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Spanish fiscal position aided by political paralysis

Spain will run a smaller budget deficit than Germany for the first time in almost two decades next year in a reversal of the two countries’ fiscal fortunes.

Europe’s fourth-largest economy, once a major casualty of the Eurozone crisis, has trimmed its deficit after years of robust growth and higher tax revenues.

Spain’s deficit is set to fall for the fifth year in a row to 2.5 per cent of GDP in 2025 and decrease to 2.3 per cent next year, according to the latest forecast from the Bank of Spain.

Germany’s deficit will rise from 2.3 per cent this year to 3.1 per cent in 2026, according to the German Council of Economic Experts, an independent group of advisers to the government. Analysts expect it will rise closer to 4 per cent in subsequent years.

Some 17 years since the end of the Eurozone debt crisis, the former crisis countries Portugal, Italy, Ireland, Greece and Spain, once branded “PIIGS” by some analysts, are on a better fiscal trajectory than the countries that helped stabilise the bloc: Germany and France.

In France, governments have collapsed over unpopular attempts to lower its budget deficit by cutting government spending.

“The different fiscal trajectories show how much the pecking order between euro area countries has changed since the euro crisis,” Karsten Junius, chief economist at Swiss private bank J Safra Sarasin, told the Financial Times.

Spain’s improving economic prospects have fuelled a rally in its government debt, mirrored by Italy and Greece.

That has pushed down the additional interest rate on Spanish 10-year debt over benchmark German Bunds — a key measure of market anxiety — to about 0.5 percentage points, their lowest since before the Eurozone debt crisis, when they topped six percentage points.

Spain now pays lower borrowing costs than France, a country viewed for a long time as one of the safest Eurozone borrowers. Despite the expected widening in its deficit, Germany’s debt remains the Eurozone’s haven asset given its strengths as the bloc’s biggest economy, which has a lower burden than larger global peers, including the US.

From the launch of the single currency in 1999 to the debt crisis, Spain experienced a multiyear boom, allowing it to run lower budget deficits than Germany in the decade to 2007. But a combination of high growth and low interest rates culminated in a housing bubble and a subsequent banking crisis.

The country tapped European bailout funds for €41bn in emergency loans at a time when Germany was reluctant to save seemingly profligate southern European peers.

Spain has now become one of the fastest-growing large developed economies, with average quarterly GDP growth of 3.9 per cent since the start of 2022, compared to Germany’s 0.3 per cent. For 2026, the IMF forecasts 2 per cent growth, just below the 2.1 per cent it predicts for the US.

“The investment cycle in Germany has faltered while investment has boosted Spanish GDP,” said Melanie Debono, an analyst at London-based macro advisory firm Pantheon Macroeconomics.

Spain’s expansion is driven by a combination of immigration, tourism, low energy costs and public spending including EU funds.

The Spanish government predicts it will this year post its first primary surplus since 2007 — a measure that excludes interest payments on debt and costs related to floods in Valencia.

Ironically, its fiscal position is being aided by political paralysis. Prime Minister Pedro Sánchez’s minority government has been unable to muster the parliamentary votes to pass a new budget, leaving the country operating on a rolled-over version of its 2023 spending plans.

That has prevented the government from introducing any major new spending plans, although it has been able to raise outlays on defence by taking advantage of some flexibility within the budget rules.

During the Eurozone crisis, Spain was running deficits of up to 11.5 per cent of GDP a year, causing its overall debt levels to balloon from about 35 per cent of GDP in 2007 to more than 100 per cent.

However, total government debt in Spain remains high, equal to 100.4 per cent of GDP according to the IMF, while Germany’s debt is 64.4 per cent of its economy’s size.

Miguel Sebastián, a former Spanish industry minister who is now an economics professor at Madrid’s Complutense University, said: “Spain’s debt-to-GDP ratio is still too high and that will significantly reduce room for manoeuvre if and when there is a recession. That is a problem.”

The Bank of Spain warned in its latest financial stability report last week that high levels of overall debt created a “vulnerability for the Spanish economy”, limiting the room for manoeuvre in the next crisis and exposing the state to the risk of higher interest rates.

Germany ran budget surpluses of up to 1.9 per cent of GDP in the six years to 2019. While its level of public debt is close to the 60 per cent stipulated by EU fiscal rules, the country’s public infrastructure started to suffer from an investment backlog that has resulted in unreliable railways, crumbling motorway bridges and military forces with ammunition for just two days of war.

Russia’s invasion of Ukraine, Donald Trump’s second term as US president and the lingering infrastructure crisis led to a historic political U-turn in Berlin, with new chancellor Friedrich Merz loosening the tight constitutional debt brake which limited borrowing to 0.35 per cent of GDP a year.

