Analysis-Pope's death, US aid cuts complicate Vatican's debt relief push
By Libby George, Karin Strohecker
LONDON (Reuters) -The death of Pope Francis and global aid cuts led by the United States could complicate the work of a group of experts assembled by the Vatican to bring debt relief and a fairer financing system to the world's poor.
Developing countries are already grappling with shrinking concessional financing and difficulty accessing bond markets due to the selloff triggered by U.S. President Donald Trump's sweeping tariffs.
The challenges were highlighted when the Vatican-assembled group, known as the "Jubilee Commission", presented its draft plan for debt relief and affordable finance at the IMF and World Bank spring meetings last week in Washington.
Less than a year ago, liquidity concerns for the developing world were a priority at such meetings. But in D.C., concrete, high-level talks to increase the amount of development and finance cash for emerging economies took a backseat.
"For any finance minister, central bank governor of a developing country, it is a depressing takeaway from the meetings," said Reza Baqir, head of sovereign debt advisory at Alvarez & Marsal, and a former Pakistan central bank governor.
Notably, U.S. Treasury Secretary Scott Bessent told the gathering that the world's richest nation had not yet decided whether it would meet a $4 billion commitment to a lending arm for the world's poorest countries.
Experts say the shifts could sow the seeds for slow growth and the next cascade of debt defaults.
"More countries will be forced to choose between honouring their debt and ensuring their future," Paolo Gentiloni, co-chair of the U.N. Expert Group on Debt, said at a panel discussion on the sidelines of the meeting.
Investment bank JPMorgan, in a note summarising the meetings, said that "a new default wave cannot be ruled out by next year" if risks continue rising.
'HAND GRENADE'
The group drafting the Jubilee report has postponed its plans to present the initial proposals to the Vatican on May 16 due to Pope Francis's death and the conclave to select his successor scheduled to start on May 7.
Those involved said the work - which will include proposals to help defaulted countries restructure more quickly and to expand access to affordable lending - will continue. They are playing a long game, not focusing on quick wins, Commission Chair Joseph Stiglitz said.
"It is clear that we haven't solved the problem in any way," Nobel laureate Stiglitz told Reuters about the developing world's debt problems, adding that tariff wars amount to a "hand grenade" whose explosion would hit developing nations the most.
The Commission's work this year sharply contrasts with the last "Jubilee" year in 2000, which yielded billions in historic debt forgiveness to dozens of countries, enabling them to access lending to help their economies grow.
China also lent billions to developing economies in that time, leaving a more complex slate of creditors.
Now, emerging economies that had been limping out of a default wave sparked by external shocks such as the COVID-19 pandemic and the fallout from Russia's invasion of Ukraine are facing a global economic growth slowdown.
A spike in U.S. Treasury yields has shut many out of global bond markets, and made it expensive for the others.
The World Bank lists 59 countries worldwide as in or at risk of debt distress, and that does not include some that have run into issues more recently, including countries such as Senegal, Colombia and Indonesia.
David McNair, executive director of non-profit advocacy group ONE Campaign, said some of them were putting in place "very stringent austerity measures" to avoid default.
South African Finance Minister Enoch Godongwana told Reuters that the developing world's liquidity problems were high on the agenda for the G20 top economies, which South Africa is chairing, citing an increase in the number of countries requesting IMF balance of payments assistance.
But countries with cash - like the United States, the United Kingdom, Germany and France - are cutting aid to boost defence spending. According to the OECD, official development assistance fell 7.1% in real terms last year, and is estimated to drop between 9% and 17% this year.
The ONE Campaign estimates it could shrink by 23% by 2027.
China's lending is also in flux, after the developing world's default wave and as Trump's tariffs threaten its economic recovery.
World Bank President Ajay Banga warned that if the U.S. withholds its pledged funds for the International Development Association (IDA), and Europe also cuts, the $100 billion funding round for the lending arm for the poorest countries could drop to $80-$85 billion.
Vera Songwe, chair of the Liquidity and Sustainability Facility who is working with the Jubilee Commission, said the environment for concessional finance and debt forgiveness was undeniably tougher.
But some work, such as getting global south development banks to step up funding and pressuring the IMF to include climate in debt sustainability calculations was progressing, though she added the progress was not fast enough and at scale.
