A turbulent Thursday across Europe brought political upheaval in London, a cautious monetary stance in Frankfurt, a security scare on NATO’s eastern flank, and relief on the trading floors as investors absorbed the latest signals from policymakers and markets.
Mandelson sacked after Epstein email revelations
Peter Mandelson, Britain’s ambassador to Washington and a veteran Labour strategist, was abruptly dismissed by Prime Minister Keir Starmer after leaked correspondence revealed extensive ties with the late US sex offender Jeffrey Epstein.
Once a central figure in Tony Blair’s New Labour project, Mandelson was regarded as one of Starmer’s most senior envoys, especially valued for cultivating a close relationship with US President Donald Trump ahead of his state visit next week.
The fallout began when US lawmakers released documents, including a personal letter in which Mandelson described Epstein as “my best pal.”
British media then published emails showing Mandelson had offered advice on how Epstein might secure early release from jail in 2008, when he was serving an 18-month sentence for soliciting a minor.
Starmer, whose Labour government is already under pressure in the polls, initially defended his envoy but was forced to act as the political damage mounted.
Mandelson’s removal from what many consider the most desirable diplomatic posting underscores the fragility of Starmer’s position heading into a high-stakes visit from Washington.
ECB keeps rates on hold as inflation steadies
In Frankfurt, the European Central Bank opted to hold borrowing costs steady for the second consecutive meeting, leaving the deposit rate at 2%.
The Governing Council said inflation was now broadly in line with its medium-term 2% target, with projections showing consumer prices rising 1.7% in 2026 and 1.9% in 2027.
The ECB stressed that decisions will continue to be made “meeting by meeting,” giving no forward guidance on rate cuts or hikes.
Growth in the 20-nation euro area is forecast at 1.2% this year and 1% in 2026.
Officials said the eurozone economy has shown “resilience,” even as higher US tariffs weigh on global trade.
Poland pushes for UN meeting over drone incursion
Tensions rose on NATO’s eastern border after Warsaw accused Moscow of a deliberate drone attack.
Foreign Minister Radosław Sikorski said Poland would call for an emergency UN Security Council session following what he described as “an unprecedented Russian drone attack on a member of the UN, EU and NATO.”
Polish officials reported 19 violations of national airspace over the course of seven hours on Wednesday night, with several drones shot down.
While Poland insists the strikes were intentional, some allies have urged caution over attributing deliberate intent, and US President Donald Trump has offered little public comment so far.
Markets climb after ECB decision, Stellantis rebound
European stock markets closed higher, boosted by the ECB’s steady hand decision and mixed economic signals from the US.
The Stoxx 600 finished up 0.51%, leaving it on course for a weekly gain.
Auto stocks led the charge, reversing early weakness to close 1.27% higher.
Stellantis surged more than 9% after CEO Antonio Filosa said in an interview that the company plans to reintroduce the Jeep Cherokee and V8 RAM trucks, moves aimed at reviving cash flow after recent sales struggles.
The euro gained 0.3% against the dollar, while investors digested US inflation figures that showed consumer prices rising 2.9% year-on-year in August, in line with forecasts.
A sharper-than-expected rise in weekly jobless claims added a note of caution, but traders broadly welcomed the data as consistent with a soft-landing scenario.
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