Editors’ Pick: Keeping the Budget Line

Today’s edition is powered by the IMF

Reforming Europe under pressure

Europe is facing a new energy-driven supply shock, and the economic costs are mounting: weaker growth, higher inflation and growing uncertainty across the region. With euro area growth forecast at 1.1 percent in 2026, policymakers are under pressure to act. The IMF examines what the war in the Middle East means for European economies and what a decisive and well-targeted response requires.

The EU has a way of dealing with emotive issues in the clearest terms, wrapping lively debates in layers of jargon, ditching the high-stakes horse-trading with a plethora of acronyms and other unpleasant terminology. The institutional vernacular is inadequate to convey the strength of feeling that fuels so many Brussels issues.

Sometimes it takes the arrival of the Union’s heads of state to peel back the veil of discretion and reveal the fiercest squabbles that highlight the individual interests of members. Council meetings can see details that have been painstakingly negotiated for months, radically reworked or thrown into disarray.

Such may be the case with the next EU budgetwhich Brussels is trying to topple by the end of the year – before the balance of power changes drastically if the far right takes control after French elections next year. If the next budget (due to start in 2028) is not resolved, presidential candidate Jordan Bardella would decide to reduce France’s contribution, potentially undoing the hard-won progress up to that point.

The commission last summer set its sights on an enlarged budget – ideally 1.27% of the bloc’s gross national income, or around €2 trillion. Many members were against the idea of ​​committing more to the EU’s coffers, especially “thrifts” who want exactly the opposite: tighter budget lines that would require more strategic spending and limit net contributor losses. These places already planned the first budget proposal with numbers (‘nego box’), presented by Cyprus last week.

Equally controversial have been the new ‘own resources’ that, alongside direct contributions from EU members, finance the budget. Different countries have different preferences for how these taxes should (or shouldn’t) be raised across the EU. Tobacco excise, emissions trading revenue and e-waste can all be used for the budget. But many capitals prefer to keep the money for themselves rather than pay into the common pot.

But time is running out and on Friday the Commission warned that foot-dragging by uncooperative capitals could result in a huge discount of 40%. across the board – a bombshell that would destroy many crucial aspects of the budget and leave the Union’s finances decimated, to the detriment of all.

It remains to be seen whether this threat will serve to focus negotiations or further divide. But the clash cannot last long.

The week from Euractiv policy desks

Tech – Europe is wrapped up by fellow Mythos

This week’s talk of the Brussels tech bubble was Washington’s surprise decision Anthropic bana leading AI lab, from offering its two newest AI models to any non-US citizen – prompting the company to remove the models for everyone. This immediately confirmed long-standing European fears that the US government could simply flip a switch and shut down the technology that our administrations and companies increasingly rely on. ABOUT many politiciansthe clear and urgent answer is to make Europe more technologically sovereign. Some also rolled their eyes at the move being called a “wake-up call” — as if there hadn’t been too many in the past decade. If Europe’s leaders are still asleep at this point, they should see a somnologist. But there was also dissenting opinion from artificial intelligence experts, worried that Europe has completely missed the boat on AI. – Maximilian Henning

Energy, environment and transport – Fast fashion goes out of fashion

Even intrepid fashionistas and teenage shopaholics have to occasionally sense something amiss on websites that dress you head to toe for the price of a cappuccino. Well, it seems people very high up in Berlin, Paris and The Hague have their doubts too. In a strongly worded discussion note circulated ahead of next week’s summit of EU Council environment ministers, the troika has warned not just about the sustainability and ecological impact of the cheap and cheerful clothes – they also point to health impacts and even potential psychological harm, particularly to teenagers. Florent Servia took the doctor and brought you the story. – Robert Hodgson

Agri – New rules for biotech crops clear final hurdle in Parliament

The big news this week is the final approval by the European Parliament of specific rules for plants produced using next generation biotechnologies. After weeks of uncertainty and decades of culture wars over GMOs, this vote opens the door to EU crop biotechnology, albeit limited to specific techniques and targeted gene changes that can also occur naturally or through conventional breeding. Maria Simon Arobleas and Sofia Sanchez Manzanaro covered the vote. – Angelo Di Mambro

PROTECTION – Europe hopes sovereign drones will hit supply chain reality

European military and defense companies are more and more the development of drones and pursuing sovereign capabilities, but achieving supply chain independence from foreign suppliers seems almost impossible. A major obstacle for any drone manufacturer of ground or air systems is magnets. These are an essential component of engines and rotors, and China has established a near-monopoly on them. – Alice Tidey

health – The politics behind the European Parliament’s tobacco tax fire

The collapse of the European Parliament’s position on tobacco taxation has caused confusion, with the Socialists largely to blame, after MEPs rejected both the far-right rapporteur’s proposal and a slightly amended version of the Commission’s plan to sharply increase taxes on cigarettes and nicotine. leaving the Parliament without a post. Critics say the Socialists are likely to be motivated by politics rather than opposition to the position, as the S&D group aimed to prevent another increasingly common alliance between the EPP and the far right. – Magdalena Kensy