S&P Global Ratings has warned countries are likely to default more frequently in the coming decade due to higher debt and rising borrowing costs. Rising costs to service debt could cut spending on education, infrastructure and health, which help economies grow.
"Sixty percent of growth is happening in the developing world, middle economies," Songwe said. "If there is slowing down, the world slows down with them."
(Reporting By Libby George and Karin Strohecker; Editing by Emelia Sithole-Matarise)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Miami Herald
an hour ago
- Miami Herald
Hopes Of Lower Tariffs Against European Cars Are Fading Fast
One of the biggest promises of President Donald J. Trump's electoral race was to impose tariffs on foreign imports, and shortly after he was inaugurated for the second time, "tariffs" quickly became one of the buzzwords of his presidency. When it comes to cars, just about anything produced outside of American borders is going to get a lot more expensive, and due to vastly complex international supply chains, even domestically produced products could be impacted. But there was a glimmer of hope that the president would change - or at least soften - his stance against America's allies in Europe. European Union leaders had publicly expressed this expectation, citing a history of cooperation. However, as the July 9 deadline for tariffs to be further increased approaches, hope is fading, reports Reuters. The publication spoke to an anonymous official who reportedly noted that hopes of relief are fading faster now that tariffs have come into effect: "10% is a sticky issue. We are pressing them, but now they are getting revenues." A second source reportedly said the EU still would not accept the baseline rate but acknowledged that it would be difficult to change or abolish the measure. The European Union has also publicly declared that it would not accept double-digit tariffs as the United Kingdom has, but U.S. Commerce Secretary Howard Lutnick has ruled out the idea of any tariffs being lowered under the 10 percent baseline. What makes this worse is that the tariffs don't only apply to finished products; steel and aluminum from Europe face a 50 percent tariff, and that doesn't even include the standalone 25 percent tariff on foreign cars. The good news is that Europe, with a trade surplus of $236 billion with the U.S., needs to continue doing business with the largest economy in the world, so your local BMW dealer isn't closing up shop anytime soon. An EU official is quoted by Reuters as saying that the 10% baseline rate would "not massively erode competitive positions, especially if others receive the same treatment." And although hope of a compromise is fading, it hasn't been extinguished just yet. As noted by CarScoops, European Commission President Ursula von der Leyen has confirmed that negotiations are still underway, despite President Trump's assertion earlier this week that the EU hadn't been fair thus far. "We're talking, but I don't feel that they're offering a fair deal yet," said President Trump. "They're either going to make a good deal or they'll just pay whatever we say they have to pay." Von der Leyen said, "It's complex, but we are advancing - that is good - and I push hard to pick up more speed. So we are mixed in the negotiations, and we will see what the end brings." The United States government is adamant that its long-standing partners are benefitting more from the status quo than America is, and that mindset means that any price increases as a result of tariffs on EU imports will likely not be small. That said, automakers are working to find ways of absorbing as much of the financial strain as possible, and one way of doing that is by pushing sales of existing inventory with incentives and employee pricing offers. Related: Mercedes CEO Has a Trump Tariff Deal That Could Reshape US-EU Auto Trade Copyright 2025 The Arena Group, Inc. All Rights Reserved.
