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UK Prime Minister Liz Truss defended her tax-slashing plans Thursday but vowed to “get borrowing back on track”, after nearly a week of silence when markets tanked and the Bank of England was forced into an emergency intervention.

“We had to take urgent action to get our economy growing, get Britain moving, and also deal with inflation,” she said in an initial round of local BBC radio interviews.

“And of course, that means taking controversial and difficult decisions, but I’m prepared to do that as prime minister,” she added, in her first comments to UK media since the crisis sparked by Friday’s “mini-budget”.

“It’s important the United Kingdom’s on the front foot, that we are pulling all the levers we can to drive economic growth. That is what we are pushing ahead with.” 

In a series of further BBC regional television interviews, Truss — in power for less than a month — said some aspects of her growth plan “will take time” while insisting “we will get borrowing back on track”.

The under-fire leader is facing severe pressure after the markets reacted to her government’s contentious plans for extra borrowing to fund uncosted tax cuts by sending the pound to an all-time low against the dollar.

UK markets remain highly volatile, with the central bank intervening on Wednesday to buy government bonds in order to prevent a “material risk” to stability.

The Bank of England announced a two-week programme to buy long-term UK bonds, capped initially at £65 billion ($71 billion), as UK pension funds scrambled to sell investments in order to remain solvent.

After sterling hit its dollar low early Monday, the bank said it would “not hesitate to change interest rates by as much as needed” to curb high inflation.

But it also signalled that it would wait until its next policy meeting on November 3 before fully assessing the impact of the government’s contentious plans.

Parliament’s Treasury Committee on Thursday called on Chancellor Kwasi Kwarteng directly to publish a fully costed economic forecast by the end of October to help the bank rather than on November 23 as planned.

Opposition leaders have demanded that Truss cancel her Conservative party’s annual conference starting on Sunday and recall parliament over the crisis.

– Truss v IMF –

Markets are concerned that Britain cannot fund its huge spending commitments, having announced a massive fuel subsidy package alongside the tax cuts.

Truss defended her fiscal policy, which includes a cut to the top rate of income tax, arguing the UK currently had its highest tax burden in 70 years. 

“We’ve reduced those taxes across the board. And of course people who are better off tend to pay more taxes,” she said.

The pound rebounded somewhat during Thursday, rising one percent against the dollar and reaching $1.09, reversing losses the previous day following the BoE’s emergency move.

But former BoE chief Mark Carney said the government had “undercut” financial institutions with its actions. 

“Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the bank — has led to quite dramatic moves in financial markets,” he told the BBC. 

But Truss insisted she was working “very closely” with the central bank.

In a highly unusual intervention on Wednesday, the International Monetary Fund said it was “closely monitoring” developments and urged the UK government to change tack.

It noted that Truss and Kwarteng, were trying to deal with the energy shock and boost growth.

“However, given elevated inflation pressures in many countries… we do not recommend large and untargeted fiscal packages at this juncture.” 

The IMF stressed the importance of fiscal policy not working “at cross purposes to monetary policy”.

Many central banks, including the Bank of England, are aggressively hiking interest rates in a bid to cool decades-high inflation. 

“There are many people with many different opinions, but what I think nobody is arguing with is that we had to take action to deal with what is a very, very difficult economic situation,” Truss retorted.

“My priority was making sure that we were supporting the British people in what is going to be a very difficult winter.”

European and US equities sank Thursday on fears that rising interest rates will spark a global recession, while the pound clawed back ground one day after emergency bond-market intervention from the Bank of England.

“Higher US treasury yields, inflation and rising recession fears are back in the driving seat,” said market analyst Fiona Cincotta at City Index.

German inflation accelerated sharply in September, official data showed Thursday in the latest indication that Europe’s biggest economy is buckling under the pressure from soaring energy prices.

Consumer prices spiked 10.0 percent compared to the same month a year earlier.

German Chancellor Olaf Scholz announced that the nation would plough 200 billion euros into shielding households and businesses from skyrocketing energy costs in the wake of Russia’s invasion of Ukraine.

