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US debt default will threaten global financial system, says BlackRock

Addressing the broader economy, Hildebrand said he saw no scenario in which interest-rate cuts would happen this year

Philipp Hildebrand

Philipp Hildebrand

A US debt default would threaten “a basic anchor” of the global financial system and “must not happen,” BlackRock Inc. Vice Chairman Philipp Hildebrand warned Thursday at the Bloomberg New Economy Gateway Europe event near Dublin.
“All we can do is to pray that everyone in the United States understands how important the sanctity of the sovereign signature of the leading currency, of the leading bond market, of the leading economy in the world is,” Hildebrand, a former president of the Swiss central bank, said during an on-stage interview. “This is not something you want to mess with.”

The Gateway series brings together leaders from the private and public sectors to discuss the economy’s most pressing problems. This week’s event is focusing on the theme of “Reglobalization” — exploring the forces transforming trade and industry, from banking to aviation and energy to semiconductors.

Join us for a conversation later with Serbian Prime Minister Ana Brnabic. We also have interviews with Irish Finance Minister Michael McGrath and Amos Hochstein, the US Special Presidential Coordinator for Global Infrastructure and Energy Security.

Key Developments
EU Needs United Response on China-US Question, Irish PM Warns
Hildebrand Says Execution Key to Wrap Up UBS-Credit Suisse Deal
Silicon Valley’s Top EU Data Enforcer Rejects Snipes Over Speed
Eurogroup’s Donohoe Confident on Reaching Deal on Fiscal Rules
ECB Set to Keep Hiking If Projections Hold, Spain’s De Cos Says

Steel Industry ‘Escaping Proper Climate Scrutiny’ (3 p.m.)
The steel industry is not getting enough attention as a “massive polluter,” according to an green transport expert. Rachel Muncrief, deputy director of the International Council on Clean Transportation, also urged policymakers to focus on the full supply chains of technologies such as electric cars when considering how to speed up decarbonization.

She said that “five pieces of the puzzle” need to be in place to speed up the shift to net zero: ensuring commitments from industry and government, creating regulatory targets for suppliers of green technologies, encouraging demand for these products, building the infrastructure to support them, and implementing fiscal incentives.

Hildebrand Doesn’t See Rate Cuts This Year (1:30 p.m.)
Addressing the broader economy, Hildebrand said he saw no scenario in which interest-rate cuts would happen this year, noting that core inflation and labor costs will remain tight, and that cracks could appear in the commercial real estate sector. He also dismissed concerns about Europe having a structural banking problem, saying that he wasn’t worried about systemic risk.

Whether the union of Credit Suisse and UBS functions smoothly will all come down to execution, he said. Given that Switzerland has historically had several large banks, the transition to a single one will come with an intense and emotional national discussion, especially since the banks involved have very different cultures, he predicted.

Irish PM Hopes UK Will Seek Closer EU Ties (1 p.m.)
Irish Prime Minister Leo Varadkar said he hopes the UK will one day seek a closer relationship with the European Union, although rejoining the bloc as a full member remains “a remote prospect.”

“Brexit will never just be done and will require constant negotiations, constant alterations to the relationship,” Varadkar said during an on-stage discussion with Bloomberg’s Stephanie Flanders.

“It’s not impossible in my view that a future British government — maybe not the next one, maybe not the one after that — will seek a closer relationship with the European Union again,” he added. “It might involve a revision of the Trade and Cooperation Agreement to have a closer relationship and that’s something the door will always be open to.”

Tech Watchdog Rejects Snipes Over Speed (12:30 p.m.)
Big Tech’s top privacy watchdog in the EU took aim at critics who blame her office for taking far too long to issue rulings against Silicon Valley firms.

“Some of the people that comment on speed, understand very little about the process of conducting an investigation, the complexity of finding the facts, the implementation of fair procedures in the process,” Helen Dixon, Ireland’s Data Protection Commissioner, said during a panel.

The EU’s General Data Protection Regulation, which took effect in 2018, empowers EU data regulators to levy penalties of as much as 4% of a company’s annual revenue for the most serious violations. Tensions built up quickly, as the Irish watchdog was transformed overnight into the leading EU supervisor for global tech companies with a base in the nation, such as Apple Inc. and Meta Platforms Inc.

