The EU wants a Putin whisperer

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0:17Good morning from the Financial Times. Today is Wednesday, May 20th, and this is your FT News Briefing. Europe wants to start its own negotiations with Vladimir Putin. and protests over fuel prices are erupting across Africa. Plus, Friday is Jerome Powell's last day as chair of the Federal Reserve. We'll take a look back at his term. I'm Mark Filipino, and here's the news you need to start your day.

0:52U.S.-led talks on ending the war in Ukraine have stalled out in recent months, And this is prompting European leaders to think about creating their own special envoy to negotiate with Russian President Vladimir Putin. Washington and Kiev have both expressed support for Europe to engage with Russia in parallel to the U.S.-led peace talks. And Russia appears to be open to the idea. So what happens next? Henry Foy has been reporting on this development and he joins me now. Hi, Henry. Hey, Mark. So what's the motive for this move and why now? The motive is really twofold. The first is that, as you said, the US-led push for peace talks in Ukraine has really stalled.

1:31The Iran war is now distracting US diplomats and the sort of US political machine. And the kind of stalemate on the front lines in Ukraine and the fact that both sides have dug in on their demands means there's no real movement on that track. And then secondly, the Europeans are becoming increasingly nervous that if they're not involved in this conversation, they're going to be forced to accept some kind of a deal that they don't have any say in and may well not like. So that's prompting these discussions that have sort of bubbled around for a while, but now are very much mainstream. And there's a certain amount of momentum here in setting out the frameworks for what those talks could look like, what the Europeans would want to say.

2:09And as he said, who would be the one saying it? Right. So we kind of give a little hint there that Russia is on board with it. But, you know, tell me about what the attitude of Russia and Ukraine is to this idea. Yeah, Mark, Ukrainian President Vladimir Zelensky and his administration have signaled openness to this. And the Russians, at least publicly, are saying that they also welcome it. Vladimir Putin's spokesperson has said that they think it's great if somebody wants to pick up the phone. Putin won't be the one to do it. But they're always welcome to talk to somebody from Europe who's going to be productive.

2:44Of course, the proof of the pudding here very much in the eating. We will wait to see if indeed these talks ever happen. But at the moment, at least, the music from Kiev and from Moscow is good. And indeed, Washington,

2:55FT News Briefing Team: we understand, has signaled to Europe that it is okay with Europe setting up a parallel track and doesn't think it would disrupt or take attention away from the existing talks. And I guess the success of these talks comes down to who is leading them, who's being considered for this role. Well, every capital has their own ideas, but we understand there's at least four leading candidates on a shortlist. That's Mario Draghi, the former ECB president and Italian prime minister, former German chancellor Angela Merkel, the current Finnish president Alexander Stubb, and his predecessor Suli Nenisto. Now, these are the four that we know are going to be discussed by foreign ministers of the EU in a meeting next week.

3:37FT News Briefing Team: Draghi's spokesperson declined to comment to the FT. Of course, Draghi is widely regarded across the EU capitals as a technocratic, pragmatic, solid figure that could speak on behalf of the entire continent. Angela Merkel has the best relationship with Putin, given the time she spent negotiating with him as Chancellor of Germany. That, however, counts against her in many capitals that think she was too close to the Kremlin. I mean, basically, any candidate is going to have pros and cons and supporters from some member states and detractors in another, it's hard to say exactly who might emerge from this.

4:11So Henry, what are you looking out for next? What happens from here?

4:15FT News Briefing Team: Well, we'll see if there is indeed a formal proposal from the EU to appoint any one of those four people or indeed somebody else. And then of course, we need to see if indeed Vladimir Putin is willing to talk to them. I think, Mark, there is a lot of discussion here about personalities. It may well not matter who the personality is. Vladimir Putin has been very clear on his red lines. Europeans are just keen for a seat at the table. But at the moment, with things stalled on the US track and, of course, on the ground in Ukraine, the Europeans feel they have nothing to lose by trying to get involved here and seeing if they can make a difference.