However, Frankfurt stocks slumped 1.7 percent, while Paris fell 1.5 percent.

London equities dropped 1.8 percent as the pound rebounded somewhat from earlier falls, one day after the BoE snapped up UK bonds to avert a risk to UK financial stability.

“The BoE rode to the rescue of the markets for one day, and the overall impact has been limited,” said Cincotta, although the pound bounced more than one percent higher to climb above $1.10.

The BoE, the European Central Bank, the US Federal Reserve and many other counterparts are ratcheting up interest rates to fight decades-high inflation.

Wall Street’s main stock indices slumped as US treasury yields continued to rise, and with the latest data showing a drop in first-time unemployment benefit claims falling under 200,000 for the first time since May.

The reading will be used by the Fed “as a basis to maintain an aggressive line with its rate hikes” because the bank sees a softening of the labour market as necessary to bring inflation back down to its two-percent target, said Patrick O’Hare, analyst at Briefing.com.

The Dow was down 1.6 percent in late morning trading, while the broader S&P 500 fell 2.1 percent, and the tech-heavy Nasdaq Composite tumbled 2.9 percent.

– ‘Pessimistic’ investors –

“There’s a growing list of reasons why investors are pessimistic right now, with the prospect of an interest-rate recession being right up there,” Craig Erlam, analyst at trading platform OANDA, told AFP.

“But we are increasingly seeing pressures mounting and forcing responses from policymakers that are not normal. That started out as super-sized rate hikes, and now includes Japanese foreign-exchange interventions and the BoE intervening in bond markets.”

Stocks had also rallied Wednesday partly after the BoE’s surprise purchase, which came after Britain’s recent tax-cutting budget sparked soaring bond yields and sent the pound to a record dollar low on Monday. 

The BoE launched a two-week programme to buy long-term UK bonds, capped initially at £65 billion ($71 billion), as UK pension funds scrambled to sell investments to remain solvent.

While the UK government’s 30-year sovereign bond yield retreated further to 3.97 percent, having briefly surged Wednesday to a 1998 peak at 5.14 percent, the yield on 10-year bonds began to march higher.

Meanwhile, sentiment was also dented this week by leaks from the undersea Nord Stream pipelines running from Russia to Europe.

That sparked accusations of sabotage amid strained relations between the West and sanctions-hit Russia over the latter’s war on Ukraine.

– Key figures around 1530 GMT –

New York – Dow: DOWN 1.6 percent at 29,217.11 points

EURO STOXX 50: DOWN 1.7 percent at 3,279.04

London – FTSE 100: DOWN 1.8 percent at 6,881.59 (close) 

Frankfurt – DAX: DOWN 1.7 percent at 11,975.55 (close) 

Paris – CAC 40: DOWN 1.5 percent at 5,676.87 (close)

Tokyo – Nikkei 225: UP 1.0 percent at 26,422.05 (close)

Hong Kong – Hang Seng Index: DOWN 0.5 percent at 17,165.87

Shanghai – Composite: DOWN 0.1 percent at 3,041.20 (close)

Pound/dollar: UP at $1.1024 from $1.0689 on Wednesday

Euro/dollar: DOWN at $0.9777 from $0.9735

Euro/pound: UP at 88.65 pence from 89.40 pence

Dollar/yen: UP at 144.51 yen from 144.16 yen

Brent North Sea crude: DOWN 0.2 percent at $89.13 per barrel

West Texas Intermediate: UP 0.1 percent at $82.24 per barrel

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Swedish authorities said Thursday a fourth leak was detected on undersea pipelines linking Russia to Europe following what NATO described as an act of sabotage.

The Nord Stream 1 and 2 pipelines have been at the centre of geopolitical tensions as Russia cut gas supplies to Europe in suspected retaliation against Western sanctions following Moscow’s invasion of Ukraine.

The Swedish Coast Guard confirmed Thursday there were four leaks in total on the pipeline in the Baltic Sea — two on the Swedish side and two on the Danish side. Three leaks were previously reported.

NATO declared that the damage was “the result of deliberate, reckless and irresponsible acts of sabotage” and said it supported investigations to determine the origin of the damage.

