Category: 2. World

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French borrowing costs rose to their highest since March and stocks sold off for a second day on Tuesday, as investors reacted to the prospect of a government collapse as soon as next month.

Prime Minister François Bayrou on Monday called a confidence vote for September 8 over his deficit-cutting budget proposals.

Lawmakers have two weeks to “say whether they are on the side of chaos or on the side of responsibility”, Bayrou said as he addressed union members on Tuesday. “The first risk, the one from which we would not recover, is denial.”

Finance minister Éric Lombard said on Tuesday that the government “certainly was not resigned” to losing the confidence vote. But he warned that there was a risk the IMF could step in if the government were to fall next month and subsequent administrations fail to tackle the country’s finances.

“This is the risk that is in front of us . . . [that] the financial situation deteriorates, which we would like to [and] should avoid. But I can’t tell you that this risk doesn’t exist,” he told France Inter radio.

France’s 10-year borrowing costs climbed as high as 3.53 per cent, approaching the post-Eurozone crisis high set in March. They later came back a little to 3.5 per cent. The additional interest rate over Germany’s benchmark Bunds reached almost 0.8 percentage points, close to its peaks during the past year’s political crisis.

The country’s blue-chip stock index, the Cac 40, fell 1.7 per cent, adding to a 1.6 per cent decline on Monday.

“The risk the market sees is that if the government falls again, it’s complete stalemate and there’s no chance of tackling the deficit,” said Peter Schaffrik, chief European macro strategist at RBC Capital Markets.

Opposition parties in parliament, including crucial swing blocs such as the Socialists and the far-right Rassemblement National, have said they will not support the government, making it all but inevitable that Bayou’s administration will fall.

Bayrou’s proposed package of €44bn in tax rises and spending cuts for 2026, including a one-year freeze on state spending and cutting two days of national holiday, has been rejected by opposition lawmakers. Lombard said that while there was room to negotiate on some measures in the plan, the government would not compromise on its €44bn target.

No party has held a clear majority in France’s fragile parliament since President Emmanuel Macron called and lost snap elections a year ago. The government of Bayrou’s predecessor collapsed in December after a few months in power.

Emmanuel Cau, head of European equity strategy at Barclays, said the falling market was pricing in two risks on Tuesday morning: “political instability and more fiscal indiscipline”.

“The equity market was complacent,” Cau said, noting that the stock market had been rising in recent months despite signs of stress in the bond market. “A lot of this was about investors buying the European revival story,” he said.

However, “there is a limit to how much bond market stress [equities] can ignore”, Cau said. “Now we are seeing a bit of convergence between stocks and bonds.”

Domestic-facing stocks were hit particularly hard. Shares in the country’s biggest banks, seen as proxies for the wider economy, were the most affected. BNP Paribas, Société Générale and Crédit Agricole were all down 4 per cent or more.

France’s slow-rolling political crisis has seen its borrowing costs converge with Italy’s in recent months, for the first time since the global financial crisis. Lombard said France’s borrowing costs would exceed Italy’s “within 15 days” if the government lost the vote.

On Tuesday, the gap closed further, with the yield on 10-year French government bonds less than 0.1 percentage point below Italy’s.

Nicolas Trindade, a senior portfolio manager at Axa Investment Managers, said he expected French government bonds to underperform because the “likelihood of a government collapse has sharply risen, since main opposition parties have signalled they’ll vote against the Bayrou government”.

He said installing a new prime minister “would not change parliamentary arithmetics”, so any meaningful fiscal consolidation “would still be very difficult to implement”. He said a snap election “would run the risk of the far right getting an outright majority this time around”.

Mujtaba Rahman, managing director for Europe at Eurasia Group, said the firm’s base case was that the prime minister would be unseated on September 8.

The euro rallied slightly against the dollar on Tuesday, paring losses from Monday when the currency fell 0.8 per cent.

“The broader question for the euro is whether recent French news destabilises appetite for the euro more broadly, or whether this is an isolated French issue,” said Chris Turner, global head of markets research at ING.

Analysts at Barclays forecast a “virtually unchanged” French deficit over the next two years, equal to 5.6 per cent of GDP in 2025 and 5.4 per cent in 2026, after 5.8 per cent last year. The government is targeting 5.4 per cent this year and 4.6 per cent in 2026, in a four-year plan announced last month aimed at bringing France’s deficit in line with the EU’s 3 per cent limit.

