BRUSSELS — Ukraine’s war chest stands to get a vital cash injection after EU envoys agreed on a €90 billion loan to finance Kyiv’s defense against Russia, the Cypriot Council presidency said on Wednesday. “The new financing will help ensure the country’s fierce resilience in the face of Russian aggression,” Cypriot Finance Minister Makis Keravnos said in a statement. Without the loan Ukraine had risked running out of cash by April, which would have been catastrophic for its war effort and could have crippled its negotiating efforts during ongoing American-backed peace talks with Russia. EU lawmakers still have some hurdles to clear, such as agreeing on the conditions Ukraine must satisfy to get a payout, before Brussels can raise money on the global debt market to finance the loan — which is backed by the EU’s seven-year budget. A big point of dispute among EU countries was how Ukraine will be able to spend the money, and who will benefit. One-third of the money will go for normal budgetary needs and the rest for defense. France led efforts to get Ukraine to spend as much of that as possible with EU defense companies, mindful that the bloc’s taxpayers are footing the €3 billion annual bill to cover interest payments on the loan. However, Germany, the Netherlands and the Scandinavian nations pushed to give Ukraine as much flexibility as possible. The draft deal, seen by POLITICO, will allow Ukraine to buy key weapons from third countries — including the U.S. and the U.K. — either when no equivalent product is available in the EU or when there is an urgent need, while also strengthening the oversight of EU states over such derogations. The list of weapons Kyiv will be able to buy outside the bloc includes air and missile defense systems, fighter aircraft ammunition and deep-strike capabilities. If the U.K. or other third countries like South Korea, which have signed security deals with the EU and have helped Ukraine, want to take part in procurement deals beyond that, they will have to contribute financially to help cover interest payments on the loan. The European Parliament must now examine the changes the Council has made to the legal text. | Philipp von Ditfurth/picture alliance via Getty Images The text also mentions that the contribution of non-EU countries — to be agreed in upcoming negotiations with the European Commission — should be proportional to how much their defense firms could gain from taking part in the scheme. Canada, which already has a deal to take part in the EU’s separate €150 billion SAFE loans-for-weapons scheme, will not have to pay extra to take part in the Ukraine program, but would have detail the products that could be procured by Kyiv. NEXT STEPS Now that ambassadors have reached a deal, the European Parliament must examine the changes the Council has made to the legal text before approving the measure. If all goes well, Kyiv will get €45 billion from the EU this year in tranches. The remaining cash will arrive in 2027. Ukraine will only repay the money if Moscow ends its full-scale invasion and pays war reparations. If Russia refuses, the EU will consider raiding the Kremlin’s frozen assets lying in financial institutions across the bloc. While the loan will keep Ukrainian forces in the fight, the amount won’t cover Kyiv’s total financing needs — even with another round of loans, worth $8 billion, expected from the International Monetary Fund. By the IMF’s own estimates, Kyiv will need at least €135 billion to sustain its military and budgetary needs this year and next. Meanwhile, U.S. and EU officials are working on a plan to rebuild Ukraine that aims to attract $800 billion in public and private funds over 10 years. For that to happen, the eastern front must first fall silent — a remote likelihood at this point. Veronika Melkozerova contributed reporting from Kyiv.

