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When Chancellor of the Exchequer Rachel Reeves unveils the UK budget on November 26, bond markets will quickly pass judgment, with investors deciding whether she’s done enough to put the country’s debt on a sustainable path.**media[385501]**The budget lays out the government’s plans for the economy, including how much it wants to tax and spend. This year, there’s extra tension. Reeves needs to raise around £30bn ($39.3bn) to plug a hole in government finances and establish a rainy day fund in case the fiscal outlook darkens again.Not everyone believes the chancellor can balance the books in a credible way, especially after recent reports that she has dropped plans to hike income taxes. This is where bond markets come in. If traders don’t find the budget convincing, they will sell UK debt, making it more expensive for the government to borrow and worsening its fiscal position.The stakes are high, both in terms of money and politics. Only three years ago, a budget-gone-wrong caused government borrowing costs to spike and the pound to crash, effectively ending the short-lived premiership of Liz Truss.Why are bonds key to government finances?UK government bonds, which are often called gilts because they used to be issued as paper certificates with a golden edge, play a vital role in public finances. When the government spends more than it receives in taxes, it borrows money from bond investors to make up the difference.In the first half of the year, borrowing totalled £100bn. It doesn’t come free. When the UK sells bonds, investors require the government to pay them interest. The higher the perceived risk, the higher the interest payments — or yield — have to be.When Reeves lays out her budget in parliament, investors will be trying to gauge the appropriate level of risk. If they think the chancellor’s plan puts state finances on a solid footing, they might buy gilts, pushing down yields. Likewise, a selloff in gilts would increase yields and signal that investors are losing confidence in the government’s ability to contain deficits.The amount of interest the government pays on gilts really matters. In the most recent fiscal year, it spent around £106bn paying interest on its debts, an increase from roughly £40bn a year before the pandemic, according to the Office for Budget Responsibility. That’s not far off what the government spends on education each year. The more money that goes to interest payments, the less there is for general spending.Why are UK bond yields higher than elsewhere?**media[385500]**While acting as a gauge of repayment risk, government bond yields are also influenced by a range of factors including inflation and central bank policy. If inflation is expected to remain elevated, investors will demand a higher yield on bonds to compensate for the drop in the value of their money in real terms. Similarly, expectations that the central bank will keep its base rate elevated will see investors demand higher yields as they compare potential returns in gilts to what they could earn from putting their cash to work elsewhere.Inflation has remained higher for longer in the UK than in other parts of the world, and because of this the Bank of England hasn’t cut interest rates as much as other central banks. This is part of the reason why UK yields are so much higher than other developed bond markets. Yields on 30-year gilts are trading around 5.4%, and the Bank of England’s base rate is 4%.Why are gilts so prone to sudden selloffs?The gilt market is relatively small, especially when compared to trading in US Treasuries. This means smaller traders can have an outsize impact on prices, heightening volatility.Some observers also blame the changing makeup of the gilt market. Steady demand from local pension funds, which tend to be stable, long-term investors, has fallen away as they pivot retirement pots toward risky assets like equities. The Bank of England has also switched from gobbling up large quantities of bonds to selling down its holdings. The market is now more exposed to the whims of hedge funds and foreign investors who are more likely to sell at the first sign of trouble.What’s Liz Truss got to do with all this?**media[385502]**Part of the nervousness around gilts stems from Truss’ 2022 mini-budget, which included £45bn of unfunded tax cuts at a time when the government was already paying billions of pounds to support households through an energy crisis. Her chancellor, Kwasi Kwarteng, poured fuel on the fire by promising even deeper tax cuts.The collapse was accelerated by so-called liability-driven investment strategies employed by pension funds, which were forced to sell gilts. The Bank of England needed to swoop in with government debt purchases to help restore calm.Since then, the gilt market has become more resilient. For example, pension funds using LDI strategies must now hold larger cash buffers to reduce the chance of another liquidity crisis. The Bank of England has also launched a new so-called repo facility to make it easier for these funds to raise cash in the event of future turbulence.Still, the UK’s borrowing costs are higher now than during Truss’ brief tenure. While the market expects further interest rate cuts, potentially as soon as December, this elevated starting point means a sharp rise in yields would be all the more punitive.A market gauge of volatility in long-dated interest rate swaps jumped in mid-November to the highest level since June, diverging sharply from the equivalent US metric, a sign that traders were bracing for big moves around the budget.What does history tell us?The UK doesn’t have an unblemished record when it comes to keeping its finances in check. Whereas the US, Germany and Japan have never been bailed out by the International Monetary Fund, the UK government had to ask it for a $3.9bn loan in 1976, after a surge in debt costs and sharp fall in the pound.This year, former Bank of England rate-setter Martin Weale and Conservative Party leader Kemi Badenoch drew parallels to that crisis, with Badenoch saying the UK may have to go “cap in hand” to the IMF to ask for money as long-term borrowing costs rose to the highest level since 1998. Reeves said the comparison was “not serious” and “irresponsible.”Since then, the gilt market has calmed. On Nov. 21, yields on 30-year bonds traded around 40 basis points below the 27-year high touched in September. If the package Reeves presents is seen as credible, that slide may continue, helped by reduced fiscal risk and the prospect of more Bank of England interest-rate cuts.