The death toll from Typhoon Kajiki in Vietnam has risen to three as rescue workers battled uprooted trees and downed power lines, while widespread flooding brought chaos to the streets of the capital Hanoi.

The typhoon struck central Vietnam on Monday with winds of up to 130 kilometres per hour (80 miles per hour), tearing roofs off thousands of homes and knocking out power to more than 1.6 million people.

Authorities on Tuesday said three people had been killed and 13 injured, and warned of possible flash floods and landslides in eight provinces, as Kajiki’s torrential rains continued to wreak havoc.

Vietnam has long been affected by seasonal typhoons, but human-caused climate change is driving more intense and unpredictable weather patterns.

Flooding has cut off 27 villages in mountainous inland areas, while more than 44,000 people were evacuated as the storm approached.

Further north in Hanoi, the heavy rain flooded many streets, bringing traffic chaos on Tuesday morning.

After hitting Vietnam and weakening to a tropical depression, Kajiki swept westwards over northern Laos, bringing intense rain.

In Vietnam, more than 100 people have been killed or reported missing as a result of natural disasters in the first seven months of 2025, according to the agriculture ministry.

In September last year, Typhoon Yagi battered northern Vietnam, Laos, Thailand and Myanmar, triggering floods and landslides that killed more than 700 people and caused billions of dollars’ worth of economic losses.

Australia has given Iran’s ambassador seven days to leave the country after alleging the country’s government directed antisemitic attacks in Sydney and Melbourne.

Intelligence services linked Iran to an arson attack on a cafe in Sydney in October last year, and another on a synagogue in Melbourne in December, Prime Minister Anthony Albanese told a press conference on Tuesday.

Albanese added the two incidents were “attempts to undermine social cohesion and sow discord in our community”.

Ambassador Ahmad Sadeghi and three other officials have been ordered to leave Australia, which has withdrawn its own diplomats from Tehran. Iran has “absolutely rejected” the allegations.

Iran’s foreign ministry spokesman added the decision to expel their envoy was “driven by Australia’s domestic policies”.

However, Australian Security Intelligence Organisation (Asio) chief Mike Burgess said his teams had uncovered links “between the alleged crimes and the commanders in Iran’s Islamic Revolutionary Guard Corps, the IRGC”, following a “painstaking”, months-long investigation.

“They’re just using cut-outs, including people who are criminals and members of organised crime gangs to do their bidding or direct their bidding,” Mr Burgess told reporters.

He added that IRGC had “used a complex web of proxies to hide its involvement” in the attacks on the Lewis Continental Kitchen in Sydney on 20 October, and Melbourne’s Adass Israel Synagogue on 6 December.

Australia’s intelligence services had also found evidence Iran was likely to be behind other antisemitic incidents in Australia, which has seen attacks on Jewish schools, homes, vehicles and synagogues since the 7 October 2023 attack on Israel by Hamas, Iran’s ally, and the ensuing war in Gaza.

In the same period of time, civil society group the Islamophobic Register has also recorded a rise in Islamophobic incidents.

Police first indicated they were looking into the possibility that attacks on Jewish-linked property were being directed by “overseas actors or individuals” back in January.

The findings revealed on Tuesday were “deeply disturbing”, Albanese said, describing the two incidents as “extraordinary and dangerous acts of aggression”.

In the second incident, a number of worshippers were forced to flee as the fire took hold of the synagogue, which was built by Holocaust survivors in the 1960s.

Foreign Minister Penny Wong said it was the first time since World War Two that Australia had expelled an ambassador.

The ambassador was not found to have any links to the attacks, Mr Burgess stressed.

Wong said Australia would continue to maintain some diplomatic lines with Tehran but had suspended operations at its embassy in Iran for the safety of staff.

She also urged Australians not to travel to Iran and called for any citizens in the country to leave now if it is safe to do so.

Albanese said his government would also designate the IRGC as a terrorist organisation.

Israel’s embassy in Canberra has welcomed the moves against Iran, which Israel fought a 12-day war with in June.

“Iran’s regime is not only a threat to Jews or Israel, it endangers the entire free world, including Australia,” it said in a statement on X.

Australia has announced that it will list Iran’s Islamic Revolutionary Guard Corps (IRGC) as a terrorist group, after the country’s intelligence agency determined that it had directed at least two attacks against Australia’s Jewish community.