BRUSSELS — EU ambassadors are close to a deal on a €90 billion loan to finance Ukraine’s defense against Russia thanks to a draft text that spells out the participation of third countries in arms deals, three diplomats said Wednesday. The ambassadors are scheduled to meet on Wednesday afternoon to finalize talks after a week of difficult negotiations. The final hurdle was deciding how non-EU countries would be able to take part in defense contracts financed by the loan. The draft deal, seen by POLITICO, would allow Ukraine to buy key weapons from such countries — including the U.S. and the U.K. — either when no equivalent product is available in the EU or when there is an urgent need. The list of weapons Kyiv will be able to buy outside the bloc includes air and missile defense systems, fighter aircraft ammunition and deep-strike capabilities. If the U.K. wants to take part in procurement deals beyond that, it will have to contribute financially to help cover interest payments on the loan. The text also mentions that the British contribution — to be agreed in upcoming negotiations with the European Commission — should be proportional with the potential gains of its defense firms taking part in the scheme.  France led the effort to ensure that EU countries — which are paying the interest on the loan — gain the most from defense contracts. In an effort to get Paris and its allies on board, the draft circulated late Tuesday includes new language which says that “any agreement with a third country must be based on a balance of rights and obligations,” and also that “a third country should not have the same rights nor enjoy the same benefits,” as participating member states. The draft also strengthens the control of EU countries over whether the conditions to buy weapons for Ukraine outside the bloc have been met, saying Kyiv will have to “provide the information reasonably available to it demonstrating that the conditions for the application of this derogation are met.” That will then be checked  “without undue delay” by the European Commission after consultation with a new Ukraine Defence Industrial Capacities Expert Group. The new body will include representatives from EU members countries, according to diplomats. The European Commission will raise €90 billion in debt to fund Ukraine’s war effort before Kyiv runs out of cash in April. After facing intense pressure from national capitals, the Commission agreed to deploy unused funds in its current seven-year budget to cover the borrowing costs. If that is not enough, member countries will have to pay the difference. Budget Commissioner Piotr Serafin will meet the European Parliament and the Cypriot presidency of the Council of the EU on Thursday in an attempt to solve disagreements on the repayment of the borrowing costs, said one official.

LONDON — The European Commission is looking into whether former British politician Peter Mandelson broke EU rules over his contact with sex offender Jeffrey Epstein. Even though the U.K. left the EU six years ago, Mandelson remains bound by obligations that he signed up to during his time as a commissioner, from 2004 to 2008. Newly released files suggest Mandelson in 2010, while he was a senior minister in the U.K. government, may have given Epstein advance notice of a €500 billion bailout to save the euro at the height of the spiraling Greek debt crisis. European finance ministers agreed the deal overnight amid fears that the failing Greek economy could trigger a wider crisis across the eurozone. According to the files released in the U.S., Epstein, who was a financier, sent Mandelson an email the previous night saying: “Sources tell me 500 b euro bailout , almost complete.” Mandelson replied: “Sd be announced tonight.” The cabinet minister then said he was just leaving 10 Downing Street and “will call.” The British government decided not to take part in the bailout for the euro but was part of the talks that paved the way for the emergency measure, so would have known how events were progressing. On Tuesday, Balazs Ujvari, a spokesperson for the Commission said: “We have rules in place emanating from the treaty and the code of conduct that commissioners, including former commissioners, have to follow.” When there is an indication that the rules may not have been followed, the Commission looks into any potential breaches, he said. “We will be assessing if, in light of these newly available documents, there might be breaches of the respective rules with regard to Peter Mandelson.” Mandelson did not immediately respond to a request for comment. He has previously said he was wrong to have continued his association with Epstein and apologized “unequivocally” to Epstein’s victims.

