 senators who caucus with the Democratic party would need to vote the same way, with vice-president Kamala Harris casting the tiebreaker through a special congressional mechanism called reconciliation that many Republicans complain is divisive.

Rob Portman, one of the ten Republicans who signed on to the new letter, told CNN on Sunday that any effort by Mr Biden to “jam through” his own package would risk poisoning the well of bipartisanship in Congress.

But Bernie Sanders, a leading senator from the progressive wing who votes with the Democratic party, has warned against sacrificing a deal in pursuit of bipartisanship.

“I don’t care what anybody says, we have got to deal with this pandemic,” he told ABC News on Sunday, adding the question was not bipartisanship but addressing the unprecedented crisis the county was facing. “We cannot have children in America going hungry, people being evicted, schools not open. We need to open our schools in a safe way.”

Brian Deese, director of the White House’s National Economic Council, signalled Mr Biden was still open to a compromise solution.

“[T]he president has said repeatedly he is open to ideas, wherever they may come, that we could improve upon the approach to actually tackling this crisis,” he told NBC News on Sunday. But he said he would still require “a comprehensive approach” delivered at speed.

Mr Biden has warned the US death toll from coronavirus — which stands at more than 430,000 — will surpass 500,000 in February. The number of people admitted to hospital with the virus dipped below 100,000 on Saturday for the first time in almost two months, according to data from The Covid Tracking Project.

The proposal comes as Democrats prepare to advance the president’s $1.9 trillion plan without Republican support

WASHINGTON—A group of 10 Republican senators asked President Biden to work with them on a bipartisan coronavirus relief effort in a letter Sunday, as Democrats prepared to move forward on a $1.9 trillion package without GOP support.

In their letter, the Republican senators asked to meet with Mr. Biden to present details of their proposal, whose overall cost they didn’t state, and said they were coming forward in response to his appeal for bipartisanship.

“We recognize your calls for unity and want to work in good faith with your administration to meet the health, economic, and societal challenges of the Covid crisis,” the Republican senators wrote.

The letter outlines a few components of the Republican proposal, including $160 billion for vaccine distribution, testing, tracing and personal protective equipment, $4 billion to bolster behavioral health and substance abuse services, extending enhanced federal unemployment insurance and small business relief. The Republican senators also said they supported a “more targeted” round of direct checks “for those families who need assistance the most” but didn’t specify the size of the check.

Mr. Biden’s $1.9 trillion plan provides a $1,400 check to many Americans; increases and extends federal unemployment support and offers funds for vaccine distribution and schools. It also includes provisions opposed by many Republicans, such as an increase in the minimum wage to $15 per hour and funding for state and local governments.

The Republican senators who signed the letter represent more centrist members of the party: Sens. Susan Collins of Maine, Lisa Murkowski of Alaska, Bill Cassidy of Louisiana, Mitt Romney of Utah, Rob Portman of Ohio, Shelley Moore Capito of West Virginia, Todd Young of Indiana, Jerry Moran of Kansas, Thom Tillis of North Carolina and Mike Rounds of South Dakota.

Republicans have balked at the $1.9 trillion price tag of Mr. Biden’s proposal. In response, Democrats are gearing up to move forward with the bigger package of coronavirus relief, using a legislative process that would bypass the need for Republican support.

Democratic leaders have said they plan to begin the process known as reconciliation as soon this week, setting up an avenue they could use to pass legislation with a simple majority in both chambers. That would mean they could pass a coronavirus relief package with just Democratic votes, if all 50 Senate Democrats stick together, and Vice President Harris casts a tiebreaking vote.

The first step is to pass a budget resolution, which could be introduced as early as Monday, according to aides, setting up votes in both chambers later in the week.

Republicans have said the $1.9 trillion package isn’t needed right now, with Congress late last year having passed $900 billion in relief. Democrats, including Mr. Biden, have said the last package was a down payment on a bigger stimulus needed now to meet the health and economic demands of the crisis.

Democratic leaders said last week they have not ruled out a bipartisan effort, but are commencing the lengthy, multistep reconciliation process to preserve that option. Many Democrats view the expiration of unemployment benefits in mid-March as the deadline to pass the next aid package.

“We have to be ready,” House Speaker Nancy Pelosi (D., Calif.) told reporters last week. “We want it to be bipartisan always, but we can’t surrender if they’re not going to be doing that,” she said of Republicans.

Even so Democrats will have to keep their own ranks aligned. They can afford no defections in the evenly-split Senate and no more than four in the narrowly divided House on legislation if Republicans remain unified in opposition.