Miami Herald
an hour ago
- Miami Herald
Report: Maserati Under Threat of Being Sold by Parent Company
According to a new report published by Reuters, the storied Italian performance powerhouse, Maserati, may be headed toward an uncertain future. The newswire states that "two sources familiar with the matter" told them that parent company Stellantis is exploring a potential sale of the Trident as part of a broader review of its massive portfolio of 14 distinct automotive brands. Discussions regarding Maserati began before Antonio Filosa was named the automaker's new CEO last month. Filosa's first day as CEO of Stellantis is Monday, June 23, where he will take the helm as Carlos Tavares's formal successor. Tavares, who led Stellantis from its inception, stepped down in December amid disappointing U.S. sales and inventory struggles and growing internal and external pressure to reassess the company's direction. Stellantis Chairman John Elkann has a plate and a half full when it comes to overseeing the company's wide range of global brands, which include the likes of Jeep, Dodge, Ram, Peugeot, and Alfa Romeo. The company is under pressure to streamline its operations and invest wisely. Stellantis is a publicly traded company listed on the stock exchanges of New York, Paris, and Milan, and financially savvy investors and analysts think that trimming down the 14-brand lineup could boost Stellantis' margins. Back in April, they brought in McKinsey & Co., a consulting firm based in New York, to examine the impact of new U.S. tariffs and explore options for Maserati and Alfa Romeo. According to the sources cited by Reuters, selling one or both brands is on the table, but any decisions are still in the early phases. In an emailed statement to Autoblog, a Maserati spokesperson provided the following statement: "A spokesperson for Stellantis stated: 'Respectfully, Maserati is not for sale.'" Additionally, a McKinsey spokesperson told Autoblog in a separate emailed statement that they "have no comment for this story." The timing of the Trident's review coincides with its efforts to position itself to navigate some significant industry challenges. Chinese brands and their affordable, tech-forward offerings are eating into the European market share. Like other European automakers, Stellantis is also trying to navigate the steep U.S. import tariffs recently imposed by President Donald Trump, which can greatly impact import brands like Maserati and the expensive motors it imports in smaller numbers. Unlike Stellantis brands like Dodge, Jeep, and Chrysler, no Maserati comes from a production facility in North America; all of Maserati's U.S. lineup is exclusively imported from Italy. Maserati's performance has been underwhelming, as it faces tough ground in its key markets. According to Maserati Chief Executive Officer Santo Ficili, about 35% to 40% of its customers are American. In 2024, Maserati posted an adjusted operating loss of €260 million ($298 million) as it sold just 11,300 units, with 4,819 of those cars reaching drivers in the United States. One of the sources who talked to Reuters said that Stellantis is starting to realize it has more brands than it can really focus on, adding that it needs to "set priorities" with the matter. They also report that some board members are split on this scenario: some think selling Maserati is the best move, while others worry that getting rid of its only luxury brand would hurt the company's reputation. This is not the first time that Maserati has been speculated to be sold. Notably, last year, comments from former Stellantis CFO Natalie Knight suggested that the Trident may be on the way out at the 14-brand automaker, which has sincebeen refuted. However, what we solidly know is that Maserati and Alfa Romeo's brand CEO said that it has a turnaround plan as soon as Filosa takes the helm on Monday, the 23rd. In a June 5 interview with Reuters, he not only denied that Stellantis was selling Maserati, but he also expressed optimism over the future of the Trident and that Filosa will back potential plans, which include new products on the horizon. "We have clear ideas about what we want to do, and we hope we can be ready very soon. Let's wait for Antonio to take up his job," Ficili told the newswire. Copyright 2025 The Arena Group, Inc. All Rights Reserved.
USA Today
2 hours ago
- USA Today
Trump 'looking at' immigration relief for farm workers after resuming ICE raids on them
"We can't put the farms out of business," Trump said June 20 in discussing his immigration enforcement efforts. President Donald Trump again is saying he wants to shield farmers from the effects of his crackdown on illegal immigration, just days after his administration reinstated workplace raids on agricultural operations. "We're looking at doing something where, in the case of good, reputable farmers, they can take responsibility for the people that they hire and let them have responsibility, because we can't put the farms out of business," Trump told reporters June 20 while traveling to his golf club in Bedminster, New Jersey. "And at the same time we don't want to hurt people that aren't criminals." The Trump administration has been sending conflicting messages on the issue. Under Trump, Immigration and Customs Enforcement has been conducting widespread raids and arresting and detaining immigrants, many of whom do not have any criminal record. Trump promised changes to protect migrants in the farming, hotel and leisure industries in a June 12 Truth Social post. "Our farmers are being hurt badly," Trump said in remarks later that day. Following those comments, Trump's administration directed immigration officials to largely pause raids on farms, hotels, restaurants and meatpacking plants. But the administration reversed course a few days later and resumed the raids. Trump has made mass deportations a cornerstone of his second administration, but he has been under pressure from businesses affected by his aggressive enforcement efforts. Brooke Rollins, Trump's Agricultural secretary, has relayed the farming industry's concerns to Trump about losing workers because of the president's mass deportations. 'You have people that have worked on farms for 20 years," Trump said June 20. "It's very hard to go in there and say 'you're coming out.' But we're going to let the farmers take responsibility, they're great people, they'll do it. They know the good and the bad.' 'I never want to hurt our farmers... they keep us happy and healthy and fat," Trump added. About 42% of farm workers in the United States between 2020 and 2022 lacked legal status, according to the U.S. Department of Homeland Security. Contributing: Joey Garrison, Reuters