The prime minister, Anthony Albanese, said Australia’s domestic spy agency had “credible intelligence” that attacks against a synagogue in Melbourne and Jewish restaurant in Sydney were “directed by the IRGC.”

The Iranian ambassador to Australia, Ahmad Sadeghi, will be expelled and Australia’s embassy in Tehran will suspend operations.

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Who are the IRGC?

The Islamic Revolutionary Guard Corps are one of the most feared and powerful organisations in Iran, whose influence stretches beyond military and intelligence to politics, education and the economy.

Established after the 1979 Islamic revolution, the IRGC operates separate to – and often contrary to – Iran’s traditional military. It is an elite force, loyal to the country’s supreme leader, Ayatollah Ali Khamenei, and has grown in size and power over the decades.

With ground troops numbering more than 150,000, the IRGC also runs its own navy and air force, separate from Iran’s regular armed forces. It oversees the country’s ballistic missile programme, once regarded as the largest in the Middle East but which was widely incapacitated during Israel’s attacks on Iran’s nuclear sites in June.

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Have other countries sanctioned the IRGC?

The US designated the IRGC as a foreign terrorist organisation in 2019, during Donald Trump’s first administration. Canada followed in 2024. The EU and UK have indicated that they plan to list the IRGC but have yet to do so.

The US state department has accused the IRGC of being directly involved in terrorist plotting. In 2024, Argentina’s highest criminal court blamed the IRGC and Hezbollah for a 1994 attack against a Jewish community centre in Buenos Aires which killed 85 people. Iran has said it was not involved.

In 2020, an IRGC missile operator shot down a Ukraine Airlines flight moment after it took off from Tehran airport, killing 176 people. An IRGC official said the plane had been misidentified as a cruise missile.

In 2024, an IRGC official was among three men charged in the US over an attempted plot to kidnap and assassinate an Iranian-American journalist in New York. All three men were based in Iran and remain at large.

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How influential are the IRGC in Iran’s domestic politics?

Former IRGC officers have held key positions in Iran’s politics and the group’s mandate to protect “revolutionary values” has seen it become a powerful force in policing social and cultural issues in the country.

Overseen by the supreme leader, the IRGC is often seen as more powerful than the country’s president and are thought to have more sway on foreign policy.

The group oversees some educational institutions and has pushed research into aerospace and drone technology to advance its military capabilities. It has economic interests that span construction and telecommunications to oil and gas projects – and it’s thought the IRGC is behind the vast network of shadow tankers that has seen Iran circumvent western sanctions on its oil exports.

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What role does it play internationally?

The Quds Force is responsible for the IRGC’s overseas operations. It has sponsored and armed groups across the Middle East, including Hamas in Gaza, Hezbollah in Lebanon and the Houthis in Yemen.

Known in Tehran as the Axis of Resistance, these groups helped to push Iran’s influence abroad, but have been dismantled and degraded to varying degrees over the course of almost two years of conflict with Israel, after the 7 October attacks and the start of the war in Gaza.

The Quds force itself has also suffered major blows, with many of its most senior commanders killed in Israel’s attacks on Iran in June. Qassem Suleimani, the feared and renowned commander of the Quds force, was killed by a US drone strike in 2020.

The current operational environment in Gaza remains extremely challenging. The UN has enough food in the region or en route to feed the entire Gaza population for at least three months. However, access constraints have meant that at least 14,000 tons of food aid were offloaded by hungry crowds before they reached the warehouses. The supplies had been procured through the UN-coordinated aid mechanism and collected from border crossings in July.

The UN estimates that more than 62,000 tonnes of food are required each month to cover basic humanitarian needs. However, the food assistance that has entered Gaza in the months of June and July was less than a quarter of that minimum amount.

The UN has repeatedly spoken out about and documented the myriad access constraints they face, including the closure of all but one border crossing, long delays in obtaining Israeli clearances and the limited number of designated safe routes for humanitarian convoys. These are not just statements. They are backed by video footage and first-hand reporting that show the conditions UN convoys face when trying to transport supplies. Even where routes exist, they are often overcrowded due to repeated displacement orders and delays at Israeli checkpoints. This exposes convoys to large crowds of people who, pushed to the brink of starvation, wait desperately for aid trucks in the hope of securing any food they can find.

