LONDON — Reza Pahlavi was in the United States as a student in 1979 when his father, the last shah of Iran, was toppled in a revolution. He has not set foot inside Iran since, though his monarchist supporters have never stopped believing that one day their “crown prince” will return.  As anti-regime demonstrations fill the streets of more than 100 towns and cities across the country of 90 million people, despite an internet blackout and an increasingly brutal crackdown, that day may just be nearing.   Pahlavi’s name is on the lips of many protesters, who chant that they want the “shah” back. Even his critics — and there are plenty who oppose a return of the monarchy — now concede that Pahlavi may prove to be the only figure with the profile required to oversee a transition.  The global implications of the end of the Islamic Republic and its replacement with a pro-Western democratic government would be profound, touching everything from the Gaza crisis to the wars in Ukraine and Yemen, to the oil market.  Over the course of three interviews in the past 12 months in London, Paris and online, Pahlavi told POLITICO how Iran’s Supreme Leader Ayatollah Ali Khamenei could be overthrown. He set out the steps needed to end half a century of religious dictatorship and outlined his own proposal to lead a transition to secular democracy. Nothing is guaranteed, and even Pahlavi’s team cannot be sure that this current wave of protests will take down the regime, never mind bring him to power. But if it does, the following is an account of Pahlavi’s roadmap for revolution and his blueprint for a democratic future.  POPULAR UPRISING  Pahlavi argues that change needs to be driven from inside Iran, and in his interview with POLITICO last February he made it clear he wanted foreign powers to focus on supporting Iranians to move against their rulers rather than intervening militarily from the outside.  “People are already on the streets with no help. The economic situation is to a point where our currency devaluation, salaries can’t be paid, people can’t even afford a kilo of potatoes, never mind meat,” he said. “We need more and more sustained protests.” Over the past two weeks, the spiraling cost of living and economic mismanagement have indeed helped fuel the protest wave. The biggest rallies in years have filled the streets, despite attempts by the authorities to intimidate opponents through violence and by cutting off communications. Pahlavi has sought to encourage foreign financial support for workers who will disrupt the state by going on strike. He also called for more Starlink internet terminals to be shipped into Iran, in defiance of a ban, to make it harder for the regime to stop dissidents from communicating and coordinating their opposition. Amid the latest internet shutdowns, Starlink has provided the opposition movements with a vital lifeline. As the protests gathered pace last week, Pahlavi stepped up his own stream of social media posts and videos, which gain many millions of views, encouraging people onto the streets. He started by calling for demonstrations to begin at 8 p.m. local time, then urged protesters to start earlier and occupy city centers for longer. His supporters say these appeals are helping steer the protest movement. Reza Pahlavi argues that change needs to be driven from inside Iran. | Salvatore Di Nolfi/EPA The security forces have brutally crushed many of these gatherings. The Norway-based Iranian Human Rights group puts the number of dead at 648, while estimating that more than 10,000 people have been arrested. It’s almost impossible to know how widely Pahlavi’s message is permeating nationwide, but footage inside Iran suggests the exiled prince’s words are gaining some traction with demonstrators, with increasing images of the pre-revolutionary Lion and Sun flag appearing at protests, and crowds chanting “javid shah” — the eternal shah. DEFECTORS Understandably, given his family history, Pahlavi has made a study of revolutions and draws on the collapse of the Soviet Union to understand how the Islamic Republic can be overthrown. In Romania and Czechoslovakia, he said, what was required to end Communism was ultimately “maximum defections” among people inside the ruling elites, military and security services who did not want to “go down with the sinking ship.”  “I don’t think there will ever be a successful civil disobedience movement without the tacit collaboration or non-intervention of the military,” he said during an interview last February.  There are multiple layers to Iran’s machinery of repression, including the hated Basij militia, but the most powerful and feared part of its security apparatus is the Islamic Revolutionary Guard Corps. Pahlavi argued that top IRGC commanders who are “lining their pockets” — and would remain loyal to Khamenei — did not represent the bulk of the organization’s operatives, many of whom “can’t pay rent and have to take a second job at the end of their shift.”  “They’re ultimately at some point contemplating their children are in the streets protesting … and resisting the regime. And it’s their children they’re called on to shoot. How long is that tenable?” Pahlavi’s offer to those defecting is that they will be granted an amnesty once the regime has fallen. He argues that most of the people currently working in the government and military will need to remain in their roles to provide stability once Khamenei has been thrown out, in order to avoid hollowing out the administration and creating a vacuum — as happened after the 2003 U.S.-led invasion of Iraq.  Only the hardline officials at the top of the regime in Tehran should expect to face punishment.  In June, Pahlavi announced he and his team were setting up a secure portal for defectors to register their support for overthrowing the regime, offering an amnesty to those who sign up and help support a popular uprising. By July, he told POLITICO, 50,000 apparent regime defectors had used the system.  His team are now wary of making claims regarding the total number of defectors, beyond saying “tens of thousands” have registered. These have to be verified, and any regime trolls or spies rooted out. But Pahlavi’s allies say a large number of new defectors made contact via the portal as the protests gathered pace in recent days.  REGIME CHANGE In his conversations with POLITICO last year, Pahlavi insisted he didn’t want the United States or Israel to get involved directly and drive out the supreme leader and his lieutenants. He always said the regime would be destroyed by a combination of fracturing from within and pressure from popular unrest.  