FirstFT: Europe’s economy is recovering at two different speeds

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Good morning. We have new research today that shows Europe’s economic recovery from recent shocks has been happening at two speeds.

The four biggest southern European economies have outgrown Germany by about 5 per cent since 2017, according to an analysis conducted by the Capital Economics consultancy for the Financial Times.

Italy, Spain, Portugal and Greece collectively added more than €200bn of gross domestic product — more than the entire Portuguese economy — in price-adjusted terms over the past six years.

Germany’s GDP has expanded by only €85bn, and its economy has barely grown since the coronavirus pandemic struck in 2020 after a sharp slowdown in its vast manufacturing sector was exacerbated by a rise in energy prices since Russia’s invasion of Ukraine.

In contrast, southern European countries have been boosted by a rebound in tourism following the lifting of pandemic restrictions, as well as their lower exposure to the manufacturing downturn and loss of cheap Russian gas. Here’s what the two-speed economy means for the region.

• EU regulation: The bloc’s growing regulatory burden is putting off investors in life sciences and threatening innovation in Europe, Ireland’s investment chief told the FT.

Here’s what else I’m keeping tabs on today:

• Taiwan earthquake: At least one person has been killed and 56 injured in the strongest earthquake to hit the island in nearly 25 years. We’ll have more updates on this developing story here.

• Economic data: The EU releases its preliminary consumer price index for March, while the bloc and Italy have unemployment figures for February. S&P Global publishes its services purchasing managers’ indices for the US, Canada and Russia.

• IMF: The nomination period for the fund’s next managing director closes. Kristalina Georgieva has indicated her interest in staying at the helm for a second term.

• Federal Reserve: Chair Jay Powell speaks at the Stanford Business, Government and Society Forum in California. A top Fed rate-setter yesterday said US interest rates were unlikely to fall as far as expected in the longer term.

• Companies: Walt Disney shareholders vote at the entertainment giant’s annual general meeting on whether to award billionaire activist Nelson Peltz a board seat. Hilton Food Group has full-year results, while Topps Tiles has a trading update.

Five more top stories

1. Exclusive: Blackstone’s flagship property fund failed to generate enough cash to cover its dividend last year, putting strain on a vehicle the private capital group views as a beachhead in the retail investor marketplace. According to its annual report, the $60bn Blackstone Real Estate Income Trust generated $2.7bn in cash flows in 2023 but paid out a distribution of more than $2.8bn, resulting in the first annual shortfall of cash from operations to cover payouts to shareholders.

2. Morgan Stanley has agreed to stay in its Canary Wharf office for another 14 years in a big boost to the east London financial centre that has been hit by high-profile tenant departures. The US investment bank has added a decade to the lease on its European headquarters at 20 Bank Street, extending its tenure to at least 2038. Read the full story.

3. Exclusive: Nato is planning a five-year military aid package of up to $100bn for Ukraine in an attempt to shield the country from “winds of political change” that could usher in a second Trump presidency. The so-called Mission for Ukraine will be discussed by Nato foreign ministers today and is being put forward by the alliance’s secretary-general Jens Stoltenberg. Henry Foy in Brussels has more details on the proposal.

• War in Ukraine: Kyiv has carried out long-range strikes on a Russian drone factory and an oil refinery more than 1,300km behind enemy lines, injuring at least a dozen people.

4. Venture capitalists are struggling to raise money, signalling the end of an era of “megafunds”. Globally, venture firms raised $30.4bn from university endowments, foundations and other institutional investors in the first three months of this year, a marked slowdown from 2023 — which itself was the worst year for fundraising since 2016, according to PitchBook. Here’s why there’s been a sustained slowdown.

5. Joe Biden said Israel “has not done enough” to protect aid workers and civilians in Gaza and blamed it for making it difficult to distribute humanitarian aid after the death of seven workers in an Israeli strike. In a lengthy statement that did not signal a shift in US policy but was repeatedly critical of the Jewish state, the president said he was “outraged and heartbroken” by the deaths of workers from World Central Kitchen. Here’s more from Biden’s remarks yesterday.

• Israel-Hamas war: This week’s presumed Israeli strike on Iran’s consulate in Damascus has renewed fears of a full-blown regional conflict.

• US foreign policy: President Biden held a 105-minute call with his Chinese counterpart Xi Jinping yesterday, their first engagement since meeting in San Francisco in November. Here’s what they talked about.

The Big Read

Africa had to import $43bn of food in 2019, and the World Bank estimates it could rise to $110bn by next year. The continent’s agriculture is generally inefficient; average yields from cereals are half those of India and a fifth of those of the US. Yet improvements in farming could prove transformational, with Bill Gates, whose foundation invests across the continent, telling the FT: “Africa can be a net food exporter.”

We’re also reading and watching . . . 

• Bank of England: The UK’s central bank is planning a “once in a generation” overhaul of its forecasting after facing criticism for failing to predict the post-pandemic surge in prices.

• Democracy vs autocracy: All the evidence shows that despotism cannot consistently deliver the economic goods for developing countries, writes Martin Wolf.

• The limits of AI: A shortlived retail crime wave linked to self-checkout systems is a warning about the unintended consequences of automation, writes Brooke Masters.

• 🎬 Brexit: Watch the FT’s latest film on why no one wants to talk about the UK’s dramatic 2016 vote to leave the EU and its impact on British business.

Keep up to date with the latest post-Brexit developments with our public policy editor Peter Foster in our Britain after Brexit newsletter. Sign up here if you’re a premium subscriber, or upgrade your subscription here.

Chart of the day

With less than eight months to go until an expected autumn UK general election, Rishi Sunak has a steep climb to avoid defeat. But an FT polling analysis shows there is almost no way for the prime minister’s Conservative party to remain in power.

What paths does Sunak have to pull off the biggest electoral comeback in decades? Sign up for our Inside Politics newsletter by Stephen Bush for the inside track on UK politics.

Take a break from the news

Thirty years after the death of Nirvana frontman Kurt Cobain, his aesthetic lives on. Annachiara Biondi looks at the impact of grunge style on today’s fashion.

Additional contributions from Benjamin Wilhelm and Gordon Smith