BRUSSELS ― European governments and corporations are racing to reduce their exposure to U.S. technology, military hardware and energy resources as transatlantic relations sour.  For decades, the EU relied on NATO guarantees to ensure security in the bloc, and on American technology to power its business. Donald Trump’s threats to take over Greenland, and aggressive comments about Europe by members of his administration, have given fresh impetus to European leaders’ call for “independence.” “If we want to be taken seriously again, we will have to learn the language of power politics,” German Chancellor Friedrich Merz said last week. From orders banning civil servants from using U.S.-based videoconferencing tools to trade deals with countries like India to a push to diversify Europe’s energy suppliers, efforts to minimize European dependence on the U.S. are gathering pace. EU leaders warn that transatlantic relations are unlikely to return to the pre-Trump status quo. EU officials stress that such measures amount to “de-risking” Europe’s relationship with the U.S., rather than “decoupling” — a term that implies a clean break in economic and strategic ties. Until recently, both expressions were mainly applied to European efforts to reduce dependence on China. Now, they are coming up in relation to the U.S., Europe’s main trade partner and security benefactor. The decoupling drive is in its infancy. The U.S. remains by far the largest trading partner for Europe, and it will take years for the bloc to wean itself off American tech and military support, according to Jean-Luc Demarty, who was in charge of the European Commission’s trade department under the body’s former president, Jean-Claude Juncker. Donald Trump’s threats to take over Greenland, and aggressive comments about Europe by members of his administration, have given fresh impetus to European leaders’ call for “independence.” | Kristian Tuxen Ladegaard Berg/NurPhoto via Getty Images “In terms of trade, they [the U.S.] represent a significant share of our exports,” said Demarty. “So it’s a lot, but it’s not a matter of life and death.” The push to diversify away from the U.S. has seen Brussels strike trade deals with the Mercosur bloc of Latin American countries, India and Indonesia in recent months. The Commission also revamped its deal with Mexico, and revived stalled negotiations with Australia. DEFENDING EUROPE: FROM NATO TO THE EU Since the continent emerged from the ashes of World War II, Europe has relied for its security on NATO — which the U.S. contributes the bulk of funding to. At a weekend retreat in Zagreb, Croatia, conservative European leaders including Merz said it was time for the bloc to beef up its homegrown mutual-defense clause, which binds EU countries to an agreement to defend any EU country that comes under attack. While it has existed since 2009, the EU’s Article 42.7 mutual defense clause was rarely seen as necessary because NATO’s Article 5 served a similar purpose. But Europe’s governments have started to doubt whether the U.S. really would come to Europe’s rescue. In Zagreb, the leaders embraced the EU’s new role as a security actor, tasking two leaders, as yet unnamed, with rapidly cooking up plans to turn the EU clause from words to an ironclad security guarantee. “For decades, some countries said ‘We have NATO, why should we have parallel structures?’” said a senior EU diplomat who was granted anonymity to talk about confidential summit preparations. After Trump’s Greenland saber-rattling, “we are faced with the necessity, we have to set up military command structures within the EU.” At a weekend retreat in Zagreb, Croatia, conservative European leaders including Merz said it was time for the bloc to beef up its homegrown mutual-defense clause, which binds EU countries to an agreement to defend any EU country that comes under attack. | Marko Perkov/AFP via Getty Images In comments to EU lawmakers last week, NATO Secretary-General Mark Rutte said that anyone who believes Europe can defend itself without the U.S. should “keep on dreaming.” Europe remains heavily reliant on U.S. military capabilities, most notably in its support for Ukraine’s fight against Russia. But some Europeans are now openly talking about the price of reducing exposure to the U.S. — and saying it’s manageable. TECHNOLOGY: TEAMS OUT, VISIO IN The mood shift is clearest when it comes to technology, where European reliance on platforms such as X, Meta and Google has long troubled EU voters, as evidenced by broad support for the bloc’s tech legislation. French President Emmanuel Macron’s government is planning to ban officials from using U.S.-based videoconferencing tools. Other countries like Germany are contemplating similar moves. “It’s very clear that Europe is having our independence moment,” EU tech czar Henna Virkkunen told a POLITICO conference last week. “During the last year, everybody has really realized how important it is that we are not dependent on one country or one company when it comes to some very critical technologies.” France is moving to ban public officials from using American platforms including Google Meet, Zoom and Teams, a government spokesperson told POLITICO. Officials will soon make the switch to Visio, a videoconferencing tool that runs on infrastructure provided by French firm Outscale. In the European Parliament, lawmakers are urging its president, Roberta Metsola, to ditch U.S. software and hardware, as well as a U.S.