The Western alliance warned that it was “committed to prepare for, deter and defend against the coercive use of energy and other hybrid tactics”.

“Any deliberate attack against Allies’ critical infrastructure would be met with a united and determined response,” it said, adding that the leaks present risks to shipping and cause substantial environmental damage.

Russia, which has denied it was behind the explosions, said a foreign state was likely responsible for what it described as a “terrorist act”.

Russia’s security service launched an “international terrorism” investigation into the gas leaks, saying the damage had caused “significant economic damage to the Russian Federation”.

Kremlin spokesman Dmitry Peskov said that such a probe “required the cooperation of several countries”, but that there was an “unwillingness” from many countries to contact Russia.

Russia said Wednesday that Washington should answer if it was behind the leaks — an assertion rejected by the United States as “ridiculous”.

The UN Security Council will meet Friday to discuss the matter.

Finland, which borders Russia, decided to reinforce security around its critical infrastructures, with particular focus on the electricity network.

Sweden’s two main nuclear power plants stepped up their alert levels.

– ‘Constant’ gas flow –

Operated by a consortium majority-owned by Russian gas giant Gazprom, Nord Stream 1 and 2 run from Russia to Germany.

While the pipelines are not currently in operation, they both still contained gas.

The vast leaks have caused underwater gas plumes, with significant bubbling at the surface of the sea several hundred metres wide, making it impossible to immediately inspect the structures. 

Seismic institutes on Tuesday reported they had recorded “in all likelihood” explosions in the area, prior to the leaks being detected.

A Swedish Coast Guard search and rescue vessel was patrolling the area.

“The crew reports that the flow of gas visible on the surface is constant,” the agency said in a statement. 

Danish authorities said the leaks will continue until the gas in the pipelines is exhausted, which is expected to occur on Sunday.

Fatih Birol, executive director of the International Energy Agency, said at a symposium in Paris that to him it was “very obvious” who was behind the leaks.

He said natural gas shortages in the wake of the war in Ukraine could make for a tough winter in Europe. 

“In the absence of a major negative surprise, I think Europe, in terms of natural gas, can survive this winter with a lot of bruises in our bodies in terms of prices, economy and social issues, but we can go through that,” Birol said. 

According to climate groups, Nord Stream 1 and 2 contained some 350,000 tonnes of natural gas — methane.

Greenpeace says the leaks could have the effect of almost 30 million tonnes of CO2, or more than two-thirds of the annual emissions of Denmark.

Doreen Bogdan-Martin was elected Thursday as the first woman to lead the UN’s telecoms agency in its 157-year history, with the US contender beating a Russian rival to the post.

Bogdan-Martin will become the next secretary-general of the International Telecommunication Union, which plays an important global role in setting the technical standards underlying mobile phones, television and the internet.

She claimed a landslide 139-25 victory over Russia’s former deputy telecoms minister Rashid Ismailov in an election among the ITU’s member states at a conference in Bucharest.

“Today, we made history. After 157 years, we shattered the glass ceiling,” she said.

Bogdan-Martin has worked her way up through the ITU. She joined its development bureau — one of the ITU’s three main divisions — in 1993 and became its director in 2019, pushing digital transformation.

Contests for the top UN jobs are typically about the balance of power between regional blocs.

The vote to lead the UN’s Geneva-based information and communication technologies agency — which coordinates everything from radio frequencies to satellites and 5G — was unrelated to Russia’s invasion of Ukraine.

However, the election was being seen as a test of Russia’s standing in the United Nations as the war in Ukraine grinds on.

Moscow’s reliable friends in UN circles have dwindled due to the war, though ITU member states had nonetheless blocked a bid to stop Russian candidates from running.

– ‘2.7 billion still offline’ –

Bogdan-Martin’s pitch was about getting more of the world connected to the internet and pushing forward high-speed access.

“The world is facing significant challenges: escalating conflicts, a climate crisis, food security, gender inequalities, and 2.7 billion people with no access to the internet,” she said.