He’s also been critical of the reluctance of European governments to challenge the regime and of their preference to continue diplomatic efforts, which he has described as appeasement. European powers, especially France, Germany and the U.K., have historically had a significant role in managing the West’s relations with Iran, notably in designing the 2015 nuclear deal that sought to limit Tehran’s uranium enrichment program.  But Pahlavi’s allies want more support and vocal condemnation from Europe. U.S. President Donald Trump pulled out of the nuclear deal in his first term and wasted little time on diplomacy in his second. He ordered American military strikes on Iran’s nuclear facilities last year, as part of Israel’s 12-day war, action that many analysts and Pahlavi’s team agree leaves the clerical elite and its vast security apparatus weaker than ever.  U.S. President Donald Trump pulled out of the nuclear deal in his first term and wasted little time on diplomacy in his second. | Pool photo by Bonnie Cash via EPA Pahlavi remains in close contact with members of the Trump administration, as well as other governments including in Germany, France and the U.K. He has met U.S. Secretary of State Marco Rubio several times and said he regards him as “the most astute and understanding” holder of that office when it comes to Iran since the 1979 revolution.  In recent days Trump has escalated his threats to intervene, including potentially through more military action if Iran’s rulers continue their crackdown and kill large numbers of protesters.  On the weekend Pahlavi urged Trump to follow through. “Mr President,” he posted on X Sunday. “Your words of solidarity have given Iranians the strength to fight for freedom,” he said. “Help them liberate themselves and Make Iran Great Again!” THE CARETAKER KING  In June Pahlavi announced he was ready to replace Khamenei’s administration to lead the transition from authoritarianism to democracy.   “Once the regime collapses, we have to have a transitional government as quickly as possible,” he told POLITICO last year. He proposed that a constitutional conference should be held among Iranian representatives to devise a new settlement, to be ratified by the people in a referendum.  The day after that referendum is held, he told POLITICO in February, “that’s the end of my mission in life.”  Asked if he wanted to see a monarchy restored, he said in June: “Democratic options should be on the table. I’m not going to be the one to decide that. My role however is to make sure that no voice is left behind. That all opinions should have the chance to argue their case — it doesn’t matter if they are republicans or monarchists, it doesn’t matter if they’re on the left of center or the right.”  One option he hasn’t apparently excluded might be to restore a permanent monarchy, with a democratically elected government serving in his name.  Pahlavi says he has three clear principles for establishing a new democracy: protecting Iran’s territorial integrity; a secular democratic system that separates religion from the government; and “every principle of human rights incorporated into our laws.” He confirmed to POLITICO that this would include equality and protection against discrimination for all citizens, regardless of their sexual or religious orientation.  COME-BACK CAPITALISM  Over the past year, Pahlavi has been touring Western capitals meeting politicians as well as senior business figures and investors from the world of banking and finance. Iran is a major OPEC oil producer and has the second biggest reserves of natural gas in the world, “which could supply Europe for a long time to come,” he said.  “Iran is the most untapped reserve for foreign investment,” Pahlavi said in February. “If Silicon Valley was to commit for a $100 billion investment, you could imagine what sort of impact that could have. The sky is the limit.”  What he wants to bring about, he says, is a “democratic culture” — even more than any specific laws that stipulate forms of democratic government. He pointed to Iran’s past under the Pahlavi monarchy, saying his grandfather remains a respected figure as a modernizer.  “If it becomes an issue of the family, my grandfather today is the most revered political figure in the architect of modern Iran,” he said in February. “Every chant of the streets of ‘god bless his soul.’ These are the actual slogans people chant on the street as they enter or exit a soccer stadium. Why? Because the intent was patriotic, helping Iran come out of the dark ages. There was no aspect of secular modern institutions from a postal system to a modern army to education which was in the hands of the clerics.”   Pahlavi’s father, the shah, brought in an era of industrialization and economic improvement alongside greater freedom for women, he said. “This is where the Gen Z of Iran is,” he said. “Regardless of whether I play a direct role or not, Iranians are coming out of the tunnel.”  Conversely, many Iranians still associate his father’s regime with out-of-touch elites and the notorious Savak secret police, whose brutality helped fuel the 1979 revolution. NOT SO FAST  Nobody can be sure what happens next in Iran. It may still come down to Trump and perhaps Israel.  Anti-regime demonstrations fill the streets of more than 100 towns and cities across the country of 90 million people. | Neil Hall/EPA Plenty of experts don’t believe the regime is finished, though it is clearly weakened. Even if the protests do result in change, many say it seems more likely that the regime will use a mixture of fear tactics and adaptation to protect itself rather than collapse or be toppled completely.  While reports suggest young people have led the protests and appear to have grown in confidence, recent days have seen a more ferocious regime response, with accounts of hospitals being overwhelmed with shooting victims. The demonstrations could still be snuffed out by a regime with a capacity for violence.  The Iranian opposition remains hugely fragmented, with many leading activists in prison. The substantial diaspora has struggled to find a unity of voice, though Pahlavi tried last year to bring more people on board with his own movement.  Sanam Vakil, an Iran specialist at the Chatham House think tank in London, said Iran should do better than reviving a “failed” monarchy. She added she was unsure how wide Pahlavi’s support really was inside the country. Independent, reliable polling is hard to find and memories of the darker side of the shah’s era run deep. But the exiled prince’s advantage now may be that there is no better option to oversee the collapse of the clerics and map out what comes next. “Pahlavi has name recognition and there is no other clear individual to turn to,” Vakil said. “People are willing to listen to his comments calling on them to go out in the streets.”