The United Nations Interim Force in Lebanon (UNIFIL) affirmed that the UN's decision to reduce its peacekeeping forces by a quarter in 11 operations worldwide in the coming months due to budget shortfalls will impact the force's activities in southern Lebanon. In her remarks to Qatar News Agency (QNA), UNIFIL Spokesperson Kandice Ardiel said: "We are still studying what the peacekeeping budget shortfalls will mean for UNIFIL, but we know we will have to make some difficult decisions. We are finalizing our plans, but we know this will directly impact our activities and require adjustments." "Nonetheless, we will do everything possible to mitigate the effects and will work closely with Lebanese authorities and our troop-contributing countries to implement any changes in the least disruptive way possible," she added. Concluding her remarks to QNA, she affirmed the commitment to continuing to implement the core tasks stipulated in UN Security Council Resolution 1701, and to continuing coordination with the Lebanese authorities and contributing countries to limit the repercussions of the resolution on the mission's work. The United Nations is preparing to reduce the number of peacekeeping forces worldwide by 25 percent over the coming months, or between 13,000 and 14,000 soldiers and police, due to funding shortfalls following the US halving of its contribution. The reduction includes missions in countries including the Congo, Lebanon, South Sudan, and the Central African Republic.

Lecornu faces divided parliamentBudget draft must be presented by MondayLecornu pledges cabinet of 'renewal and diversity'Sebastien Lecornu began his second stint as French prime minister under a cloud of uncertainty on Saturday, forced to pick a new cabinet to present a budget by a Monday deadline as rivals pledged to topple his government.French President Emmanuel Macron reappointed his staunch supporter late on Friday, just days after Lecornu had resigned from the post, saying there was no way to form a government capable of passing a slimmed-down 2026 budget through a deeply divided parliament.Lecornu's 27 days in office made him the shortest serving prime minister in modern French history, but there is no guarantee he will last any longer this time round.Macron's decision to reappoint Lecornu enraged some of his fiercest opponents who have argued the only way out of France's worst political crisis in decades is for the president to call fresh legislative elections or resign. Leftist, hard-left and far-right parties all said they would vote to topple Lecornu, leaving him reliant on the Socialists, whose leaders have so far kept mum on their plans.Lecornu's inbox is pressing. By Monday, he must present a draft budget bill - first to cabinet, and then on the same day to parliament. That means, at a minimum, the ministers responsible for finance, budget, and social security must be appointed by then.Neither the Elysee palace nor Lecornu's office, Matignon, gave immediate indication on when he could name his cabinet, or who could be in it.In an X post on Friday, Lecornu said that whoever joined his government would have to renounce their personal ambitions to succeed Macron in 2027, a contest that has injected instability into France's weak minority governments and fractious legislature. He pledged a cabinet of "renewal and diversity".Lecornu has not disclosed any details about what is in the draft, but he did say after he resigned that the budget deficit must be reduced to between 4.7% and 5% of economic output next year, a bigger gap than the 4.6% targeted by his predecessor. The deficit is forecast at 5.4% this year.It remains to be seen what he will do about repealing Macron's pensions reform and adding a billionaires' tax - two measures the Socialists had made their price to support his weak minority government.

Irish budget airline Ryanair Wednesday said it would slash more than 1mn winter seats in Spain over "excessive airport fees", sparking "extortion" accusations from the national airport operator.The row is the latest clash in an ongoing spat between the carrier and Spanish authorities that erupted last year after the leftist government fined Ryanair €107.8mn for "abusive practices" such as charging for hand luggage.Ryanair said in a statement that the cuts, which affect destinations including the popular Atlantic holiday island of Tenerife, were "due to excessive and uncompetitive airport fees" applied by state-owned airport operator Aena."These cuts will harm already vulnerable Spanish regional airports even more, and inevitably lead to a loss of investment, connectivity, tourism and jobs," Ryanair added, warning "many routes will be economically unviable".Aena chief executive Maurici Lucena retorted in a scathing statement that Spanish airports would "cease to function well" if they "evolved to the tune of the demands, whining, swindling and intolerable strategy of extortion of Ryanair".In January, the airline announced it was scrapping 800,000 seats on seven regional Spanish routes in response to Aena's airport fees.It has also dropped several French airports over a tax hike on air travel.In the past two years, the company has "tried to intimidate the public authorities of Germany, France, Belgium, Portugal, Italy, Greece, Austria, the Netherlands, Denmark and the United Kingdom", Lucena added.In response to last year's fine in Spain, Ryanair's group chief executive Michael O'Leary slammed Spain's far-left consumer rights minister Pablo Bustinduy as a "crazy communist".The firm then launched an advertising campaign that depicted the minister as a clown.Bustinduy has said "no pressure, no blackmail and no insult will stop me" in his defence of Spanish consumers against multinationals.