The new rules opened the door to up to €1tn of debt-funded infrastructure and defence spending over the next decade.

But Merz faces criticism for using some of the borrowing to fund welfare and tax cuts. “The opportunities arising from [the debt-funded investment funds] must not be squandered,” warned Monika Schnitzer, chair of the GCEE last week.

Investment bank has secured its dominant position as megadeals rebound

Goldman Sachs is vying to capture its biggest share of the deals market in almost a quarter of a century, with Wall Street’s dominant investment bank emerging as one of the big winners from the rebound in mergers and acquisitions.

The bank has advised on 34 per cent by value of the $3.8tn of global mergers announced this year, according to data from LSEG, up from 28 per cent in 2024.

With less than seven weeks of the year remaining for new deals to be announced, the performance puts Goldman on track for its biggest share of the market since it captured 34.26 per cent in 2015.

The bank’s role advising biotech Cidara Therapeutics on its $9.2bn takeover by Merck, announced on Friday after the LSEG data was compiled, could help push the figure beyond that benchmark to its highest level since 2001. 

After a slow start, 2025 is shaping up to be the biggest year for M&A activity since the pandemic-era boom of 2021, with a series of megadeals topped by the $55bn take-private of video games maker Electronic Arts.

Boards have dusted off deals put on hold amid the market turbulence caused by US President Donald Trump’s trade war earlier this year, as confidence has grown in an increasingly laissez-faire attitude by the administration towards big strategic combinations in critical sectors.

Goldman’s performance suggests that Wall Street rivals and boutique advisers such as Evercore and Centerview have done little to loosen the market leader’s grip on the business of offering blue-chip M&A advice. Its presence on many of the biggest deals this year has boosted optimism for future earnings, pushing the bank’s shares to a fresh record high this week.

Although Goldman has advised on many of the biggest deals, it will not receive anything close to a third of the fees. Goldman’s market share by revenue from deals that have been completed is 10.7 per cent in 2025, according to Dealogic data, its highest since 2022.

The bank did record its most lucrative M&A transaction in the bank’s history this quarter, securing a fee of $110mn for advising Electronic Arts on its take-private deal.

It will only receive the full fee when the deal closes, however, with a typical lag of between six and 12 months between a transaction being announced and closing.

Other significant mergers announced this year include Union Pacific’s $85bn takeover of rival Norfolk Southern — from which Bank of America stands to earn a $130mn fee — and Kimberly-Clark agreeing to buy Tylenol owner Kenvue for $48.7bn. Centerview and Goldman were the advisers to Kenvue.

Goldman’s global head of M&A, Stephan Feldgoise, said executives were recognising the dealmaking environment was favourable to transactions with a compelling strategic logic.

“In the current environment, CEOs are recognising from a capital markets and regulatory perspective that if something makes sense strategically then they should consider it,” he said.

JPMorgan Chase, BofA and Wells Fargo are among other investment banks to have made large market share gains in announced M&A this year. 

Wells, which earlier this year was freed from a punitive asset cap and has identified investment banking as a growth area, has about an 8 per cent share in announced M&A this year, which would comfortably be its best-ever year. It has risen to eighth place in the rankings from 17th in 2024. 

Citigroup, whose investment bank is run by ex-JPMorgan banker Vis Raghavan, has taken the biggest hit to its share of deals by value, falling from 17 per cent in 2024 to 13.6 per cent so far in 2025, according to LSEG data. This would be Citi’s lowest share of announced M&A since 2014. 

However, by fees earned on completed deals, Citi’s market share rose to 4.8 per cent, its best showing since 2015.

BlackRock to compete with hedge fund giants

The world’s largest asset manager might be best known for its dominance in the realm of index trackers, but BlackRock plans to take on the giants of hedge fund land.

The US fund group, which has $13.5tn of assets under management and is led by Larry Fink, is revamping its flagship quant hedge fund as it seeks to compete with industry stalwarts such as DE Shaw, Citadel and Millennium.

BlackRock is adding stockpickers to Systematic Total Alpha, its top mathematical and data-driven hedge fund, following a strategy pursued by multi-manager hedge funds that house human and computer-driven strategies under one roof, writes Costas Mourselas.

The quant fund is also expanding fundraising efforts to challenge larger rivals after securing the three-year trading record required by many allocators to invest.

STA had $7bn in capital to invest as of the end of October, up from $5bn in August, but is still a relative minnow compared with the multi-strategy firms Citadel and Millennium.

Between its launch in June 2022 and October this year it returned 14 per cent on an annualised basis, net of fees, a strong performance for a three-year period but one that STA will need to show it can maintain over a longer timeframe.