Donald Trump started his second term by calling the European Union an “atrocity” on trade. He said it was created to “screw” Americans. As he imposed the highest tariffs in a century, he derided Europe as “pathetic.” And to round off the year, he slammed the continent as “weak” and “decaying.” In the midst of all this, Ursula von der Leyen, the EU’s top official, somehow summoned the composure to fly to Trump’s Scottish golf resort to smile and shake hands on a one-sided trade deal that will inflict untold pain on European exporters. She even managed a thumbs up in the family photo with Trump afterwards. Yes, it’s been one hell of a year for the world’s biggest trading relationship. The economic consequences will take years to materialize — but the short-term impact is manifest: in forcing Europe to face up to its overreliance on the U.S. security umbrella and find new friends to trade with. With a warning that the following might trigger flashbacks, we take you through POLITICO’s coverage of Europe’s traumatic trade year at the hands of Trump: JANUARY As Trump returns to the White House, we explore how America’s trading partners are wargaming his trade threats. The big idea? Escalate to de-escalate. It’s a playbook we later saw unfold in Trump’s clashes with China and Canada. But, in the event, the EU never dares to escalate. Trump’s return does galvanize the EU into advancing trade deals with other partners — like Mexico or Latin America’s Mercosur bloc. “Europe will keep seeking cooperation — not only with our long-time like-minded friends, but with any country we share interests with,” von der Leyen tells the World Economic Forum the day after Trump is sworn in. FEBRUARY As Trump announces that he will reimpose steel and aluminum tariffs, von der Leyen vows a “firm and proportionate response.” The bloc has strengthened its trade defenses since his first term, and needs to be ready to activate them, advises former top Commission trade official Jean-Luc Demarty: “Especially with a personality like Trump, if we don’t react, he’ll trample us.” That begs the question as to whether trade wars are as easy to win, as Trump likes to say. The short answer is, of course, “no.” Trade Commissioner Maroš Šefčovič, meanwhile, packs a suitcase full of concessions on his first mission to Washington. At the end of the month, Brussels threatens to use its trade “bazooka” — a trade-defense weapon called the Anti-Coercion Instrument — after Trump says the European Union was created to “screw” America. MARCH We called it early with this cover story by Nicholas Vinocur and Camille Gijs: Trump wants to destroy the EU — and rebuild it in his image. As Trump’s steel tariffs enter force, Brussels announces retaliatory measures that far exceed those it imposed in his first term. And, as he builds up to his “Liberation Day” tariff announcement, the EU signals retaliation extending beyond goods to services such as tech and banking. (None of these are implemented.) APRIL “They rip us off. It’s so sad to see. It’s so pathetic,” Trump taunts the EU as he throws it into the sin bin along with China, Japan, Taiwan and Korea. In his Liberation Day announcement in the White House Rose Garden, Trump whacks the EU with a 20 percent “reciprocal” tariff. Von der Leyen’s response the next morning is weak: She says only that the EU is “prepared to respond.” That’s because, even though the EU has strengthened its trade armory, its 27 member countries can’t agree to deploy it. The bloc nonetheless busies itself with drawing up a retaliation list of goods made in states run by Trump’s Republican allies — including trucks, cigarettes and ice cream. MAY The EU’s hit list gets longer in response to Trump’s Liberation Day tariffs — with planes and automobiles targeted in a €100 billion counterstrike that looks scary on paper but is never acted on.  We report exclusively that Brussels is ramping up contacts with a Pacific trade group called the CPTPP. And we assess the chances of Trump pressuring the EU into a big, beautiful trade deal by threatening to raise duties on European exports to 50 percent. The verdict? Dream on!  JUNE The setting shifts to the Canadian Rockies — where a G7 summit takes on a G6 vs. Trump dynamic as other leaders seek ways to cooperate with him on Russia and China even as he pummels them with tariffs. Von der Leyen tries her best, turning hawkish on China in a bid to find common ground. Back in Brussels, at a European leaders’ summit, von der Leyen announces her pivot to Asia — floating the idea of a world trade club without the U.S. JULY As the clock counts down to Trump’s July 9 deal deadline, the lack of unity among the EU’s 27 member countries undermines its credibility as a negotiating partner to be reckoned with. There’s still hope that the EU can lock in a 10 percent tariff, but should it take the deal or leave it? The deadline slips and, as talks drag on, it looks more likely that the EU will end up with a 15 percent baseline tariff — far higher than Europe had feared at the start of Trump’s term. Brussels is still talking about retaliation but … yeah … you already know that won’t happen. With Trump in Scotland for a golfing weekend, von der Leyen jets in to shake hands on a historic, but one-sided trade deal at his Turnberry resort. Koen Verhelst also flies in to get the big story. “It was heavy lifting we had to do,” von der Leyen said, stressing that the 15 percent tariff would be a ceiling. AUGUST Despite the thumbs-up in Turnberry, recriminations soon fly that the EU has accepted a bad deal. EU leaders defend it as the best they could get, given Europe’s reliance on the U.S. to guarantee its security. The two sides come out with a joint statement spelling out the terms — POLITICO breaks it down. Not only does the EU come off worse in the Turnberry deal, but it also sacrifices its long-term commitment to rules-based trade in return for Trump’s uncertain support for Ukraine. The realization slowly dawns that Europe’s humiliation could be profound and long-lasting. With the ink barely dry on the accord, Trump takes aim at digital taxes and regulation that he views as discriminatory. It’s a blast that is clearly aimed at Brussels. SEPTEMBER The torrent of trade news slows — allowing Antonia Zimmermann to travel to Ireland’s “Viagra Village” to report how Trump’s drive to reshore drug production threatens Europe’s top pharmaceuticals exporter. OCTOBER EU leaders resist Trump’s pressure to tear up the bloc’s business rules, instead trying to present a red tape-cutting drive pushed by von der Leyen as a self-generated reform that has the fringe benefit of addressing U.S. concerns.    NOVEMBER Attention shifts to Washington as the U.S. Supreme Court hears challenges to Trump’s sweeping tariffs. The justices are skeptical of his invocation of emergency powers to justify them. Even Trump appointees on the bench subject his lawyer to tough questioning.  A row flares on the first visit to Brussels by U.S. Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer. Lutnick presses for concessions on EU digital regulation in exchange for possible tariff relief on steel. “Blackmail,” is the counterblast from Teresa Ribera, the EU’s top competition regulator. DECEMBER The year ends as it started, with another Trump broadside against Europe and its leaders. “I think they’re weak,” he tells POLITICO. “They don’t know what to do on trade, either.”