“We are riding a powerful wave of innovation and growth and must use this opportunity to improve peoples’ lives — especially those who are excluded.”

US Secretary of State Antony Blinken said in a statement: “This outcome reflects a broad endorsement by member states of Ms. Bogdan-Martin’s vision for universal connectivity, digital empowerment, and leadership at the ITU that is innovative, collaborative, and inclusive.”

He said Washington was determined to ensure that international organisations were well-run, responsive and accountable.

Bogdan-Martin will take over from China’s Houlin Zhao when his second four-year term as ITU secretary-general expires at the end of the year.

“This marks a new beginning for ITU. Let this be an inspiration for more women and girls to make their contribution to our industry,” Zhao said.

France’s mission in Geneva called her an “inspiring force for women who want to embark on a career in information communications technology”.

The European Broadcasting Union said it looked forward to strengthening its partnership with the ITU and its new chief in the years to come.

– Oldest UN agency –

Bogdan-Martin was chosen in a secret ballot during the ITU’s plenipotentiary conference, its main decision-making body.

The gathering in Bucharest, from September 26 to October 14, is the major event in the agency’s four-year calendar.

The ITU is preparing a widely-anticipated report on the telecoms infrastructure damage in Ukraine since Russia’s invasion, with the European Union voicing frustration it was not released in time for the Bucharest conference.

In response, Zhao said in a letter sent to the EU on Wednesday, seen by AFP on Thursday, saying that an “interim assessment report” would be published “after” the gathering.

A Western diplomat aired disappointment at the delay, saying six months had now passed, and telling AFP: “They really are running out of excuses.”

The ITU was founded in 1865, making it the oldest agency in the UN fold.

It was created to manage international telegraph networks, but expanded its remit with new technological developments such as telephones, radio, television, satellites, mobile phones and the internet.

It brings together 193 member states as well as some 900 companies, universities, and international and regional organisations.

“Every time you make a phone call via the mobile, access the internet or send an email, you are benefiting from the work of ITU,” it boasts.

Germany on Thursday extended a 200-billion-euro ($194-billion) shield to protect households and businesses from skyrocketing power costs, as Europe’s biggest economy found itself in an “energy war over prosperity and freedom” against Russia.

“The German government will do everything so that prices sink,” Chancellor Olaf Scholz vowed, announcing a price cap for electricity and gas, as well as a plan to cream off windfall profits made by energy companies little hit by soaring gas prices.

The multi-billion-euro fund was designed to ensure that Germany could contend with the fallout from rising prices “this year and next year and the one after that”, Scholz said.

Thursday’s announcement came as inflation soared to a 70-year high of 10 percent in September, according to official data, driven higher by spiking energy prices.

The country was also predicted to sink into a recession in 2023, with consumer prices seen reaching 8.8 percent annually, leading economic institutes said Thursday. 

Germany, which has been highly dependent on imports of fossil fuels from Russia to meet its energy needs, has come under acute pressure as dwindling supplies from Moscow have stoked prices for the fuel.

“We find ourselves in an energy war over prosperity and freedom,” Finance Minister Christian Lindner said.

Protecting consumers against the rising bills was a “crystal clear answer” to Russian President Vladimir Putin that Germany was “strong economically”, he added.

– ‘Bakers and craftsmen’ –

Protection from rising prices was needed for “pensioners, workers, families… but also bakers and craftsmen or big industrial plants that are dependent on electricity and the gas supply”, Scholz said. 

Confidence amongst businesses and consumers has dropped precipitously in recent months as Germany slips towards a winter recession.

As well as rising household bills, some businesses have been forced to rein in production or operate a loss as their energy costs soar. 

The gas price cap should cover “at least a part” of the gas used by households and businesses, while “maintaining an incentive to reduce gas use” over the winter as supplies are limited, the government said in a statement.

In the same way, the government would work to limit the price of electricity for consumers by skimming off profits made by energy firms that have profited by the higher asking prices for gas but which do not use the energy source to generate power.

Ahead of the announcement, analysts warned that a full energy price cap would rob consumers of a reason to limit their usage, just as the government is imploring households to make every saving possible over the winter.