STA is only part of BlackRock’s wider hedge fund business, which has about $90bn in client assets, making it one of the biggest hedge fund platforms in the world. BlackRock has increasingly been investing in its alternative asset management business, having purchased private credit manager HPS for $12bn last year.

BlackRock does not plan to recruit from outside the group but to make use of existing employees elsewhere in its hedge fund business to help increase the stability of STA’s returns.

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Swiss investors push for UBS to settle over Credit Suisse bond write-off

A surprise court ruling that the move lacked a legal basis could lead to years of appeals and proceedings

Swiss bondholders are exploring ways to push for a settlement with UBS, after a court ruled that the SFr16.5bn write-off of Credit Suisse bonds during the bank’s 2023 rescue by its rival lacked a legal basis. 

The Swiss Federal Administrative Court delivered a surprise ruling last month that market regulator Finma’s order to write off the additional tier 1 bonds lacked a sufficient legal basis. Finma and UBS are both appealing against the decision, which will now go to the Supreme Court. 

The appeals process and subsequent proceedings could take years and the court’s decision will not be not enforced while an appeal is pending.

Altana Wealth, a large holder of Credit Suisse AT1s which is part of a group led by law firm Pallas Partners that is challenging Finma’s 2023 write-off, said it thought settlement with UBS and Finma was now a “likely outcome”. 

“Our belief is both sides are incentivised to settle before that final decision [by the Supreme Court],” said Lee Robinson, founder and chief investment officer of Altana Wealth, adding there was a “high chance” Finma would push the cost to UBS. 

AT1s are a class of debt designed to take losses when institutions run into trouble and generally rank ahead of equity on the balance sheet. The Credit Suisse rescue forced bigger losses on to some bondholders than shareholders, upending the traditional credit hierarchy.

The court stopped short of ruling whether investors should be repaid and any compensation from the process could take years to determine. Some analysts expect Finma and the Swiss government to be the first in line to pay compensation claims if the ruling is upheld.

UBS declined to comment. In a statement last month, it said that “being a party in the proceedings does not increase our potential legal exposure” and that it would not speculate on potential outcomes. It added it saw no need to make an accounting provision for potential costs.

“UBS believes that the writedown was in accordance with the contractual terms of the AT1 instruments and the applicable law and that Finma’s decree was lawful,” the bank added.

Andrew Coombs, an analyst at Citigroup, said: “Our base case is that this is a matter for Finma, rather than UBS, but nonetheless [the court ruling] does introduce a degree of uncertainty.”

Were the Swiss Supreme Court to uphold the lower court’s finding — even without ordering remedies or compensation — it could be disruptive.

UBS could be required to reinstate the AT1s, an act that would mean “unscrambling the egg” according to lawyers. That could mean issuing new capital, and paying backdated coupons with interest, potentially costing several billion dollars and straining its capital ratio, Robinson added.

One senior finance executive in Zurich said they thought the odds of Supreme Court upholding the lower court’s decision were “50-50”. The situation is “bad for Finma, bad for UBS and bad for Switzerland”, they added

Anke Reingen, co-head of global financials research at Royal Bank of Canada, said UBS would likely seek its own compensation from the Swiss state were it required to make payouts to bondholders. 

Since their wipeout, Credit Suisse AT1s no longer pay coupons or carry enforceable terms that UBS must honour. Instead, dealers and investors trade claims tied to potential future compensation or to the possibility that the bonds might one day regain their legal status as securities.

Prices on claims tied to the AT1 bonds have risen rapidly since the court ruling. Dealers are willing to buy claims for more than 30 cents on the dollar, up from about 12 cents before the court ruling. 

Jonas Hertner, a lawyer representing several bondholders who has approached both UBS and Finma, has proposed a special fund created by the state and financed by UBS to compensate bondholders in exchange for waiving claims against both. “Settling these disputes conclusively would help the bank a lot,” he said. 

It's the second time this boutique has been hit.

Forensic police conduct investigations at the Chanel store on Avenue Montaigne, after a failed robbery attempt.

PARIS — An attempted armed robbery at Chanel’s fine jewelry and watch boutique on Avenue Montaigne was foiled on Saturday after a security guard intervened, prompting the four assailants to flee.

A spokesperson from Chanel confirmed the boutique had been targeted, and that a security guard was injured during the attempt.

The incident occurred shortly before noon local time at 42 Avenue Montaigne in Paris’ luxury retail district, home to flagships of leading fashion and jewelry houses.

Four individuals arrived on Yamaha TMax scooters, armed with rifles and an axe, and attempted to force entry into the boutique using their scooters as battering rams at the store’s entrance.

Their attempt was disrupted when a security guard managed to lower the metal security gate, preventing the attackers from entering. The four fled the scene immediately and police are continuing the investigation.