Europe, US Must Unite in Clean Tech Race (12 p.m.)
The race between Europe and the US to expand clean-technology industries should align in order to stand a chance against China, according to Ann Mettler, vice president at Bill Gates-founded Breakthrough Energy.

“The fact is, both Europe and the US are behind China in some of these areas, so it makes a lot of strategic sense for us to come together and to really accelerate,” Mettler said on a panel. “Europe and the United States should be talking about sort of a trans-Atlantic clean marketplace where we would really look to align at an early stage in the development of some of these technologies.”

The US Inflation Reduction Act is set to unleash hundreds of billions of dollars of investment for technologies including renewable power, EVs and green hydrogen. Its passage last year spurred European leaders to counter the American subsidies with their own plans.

Putin Prepared for the Long Haul’ (11:40 a.m.)
Russian President Vladimir Putin is prepared for the long haul in Ukraine and is counting on the alliance of western nations that opposes him breaking apart once the cost of supporting the government in Kyiv becomes too great, according to Kim Darroch, a former UK National Security Adviser and ambassador to the US.

“Don’t let’s think that Putin wouldn’t be prepared to do this for years and take whatever casualties — because the Russians are taking much, much higher casualties than the Ukrainians — are necessary to win,” Darroch said during a panel discussion.

NATO Expansion ‘Major Blow’ for Putin (11:30 a.m.)
Finland and Sweden’s applications to join the North Atlantic Treaty Organization represent a major blow to Putin, Kolinda Grabar Kitarovic, a former president of Croatia, said on the same panel.

“Finland and Sweden joining NATO was a big blow to Putin,” Kitarovic said. “He wanted less NATO, not more NATO at his border.”

Ireland Not Planning Swift ChatGPT Data Action (10:30 a.m.)

Dixon said that her agency is not planning any “swift move” to prohibit the processing of data by AI chatbot ChatGPT but cautioned that there is a need to look at the “range of issues and harms” arising from the use of such technologies.

“EU policymakers recognize that we need to call out some of the higher-risk use purposes” of AI “and implement very specific rules in those areas,” Dixon said in an interview with Bloomberg Radio.

European Accord on TikTok Data Use Elusive (10 a.m.)
Dixon also said that her agency has been unable to reach an agreement with its German and Italian counterparts on a draft decision it set out late last year about TikTok Inc.’s processing of children’s personal data. The draft was written in the wake of a probe into the company’s use of such data, and recommended that “a preliminary range of fines” be imposed.

“We’ve come to a point of certainty that we cannot reach agreement,” Dixon said. The case will now be transferred to the General Data Protection Regulation’s dispute resolution mechanism and a conclusion is expected in “a short number of months,” Dixon added.

The Irish watchdog is the leading EU supervisor for global tech companies with a base in the nation, such as Apple Inc. and Meta Platforms Inc.

Atlantic Bridge Upbeat on Longer-Term Outlook (8:30 a.m.)
Elaine Coughlan, a managing partner at Atlantic Bridge Capital, said she’s “very positive” about the investment outlook despite the dent to confidence both from “difficult” equity markets and the collapse of US lender Silicon Valley Bank.

“If you look at the fundamental technology sectors, the foundational technologies — quantum, semiconductors, cybersecurity — those areas have actually performed very well and there’s still a lot of investor demand,” Coughlan told Bloomberg Radio.

“In the longer term I would be very positive because of the involvement of new entrants into the market, which across Europe is government,” she added.

Eurogroup President Says China Engagement Key (4/19)
Relations with China will continue to be an important feature of how the global economy develops in spite of pressure from the US to decouple from Beijing, according to Paschal Donohoe, president of the Eurogroup of finance ministers from the single currency bloc.

“Engagement with China continues to be essential,” Donohoe said in an interview Wednesday. “There may be a different emphasis in tone but the fact that the engagement is happening is the key thing.”

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First Published: Apr 20 2023 | 8:21 PM IST

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