One in two flats in Germany is heated with gas, with figures from Thursday showing national usage was above average for the time of year.

“Without significant reductions, including in private households, it will be difficult to avoid a gas shortage,” the head of the Federal Network Agency Klaus Mueller warned.

– Gas levy –

Scholz also announced that the government would be scrapping a controversial gas levy that would have allowed energy companies to pass on rising costs and stabilise their business.

Germany has moved to prop up the energy market, announcing the nationalisation of struggling provider Uniper, which had been one of the biggest importers of Russian gas.

An agreement on the financing for the new package only emerged after weeks of haggling within the three-way coalition between Scholz’s Social Democrats, the Greens and the liberal FDP.

The 200 billion euros would be pumped into an economic stability fund outside the government’s main budget, allowing the government to stick to constitutional debt rules that limit public deficits — a red line for FDP leader Lindner.

“Through these measures, we want to send a clear signal to the capital markets that even while we use such a shield, Germany will keep to its stability-oriented fiscal policy. German bonds remain the gold standard in the world,” he said. 

Over the last months, Germany has also rushed to tap new sources of energy to reduce the demands put on gas. 

Earlier this month, the government said it would keep two nuclear power plants running beyond the end of the year to prop up the electricity grid.

The decision marked a major U-turn, with the traditionally anti-nuclear Greens consenting to delay Merkel era plans to exit atomic energy.

The EU on Friday will seek urgent ways to bring down skyrocketing energy prices as winter looms, with “sabotage” of gas pipelines from Russia this week injecting drama into the effort.

Energy ministers will gather in Brussels to consider an emergency European Commission proposal that includes cutting power use in the bloc, imposing windfall levies on energy companies and discussing a price cap on wholesale gas supplies.

Europe has found itself over a barrel as fossil fuel deliveries from Russia dry up. 

EU sanctions on Moscow for its invasion of Ukraine, which include shunning Russian oil starting in December, have prompted the Kremlin to retaliate by severely reducing supplies of natural gas.

Unexplained leaks on the undersea Nord Stream 1 and 2 gas pipelines from Russia to Germany — seen as “sabotage” by EU leaders, with suspicion falling on Moscow — have aggravated the situation.

– Sky-high bills –

Alarm is rising sharply among Europeans faced with climbing energy bills.

“It’s utterly impossible to pay,” Pascale Dumont, a baker in a Belgian town called Gedinne, told AFP after her business’s monthly electricity bill jumped tenfold, to 11,836 euros ($11,500).

“If you work it out over a year, it’s how much a house costs!” she exclaimed.

Business Europe, an EU lobby, warned that “the current state of high gas and electricity prices bears the imminent risk of production losses and shutdowns of thousands of European companies”.

The EU country on the frontline of the energy crunch is Germany, the bloc’s export powerhouse which had long been dependent on Russian gas.

After recording a jump to 10 percent inflation, its government said it will borrow 200 billion euros to shield German households and businesses from “an energy war”.

That adds to various national initiatives across the European Union totalling many hundreds of billions of euros — a hefty bill added to the one run-up during the worst of the Covid pandemic.

The European Commission is trying to leverage the Covid-era cooperation to forge a common EU approach on energy.

“Europe is facing energy blackmail by Russia, and global demand for gas is higher than supply,” EU energy commissioner Kadri Simson said.

“We need to work along the whole chain to tackle the challenge,” she said, adding that a price cap on the wholesale price of gas entering the EU “is possible” if other measures fail to bring results.

– Price cap mooted –

One core proposal with strong backing is a “cap” on non-gas electricity producers’ profits and a “contribution” from other energy majors. 

The levies — the commission refuses to call them a “windfall tax” — are calculated to raise 140 billion euros which can be spent to cushion consumers.

Another is to encourage reduced energy consumption, for instance by turning off public lighting earlier, lowering thermostats to a maximum of 19 degrees Celsius (66 degrees Fahrenheit) and lower peak-hour power use.

The Bruegel think tank in Brussels, however, said those steps are “not sufficient”.