BRUSSELS — European banks and other finance firms should decrease their reliance on American tech companies for digital services, a top national supervisor has said. In an interview with POLITICO, Steven Maijoor, the Dutch central bank’s chair of supervision, said the “small number of suppliers” providing digital services to many European finance companies can pose a “concentration risk.” “If one of those suppliers is not able to supply, you can have major operational problems,” Maijoor said. The intervention comes as Europe’s politicians and industries grapple with the continent’s near-total dependence on U.S. technology for digital services ranging from cloud computing to software. The dominance of American companies has come into sharp focus following a decline in transatlantic relations under U.S. President Donald Trump. While the market for European tech services isn’t nearly as developed as in the U.S. — making it difficult for banks to switch — the continent “should start to try to develop this European environment” for financial stability and the sake of its economic success, Maijoor said. European banks being locked in to contracts with U.S. providers “will ultimately also affect their competitiveness,” Maijoor said. Dutch supervisors recently authored a report on the systemic risks posed by tech dependence in finance. Dutch lender Amsterdam Trade Bank collapsed in 2023 after its parent company was placed on the U.S. sanctions list and its American IT provider withdrew online data storage services, in one of the sharpest examples of the impact on companies that see their tech withdrawn. Similarly a 2024 outage of American cybersecurity company CrowdStrike highlighted the European finance sector’s vulnerabilities to operational risks from tech providers, the EU’s banking watchdog said in a post-mortem on the outage. In his intervention, Maijoor pointed to an EU law governing the operational reliability of banks — the Digital Operational Resilience Act (DORA) — as one factor that may be worsening the problem. Those rules govern finance firms’ outsourcing of IT functions such as cloud provision, and designate a list of “critical” tech service providers subject to extra oversight, including Amazon Web Services, Google Cloud, Microsoft and Oracle. DORA, and other EU financial regulation, may be “inadvertently nudging financial institutions towards the largest digital service suppliers,” which wouldn’t be European, Maijoor said. “If you simply look at quality, reliability, security … there’s a very big chance that you will end up with the largest digital service suppliers from outside Europe,” he said. The bloc could reassess the regulatory approach to beat the risks, Maijoor said. “DORA currently is an oversight approach, which is not as strong in terms of requirements and enforcement options as regular supervision,” he said. The Dutch supervisors are pushing for changes, writing that they are examining whether financial regulation and supervision in the EU creates barriers to choosing European IT providers, and that identified issues “may prompt policy initiatives in the European context.” They are asking EU governments and supervisors “to evaluate whether DORA sufficiently enhances resilience to geopolitical risks and, if not, to consider issuing further guidance,” adding they “see opportunities to strengthen DORA as needed,” including through more enforcement and more explicit requirements around managing geopolitical risks. Europe could also set up a cloud watchdog across industries to mitigate the risks of dependence on U.S. tech service providers, which are “also very important for other parts of the economy like energy and telecoms,” Maijoor said. “Wouldn’t there be a case for supervision more generally of these hyperscalers, cloud service providers, as they are so important for major parts of the economy?” The European Commission declined to respond.

