UK Pledges Ukraine Peacekeepers, Defence Spending & Xi Drives China Rally
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This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Monday, the 17th of February in London. I'm Caroline Hipker. And I'm Stephen Carroll. Coming up today, the Prime Minister Keir Starmer says Britain will send peacekeeping troops to Ukraine if needed. France's Emmanuel Macron holds an emergency meeting with key European leaders to discuss Ukraine, as Donald Trump says President Zelensky will be involved in peace talks with Russia.

Plus, boosting business support. China's President Xi Jinping meets key private sector leaders, including the e-commerce icon Jack Ma. Let's start with a roundup of our top stories. UK Prime Minister Keir Starmer has pledged to send British peacekeeping troops to Ukraine if needed. Writing in the Telegraph newspaper, he said, "...we have got to show we are truly serious about our own defence and bearing our own burden."

However, the reality of delivering on that pledge is already in question. Speaking to the BBC's The Week in Westminster in advance of those comments, the former head of the British Army, Richard Dannett, warned that the UK would not be able to play a leading role in any peacekeeping operation.

It would probably require, let's say, about 100,000 people. The UK would have to supply quite a proportion of that. And we really couldn't do it. Our military is so run down at the present moment, numerically and as far as capability and equipment is concerned, it would be potentially really quite embarrassing.

Lord Dannert's warning comes after US Defence Secretary Pete Hegseth rejected a proposal from Ukraine's President Zelensky for American troops to be deployed to help guarantee any ceasefire with Russia.

Starmer is expected to join Germany's Olaf Scholz, Italy's Giorgio Maloney and other European leaders in Paris today after French President Emmanuel Macron convened urgent talks on Ukraine and the continent's wider security. However, the UK Prime Minister faces domestic pressure to say whether he'll raise Britain's defence spending or when he'll raise Britain's defence spending to a promised 2.5% of GDP. Paul Johnson from the Institute for Fiscal Studies says doing that will have a major impact on the UK's finances.

For decades, we funded a growing welfare state by continually cutting defence spending. If we start really increasing it fast, that's going to put huge pressure on everything else. Paul Johnson's comments come as the Trump administration has insisted that NATO's European members should spend 5% of GDP on defence, far exceeding the 3.4% that his own country spends.

Well, the U.S. move to pull back from providing European security guarantees comes as Donald Trump said that he is open to allowing Europe to buy U.S.-made weapons to give to Ukraine. European officials are working on a major new package to increase defense spending and support for Ukraine, but the plans won't be announced until after the German election this coming weekend.

Ahead of the vote, German Chancellor Olaf Scholz spoke to Bloomberg about Western support for Kyiv. I spoke to President Trump very early about how to support Ukraine. My plea is that there should be first a message to Putin that Europe and the United States will continue with their support to Ukraine because he has to understand that he cannot hope that we stop our support.

Olaf Scholz speaking to Bloomberg's Stephanie Flanders there. As traders began pricing in the potential for higher defence costs, dampening the outlook for the region's sovereign bonds should the debate on using common debt to fund their efforts intensify. Bloomberg Economics estimates that upgrading defence and protecting Ukraine may cost Europe's major powers an additional $3.1 trillion over 10 years.

Bloomberg has learned that the US administration has told European officials that it wants to secure a ceasefire in Ukraine by Easter. After one top US advisor suggested peace talks could happen without Zelensky, Donald Trump now says the Ukrainian president will be involved. Here's what he told reporters as he got ready to board Air Force One on Sunday. We're trying to get a peace with Russia and Ukraine and we're working very hard on it. It's a war that should have never started. Good success.

these conversations? What will his role be? I do. He will be involved, yes. Trump says he's planning to see Putin as soon as this month while US representatives are travelling to Saudi Arabia for peace talks with Russia this week.

Now, President Xi Jinping met major Chinese tech founders in a sign of support for the sector after years of turmoil. E-commerce icon Jack Ma and DeepSeek founder Liang Wenfeng were among those meeting China's leader. Global X investment strategist Billy Leung says that it is a rare but not

to unprecedented endorsement. Obviously, this is very symbolic in terms of Xi calling a meeting, arranging a symposium meeting. But if you look back into historically, we've seen this happen probably once during 2018, end of 2018, when Xi very similarly called a meeting between private enterprises. During that time, the outcome of that was very much more on the narrative side. There was recognition, there was acknowledgement, but there was very little to do with actual guest policies.

Liang adds DeepSeek has changed the narrative around investing in China's tech stocks. Optimism over AI's potential has sparked a blistering rally over the past month, turning the Hang Seng China Enterprises Index into the world's best performer. Strategists at Goldman Sachs have also raised targets for the MSCI China and CSI 300, expecting double-digit gains from here.