“A more comprehensive plan needs to ensure that all countries bring forward every available supply-side flexibility, make real efforts to reduce gas and electricity demand, keep their energy markets open and pool demand to get a better deal from external gas suppliers,” it said.

Part of the problem in coming up with a more biting EU approach is the different energy mixes in member countries. 

France, for example, is largely nuclear-powered, while eastern EU countries rely on fossil fuels, and Spain gets its gas from North Africa.

Fifteen EU countries, among them France, Italy and Poland, have written a joint letter calling for a price cap on all gas imports into the bloc — covering pipeline gas from Russia but also liquified natural gas (LNG) shipments from the US and elsewhere.

An EU official briefing journalists on condition of anonymity called that idea “radical”.

The “significant risks” it carried included a sudden shortfall in gas supplies to Europe, especially from LNG suppliers diverting ships to more lucrative buyers elsewhere in the world.

One possible solution would be a centralised EU buying for gas “but the complexity of such a mechanism is such that I think in a short timeframe it is difficult to address,” the official said.

The French government vowed on Thursday to push through pension reform by the end of the winter despite fierce opposition from unions whose first major day of strikes failed to have much impact.

A nationwide day of stoppages called by the CGT union on Thursday — the first since President Emmanuel Macron was re-elected in April — caused some disruption, but was not widely followed.

Several unions, including the country’s biggest, did not take part, although all of them are gearing up for a months-long battle over efforts to raise the pension age.

Macron made raising the retirement age from its current level of 62 one of the key planks of his re-election campaign, arguing that the current system was unsustainable and too expensive.

“All the unions in France are against working up to 64 or 65 years. Because it’s stupid,” the head of the CGT union, Philippe Martinez, told France 2. 

Left-wing political parties have called their own separate rallies on October 16 to demand pay rises and an end to the planned pension changes.

Though known to be in a rush to push through the changes, Macron’s Prime Minister Elisabeth Borne announced Thursday that the government would spend another few months in consultations.

“There are important questions we want to open talks about” with other political parties, unions and employers’ groups, Borne told AFP.

“We’re starting from the assumption that we’ll be able to hold a dialogue,” she added.

A bill would be voted on “before the end of the winter”, she promised.

– Fresh elections? –

With deficits spiralling and public debt at historic highs, Macron views pushing back the pension age as one of the only ways the state can raise revenues without increasing taxes.

But his centrist party lost its majority in parliament in June, severely undermining his ability to make changes.

“If the president insists on declaring a social war on the people, we will respond with all the means at our disposal,” the parliamentary leader of the hard-left France Unbowed (LFI) party, Mathilde Panot, warned on Wednesday.

Labour Minister Olivier Dussopt said that the 44-year-old head of state would not hesitate to call fresh elections if opposition parties voted down the government over the reform.

“If all of the opposition comes together to adopt a vote of no-confidence and brings down the government, he (Macron) will let French people decide and say what sort of a majority they want,” Dussopt told the LCI channel. 

No opposition party has pledged to support the centrist minority government so far, but the conservative Republicans party might still be persuaded, observers say.

– Stoppages – 

The strike on Thursday was followed by about one in ten teachers, according to the education ministry, leading to school closures in some areas.

One in three railway workers also stopped work, according to the CGT, leading to major cancellations on key routes including Paris-Bordeaux.

The biggest of around 200 protests nationwide was expected to draw 3,000-6,000 people in Paris on Thursday afternoon, according to a police source.

Around 4,300 people marched in the southern city of Marseille. 

The strikes and demonstrations were small by historic French standards and even the last round of protests against pension reform in 2019. 

Hundreds of thousands marched in 2019 and a four-week strike on Paris transport crippled the metro system in what was the longest stoppage in decades.

“I don’t know anyone who wants to work for longer, but I don’t know anyone who thinks they are not going to work for longer,” a minister close to the president told AFP last week on condition of anonymity.

“Maybe I’m mistaken, but I’m not sure that the turnout will be as large as the unions and LFI are hoping for,” the minister said of Thursday’s day of action.

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