Europe bulletin: BoE nears rate cut, Airbnb faces fine, trade tensions rise

Europe’s policy, regulatory, and tech landscape is in flux as central banks, governments, and businesses adjust to mounting economic and political pressures.

In the UK, the Bank of England faces a finely balanced rate decision as inflation cools but growth risks rise.

Elsewhere, regulators are tightening the screws on short-term rentals, trade tensions are flaring over agriculture, and Italy’s companies are cautiously ramping up their use of artificial intelligence despite lingering hurdles.

A glance at the major developments in Europe today.

BoE set for knife-edge rate cut decision

The Bank of England is heading into a high-stakes Monetary Policy Committee meeting on December 18, and it could come down to a single vote.

A narrow 5-4 majority is expected to back cutting the Bank Rate from 4% to 3.75%, the first rate cut since August.

Governor Andrew Bailey, who voted to hold rates in November as the UK grappled with some of the highest inflation in the G7, is widely expected to change course this time.

Cooling inflation, combined with growing concerns about the job market from domestic tax hikes to uncertainty around US trade policy, appears to be tipping the balance.

According to a Reuters poll, economists see a rate cut as almost a done deal unless the data takes an unexpected turn. Markets are already looking ahead, pricing in another cut to 3.5% by March.

Spain fines Airbnb over unlicensed rentals

Spain’s Consumer Affairs Ministry has hit Airbnb with a hefty $75 million fine, accusing the platform of advertising more than 65,000 unlicensed tourist rentals.

The penalty, equal to six times the profits authorities say Airbnb made after being warned in October 2024, comes as Spain grapples with a worsening housing crunch.

Regulators said the listings were riddled with problems, including fake or mismatched license numbers and misleading information about whether hosts were private individuals or professional operators.

Under regional rules, all short-term rentals must clearly display valid registration details, a requirement that has taken on added urgency as a record 94 million tourists visited Spain in 2024.

The fine cannot be appealed and forces Airbnb to remove the offending ads, publicly disclose the violations, and fix compliance gaps.

France pushes to delay Mercosur vote

France is pushing to delay a key EU vote on the Mercosur trade deal, which had been penciled in ahead of European Commission President Ursula von der Leyen’s December 20 trip to Brazil.

The timing has become politically fraught, with farmers across France protesting what they see as cheap South American imports threatening local agriculture.

As Europe’s largest agricultural producer, Paris says the current safeguards don’t go far enough.

French officials are calling for tougher anti-dumping measures, “mirror clauses” that would force Mercosur producers to meet EU standards on pesticides and animal feed, and stricter food safety checks.

They have brushed off the Commission’s proposed protections as unfinished and insufficient.

Italy has lined up behind France, raising the possibility of a blocking minority if countries such as Poland, Hungary, Austria, and Ireland also hold their ground.

Italy’s AI adoption accelerates

AI adoption in Italy is picking up speed, with the share of companies using artificial intelligence doubling to 16.4% in 2025, up from 8.2% last year and just 5% in 2023.

The figures cover businesses with at least 10 employees and point to a clear acceleration, even if overall usage is still catching up.

Big companies are leading the charge. More than half of large enterprises with 250 or more staff now use AI, a jump of 32.5 percentage points from last year.

Smaller firms are also moving in, though at a slower pace: adoption among them rose 15.7% to 7.7%, reflecting the challenges in an economy dominated by SMEs.

Those challenges are still significant. Nearly six in ten firms say they lack the right skills, while almost half point to unclear regulations.

Data privacy concerns and high costs also rank high on the list, and about 15% of companies say AI simply isn’t relevant to their business.

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