More than one in five British managers expect they will roll back parental leave perks to pay for rising employment costs. A Chartered Management Institute poll found 22% of managers offering enhanced parental benefits said that it's likely they'll be made less generous. Bloomberg's James Wolcock has more. Companies are staring at a £26 billion hike in payroll taxes coming this spring. That leaves bosses looking for creative ways to save money without firing staff.

Some are eyeing their parental leave policies that go beyond what's required in law. The CMI survey shows small and medium-sized businesses are almost twice as likely as large employers to review their parental benefits. But it's a choice that may end up backfiring in the long run. One employment lawyer says better parental policies help firms retain female employees, particularly in senior positions. In London, James Wilcock, Bloomberg Radio.

And those are your top stories. On the markets, equities in Hong Kong and China trading choppily this morning. The Hang Seng Index down by four tenths of one percent. The Hang Seng Tech Index down by 1.1 percent after gains earlier. Partly supported by reports that Xi Jinping met with private sector leaders, including Alibaba's Jack Ma.

Tencent shares at one stage jumping as much as 7%, hitting a three-year high after news that its app is testing deep-seek AI. On currency markets, the Japanese yen is half a percent stronger against the dollar at 1.5152. The Bloomberg Dollar Spot Index a touch weaker. The euro is flat ahead of that meeting of European leaders in Paris at 1.0490 against the dollar as well. President's Day in the US, so no cash treasuries trading today and tomorrow.

no stocks trading either. Now, in a moment, the latest on how Europe is responding to Donald Trump's policy shift on the war in Ukraine. We're going to try to bring you all the angles as those European leaders, key European leaders, are meeting in Paris today. But then there's another story that caught my eye this morning about Ukraine.

about AI. Obviously, we talk a lot about it, but AI-powered note-takers are apparently taking over meetings. Have you noticed? Well, I mean, they are everywhere. Now, I have to say, as my younger colleagues' eyes glaze over when I talk about having to actually type out the transcript of an interview that you've done afterwards, I think there are lots of good things to be said for note-taking apps that allow that process to be sped up now. But there is this question then of how well...

an AI can summarise a meeting because there's so much of nuance involved. And, you know, if somebody makes a sarcastic comment, does that become a key action point in the summary from an AI? It mixes the nuances of human interaction. Yes. I mean, look, it saves my hand from having to scribble out all the notes. But yes, it does raise all of these questions about privacy and about security and whether it picks up on those nonverbal cues.

There's a lovely piece by Bloomberg's Chris Stockwell-Walker who writes about, you know, worrying about whether his words are going to be taken out of context and just how much needs to be thought about as you bring in. And sometimes actually multiple people are bringing in different AIs.

note takers to try to summarise meetings and how careful we should be about that. Yeah, interesting conversation to be had in many meetings to come. Let's turn back though to our top story this morning and French President Emmanuel Macron holding an emergency meeting with several European leaders today to discuss Ukraine and to respond to what US officials laid out in stark terms this weekend that after almost 80 years of US security guarantees, the Transatlantic Alliance, as we know it, could be dead.

Joining us now to discuss Bloomberg's EMEA News Director, Rosalind Matheson. And we'll bring in our correspondent in Berlin, Oliver Crook, in just a moment, who is at the Munich Security Conference. To you first, Ros. This is a wake-up call for Europe. It has been coming for a long time. But the comments at the Munich Security Conference from JD Vance and Pete Hegseth have left European leaders looking for, I suppose, a completely different relationship with the United States when it comes to security.

Well, it's kind of surprising that they are surprised to some extent because the US administration of Donald Trump has been telegraphing this

even before he took office. But it was just very starkly laid out. And of course, the location being, you know, European soil at Munich. And you had those speeches, including from JD Vance, including from the defence secretary, making it very clear that it's going to be a very different environment for the relationship on a variety of fronts, of course, the economic and trade front, but also very much on the security front and that Europe's going to have to really step up

and find a way finally to really arrange its own defence, that it cannot presume that the US will provide that umbrella into the long term. And particularly when it comes to Ukraine, that Europe's going to have to at least put some of the bill there, particularly around future security of Ukraine. And so we've got this meeting obviously today of leaders, a select group of European leaders in Paris, where they'll talk about some of these issues,

But at this point, it's really a fundamental reset of the relationship because it crosses not just economics, investment and business, but also geo-security. Yeah. In terms of defence spending, what do you think the discussions are going to look like in Paris today? Peacekeeping troops in Ukraine, the UK has offered to do that, debate about whether that's even possible. What do you think is going to be discussed or emerge from Paris?