The discussion surrounding the digital euro is strategically important to Europe. On Dec. 12, the EU finance ministers are aiming to agree on a general approach regarding the dossier. This sets out the European Council’s official position and thus represents a major political milestone for the European Council ahead of the trilogue negotiations. We want to be sure that, in this process, the project will be subject to critical analysis that is objective and nuanced and takes account of the long-term interests of Europe and its people. > We do not want the debate to fundamentally call the digital euro into question > but rather to refine the specific details in such a way that opportunities can > be seized. We regard the following points as particularly important: * maintaining European sovereignty at the customer interface; * avoiding a parallel infrastructure that inhibits innovation; and * safeguarding the stability of the financial markets by imposing clear holding limits. We do not want the debate to fundamentally call the digital euro into question but rather to refine the specific details in such a way that opportunities can be seized and, at the same time, risks can be avoided. Opportunities of the digital euro:  1. European resilience and sovereignty in payments processing: as a public-sector means of payment that is accepted across Europe, the digital euro can reduce reliance on non-European card systems and big-tech wallets, provided that a firmly European design is adopted and it is embedded in the existing structures of banks and savings banks and can thus be directly linked to customers’ existing accounts. 2. Supplement to cash and private-sector digital payments: as a central bank digital currency, the digital euro can offer an additional, state-backed payment option, especially when it is held in a digital wallet and can also be used for e-commerce use cases (a compromise proposed by the European Parliament’s main rapporteur for the digital euro, Fernando Navarrete). This would further strengthen people’s freedom of choice in the payment sphere. 3. Catalyst for innovation in the European market: if integrated into banking apps and designed in accordance with the compromises proposed by Navarrete (see point 2), the digital euro can promote innovation in retail payments, support new European payment ecosystems, and simplify cross-border payments. > The burden of investment and the risk resulting from introducing the digital > euro will be disproportionately borne by banks and savings banks. Risks of the current configuration: 1. Risk of creating a gateway for US providers: in the configuration currently planned, the digital euro provides US and other non-European tech and payment companies with access to the customer interface, customer data and payment infrastructure without any of the regulatory obligations and costs that only European providers face. This goes against the objective of digital sovereignty. 2. State parallel infrastructures weaken the market and innovation: the European Central Bank (ECB) is planning not just two new sets of infrastructure but also its own product for end customers (through an app). An administrative body has neither the market experience nor the customer access that banks and payment providers do. At the same time, the ECB is removing the tried-and-tested allocation of roles between the central bank and private sector. Furthermore, the Eurosystem’s digital euro project will tie up urgently required development capacity for many years and thereby further exacerbate Europe’s competitive disadvantage. The burden of investment and the risk resulting from introducing the digital euro will be disproportionately borne by banks and savings banks. In any case, the banks and savings banks have already developed a European market solution, Wero, which is currently coming onto the market. The digital euro needs to strengthen rather than weaken this European-led payment method. 3. Risks for financial stability and lending: without clear holding limits, there is a risk of uncontrolled transfers of deposits from banks and savings banks into holdings of digital euros. Deposits are the backbone of lending; large-scale outflows would weaken both the funding of the real economy – especially small and medium-sized enterprises – and the stability of the system. Holding limits must therefore be based on usual payment needs and be subject to binding regulations. -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany * The ultimate controlling entity is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany More information here.

LONDON — A British police force investigating bribery and money laundering will be expanded amid fears corruption is threatening U.K. national security. The U.K. government on Monday pledged £15 million to expand its “Domestic Corruption Unit” — a body which investigates corruption in local authorities and banks. The announcement came as ministers published a new U.K. anti-corruption strategy setting out more than 100 measures to tackle bribery, money laundering and intimidation. “Corruption threatens our national security, undermines legitimate business and steals money from working people’s pockets,” Security Minister Dan Jarvis said in a press statement issued alongside the anti-corruption document. “Our landmark strategy will take on the rogue actors and insiders who often exploit their positions of power and manipulate the public purse for personal gain,” he added.   The U.K. government wants to crackdown on what it calls “professional enablers” of corruption and crime, which it claims are sometimes working for the benefit of hostile states, such as Russia, or criminal gangs overseas. A plan to strengthen sanctions against bad actors in banking, accountancy and the law were also set out Monday. There will also be increased vetting for new police, prison officer and border security recruits, and staff moving between organizations to stop organized crime groups infiltrating Britain’s frontline services. Ministers are also considering payments for whistleblowers. The U.K. government will host an illicit finance summit next year to tackle the flow of dirty money. It will examine tools such cryptocurrency, which are being used by criminals, those evading sanctions and hostile states. Margaret Hodge, the government’s anti-corruption champion, will also lead a review into asset ownership in Britain, which will aim to track the flow of dirty money into the country. Transparency campaigners and MPs have tentatively supported the strategy, but some have warned that there are glaring omissions. Andrew Mitchell, the former Tory minister who chairs the APPG on Anti-Corruption and Responsible Tax, said that without “full and proper financial transparency” in Britain’s overseas tax havens, “[the] U.K.’s credibility as a global leader on anti-corruption and economic crime will continue to be undermined.”

BRUSSELS — The U.S. must preserve and grow the dominance of its financial sector worldwide, President Donald Trump argues in his new National Security Strategy. The 33-page document is a rare formal explanation of Trump’s foreign policy worldview by his administration, and can shape U.S. policy priorities. “The United States boasts the world’s leading financial and capital markets, which are pillars of American influence that afford policymakers significant leverage and tools to advance America’s national security priorities,” the document states. “But our leadership position cannot be taken for granted,” it continues, calling on America to leverage “our dynamic free market system and our leadership in digital finance and innovation to ensure that our markets continue to be the most dynamic, liquid, and secure and remain the envy of the world.” The strategy lists the “world’s leading financial system and capital markets, including the dollar’s global reserve currency status” as one of the U.S. key levers of power. Trump’s comments come as Europe looks to grow its own finance system to reduce the continent’s dependence on Wall Street. The EU has put forward a broad plan to boost its own finance industry by strengthening its single market for investment, and it will draft policy plans in the coming months aiming to boost its banks’ ability to compete globally. It is also creating a digital version of the euro currency, which would reduce its reliance on the dollar and on U.S. payment giants.