No customers were injured during the incident. The security guard sustained a minor injury from a blunt object and was treated by paramedics on site, and is currently receiving medical care.

“We immediately set up a support unit for the employees who were present. A police investigation has been opened, and we are fully cooperating with the police to assist them in their inquiries,” said the company in a statement to WWD. “We commend the swift action of the security teams and law enforcement, which enabled the attackers to flee without any material damage.”

The boutique remains closed until further notice.

The attempted robbery highlights a string of organized thefts targeting high-end boutiques in Paris, where luxury maisons have faced growing security pressures and increasingly bold break-ins.

Police have launched a search but have not disclosed further details about their burglars’ identities or potential links to other recent high-profile robberies targeting luxury retailers in the French capital.

The same Chanel boutique on Avenue Montaigne was previously hit in June 2024, when a car rammed the storefront and four thieves escaped with stolen goods. The vehicle used in the raid was later burned, and the robbery is still under investigation.

Another Chanel store on Rue Royale was ram-raided in October 2025, with 575,000 euros worth of leather goods stolen before the perpetrators fled. Two suspects were later apprehended and remain in custody.

Tesla has published the most detailed look at the performance and relative safety of its advanced driver-assistance software, just a few weeks after Waymo’s co-CEO Tekedra Mawakana at TechCrunch Disrupt called on companies to release more data.

On a new section of its website, Tesla claims that in North America, owners using the company’s Full Self-Driving (Supervised) software are driving around 5 million miles before a major collision and around 1.5 million miles before a minor collision.

That’s a far lower rate than the national average based on statistics provided by the National Highway Traffic Safety Administration (NHTSA). That data shows people get in a major collision every 699,000 miles, and a minor one every 229,000, at least according to Tesla’s interpretation.

Tesla has been releasing “vehicle safety reports” on a quarter-by-quarter basis for a while. But those reports have been repeatedly panned for being insufficient. And Tesla has released almost no information about the safety performance of the Robotaxi trial it’s been running in Austin, Texas, this year, which still has employees in the driver’s seat monitoring for safety reasons.

Waymo, the leading robotaxi company in the U.S. at the moment based on cars deployed and customers served, has published detailed data showing its vehicles are around 5x safer than human drivers, and 12x safer with respect to pedestrians. At last month’s Disrupt conference, Mawakana was asked to name other companies she felt were making roads safer.

“I don’t know who’s on that list, because they’re not telling us what’s happening with their fleets,” said Mawakana, without naming Tesla.

“I think there is a responsibility, if you’re going to put vehicles on the road, and you’re going to remove the driver from behind the wheel, and you’re going to have someone in some other room observing the fleet who can take over their vehicles, it is incumbent upon you to be transparent about what’s happening,” she added. “And if you are not being transparent, then it is my view that you are not doing what is necessary in order to actually earn the right to make the road safer.”

Waymo didn’t immediately respond to a request for comment Friday about whether Mawakana believes Tesla’s new data is sufficient.

One of the repeated criticisms of Tesla’s quarterly safety reports is that it focused on Autopilot, a far less advanced driver-assistance system than the Full Self Driving (Supervised) software, or FSD — which, despite its name, does not make a car fully autonomous. Autopilot was designed to be used on highways, which typically see a lower rate of crashes (when including minor collisions).

Tesla has finally broken out all this data. The new section of Tesla’s website claims that drivers using FSD travel about 2.9 million miles between major collisions, while NHTSA data shows all drivers travel about 505,000 miles per major collision. Tesla claims FSD users drive about 986,000 miles between minor collisions, while NHTSA data shows all drivers travel around 178,000 miles per minor collision.

Tesla is also finally showing how it defines these terms for the first time.

The carmaker is using the Federal Motor Vehicle Safety Standards, specifically 49 C.F.R. § 563.5. Tesla defines “major collisions” as crashes with higher-severity impacts where a vehicle’s airbags “or other non-reversible pyrotechnic restraints” are deployed. The company also says that if FSD was active “at any point within five seconds leading up to a collision event,” then it includes that crash in this dataset.

“This calculation ensures that our reported collision rates for FSD (Supervised) capture not only collisions that occur while the system is actively controlling the vehicle, but also scenarios where a driver may disengage the system or where the system aborts on its own shortly before impact,” Tesla says.

In its FAQ section, Tesla states that it will update the data every quarter and that it will “reflect a rolling twelve-month aggregation of miles and collisions in an effort to remain relevant to recent trends and progress.” The company says it won’t release other information, like injury rates, because it is collecting this data automatically from the vehicles.

“Instead, Tesla focuses on objective and programmatic metrics such as collision frequency and airbag deployment rates. Airbag deployments serve as a reliable proxy for collision severity,” the company writes.