From Lisbon to Tallinn, Europeans are overwhelmed by soaring home prices. This week, Brussels intends to do something about it. “This is a real crisis,” said European Commissioner for Housing Dan Jørgensen in an interview with POLITICO, ahead of the approval of the bloc’s first-ever Affordable Housing Plan. “And it’s not just enough to talk about it.” To that end, the package will seek to free up public cash for the construction of new homes, track speculation in the housing market, and give regional and local governments tools to rein in the short-term rentals contributing to the housing shortage. “The plan will be a mix of concrete actions at the EU level and recommendations that member states can apply,” Jørgensen said, adding that the European Commission wants to give national, regional and local governments ways to make real changes on the ground — while not overstepping its role in an area over which it has no official competence. “This is a real problem affecting millions of people, and the inaction is playing right into the playbook of right-wing populists,” Jørgensen noted, citing the ultranationalist parties that have stoked discontent over sky-high home prices to score major victories in countries like the Netherlands and Portugal. “Normally the EU has not played a big role here,” he added. “That needs to change.” CASH, TOOLS AND TRANSPARENCY The most concrete action set to be announced this week is a revision of state aid rules to make it easier for national governments to build affordable housing. Member countries have long complained they can only use public cash to provide homes for low-income families. Reflecting the fact that even middle-class earners are now struggling to pay for shelter, the new regulations will allow funds to be used for all groups priced out of the housing market. The package will also give national, regional and local authorities tools to target the tourist flats exacerbating the housing shortage in cities like Barcelona, Florence and Prague. “I’m not on the side of the people who call for banning short-term rentals,” Jørgensen clarified, adding that such platforms have offered travelers the ability to experience Europe differently, and provided some families with a needed source of income. But the model has grown at a rate “no one could have imagined, with short-term rentals accounting for 20 percent of homes in some very stressed areas,” he noted. It has turned into a “money machine instead of what it was intended to.” The commissioner stressed that national, regional and local leaders would ultimately be the ones deciding whether to use the tools to rein in short-term rentals. “We’re not going to force people to do anything,” he said. “If you think the status quo is fine, you can keep things as they are.” In another first, a more abstract section of the package will also aim to address speculation in the housing market. “This is a real crisis,” said European Commissioner for Housing Dan Jørgensen in an interview with POLITICO. | Lilli Förter/Getty Images While insisting he’s “not against people making money,” Jørgensen said Europe’s housing stock was being treated like “gold or Bitcoin and other investments made for the sole purpose of making money” — an approach that ignores the vital role of shelter for society at large. “Having a roof over your head, a decent house … is a human right,” he argued. As an initial step, this week’s package will propose the EU track speculation and determine the scope of the problem. However, Jørgensen acknowledged that using the resulting data for concrete action to tackle the market’s financialization might prove difficult. “While no one is really arguing this problem doesn’t exist, there’s a political conflict over whether it’s a good or a bad thing.” But regulation is essential for the proper functioning of the internal market, he added. THE COMPETENCE QUESTION The Commission’s housing package will also include a new construction strategy to cut red tape and create common standards, so that building materials manufactured at competitive prices in one member country can be easily used for housing projects in another. Additionally, there will be a bid to address the needs of the over a million homeless Europeans, many of whom aren’t citizens of the countries in which they are sleeping rough. “We want to look at what rights they have and how these are respected,” Jørgensen said. “We’re talking about humans with needs, people who deserve our help and compassion.” The commissioner explained the complexity of the housing crisis had required a “holistic” approach that led him to work in tandem with Executive Vice Presidents Teresa Ribera and Roxana Mînzatu, as well as internal market boss Stéphane Séjourné and tech chief Henna Virkkunen, among others. He also stressed the package didn’t constitute a power grab on the Commission’s part, and that national, regional and local governments are still best positioned to address many aspects of the crisis. “But,” he said, “there are areas where we haven’t done anything in which we can do something.” While much of the plan will consist of recommendations member countries won’t be required to implement, Jørgensen warned against ignoring them. The Commission is providing solutions, he said, and “policymakers need to answer to their populations if they don’t do something that’s pretty obvious they could do.” “Normal citizens will use every opportunity to make their demands known, be it in local, national or European elections,” Jørgensen explained. “I’m respectfully telling decision-makers all over Europe that either they take this problem seriously, or they accept that they’ll have to hand over power to the populists.”