Well, there will be that conversation around defence spending and it sounds like there will be a plan, we understand, that will come forward about that, but not until after the German election this weekend, the idea being you do not want to plonk that in the middle of the final stages.

of a German election campaign, but it sounds like they're really talking about how they can speed up their defence spending collectively. I mean, it has sped up, of course, since the first term of Donald Trump, but what more can they do? And also, how can they then fund...

troops potentially for Ukraine. And that includes the UK Prime Minister suggesting that he'd be willing to send British troops to Ukraine under certain circumstances. I mean, obviously, away from any ceasefire line, for example. And would other European leaders be prepared to

to do the same. And it's all about sending a message to Donald Trump that they're hearing what he's saying and they're going to respond to it and step up and give him something in return. And that's probably also very much all about two things. One is making sure Europe has a seat at the table in the conversation and be slowing this conversation about a ceasefire down. The concern is that Donald Trump is rushing towards something. He wants it done by Easter. And then if you do that very quickly, what does that look like?

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Well, let's bring in our correspondent in Berlin, Oliver Crook, who was at the Munich Security Conference over the weekend. Oliver, we were just hearing there from Rosalind Matheson about how European leaders were caught by surprise, but perhaps shouldn't have been by some of the positions being taken by the US. What was your impression from the conversations that you had at the Munich Security Conference about where European leaders might be able to find common ground on this, looking ahead to that meeting today in Paris?

Well, listen, I think that this has been sort of the, I think, frustration for many people looking at basically the Trump administration and sort of the European reaction, that everyone in Europe has felt like they're in reaction mode. They've been in reaction mode since November, and they sort of remain that way. And again, what we kept hearing, again, this weekend, but we've heard basically as a

permanent refrain since November is that Donald Trump is a wake-up call for Europe. The question is, what are the Europeans going to wake up to? What are they going to actually start doing? You know, when you start talking about things like troop deployment, security guarantees, I mean, everyone is very reticent to go into any of these details. Obviously, Donald Trump is in a sort of mode of demanding action and demanding things that are concrete from the Europeans. And that is going to be forced to do so. I mean, I've spoken to some senior lawmakers in Germany

about this idea of potentially could the Germans put sort of troops in Ukraine in the future as sort of peacekeeping operation. And this person I spoke to was a very sort of hawkish voice, one who is much more encouraging of supporting of Ukraine, sending those long-range missiles, which the German government never did in the end. But even he was saying that basically...

it may be a good to shade too far to think about sending german troops into the situation in ukraine potentially you know there's been on the return to get someone day there are troops firing russian troops firing on german troops with a fire back this is something that is very very rich for them

to consider in any sort of a realistic way, particularly at a time when in domestic politics in Germany, for example, you have a party that's number two that really wants to have sort of less and less to do with the world and is a bit more supportive of Russia. So again, this is going to be a very difficult conversation. It would be very interesting to see what these leaders can come up with concretely in Paris.

Yeah, indeed. And in terms of what emerged from the discussions between the leaders, we mentioned that there was a TV debate overnight. The election is coming up at the weekend. I mean, J.D. Vance did not meet with Olaf Scholz. He saw the AFD's Alice Veitel instead. What did you make of the four-way party leader debate last night?

Yeah, I mean, listen, I think it's very sort of interesting to see what happened with J.D. Vance in that speech. I would just linger on that just for a moment, because everybody was going into the Munich Security Conference really expecting a sort of speech about sort of foreign policy, about what the United States was supposed to be sort of doing with Ukraine and basically what their vision of Ukraine was. And basically what you got was a very sort of short reference to Ukraine at the very beginning. And then when you got instead of basically trying to extract sort of economic benefit out of the

you which is sort of been without profit than trying to do ever since he was uh... elected and have been talking about with tariffs and these sorts of things he was really about sort of exporting a domestic political ideology sort of political manifesto into europe and really sort of getting involved in a way that again it's not sort of comment in sort of political practice between united states and europe in the domestic affairs of your bed as you mentioned a defense met with alice vitale did not beat up with all our show and basically

advising effectively the next German chancellor to basically enter into coalition with the AFD, right? Saying that basically there's no, it's inappropriate and there's no room for firewalls in politics anymore. So now take that into sort of overlay to the German sort of election campaign that is now in its absolute final stretch over the next couple of days. I mean, listen, this could really cut a,

either way. This sort of gives, again, more and more legitimacy to the AFD in the mainstream. But on the other hand, no one really likes to be told how to vote and how to behave in their own country by other leaders. This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts.

You can also listen live each morning on London DAB Radio, the Bloomberg Business app and Bloomberg.com. Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130. I'm Caroline Hipker. And I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak Europe.

Developers like you are building the future, but you need the right tools to move fast and go further, right? That's where Microsoft comes in. With tools like GitHub Copilot, VS Code, and Azure AI Foundry, you have everything you need to push the limits and bring your ideas to life faster. And with security, compliance, and responsible AI built in, you can focus on what matters most, building the next big thing. Learn more at developer.microsoft.com.

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