4:51Henry Foy is the FT's Brussels bureau chief. Thanks, Henry. Thanks so much, Mark.

5:00As we've been reporting for weeks, the world's facing a fuel crisis. The U.S.-Iran war continues to disrupt global oil supplies. And now many African countries are running out of fuel. The cost of diesel and petrol are surging as much as 46 % in some places. In Kenya, the situation has turned deadly. The high petrol prices sparked violent protests this week. Four people were killed. Deadly protests also hit the East African island nation of Comoros, and that actually forced the government to stop raising the price of fuel. Meanwhile, in nearby Malawi, there are no more fuel reserves, so the government is now negotiating with a pan-African bank to finance imports.

5:46Jay Powell's term as Federal Reserve Chair is officially over. His last day will be on Friday when Kevin Warsh is sworn in as the new Fed chair. Powell has led U.S. monetary policy since 2018. He was appointed by a president who later came to call him a, quote, moron, among other things. That's President Donald Trump, of course. We have a moron at the Fed. Who wouldn't be lowering interest rates right now? Trump and Powell have spent a lot of time butting heads over interest rates, and Powell will almost certainly be remembered for protecting the Fed's independence. Claire Jones is the FT's U.S.

6:24economics editor. She joins me now to talk about it. Hi, Claire. Hi, Mark. So, Claire, Powell has been the Fed chair in some interesting times. Let's jump to the beginning. How did things start for him? Well, when he took the helm, the U.S. economy was growing at a very healthy clip. You had the unemployment rate close to its lowest level in nearly two decades, and the equity market, the US housing market, they were both doing really, really well. However, because the economy was doing so well, the Fed ended up raising rates, which very quickly led Trump to ponder whether or not Powell or China's Xi Jinping was a bigger enemy to America.

7:06And the relationship carried on in a similar vein from there. You mentioned that Powell came into a relatively strong economy. no one could have predicted the shock that hit the global economy under Powell's watch when COVID hit. How did he and the Fed handle the time that followed that? Yeah. So, you know, we went from this healthy economy to a global pandemic that we hadn't really seen on a scale in a century. And that had a very big impact on financial markets. And I think the immediate response to that market panic by the Fed is something that people really see as a strength of Powell's time in charge of the Fed.

7:54We saw, you know, very sharp falls in interest rates. We saw massive bond buy-in sprees by the Fed. And that really helped cushion the economic blow from COVID. However, that plus the fiscal response, both from Donald Trump and his successor as U.S. President Joe Biden, did produce the worst wave of inflation in decades in the U.S. Right. So we've got this high period of inflation for a few years. Then Trump gets reelected in 2024. And once again, the Fed's independence is tested. The Trump administration brings a lawsuit against Powell where they allege that he mishandled the renovation of the Fed's headquarters.

8:40How did Powell handle all this? So I think when it comes to the probe, Powell took this very dramatic action up until earlier this year. He tended not to speak publicly about Trump's attacks on the Fed. Now, that changed in January in a very short video address. Powell directly called out the U.S. president and said, The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public. This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation.

9:25And this was a real game changer. It was heard not only by former Fed governors, by central bank governors across the world, it was also heard on the Hill. A lot of Republican senators backed Powell and not the US president. And particularly Tom Tillis, the Republican senator for North Carolina, said he would not allow Trump's pick to replace Powell, Kevin Walsh, to move forward to a vote on the Senate floor unless the probe was dropped. So there's a sense in which Powell has played his hand very well. You know, he's staying on as governor. And the sense that gives me is that even though Powell's won the battle, the war for the central bank's independence from the executive branch is still at risk.

10:21And this is why he is staying on. The CFT is Claire Jones in Washington, D.C. Thanks, Claire. Thanks, Mark.

10:35Before we go, we want to say a farewell to an old friend. Cheryl Brumley has been leading the FT's audio team for the last six and a half years. During her tenure, we've done some really impressive work, from launching several wildly successful shows to keeping this little daily podcast up and running. Cheryl, thank you for everything that you've done here and for being a wonderful colleague. Good luck at your next gig.

11:02This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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