The EU plans to postpone the implementation of the Fundamental Review of the Trading Book (FRTB) to 2027, awaiting clarity on the US’s stance on financial deregulation under President Trump.

In May 2025, business activity in Europe and Japan declined, contrasting with a rebound in the U.S., amid ongoing global tariff uncertainties. Tariff hikes announced by the Trump administration on April 2 led to financial market instability and reduced global production, although many increases were later suspended for 90 days following an agreement with China. Despite these developments, global economic outlook remains uncertain as businesses adopt a cautious stance. Europe’s downturn was driven by weak domestic demand in the services sector, although its manufacturing remained resilient. The eurozone’s composite purchasing managers index dropped to 49.5, indicating contraction, contrary to expectations of growth. Conversely, U.S. activity unexpectedly improved across both manufacturing and services, with businesses stockpiling inventories, leading to higher inflationary pressures. The U.K. also experienced a decline, though its services sector showed modest recovery, while Japan’s decrease mirrored Europe’s service sector weakness. India saw a strong rebound in business activity. The OECD reported that growth among its 38 members slowed to levels not seen since the COVID-19 pandemic. The surveys suggest limited short-term economic rebound, possibly prompting further interest rate cuts in Europe, while inflation remains a concern in the U.S.

Turkish President Recep Tayyip Erdogan signaled the potential revival of a state-backed loan guarantee program that previously triggered a surge in credit growth. The Credit Guarantee Fund, which has already extended 929.5 billion liras ($23.9 billion) in loans, is being considered for reactivation to stimulate the economy.

Greek Prime Minister Kyriakos Mitsotakis stated that Turkey must revoke its longstanding threat of war, declared in 1995 as a “casus belli” over potential Greek expansion of territorial waters in the Aegean Sea, if Turkey wants to access European Union defense funds. The dispute forms part of broader tensions between NATO allies Greece and Turkey, which include disagreements over airspace, maritime boundaries, and the division of Cyprus. Mitsotakis emphasized that both Greece and Cyprus’s legitimate concerns should be considered before Turkey gains entry to EU tools like the Security Action for Europe (SAFE) arms fund. He plans to communicate this stance directly to Turkish President Tayyip Erdogan, noting recent improvements in bilateral relations. Meanwhile, a Turkish defense ministry source rejected efforts to exclude Turkey from EU defense projects, cautioning against bringing bilateral issues into multilateral contexts. Greece and Turkey are currently considering negotiations on maritime zone demarcation, with a high-level meeting planned in the coming months.

Bank of England Chief Economist Huw Pill expressed concerns about the reliability of economic forecasts amid frequent shocks and unreliable data. He suggested that traditional forecasting models may be less useful in the current volatile economic environment, emphasizing the need for policymakers to adapt their approaches.

Bank of England Deputy Governor for Financial Stability, Sarah Breeden, emphasized that the central bank should focus solely on managing financial risks from climate change and avoid involvement in political debates surrounding the UK’s net zero carbon emissions goals. Speaking at a Financial Times summit, Breeden noted that the Bank has provided guidance and tools to London-based financial firms to handle climate risks but stressed that formulating net zero policies remains the role of elected officials. This stance comes amid intensified global debate over central banks’ roles in addressing climate risks, notably after the U.S. Federal Reserve withdrew from a major international climate-focused network. In light of the UK’s legally binding net zero targets, there are ongoing political disputes about their feasibility. The Bank of England’s Prudential Regulation Authority (PRA) recently instructed banks and insurers to review their exposure to climate risks, citing challenges in quantifying potential impacts. The PRA also updated guidance on managing both physical risks (e.g., flooding) and transition-related risks from shifting away from polluting energy forms. Breeden underscored the pivotal role of insurers in accurately pricing these risks, reaffirming the significant implications climate change holds for the financial system.