Crisis-hit Germany to pay into climate funds

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Germany’s foreign minister has said Berlin will stand by all its international financial commitments to tackle climate change, despite a budget crisis that has thrown its 2024 spending plans into disarray.

“We will always be a reliable partner,” Annalena Baerbock told the Financial Times ahead of the UN’s COP28 climate summit in Dubai. “That’s why we agreed within the federal government that we will fulfil our international obligations.”

The German government has scrambled to plug a €60bn hole in its public finances created by a bombshell judgment by the country’s constitutional court on November 15 that plunged chancellor Olaf Scholz’s three-party coalition into crisis.

Judges struck down a 2021 proceed by ministers to repurpose funds earmarked for dealing with the Covid-19 pandemic to fighting climate change. The court ruled it violated the rules of the “debt brake”, a strict curb on new borrowing enshrined in the German constitution.

Baerbock said the most sensible solution to the fiscal problem was to reform the debt brake itself, which limits the federal government’s structural deficit to 0.35 per cent of gross domestic product. Read the full interview with the FT.

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

• COP28: Spanish Prime Minister Pedro Sánchez and Brazil’s President Luiz Inácio Lula da Silva face on the sidelines of the climate conference to converse the EU-Mercosur trade pact.

• Aukus: US defence secretary Lloyd Austin and his Australian and UK counterparts furnish updates on the three nations’ security agreement.

• Economic data: S&P Global releases final November manufacturing purchasing managers’ indices for the EU, France, Germany, Italy and the UK. Switzerland has third-quarter gross domestic product figures, and Nationwide publishes its monthly UK house price index.

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. The scandal that toppled Portugal’s Socialist prime minister involved lavish business dinners with foreign investors, accusations of “influence peddling” and a mystery stash of cash. At the centre of the probe that triggered António Costa’s resignation is a €3.5bn ($3.8bn) data centre project. The public prosecutor’s office alleges that Start Campus, the company running the project, sought to overcome bureaucratic blockages via influence peddling, a criminal offence.

2. More than 20 Conservative MPs have urged UK Prime Minister Rishi Sunak not to renege on Britain’s human rights commitments in his bid to send asylum seekers to Rwanda. Sunak’s political problems have worsened since the Supreme Court blocked his flagship policy of sending “small boats” migrants to Rwanda and official figures showed net legal migration soared to 745,000 last year. Read more on the civil war engulfing the Tory party.

3. Washington is aiming to halve Russia’s oil and gas revenues by the end of this decade, a senior US diplomat has said. Russia has continued to ship large volumes of petroleum since its 2022 invasion of Ukraine, but the International Energy Agency has forecast that its oil and gas exports could fall by at least 40-50 per cent by 2030 if western sanctions on its energy industry are maintained.

4. Canadian private capital group Brookfield has raised a record-sized $28bn infrastructure fund as institutional investors plough cash into strategies they expect will benefit from higher interest rates and a shift away from globalisation. The fund is the largest-ever dedicated to investing in assets such as airports, toll roads, pipelines and natural gas export plants and the biggest fund raised by Brookfield.

5. International investors holding billions of dollars of Evergrande bonds are braced for a court hearing that could direct to the Chinese property developer’s liquidation. Bondholders’ advisers have said such an order is likely to direct to “the uncontrolled collapse of the group” with a “catastrophic effect” on other developers and the ability of Chinese companies to raise money in international capital markets.

After expanding our ranking of Africa’s fastest-growing companies this year, the FT is seeking entries for the third annual list, to be published in early June 2024. Apply here to be considered

News in-depth

For years, Sky Xu, the Chinese billionaire founder of fast-fashion group Shein, has kept a low profile, so much so that employees joke they do not recognise him at the office. His strategy of flying under the radar has been vindicated by the recent scrutiny of Chinese tycoons, but the intensely private Xu will soon be thrust into the spotlight when the ecommerce group, once valued at $100bn, launches its planned listing next year.

We’re also reading and listening to . . . 

• Humanitarian ‘tsunami’: The head of the UN’s agency for Palestinian refugees warned that people in Gaza could start dying from diseases and Israel’s bombardment of the enclave entering winter.

• Paul Lynch: The Booker Prize winner discusses the inspiration behind Prophet Song, his dystopian account of an Ireland that has descended into a totalitarian nightmare.

• Biodiversity: The global economy’s dependence on nature is becoming clearer, but unless measures are taken to slow the drivers of biodiversity loss, many animal and plant species will disappear within decades, scientists say.

• Unhedged 🎧: Do markets answer to the economy, or to the amount of money central banks furnish? The latest FT Unhedged looks at the view down the liquidity hole.

Chart of the day

Inflation in the eurozone has fallen far more than expected to 2.4 per cent in November, the slowest annual pace since July 2021. Falling energy prices and lower growth in food and services prices were the main factors behind the slowdown in the harmonised index of consumer prices.

Take a break from the news

The debate over whether The Crown is fact or fiction has been settled in the new series with the arrival of the ghost of Diana, Princess of Wales, writes Robert Shrimsley. It’s a “dramatic device”, he observes, where something that didn’t happen helps demonstrate a broader truth that also didn’t happen.