- Chocoflation: another price gouging moment ahead of Easter? Cocoa futures prices have skyrocketed above USD6,000 per ton as supply looks set to fall short of demand for the third consecutive year in 2024. However, the outlook for chocolate makers’ profitability remains solid, suggesting that consumers will be paying the higher price. With price increases still lagging behind the increase in cocoa prices, more pain is looming for chocolate lovers. To untighten cocoa markets, higher prices need to reach West African farmers to incentivize more and better production.
- Capital Markets Union: Third time’s the charm? In the 10 years since its launch, the CMU project has made very limited progress. Now EU leaders are discussing a new proposal for a CMU 3.0 to prepare the ground for the next EU legislative agenda (2024-2029). A CMU has never been more urgent as competition for capital intensifies amid higher interest rates and immense investment requirements. While single supervision remains out of the scope, it includes measures to reduce the regulatory burden and improve financing conditions for EU businesses, as well increase access to capital markets.
- There’s no such thing as a free gun. European governments have pledged to increase defense spending but meeting the 2% NATO target by 2028 will require EUR470bn in additional expenditure (including EUR150bn in Germany, EUR55bn in Italy, EUR48bn in Spain and EUR17bn in France). So far, governments have been reluctant to spell out how exactly they will increase defense spending amid aging populations and immense needs for the green transition. To put it in perspective, it would require either: (i) expenditure cuts of -8.6% in Spain, -7.7% in Germany, -6.5% in Italy and -4.8% in France; or (ii) an additional interest burden of around EUR12.1bn in 2028, if relying on debt financing alone; or (iii) if betting only on increasing tax revenues, VAT rates for instance, to go up by 0.6pps across the EU. Combining the three would distribute the financial burden between generations and within society but having guns, butter and batteries anyhow comes at a heavy price.
- India: Tapping new trade opportunities. India just signed a free-trade agreement with Switzerland, Norway, Iceland and Lichtenstein, which is likely to be ratified in early 2025. While the total boost to trade of goods is likely to be limited, Indian exports of services, chemicals, transport equipment and textiles, and Swiss exports of pharmaceuticals and metals, should benefit. Investments amounting to 0.2% of GDP per year in the coming 15 years and R&D spillovers are also expected, helping to strengthen India’s position in global supply chains. Amid rising geopolitical tensions, further FTAs could position India as an alternative to China, and unlock its significant trade potential.
What to watch
Chocoflation, third time’s the charm for the EU CMU, no such thing as a free gun and India taps new trade opportunities
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Authors
Ludovic Subran
Allianz SE
Allianz SE
Arne Holzhausen
Allianz SE
Allianz SE
Michaela Grimm
Allianz SE
Allianz SE
Francoise Huang
Allianz Trade
Allianz Trade
Nikhil Sebastian
Allianz Trade
Allianz Trade
Ano Kuhanathan
Allianz Trade
Allianz Trade