LONDON — The British government is considering a ban on cryptocurrency donations to political parties — in a move that could set off alarm bells in Nigel Farage’s Reform UK. Farage’s populist party — surging ahead in U.K. opinion polls — opened the door to digital asset donations earlier this year as part of a promised “crypto revolution” in Britain, and has already accepted its first donations in the digital assets. A clampdown by the British government was absent from a policy paper outlining its upcoming Elections Bill, which is being billed as a plan to shore up British democracy. But officials are now considering measures to outlaw the use of crypto to fund U.K. politicians, according to three people familiar with recent discussions on the bill. The government did not deny that the move was under consideration, saying it would “set out further details in our Elections Bill.” Reform UK became the first British political party to accept crypto donations earlier this year. Farage told Reuters in October that his party had received “a couple” of donations in the form of crypto assets after the Electoral Commission — which regulates U.K. political donations — confirmed it had been notified of the first crypto donation in British politics. Reform has set up its own crypto donations portal and promised “enhanced” controls to avoid any misuse. Reform has set up its own crypto donations portal and promised “enhanced” controls to avoid any misuse. | Dan Kitwood/Getty Images Farage, who holds some long-term crypto assets, has told the sector he is the “only hope” for Britain’s crypto business as he seeks to emulate his long-term ally U.S. President Donald Trump’s wide embrace of digital currencies. Farage has stressed he was “way before Trump” in publicly backing cryptocurrencies. HARD TO TRACK Despite the absence of a clampdown from initial public plans for the government’s elections bill — which included measures ranging from lowering the voting age to 16 to strengthened powers for the electoral commission — the British government, which is trailing Reform in the polls, has been under pressure to adopt a ban on the practice. Among those who have floated a clampdown are then-Cabinet Office Minister Pat McFadden, Business Select Committee Chair Liam Byrne, and Phil Brickell, the Labour MP who chairs the All-Party Parliamentary Group (APPG) on Anti-Corruption and Fair Tax. Transparency experts have warned that the source of cryptocurrency donations can be difficult to track. That raises concerns that foreign donations to political parties and candidates — banned in almost all circumstances under British law — as well as the proceeds of crime and money laundering could slip through the net. Labour’s elections bill is also expected to place new requirements on political parties and their donors. It is set to include a clampdown on donations from shell companies and unincorporated associations, and could force parties to record and keep a risk assessment of donations that could pose a risk of foreign interference. Crypto is an emerging battleground of foreign interference, with Russia and its intelligence services increasingly embracing digital currencies to evade sanctions and finance destabilization — such as in Moldovan elections — after being cut off from the global banking system following Moscow’s full-scale invasion of Ukraine. Russian involvement in British politics has come under fresh scrutiny in recent months after Nathan Gill — the former head of Reform in Wales who was also an MEP in Farage’s Brexit Party — was jailed last month for over 10 years after being paid to make pro-Russian statements in the European Parliament. Farage has strongly distanced himself from Gill, describing the former MEP as a “bad apple” who had betrayed him. Nevertheless, Labour has since gone on the offensive, with Prime Minister Keir Starmer urging Farage to launch an internal investigation into Gill’s activities. According to a spokesperson for the Ministry of Housing, Communities and Local Government, which has responsibility for the bill, “The political finance system we inherited has left our democracy vulnerable to foreign interference.  “Our tough new rules on political donations, as set out in our Elections Strategy, will protect U.K. elections while making sure parties can continue to fund themselves.”

BRUSSELS — Platforms including Meta and TikTok will be held liable for financial fraud for the first time under new rules agreed by EU lawmakers in the early hours of Thursday. The Parliament and Council agreed on the package of rules after eight hours of negotiations to strengthen safeguards against payment fraud. The deal adds another layer of EU regulatory risk for U.S. tech giants, which have lobbied the White House to confront Brussels’ anti-monopoly and content moderation rules. “This is a big win. A big, big step forward. We are coming from a reality where platforms are not liable under any law,” Morten Løkkegaard, the Danish Renew MEP who shepherded part of the package through Parliament, told POLITICO. “It is a historical moment.” Social media has become rife with financial scams, and MEPs pushed hard to hold both Big Tech and banks liable during legislative negotiations. EU governments, meanwhile, believed banks should be held responsible if their safeguards aren’t strong enough. As a compromise, lawmakers agreed that banks should reimburse victims if a scammer, impersonating the bank, swindles them out of their money, or if payments are processed without consent. But social media companies will have to compensate banks if it’s clear that they failed to remove an online scam that had been reported. Some MEPs had called for more amid concerns that EU consumer safeguards on social platforms have proven insufficient. “Especially, as AI and social-engineering fuel an unprecedented rise in scams,” said Lithuanian Greens lawmaker Virginijus Sinkevičius. The new rules build on the EU’s Digital Services Act and the Digital Markets Act, which respectively limit the spread of illegal content and prevent large online platforms, such as Google, Amazon and Meta, from overextending their online empires. Breaching the DSA and DMA can come with huge fines, triggering pushback from the tech sector and U.S. President Donald Trump, who has accused the EU of discriminating against American companies. U.S. Secretary of Commerce Howard Lutnick has threatened to keep 50 percent tariffs on European exports of steel and aluminum unless the EU loosens its digital rules. Thursday’s deal triggered immediate criticism from the tech industry. “This convoluted framework undermines simplification efforts and conflicts with the Digital Services Act’s ban on general monitoring — ignoring multiple studies warning it will be counterproductive,” said CCIA Europe Policy Manager Leonardo Veneziani, whose trade body represents Amazon, Google, Meta and Apple. “Instead of protecting consumers, today’s outcome sets a dangerous precedent and shifts responsibility away from those best placed to prevent fraud,” he said.