-based travel booking tool. In Germany, politicians want a potential German or European substitute for software made by U.S. data analysis firm Palantir. “Such dependencies on key technologies are naturally a major problem,” Sebastian Fiedler, an SPD lawmaker and expert on policing, told POLITICO. Even in the Netherlands, among Europe’s more pro-American countries, there are growing calls from lawmakers and voters to ring-fence sensitive technologies from U.S. influence. Dutch lawmakers are reviewing a petition signed by 140,000 people calling on the state to block the acquisition of a state identity verification tool by a U.S. company. At the World Economic Forum in Davos, Switzerland, in late January, German entrepreneur Anna Zeiter announced the launch of a Europe-based social media platform called W that could rival Elon Musk’s X, which has faced fines for breaching the EU’s content moderation rules. W plans to host its data on “European servers owned by European companies” and limits its investors to Europeans, Zeiter told Euronews. So far, Brussels has yet to codify any such moves into law. But upcoming legislation on cloud and AI services are expected to send signals about the need to Europeanize the bloc’s tech offerings. ENERGY: TIME TO DIVERSIFY On energy, the same trend is apparent. The United States provides more than a quarter of the EU’s gas, a share set to rise further as a full ban on Russian imports takes effect. But EU officials warn about the risk of increasing Europe’s dependency on the U.S. in yet another area. Trump’s claims on Greenland were a “clear wake-up call” for the EU, showing that energy can no longer be seen in isolation from geopolitical trends, EU Energy Commissioner Dan Jørgensen said last Wednesday. The Greenland crisis reinforced concerns that the bloc risks “replacing one dependency with another,” said Jørgensen, adding that as a result, Brussels is stepping up efforts to diversify, deepening talks with alternative suppliers including Canada, Qatar and North African countries such as Algeria. FINANCE: MOVING TO EUROPEAN PAYMENTS Payment systems are also drawing scrutiny, with lawmakers warning about over-reliance on U.S. payment systems such as Mastercard and Visa. The digital euro, a digital version of cash that the European Central Bank is preparing to issue in 2029, aims to cut these dependencies and provide a pan-European sovereign means of payment. “With the digital euro, Europeans would remain in control of their money, their choices and their future,” ECB President Christine Lagarde said last year. In Germany, some politicians are sounding the alarm about 1,236 tons of gold reserves that Germany keeps in the Federal Reserve Bank of New York. “In a time of growing global uncertainty and under President Trump’s unpredictable U.S. policy, it’s no longer acceptable” to have that much in gold reserves in the U.S., Marie-Agnes Strack-Zimmermann, the German politician from the liberal Free Democratic Party, who chairs the Parliament’s defense committee, told Der Spiegel. Several European countries are pushing the EU to privilege European manufacturers when it comes to spending EU public money via “Buy European” clauses. Until a few years ago, countries like Poland, the Netherlands or the Baltic states would never have agreed on such “Buy European” clauses. But even those countries are now backing calls to prioritize purchases from EU-based companies. MILITARY INVESTMENT: BOOSTING OWN CAPACITY A €150 billion EU program to help countries boost their defense investments, finalized in May of last year, states that no more than 35 percent of the components in a given purchase, by cost, should originate from outside the EU and partner states like Norway and Ukraine. The U.S. is not considered a partner country under the scheme. For now, European countries rely heavily on the U.S. for military enablers including surveillance and reconnaissance, intelligence, strategic lift, missile defense and space-based assets. But the powerful conservative umbrella group, the European People Party, says these are precisely the areas where Europe needs to ramp up its own capacities. When EU leaders from the EPP agreed on their 2026 roadmap in Zagreb, they stated that the “Buy European” principle should apply to an upcoming Commission proposal on joint procurement. The title of the EPP’s 2026 roadmap? “Time for independence.” Camille Gijs, Jacopo Barigazzi, Mathieu Pollet, Giovanna Faggionato, Eliza Gkritsi, Elena Giordano, Ben Munster and Sam Clark contributed reporting from Brussels. James Angelos contributed reporting from Berlin.

PARIS — The French state budget for 2026 officially passed through parliament on Monday, ending a months-long deadlock that had increased fears of a debt crisis in the European Union’s second-largest economy. After months of cross-party negotiations failed to yield consensus, center-right Prime Minister Sébastien Lecornu activated a constitutional clause that allows the government to pass legislation without a vote in parliament. The use of that clause, however, allows lawmakers to put forward motions of no confidence, which, if passed, lead to the bill’s defeat and force the government to resign. Lecornu’s minority government survived several no-confidence votes put forward by left-wing and far-right groups. His survival came down to a decision by the center-left Socialist Party not to join their former allies on the left in voting against Lecornu, in exchange for government concessions including €1 lunches for university students. Lecornu had initially aimed to pass a budget that would bring France’s 2026 deficit to 4.7 percent of gross domestic product, but policy requests granted to various political groups bumped that figure to about 5 percent of GDP, per the government’s most recent estimate. To avoid a U.S.-style shutdown after failing to finalize fiscal plans before the new year, last year’s budget was rolled over into January. The 2026 budget is expected to take effect shortly after receiving a green light from France’s Constitutional Court, which will proceed imminently with a routine legal review.