Europe’s security does not depend solely on our physical borders and their defense. It rests on something far less visible, and far more sensitive: the digital networks that keep our societies, economies and democracies functioning every second of the day. > Without resilient networks, the daily workings of Europe would grind to a > halt, and so too would any attempt to build meaningful defense readiness. A recent study by Copenhagen Economics confirms that telecom operators have become the first line of defense in Europe’s security architecture. Their networks power essential services ranging from emergency communications and cross-border healthcare to energy systems, financial markets, transport and, increasingly, Europe’s defense capabilities. Without resilient networks, the daily workings of Europe would grind to a halt, and so too would any attempt to build meaningful defense readiness. This reality forces us to confront an uncomfortable truth: Europe cannot build credible defense capabilities on top of an economically strained, structurally fragmented telecom sector. Yet this is precisely the risk today. A threat landscape outpacing Europe’s defenses The challenges facing Europe are evolving faster than our political and regulatory systems can respond. In 2023 alone, ENISA recorded 188 major incidents, causing 1.7 billion lost user-hours, the equivalent of taking entire cities offline. While operators have strengthened their systems and outage times fell by more than half in 2024 compared with the previous year, despite a growing number of incidents, the direction of travel remains clear: cyberattacks are more sophisticated, supply chains more vulnerable and climate-related physical disruptions more frequent. Hybrid threats increasingly target civilian digital infrastructure as a way to weaken states. Telecom networks, once considered as technical utilities, have become a strategic asset essential to Europe’s stability. > Europe cannot deploy cross-border defense capabilities without resilient, > pan-European digital infrastructure. Nor can it guarantee NATO > interoperability with 27 national markets, divergent rules and dozens of > sub-scale operators unable to invest at continental scale. Our allies recognize this. NATO recently encouraged members to spend up to 1.5 percent of their GDP on protecting critical infrastructure. Secretary General Mark Rutte also urged investment in cyber defense, AI, and cloud technologies, highlighting the military benefits of cloud scalability and edge computing – all of which rely on high-quality, resilient networks. This is a clear political signal that telecom security is not merely an operational matter but a geopolitical priority. The link between telecoms and defense is deeper than many realize. As also explained in the recent Arel report, Much More than a Network, modern defense capabilities rely largely on civilian telecom networks. Strong fiber backbones, advanced 5G and future 6G systems, resilient cloud and edge computing, satellite connectivity, and data centers form the nervous system of military logistics, intelligence and surveillance. Europe cannot deploy cross-border defense capabilities without resilient, pan-European digital infrastructure. Nor can it guarantee NATO interoperability with 27 national markets, divergent rules and dozens of sub-scale operators unable to invest at continental scale. Fragmentation has become one of Europe’s greatest strategic vulnerabilities. The reform Europe needs: An investment boost for digital networks At the same time, Europe expects networks to become more resilient, more redundant, less dependent on foreign technology and more capable of supporting defense-grade applications. Security and resilience are not side tasks for telecom operators, they are baked into everything they do. From procurement and infrastructure design to daily operations, operators treat these efforts as core principles shaping how networks are built, run and protected. Therefore, as the Copenhagen Economics study shows, the level of protection Europe now requires will demand substantial additional capital. > It is unrealistic to expect world-class, defense-ready infrastructure to > emerge from a model that has become structurally unsustainable. This is the right ambition, but the economic model underpinning the sector does not match these expectations. Due to fragmentation and over-regulation, Europe’s telecom market invests less per capita than global peers, generates roughly half the return on capital of operators in the United States and faces rising costs linked to expanding security obligations. It is unrealistic to expect world-class, defense-ready infrastructure to emerge from a model that has become structurally unsustainable. A shift in policy priorities is therefore essential. Europe must place investment in security and resilience at the center of its political agenda. Policy must allow this reality to be reflected in merger assessments, reduce overlapping security rules and provide public support where the public interest exceeds commercial considerations. This is not state aid; it is strategic social responsibility. Completing the single market for telecommunications is central to this agenda. A fragmented market cannot produce the secure, interoperable, large-scale solutions required for modern defense. The Digital Networks Act must simplify and harmonize rules across the EU, supported by a streamlined governance that distinguishes between domestic matters and cross-border strategic issues. Spectrum policy must also move beyond national silos, allowing Europe to avoid conflicts with NATO over key bands and enabling coherent next-generation deployments. Telecom policy nowadays is also defense policy. When we measure investment gaps in digital network deployment, we still tend to measure simple access to 5G and fiber. However, we should start considering that — if security, resilience and defense-readiness are to be taken into account — the investment gap is much higher that the €200 billion already estimated by the European Commission. Europe’s strategic choice The momentum for stronger European defense is real — but momentum fades if it is not seized. If Europe fails to modernize and secure its telecom infrastructure now, it risks entering the next decade with a weakened industrial base, chronic underinvestment, dependence on non-EU technologies and networks unable to support advanced defense applications. In that scenario, Europe’s democratic resilience would erode in parallel with its economic competitiveness, leaving the continent more exposed to geopolitical pressure and technological dependency. > If Europe fails to modernize and secure its telecom infrastructure now, it > risks entering the next decade with a weakened industrial base, chronic > underinvestment, dependence on non-EU technologies and networks unable to > support advanced defense applications. Europe still has time to change course and put telecoms at the center of its agenda — not as a technical afterthought, but as a core pillar of its defense strategy. The time for incremental steps has passed. Europe must choose to build the network foundations of its security now or accept that its strategic ambitions will remain permanently out of reach. -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is Connect Europe AISBL * The ultimate controlling entity is Connect Europe AISBL * The political advertisement is linked to advocacy on EU digital, telecom and industrial policy, including initiatives such as the Digital Networks Act, Digital Omnibus, and connectivity, cybersecurity, and defence frameworks aimed at strengthening Europe’s digital competitiveness. More information here.