BRUSSELS — The European Commission appears to be slow-walking a decision to take action against Italy over its controversial use of national security powers to stall a banking merger between UniCredit, the Milan-based bank, and its crosstown rival BPM.  Officials at the competition and financial services directorates handed in their assessment of the case weeks ago to President Ursula von der Leyen’s Cabinet, but have yet to hear back, five people familiar with the matter told POLITICO. The assessment is not in favor of Rome, said one of the people, granted anonymity to discuss a private matter.  Commission insiders speculate that the delay has to do with broader political bargaining at the highest level between Brussels and Rome. According to another of the people, von der Leyen is taking care not to annoy Giorgia Meloni because she needs the Italian premier’s support to shore up the increasingly shaky political coalition that backed her for a second term last year. Earlier this year, Italy decided that UniCredit’s €10 billion takeover of BPM was a threat to national security. Under the government’s rules on screening foreign direct investments — known as its “golden power” — Rome imposed conditions on April 18 that effectively prevented UniCredit from completing the deal. The Commission opened a so-called EU Pilot procedure — carried out by its financial services directorate — to determine whether the use of national security measures in a bank merger is in line with EU banking regulations and single-market freedoms. The process can ultimately lead to an infringement procedure — as happened when the Spanish government obstructed BBVA’s acquisition of Catalan bank Banco Sabadell. The Commission’s competition directorate gave a conditional green light to the deal on June 19. A month later it warned Italy that by applying the golden power to a domestic deal, Italy may have violated merger rules as well as other provisions of EU law. The Commission is currently assessing Italy’s replies in both investigations, a spokesperson for the EU executive said. GOLDEN POWER The golden power equips Italy with wide-ranging screening tools to curb bids on national champions by foreign investors that are deemed risks to national security, such as those from China. The use of the tool to derail a domestic merger appeared to flout the EU’s push for greater banking consolidation across Europe — which it sees as necessary for the continent’s financial sector and for the economy more broadly — to compete with U.S. rivals. The largest American bank, JP Morgan, has a market capitalization more than four times that of its nearest European counterpart, Santander. Banking and Financial Services Commissioner Maria Luís Albuquerque has repeatedly spoken out in favor of banking consolidation across the bloc.  The competition and financial services teams had their assessment of the case ready shortly after Italy submitted its last round of responses to the Commission in August, said one of the people who spoke to POLITICO. But von der Leyen’s Cabinet, which ultimately has to sign off on a decision, has taken no action so far, they added. According to Italian media reports, Italy has been trying to buy more time and stave off an infringement procedure by suggesting it could amend its golden power legislation. Financial daily Milano Finanza reported on Tuesday that the Commission has set Nov. 13 for a decision. An Italian official with knowledge of the file said the Commission could very well be slow-walking action against Italy given that Unicredit’s withdrawal from the deal is by now irreversible. | Emanuele Cremaschi/Getty Images An Italian official with knowledge of the file said the Commission could very well be slow-walking action against Italy given that Unicredit’s withdrawal from the deal is by now irreversible. That would allow time to review whether Italy’s golden power is in line with EU competition rules without the pressure of a live deal. “A medium-term, out-of-the-spotlight agreement on golden power could be the best outcome,” this official explained. Reuters, citing sources familiar with the matter, reported last week that Italy could be willing to amend its golden power to address the Commission’s concerns over how it was used in the Unicredit-BPM case. All matters pertaining to the golden power are steered from von der Leyen’s office, said another Commission official who is not directly involved in the matter and was also granted anonymity to speak candidly. It is usually quite simple to perform a technical analysis of such files, but “politics always trumps it,” they added.  Spokespeople for Meloni and Italy’s economy ministry declined to comment.