BRUSSELS — EU countries shouldn’t be afraid of integrating at different speeds if that’s what it takes to gain crucial leverage on the world stage, Mario Draghi said Monday. “We must take the steps that are currently possible, with the partners who are actually willing, in the domains where progress can currently be made,” said the former European Central Bank president and ex-prime minister of Italy during a ceremony at the University of Leuven in Belgium, where he was awarded an honorary doctorate. “Power requires Europe to move from confederation to federation,” said Draghi, stressing that only in domains where EU countries have pooled their competences has the bloc gained clout on the global stage.  “Where Europe has federated, [such as] on trade, on competition, on the single market, on monetary policy, we are respected as a power and negotiate as one,” he said, citing trade agreements recently negotiated with India and Latin America. Draghi’s call comes as Europe struggles to keep pace with the U.S. and China, and is facing Russian aggression in Ukraine plus a transatlantic ally that no longer acknowledges the benefits of its historic European ties. “This is a future in which Europe risks becoming subordinated, divided and de-industrialized at once, and a Europe that cannot defend its interests will not preserve its values for longer,” Draghi warned. In the face of those challenges, areas of weakness are those where EU capitals continue to maintain a grip, such as defense, industrial policy or foreign affairs, Draghi said. In these, he added, “we are treated as a loose assembly of middle-sized states to be divided and dealt with accordingly.” The former top official praised the bloc’s recent stance on Greenland, where it decided to resist rather than accommodate threats coming from the U.S. “By standing together in the face of direct threat, Europeans discovered the solidarity that had previously seemed out of reach,” he said.  Draghi will take part in an informal gathering of European leaders next week aimed at discussing the direction for the bloc’s competitiveness, together with another former Italian prime minister, Enrico Letta. Both have laid out their economic visions in reports that form the building blocks of President Ursula von der Leyen’s second term atop the European Commission.

PARIS — French President Emmanuel Macron’s celebrations over the imminent passage of the 2026 budget will be short-lived. Once it’s approved, he’s going to be a lame duck until the presidential election of spring next year. Current and former ministers, lawmakers and political aides — including three Macron allies — told POLITICO that now that the budget fight is over and the concerns of angry citizens and jittery markets are assuaged, the whole cycle of French politics will shift to campaign mode at the expense of the dirty work of lawmaking.  First will come next month’s municipal elections, where voters in all of France’s 35,000-plus communes will elect mayors and city councils. Then all attention will flip to the race for the all-powerful presidency, Macron cannot run again due to term limits, and polls show he could be replaced by a candidate from the far-right National Rally. “It’s the end of [Macron’s] term,” a former adviser close to Prime Minister Sébastien Lecornu said of the budget’s passage.   Gabriel Attal, Macron’s former prime minister who now leads the French president’s party, confirmed in an interview with French media last month that he told his troops the budget marked “the end” of Macron’s second term.  “I stand by what I said,” Attal told FranceInfo.  As president, Macron continues to exert a strong influence over foreign affairs and defense, two realms that will keep him on the world stage given the geopolitical upheaval brought on by U.S. President Donald Trump’s second term. Domestically, however, he’s been hampered by the snap election in 2024 that delivered a hung parliament.  Lecornu was only able to avoid being toppled over the passage of the budget, as his two immediate predecessors were, thanks to his political savvy, some compromises and a few bold decisions. These included pausing Macron’s flagship pension reform that raised the retirement age and going back on his promise not to use a constitutional backdoor to ram it through without a vote. “Lecornu was smart enough to make the budget phase pass and end on a high note. That’s commendable, given that [former Prime Ministers Michel] Barnier and [François] Bayrou didn’t manage to do so, and he did it with considerable skill,” said a ministerial adviser who, like others quoted in this piece, was granted anonymity to speak candidly.  But Lecornu’s decision to prioritize uncontroversial measures in the coming weeks speak to the difficulties that lie ahead.   