BRUSSELS — The European Commission will provide a financial band-aid next year to Baltic nations suffering collateral economic damage from EU sanctions against Russia. The region is being hit particularly hard because of falls in tourism and investment, along with the collapse of cross-border trade. Regions Commissioner Raffaele Fitto is leading the plan, which aims to kickstart the economies of Finland and its Baltic neighbors, according to diplomats and Commission officials who were granted anonymity to speak freely. The intended recipients are also heading to Brussels with a lengthy wish list, hoping Fitto’s plan will reignite their economies. Their concerns will take center stage during a summit of leaders from Eastern European countries in Helsinki on Dec. 16. “We want to have special attention to our region — the eastern flank, including Lithuania — because we see the negative impact coming from the geopolitical situation,” Lithuania’s Europe minister, Sigitas Mitkus, said in an interview with POLITICO earlier this month. “Sometimes it’s difficult to convince [investors] that … we have all the facilities in place.” But skeptics warn that any immediate financial support Fitto can provide will be meager, given the scale of the challenge and with the bloc’s seven-year budget running low. The EU has agreed 19 sanction packages against Moscow in a bid to cripple the Russian war economy, which has bankrolled the Kremlin’s invasion of Ukraine since February 2022. In doing so, Finland, Estonia, Latvia, and Lithuania have all taken a hit. While the threat of a Kremlin invasion has deterred tourists and investors, the sanctions have choked off cross-border trade with Russia, and everything has been made worse by skyrocketing inflation after the pandemic. Dwindling housing prices have also made it more difficult for businesses to provide collateral to secure loans from banks. “People who had cross-border connections with some economic consequences have lost them,” Jürgen Ligi, Estonia’s finance minister, told POLITICO. A native of Tartu on Estonia’s eastern flank, Ligi has witnessed these problems first-hand as he owns a house only four kilometers from the Russian border. “Estonia’s economy has suffered the most from the war [which caused] problems with investments and jobs,” Ligi added. According to the Commission’s latest forecast, Estonia is expected to grow by only 0.6 percent in 2025 — well below the EU average — even though economic activity is expected to pick up in 2026 and 2027. The EU has agreed 19 sanction packages against Moscow in a bid to cripple the Russian war economy, which has bankrolled the Kremlin’s invasion of Ukraine since February 2022. | Sefa Karacan/Getty Images In another sign of financial strain, Finland breached the Commission’s spending rules in 2025 due to excessive spending and an economic slowdown caused by the war. “We will be acknowledging the difficult economic situation Finland is facing, including the geopolitical and the closure of the Russian border,” EU Economy Commissioner Valdis Dombrovskis, said on Tuesday. SCRAPING THE BARREL But Fitto’s options could be limited until the bloc’s new seven-year budget, known as the multi-annual financial framework (MFF), is in place by 2028. “My sense is that the communication won’t come with fresh money but with ideas that can be pursued in the next MFF,” said an EU diplomat who was granted anonymity to discuss upcoming legislation. Mindful of dwindling resources in the EU’s current cash pot, Lithuania’s Mitkus is demanding that Baltic firms get preferential access to the EU’s new funding programs from 2028 — something that is currently lacking in the Commission’s budget proposal from July. Officials from the frontline states are exploring other options. These include Brussels loosening state aid rules so they can subsidize struggling firms, and getting the European Investment Bank to provide guarantees to companies that want to invest in the region. While the upcoming strategy will draw attention to these problems, officials privately admit that it’s unlikely to mobilize enough cash to solve them immediately. “It will build the narrative that in the next MFF you can do something for [pressing issues for Eastern regions such as] drones production,” said the EU diplomat quoted above. But until 2028, “I don’t expect any new money.”