Urgently needed relief supplies are stuck

CARE continues to provide lifesaving assistance through its primary healthcare centre in Deir Al-Balah and by trucking water to communities with little to no access. However, since 2 March, when Israel imposed an 11-week total siege before reopening a single border crossing with strict controls over what goods can enter and when, we have been unable to bring in any supplies. This includes desperately needed medicines, baby kits, hygiene kits and food packages, which remain stuck in warehouses in the West Bank, Jordan and Egypt.

MELBOURNE, Australia — Australian Prime Minister Anthony Albanese accused Iran of directing at least two antisemitic attacks in Australia and said the country is expelling the Iranian ambassador on Tuesday.

Albanese said that Australian intelligence services had connected Iran to attacks on a Sydney restaurant and a Melbourne mosque.

There has been a steep rise in antisemitic events in the two cities since the Israel-Hamas war began in 2023.

“ASIO has gathered enough credible intelligence to reach a deeply disturbing conclusion. The Iranian government directed at least two of these attacks. Iran has sought to disguise its involvement but ASIO assesses it was behind the attacks,” Albanese told reporters, referring to the main domestic spy agency.

India is holding firm on its long-standing ties to Moscow as US President Donald Trump’s administration readies punitive tariffs over New Delhi’s purchases of Russian oil.

Hopes are dimming that Trump, who threatened to double levies on Indian exports to 50 per cent last month over New Delhi’s purchases of Russian oil, will lower or postpone the tariffs before a Wednesday deadline.

A planned visit to New Delhi by US trade negotiators this week was called off, Indian officials said. A draft notice published on Monday said the extra tariff would hit Indian goods after at 12.01am on Wednesday, eastern US time.

Amid the stalemate with Washington, top Indian officials have made a series of recent trips to Russia. Foreign minister Subrahmanyam Jaishankar met President Vladimir Putin last week in Moscow, where Indian national security adviser Ajit Doval was also warmly received. Putin is expected to visit India later this year.

New Delhi and Washington are playing at “who will blink first”, said Chietigj Bajpaee, senior research fellow for South Asia at Chatham House.

Meanwhile, India has continued buying Russian crude, albeit in lesser quantities. Russian crude loadings to India are currently at about 1mn barrels per day, according to ship tracking data compiled by Kpler, down from as high as 2mn b/d earlier this year.

“There’s no official directive from the Indian government to cut Russian volumes — so for now, it’s business as usual,” Sumit Ritolia, lead analyst at trade consultancy Kpler in New Delhi.

But he added that refiners were “being cautious” and were “actively exploring alternatives” to Russian oil, pointing to possible supplies from the US, west Africa, Latin America and the Middle East.

Ritolia added that it was still too early to confirm a rerouting trend, noting that August crude exports from Russia to India would only be reflected in shipment data from next month onwards.

New Delhi has struck a defiant tone in the face of Trump’s tariff threats, saying that “the targeting of India is unjustified and unreasonable”.

But trade minister Piyush Goyal told a forum in the Indian capital on Friday that Prime Minister Narendra Modi’s government would keep an “open mind, a positive outlook and the confidence that India-US relationship is very consequential . . . to both the countries”.

India has become Moscow’s largest buyer of seaborne crude since Putin’s full-scale invasion of Ukraine in 2022, importing nearly $140bn worth of Russian oil, government data shows. Much of that supply is processed by Indian refiners into petrol and diesel that is sold into domestic and international markets.

Western countries — including the US — encouraged the trade, which helped maintain global market prices, as long as it remained below the G7 price cap set to limit Russian revenues.

But Trump administration officials such as trade adviser Peter Navarro have since accused Indian companies of being “profiteers” of Moscow’s war.

“The US is questioning our sovereignty to decide who to buy oil from,” said Amitabh Singh, associate professor at Jawaharlal Nehru University’s Centre for Russian and Central Asian Studies. “We would be happy if Saudi Arabia or Iraq give us at the same price, or at a lesser price, than Russia, because this is purely a commercial decision.”

The US is India’s largest trading partner, with two-way trade in goods worth more than $130bn in the financial year ended in March — about double the comparable figure for Russia, at $68bn, of which $50bn was Indian oil imports.

Instead, Moscow’s significance to New Delhi is underpinned by strategic relations that date back to the cold war.

“There is a political comfort in the relationship with Russia which is quite different from the flip-flops and the cyclical relationships we’ve had with the Americans,” said Pankaj Saran, former Indian ambassador to Russia.

Russia has long been India’s largest supplier of arms from fighter jets to warships, accounting for more than 60 per cent of New Delhi’s weapons purchases since 2000, according to the Stockholm International Peace Research Institute.