These priorities include defining the division of power between the central government and local authorities, and streamlining and centralizing welfare payments that are currently doled out in an ad hoc fashion. Lecornu is also planning to get to work early on France’s 2027 fiscal plans to try to prevent the third budget crisis in a row.  French Prime Minister Sebastien Lecornu leaves the Elysee Palace in Paris after a Cabinet meeting on Jan. 28. His decision to prioritize uncontroversial measures in the coming weeks speak to the difficulties ahead. | Mohammed Badra/EPA “There will be a presidential election in 2027. Before then, we need to agree on a bottom line which allows the country to move forward,” government spokesperson Maud Bregeon said Thursday on Sud Radio.  Lecornu has repeatedly stressed that his government should be disconnected from the race for president, blaming “partisan appetites” for both the budget crisis and the collapse of his 14-hour government, which was eventually replaced with a suite of less ambitious ministers.   But it’s ironic that some French government officials and MPs are now saying the self-described warrior-monk prime minister may have vaulted himself into the realm of presidential contender with his budget win. Mathieu Gallard, a pollster at Ipsos, said Lecornu had clearly become a more viable presidential candidate but noted that the jump from prime minister to president “is always a hard task.”  One parliamentary leader was much less sanguine. They said the same “partisan appetites” Lecornu has long warned about will likely cost him his job before voters head to the polls to choose Macron’s successor.   “[Lecornu] has few friends … And now that the budget has passed, every political group can have fun throwing him out of office to plant their flag before the next presidential election,” the leader said.  Anthony Lattier, Sarah Paillou and Elisa Bertholomey contributed to this report. 

SHANGHAI — As Keir Starmer arrived for the first visit by a British prime minister to China for eight years, he stood next to a TV game show-style wheel of fortune. The arrow pointed at “rise high,” next to “get rich immediately” and “everything will go smoothly.” Not one option on the wheel was negative. Sadly for the U.K. prime minister, reality does not match the wheel — but he gave it a good go. After an almost decade-long British chill toward China, Starmer reveled in three hours of talks and lunch with Chinese President Xi Jinping on Thursday, where he called for a “more sophisticated” relationship and won effusive praise in return. Britain boasted it had secured visa-free travel for British citizens to China for up to 30 days and a cut in Chinese tariffs on Scotch whisky. Xi even said the warming would help “world peace.” His wins so far (many details of which remain vague) are only a tiny sliver of the range of opportunities he claimed Chinese engagement could bring — and do not even touch on the controversies, given Beijing’s record on aggressive trade practices, human rights, espionage, cyber sabotage and transnational repression. But the vibes on the ground are clear — Starmer is loving it, and wants to go much further. POLITICO picks out five takeaways from following the entourage. 1) THERE’S NO TURNING BACK NOW Britain is now rolling inevitably toward greater engagement in a way that will be hard to reverse. Labour’s warming to China has been in train since the party was in opposition, inspired by the U.S. Democrats and Australian Labor, and the lead-up to this meeting took more than a year. No. 10 has bought into China’s reliance on protocol and iterative engagement. Xi is said to have been significantly warmer toward Starmer this week (their second meeting) than the first time they met at the G20 in Rome. Officials say it takes a long time to warm him up. There is no doubt China’s readout of the meeting was deliberately friendlier to Labour than the Conservatives. One person on the last leader-level visit to China, by Conservative PM Theresa May in 2018, recalled that the meetings were “intellectually grueling” because Xi used consecutive translation, speaking for long periods before May could reply. This time officials say he used simultaneous translation. It will not end here — because Starmer can’t afford for it to. Many of the dozen or so deals announced this week are only commitments to investigate options for future cooperation, so Britain will need to now push them into reality, with an array of dialogues planned in the future along with a visit by Foreign Secretary Yvette Cooper. As Business Secretary Peter Kyle told a Thursday night reception at the British Embassy: “This trip is just the start.” 