LONDON — The U.K. government is going all-out to get Brits putting their money in stocks and shares. The timing could definitely be better. Lead policymakers and City of London analysts are increasingly warning of an artificial intelligence-fueled correction in equities just as the U.K.’s top finance minister prepares a major new policy to push Britain’s savers into the stock market. Chancellor Rachel Reeves has made upping retail participation in stocks and shares a high priority, launching a campaign earlier this year to unite financial firms in an advertising blitz extolling the benefits of investing. At next month’s budget, she’s expected to push changes to the tax system that would encourage investors to swap their steady, tax-free cash savings products for a stocks and shares ISA. With AI stocks soaring, it’s caused some raised eyebrows in the City. AI stocks in the U.S. account for roughly 44 percent of the S&P 500 market capitalization, and Nvidia just became the first company in history to become worth $5 trillion. The meteoric rise in has led some experts to warn there’s only one way out: The bubble will burst. “It would, unfortunately, be poetic timing if a major correction arrives just as the government is trying to get more people into investing,” said Chris Beauchamp, chief market analyst at IG. ATLANTIC INFLUENCE This week, City broker Panmure Liberum found that 38 percent of the U.S. stock market’s value is based in a “speculative component” that AI companies will continue to build out data centers and spend billions more on chips — by no means a sure bet. “While this capital spending could deliver substantial productivity gains that might eventually spread to the broader market, there is still no clear evidence that this is happening and is difficult to forecast the size of an eventual impact,” said Panmure analyst Susana Cruz in a research note. The “Magnificent Seven” group of tech giant composed around 20 percent of the S&P 500 at the end of 2022, but now make up more than a third of it, having tripled in size over just three years. The American index’s price-to-book ratio (meaning a company’s market cap compared to assets and liabilities) is at an all-time high, with 19 of the 20 valuation metrics tracked by Bank of America more expensive than the historical average. Despite the vast valuations, an infamous MIT study published earlier this year found that 95 percent of companies using generative AI were getting zero return. In early October, the Bank of England’s committee which monitors risks to financial stability warned of a “sudden correction” in markets, saying that “equity valuations appear stretched” as valuation metrics reached levels comparable to the peak of the dotcom bubble that unfolded in the early millennium, when the Nasdaq fell 77 percent from its peak, wiping trillions of the stock market. It took 15 years for the index to recover. The U.K. central bank’s warning came a month after global body, the Bank for International Settlements, issued a similar caution. Kristalina Georgieva, head of the International Monetary Fund, has also drawn comparisons with the dotcom bubble. Even Jamie Dimon, chief executive of U.S. banking giant JP Morgan, has said he’s seriously worried about a market correction. Over most periods investment beats cash, as long as individuals are willing to lock their money away for several years. Savers could have doubled their money over the last decade by putting their cash in the stock market rather than keeping it in a savings account, according to Schroders. Nvidia is up 13 percent this month alone — rather than an index fund which tracks hundreds of stocks, they stand to lose a lot of money if things go sour. | Jung Yeon-Je/Getty Images “No one can time the market, definitely not a bulky institution like the government,” Oliver Tipping, analyst at investment bank Peel Hunt, said. “Big picture, the government is right to try to stimulate more retail investment.” But if an individual decides to put their hard-earned savings into stocks they perceive as doing particularly well — Nvidia, for example, is up 13 percent this month alone — rather than an index fund which tracks hundreds of stocks, they stand to lose a lot of money if things go sour. “If you think about your average Joe, they’re not going to go into a safe index fund, they’ll put all of their money in Nvidia or Facebook and could get in at the wrong time,” one financial analyst, granted anonymity to speak freely, said.  Yet even an index fund, like a global equities tracker, is made up of close to 20 percent of the “Magnificent Seven” companies, due to the massive size of the American stock market compared to the rest of the world. While these funds have suffered significant drops in the past — U.S. President Donald Trump’s threat of tariffs in April caused a drop of 10 percent in a week — they have then recovered over a period of months or years. That’s good news for investors willing to wait for the market to correct any possible downturn — but if retail investors panic and withdraw their funds at the first sign of a loss, they could end up with less money than they put in, possibly wiping out emergency savings. “There is clearly a risk here that government is pushing people to invest when maybe they don’t have enough of a cash buffer in order to do that, that you’re going to be setting up problems for the long term, and it’ll be interesting to see who’s on the hook for paying that compensation,” said Debbie Enver, head of external affairs at the Building Societies Association. ONCE BITTEN, TWICE SHY City analysts also express concern that investors entering the stock market for the first time could be forever turned off from shifting their cash over to equities if an immediate correction is nigh. Only 8 percent of wealth held by U.K. adults is in stocks and funds, four times lower than in the U.S., according to data from asset manager Aberdeen. “There is no doubt that the government would find it much harder to drive retail investment in a period of financial turbulence,” added Chris Rudden, head of investment consultants at Moneyfarm. “Appetite to invest is linked to strong recent market performance. If there was to be a bubble that bursts in the coming few months, then it could make their job impossible.” IG’s Beauchamp argued that the government would need to pursue a broader education plan “to help people through the inevitable pullback” and prevent them from avoiding the stock market permanently. “How you do that without scaring people witless is a Herculean task,” he added. Laith Khalaf, head of investment analysis at AJ Bell, suggested investment platforms could encourage regular incremental savings in the stock market, known as dollar cost averaging, rather than throwing one lump sum in, which he said “mitigates the risk of a big market downdraft.” One solution that appears to be under consideration by Reeves as part of the autumn budget is to introduce a minimum U.K. stock shareholding in ISAs — which she could argue would protect British savers from a U.S. downturn and pump more money into local companies. This too is not without risk. The FTSE 100 derives nearly 30 percent of its revenue from the U.S., according to the London Stock Exchange, and U.K. markets are generally incredibly sensitive to macroeconomic shifts across the Atlantic. The FTSE 100 derives nearly 30 percent of its revenue from the U.S., according to the London Stock Exchange. | Jeff Moore/Getty Images Meanwhile, if an AI-induced stock bubble isn’t enough cause for concern, worries of trouble in the private credit sector exploded this month after the collapse of sub-prime auto lender Tricolor and car parts supplier First Brands left some U.S. banks with significant losses, causing a spillover onto public markets. BoE governor Bailey recently drew similarities between risks in the asset class and the 2008 global financial crisis, saying it was an “open question” if the event was “a canary in the coal mine” for a market meltdown. If one domino falls, they all could — and that would leave Britain’s chancellor in a real bind.