Indian officials have defended their right to buy Russian oil, insisting that it has never been the direct subject of sanctions, unlike Iran and Venezuela. Should India stop buying Russian oil, New Delhi could face an additional $3bn-5bn in annual import costs, according to analysts.

In Moscow, Jaishankar said New Delhi was “very perplexed” by the US position, noting that Washington had not singled out other major buyers of Russian oil such as China.

To Indian officials, such inconsistency points to a broader fallout between the sides and a cooling of the personal relationship between Modi and Trump, who not long ago hailed one another as “friends”.

“We are the country, which, actually, the Americans have said for the last few years that we should do everything to stabilise the world energy market, including buying oil from Russia,” he said.

Data visualisation by Haohsiang Ko in Hong Kong

KYIV: US President Donald Trump’s special envoy Keith Kellogg said in Kyiv on Monday that officials are “working very, very hard” on efforts to end the three-year war between Russia and Ukraine, as a lack of progress fuels doubts about whether a peace settlement could be on the horizon.

Officials are “hoping to get to a position where, in the near term, we have, with a lack of a better term, security guarantees” that address Ukraine’s fears of another invasion by Russia in the future, Kellogg said.

“That’s a work in progress,” Kellogg said of the potential security guarantees after attending Ukraine’s annual National Prayer Breakfast along with politicians, business leaders and diplomats.

A week ago, Trump said he had set in motion arrangements for direct peace talks between Russian President Vladimir Putin and Zelensky. But Russian officials have signaled that such a summit won’t happen any time soon.

Trump said Friday he expects to decide on next steps in two weeks if direct talks aren’t scheduled.

A stream of high-ranking visitors to Kyiv in recent days reflects concerns around the US-led peace drive.

Canadian Prime Minister Mark Carney visited Kyiv on Sunday for meetings with Zelensky, pledging 2 billion Canadian dollars in aid, and NATO Secretary General Mark Rutte was in the Ukrainian capital on Friday. Germany’s vice chancellor and finance minister, Lars Klingbeil, arrived in Kyiv on Monday to discuss “how Germany can best support Ukraine in a possible peace process.”

Putin spoke on the phone with Iranian President Masoud Pezeshkian on Monday, the Kremlin said. Russia and Iran have close relations, and Putin has also deepened ties with China, India and North Korea as Western countries have sided with Ukraine in the war.

Putin and Pezeshkian are expected to meet next week when China hosts the Shanghai Cooperation Organization’s annual summit, in Tianjin.

Germany, Norway vow more help for Ukraine

Klingbeil, the German vice chancellor, told Zelensky that Ukraine’s allies have to “talk about what happens if President Putin does not relent, if he wants to continue the war.”

Germany will continue to stand by Ukraine, he said, echoing sentiments by Norwegian Prime Minister Jonas Gahr Store earlier in the day.

Norway’s multibillion-dollar military and civilian support for Ukraine’s fight to defeat Russia’s invasion will stretch into next year, Store said in Kyiv. He said he will propose to the Norwegian Parliament spending $8.45 billion on Ukraine next year.

Store, whose country borders Russia, told a news conference with Zelensky that Ukraine is “defending a critical principle on the European level” by refusing to accept Russia’s seizure of territory.

Analysts say Putin thinks he can outlast Western governments’ commitment to Ukraine and use his bigger army to capture more Ukrainian land while peace efforts are under discussion.

Norway on Sunday pledged about 7 billion kroner ($695 million) toward air defense systems for Ukraine. Norway and Germany are jointly funding two US-made Patriot anti-missile systems, including missiles, with Norway also helping procure air defense radar, Store said.

Drone strikes continue

Ukraine’s Air Force said Russia launched 104 strike and decoy drones overnight, targeting the country’s north and east. There were no immediate reports of damage or casualties.

Ukraine has continued long-range drone attacks on Russia, hitting oil refineries, armories and transport hubs and causing commercial flight disruption during the summer vacation period.

On Sunday, an Egyptian plane carrying Russian tourists from Sharm El Sheikh to St. Petersburg diverted to Tallinn because the Russian city’s international airport had temporarily closed due to a drone attack, the Estonian daily Postimees reported.

Meanwhile, the Russian Defense Ministry reported intercepting 23 Ukrainian drones overnight and Monday morning over seven Russian regions, both on or near the border with Ukraine and deeper inside Russia.