2) BRITAIN’S STILL ON THE EASY WINS Deals on whisky tariffs and visa-free travel were top of the No. 10 list but — as standalone wins without national security implications — they were the lowest-hanging fruit. The two sides agreed to explore whether to enter negotiations towards a bilateral services agreement, which would make it easier for lawyers and accountants to use their professional qualifications across the two countries. In return, investment decisions in China were announced by firms including AstraZeneca and Octopus Energy. But many of the other deals are only the start of a dialogue. One U.K. official called them “jam tomorrow deals.” And Luke de Pulford, of the Inter-Parliamentary Alliance on China campaign group, argued that despite Britain having a slight trade surplus in services “it’s tiny compared to the whole.” He added: “This trip to China seems to be based upon the notion that China is part of the solution to our economic woes. It’s not rooted in any evidence. China hasn’t done foreign direct investment in any serious way since 2017. It’s dropped off a cliff.” Then there are areas — particularly wind farms — where officials are more edgy and which weren’t discussed by Starmer and Xi. One industry figure dismissed concerns that China could install “kill switches” in key infrastructure — shutting down a wind turbine would be the equivalent of a windless day — but concerns are real. A second U.K. official said Britain had effectively categorized areas of the economy into three buckets — “slam dunks” to engage with China, “slam dunks” to block China, and everything in between. “We’ve been really clear [with China] about which sectors are accessible,” they said, which had helped smooth the path. Then there are the litany of non-trade areas where China will be reluctant to engage: being challenged on Xi’s relationship with Russian President Vladimir Putin, the treatment of the Uyghur people and democracy campaigner Jimmy Lai. Britain is still awaiting approval of a major revamp of its embassy in Beijing, which will be expensive with U.K. contractors, materials and tech, all security-cleared, being brought in. 3) STARMER AND HIS TEAM WERE GENUINELY LOVING IT After such a build-up and so much controversy, Starmer has … been having a great time. The prime minister has struggled to peel the smile off his face and told business delegates they were “making history.” Privately, several people around him enthused about the novelty of it all (many have never visited China and Starmer has not done so since before he went into politics). One said they were looking forward to seeing how Xi operates: “He’s very enigmatic.” Briefing journalists in a small ante-room in the Forbidden City, Starmer enthused about Xi’s love of football and Shakespeare. And talking to business leaders, he repeated the president’s line about blind men finding an elephant: “One touches the leg and thinks it’s a pillow, another feels the belly and thinks it’s a wall. Too often this reflects how China is seen.” So into the spirit was Starmer that he even ticked off Kyle for not bowing deeply enough. At the signing ceremony for a string of business deals, Kyle had seen his counterpart bend halfway to the floor — and responded with a polite nod of the head. The vibes were energetic. Britain’s new ambassador to Beijing, Peter Wilson, flitted around ceaselessly and sat along from Starmer in seat 1E. The PM’s No. 10 business adviser, Varun Chandra, jumped from CEO to CEO at the British embassy. The whole delegation was on burner phones and laptops (even leaving Apple Watches at home) but the security fears soon faded to the background for U.K. officials. CEOs on the trip queued up to tell journalists that Starmer was making the right choice. “We risk a technological gulf if we don’t engage,” said one. There is one problem. Carry on like this, and Starmer will struggle to maintain his line that he is not re-entering a “golden era” — like the one controversially pushed by the Tories under David Cameron in the early 2010s — after all. 4) BUSINESS WAS EVERYTHING The trip was a tale of two groups of CEOs. The creatives and arts bosses gave the stardust and human connection that such a controversial visit needed — but business investment was the meat. In his opening speech Starmer name-checked three people: Business Secretary Peter Kyle, City Minister Lucy Rigby and No. 10 business adviser Varun Chandra. It even came through in the seating plan on the chartered British Airways plane, with financial services CEOs in the pricey seats while creatives were in economy — although this was because they were all paying their own way. Everyone knew the bargain. One arts CEO confessed that, while their industry made money too, they knew they were not the uppermost priority. Starmer’s aides insist they are delighted with what they managed to bag from Xi on Thursday, and believe it is at the top end of the expectations they had on the way out. But that will mean the focus back home on the final “big number” of investment that No. 10 produces — and the questions about whether it is worth all the political energy — are even more acute. 