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Rachel Reeves Faces £4.4 Billion Deficit, Tough Budget Choices Ahead

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British Finance Minister Rachel Reeves is set to face a £4.4 billion ($5.7 billion) deficit in her budget, reversing a previous surplus projection, according to the Resolution Foundation. The think tank warned that weaker economic growth and higher interest rate expectations have worsened the UK’s financial outlook, with the Office for Budget Responsibility expected to cut its 2025 growth forecast significantly. The Bank of England has already slashed its projection to 0.75%, mirroring the Resolution Foundation’s prediction.

With Reeves’ budget update scheduled for March 26, she is under pressure to meet fiscal rules that require balancing public spending with tax revenues by 2030. However, experts caution against deep welfare cuts and suggest tax increases instead. The rising cost of government borrowing, largely influenced by U.S. economic policies under President Donald Trump, has added to Britain’s fiscal strain. The Resolution Foundation urged Reeves to act decisively while ensuring that lower-income households are not disproportionately affected.

Prime Minister Keir Starmer and Reeves had pledged during last year’s election not to raise income tax, value-added tax, or corporate tax rates. One potential revenue-boosting measure could be extending the current freeze on income tax thresholds until 2030, which would generate billions. However, with fiscal pressures expected to intensify, experts warn that ruling out tax increases entirely could make future budgets even harder to balance.

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European Leaders Push for Defense Boost Amid Divisions Over Ukraine Peacekeepers

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European leaders met in Paris on Monday for emergency talks on strengthening the continent’s defense capabilities, agreeing on the need for increased military spending but remaining divided over the possibility of deploying peacekeepers to Ukraine. The meeting, hosted by French President Emmanuel Macron, followed U.S. President Donald Trump’s surprise decision to hold direct peace talks with Russia, excluding European allies and Ukraine. British Prime Minister Keir Starmer supported the idea of a European peacekeeping mission but stressed the necessity of U.S. security commitments, while German Chancellor Olaf Scholz and Italian Prime Minister Giorgia Meloni expressed skepticism about the feasibility and effectiveness of such an initiative.

Leaders also emphasized that any ceasefire in Ukraine should be tied to a comprehensive peace agreement to prevent further Russian aggression. Ukrainian President Volodymyr Zelenskiy, after a call with Macron, insisted that security guarantees must be “robust and reliable” to avoid another conflict. Meanwhile, European officials acknowledged the urgent need to bolster their defense budgets, with some advocating for loosening EU fiscal rules to accommodate higher military expenditures. Danish Prime Minister Mette Frederiksen warned that Russia posed a broader threat to Europe, underscoring the necessity for a stronger European defense strategy.

As European leaders debated their approach, senior U.S. and Russian officials arrived in Saudi Arabia for high-level peace talks set to begin on Tuesday. The discussions, led by U.S. Secretary of State Marco Rubio and Russian Foreign Minister Sergei Lavrov, are expected to focus on the future of U.S.-Russia relations and the potential for a settlement in Ukraine. Despite signs of differing objectives, both sides expressed a willingness to explore diplomatic solutions. Russia has ruled out territorial concessions, while Trump’s team has positioned itself as problem-solvers seeking economic and strategic cooperation between Washington and Moscow.

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Starmer Urges Europe to Intensify Efforts Against Putin’s War Machine During Brussels Visit

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British Prime Minister Keir Starmer traveled to Brussels on Monday to call for a stronger European commitment to countering President Vladimir Putin’s Russia and its ongoing war in Ukraine. In his discussions with NATO Secretary General Mark Rutte and European leaders, Starmer emphasized the need for the continent to step up its efforts, particularly in targeting Russia’s energy revenues and companies supporting Putin’s missile factories. His visit marks the first time a British leader has met with EU heads of state since the UK’s departure from the bloc.

During his visit, Starmer reiterated the importance of maintaining pressure on Putin, noting U.S. President Donald Trump’s recent threats to impose new tariffs on Russia if the war in Ukraine continues without a resolution. He expressed confidence that European allies must play a more significant role in this collective effort, working together to “crush Putin’s war machine.”

While Starmer’s visit aimed to strengthen post-Brexit relations with the EU, British Interior Minister Yvette Cooper raised concerns over the government’s position on migration. She clarified that a proposed youth mobility deal with the EU was not a priority for the UK, stressing the need to reduce net migration, which has been a central issue for the government.

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