5) STARMER’S STILL WALKING A TIGHTROPE British CEOs were taken to see a collection of priceless Ming vases. It was a good metaphor. Starmer and the No. 10 operation were more reticent even than usual on Thursday, refusing to give on-the-record comment about several basic details of what he raised in his meeting with Xi. Journalists were told that he raised the case of democracy campaigner Jimmy Lai, but not whether he called directly for his release. The readout of the meeting from Communist China was more extensive (and poetic) than that from No. 10. Likewise, journalists were given no advance heads-up of deals on tariffs and visas, even in the few hours between the bilateral and the announcements, while the details and protocol were nailed down. There was good reason for the reticence. Not only was Starmer cautious not to offend his hosts; he also did not want to enrage U.S. President Donald Trump, who threatened Canada with new tariffs after PM Mark Carney’s visit to Beijing this month. Even with No. 10 briefing the U.S. on the trip’s objectives beforehand, and Starmer giving a pre-flight interview saying he wouldn’t choose between Xi and Trump, the president called Britain’s engagement “very dangerous” on Friday. And then there’s the EU. The longer Trump’s provocations go on, the more some of Starmer’s more Europhile allies will want him to side not with the U.S. or China, but Brussels. “There’s this huge blind spot in the middle of Europe,” complained one European diplomat. “The U.K. had the advantage of being the Trump whisperer, but that’s gone now.” Starmer leaves China hoping he can whisper to Trump, Xi and Ursula von der Leyen all at the same time.

The eurozone economy held up well at the end of 2025, with three of the region’s four largest countries growing by more than expected. Preliminary data from the EU’s statistical office, Eurostat, on Friday showed that the eurozone’s economy expanded by 0.3 percent during the last three months of last year, unchanged from the third quarter. That was better than market expectations of an increase of 0.2 percent. In year-on-year terms, gross domestic product growth slowed by less than feared, to 1.3 percent from 1.4 percent in the previous quarter. GDP was up 0.3 percent in Germany, the region’s biggest economy, and by 0.4 percent and 0.8 percent in Italy and Spain, respectively. The standout underperformer was France, where it was stagnant, held back by a political deadlock that delayed the approval of a budget for 2026. Eurostat’s numbers still showed the scars of the U.S.-driven trade war that overshadowed the economy all through last year. Ireland, whose GDP figures are heavily influenced by trade and financial flows between it and the U.S., registered a sharp contraction of 0.6 percent in the final three months of the year. Eurostat gave no analysis of its numbers, but the figures were likely supported by the fall in global energy prices toward the end of last year. This typically helps European spending power, given that Europe is a net importer of energy.

Switzerland will raise its value-added tax rate for a decade to boost defense spending, its government announced today. “In view of the deteriorating geopolitical situation, the Federal Council wants to substantially strengthen Switzerland’s security and defense capabilities,” the statement reads. “To this end, additional resources in the order of 31 billion Swiss francs [€33 billion] are required.” The Council plans to temporarily raise VAT by 0.8 percent from the current 8.1 percent for 10 years, as of 2028. The additional revenues will be allocated to an armament fund that will also have borrowing capacity. However, raising the VAT requires a change in the constitution and a public consultation will open in the spring. Switzerland has been rethinking its defense stance since Russia’s attack on Ukraine almost four years ago. It is looking for more military cooperation with European nations and ramping up its rearmament, although it still has no intention of joining NATO. Switzerland spends about 0.7 percent of its GDP on defense, one of the lowest rates in Europe. The current goal of boosting that to 1 percent by 2032 is now out of date, the Federal Council said. “Due to the savings made in recent decades, the armed forces are also insufficiently equipped, particularly to effectively repel the most likely threats, namely long-range attacks and hybrid conflicts,” the statement added. Priorities for the country’s armament push include short- and medium-range air defense systems, cybersecurity and electromagnetic capabilities.