BRUSSELS — U.S. Secretary of Energy Chris Wright has called on the EU’s remaining buyers of Russian fossil fuels to drop their campaign against the bloc’s efforts to end dependency on Moscow and buy from America instead. Speaking on Friday at an event in Brussels, where he has held meetings this week with officials on how to increase imports of American liquefied natural gas and cut off the flow of funds for Russia’s war on Ukraine, Wright said it would be preferable for Europe to get its supplies from “its friends.” Asked by POLITICO whether countries like Hungary and Slovakia, which have opposed the European Commission’s efforts to phase out Russian gas, should finally end their dealings with the Kremlin, Wright said “absolutely.” “We want to displace all Russian gas. President Trump, America, and all the nations of the EU, we want to end the Russian-Ukraine war,” said Wright. “The more we can strangle Russia’s ability to fund this murderous war, the better for all of us. So the answer to your question is absolutely.” At the same time, Wright called for European countries to find alternatives to Russian atomic power, saying “we want to see nuclear technology coming from the United States or within the EU itself.” On Thursday, the EU’s top court ruled that the Commission was wrong to have allowed Hungary to give state aid to fund a major expansion of its nuclear power facilities with `Russian support. The Court of Justice said that officials should have determined whether construction of the Paks II plant, in partnership with Russian state firm Rosatom, breached procurement rules. Hungary’s populist prime minister and Trump ally, Viktor Orbán, has long campaigned in favor of the Paks II project — and against EU sanctions on Russia, including a plan from Energy Commissioner Dan Jørgensen to phase out all imports of gas from the country by 2027.

Nearly a decade after EU leaders declared all Europeans have the right to decent housing, European Commission President Ursula von der Leyen said on Wednesday that it’s time for the bloc to deliver. “A home is not just four walls and a roof: it is safety, warmth, a place for family and friends,” von der Leyen told European Parliament lawmakers during her annual State of the European Union address in Strasbourg. “But for too many Europeans today, home has become a source of anxiety.” Citing data that shows housing prices across the bloc have increased by more than 20 percent since 2015, the Commission president vowed to do more to tackle an issue that has generated mass protests in many of Europe’s cities and become a major factor in national elections. “This is more than a housing crisis,” she said. “It is a social crisis.” Von der Leyen has made the housing affordability crisis a key priority of her second administration, tapping Denmark’s Dan Jørgensen to be the bloc’s first commissioner for housing. The latest Eurobarometer survey shows Europeans want the EU to make solving the cost-of-living crisis a top priority. During her speech, von der Leyen confirmed the Commission will unveil its European Affordable Housing Plan early next year, which will include measures to accelerate the construction of new homes, renovate existing buildings and end homelessness by 2030. Responding to long-standing demands from housing experts and national governments, she said the Commission will revise state aid rules so that EU members can use public cash to build affordable housing. Following up on last year’s EU legislation requiring the registration of all short-term rentals by 2026, she also promised to further rein in the tourist flats that are a major factor in the EU’s housing shortage. EU mayors are calling for measures that would target properties in stressed markets like those found in most of the bloc’s major cities and tourism hot spots. “Nurses, teachers, and firemen cannot afford to live where they serve,” she said. “Students drop out because they cannot pay the rent, and young people delay starting families.” “Housing is about dignity,” von der Leyen added. “It is about fairness. And it is about Europe’s future.”

BRUSSELS — Ursula von der Leyen is beefing up competition capacity in her Cabinet, as antitrust gets dragged deeper into trade tensions with the United States and the EU continues to strive for a bloc-wide industrial policy. Michele Piergiovanni, an Italian official who advised former competition chief Margrethe Vestager, is set to join the European Commission president’s Cabinet, POLITICO first reported on Wednesday. A Commission spokesperson confirmed the move and said that Piergiovanni will advise the president on competition and economic issues. The move could signal an imminent departure of von der Leyen’s current antitrust and digital adviser, Anthony Whelan. The seasoned Irish official was appointed last year to lead the competition directorate’s state aid department, but never took up the role as he has been jealously guarded by the president’s Cabinet.  Piergiovanni’s appointment also signals the president’s heightened attention to a policy area that has become increasingly political, both externally, in the context of transatlantic trade tensions, and internally, as the bloc looks to revisit rules on mergers and public industry funding in an effort to boost economic growth. Earlier this week, the Commission halted an antitrust decision targeting search giant Google under U.S. pressure in trade talks. The EU executive is also under increasing pressure to bend rules on public industry funding — or state aid — to allow EU countries to funnel cash into their industries. There are also calls to relax merger rules to allow companies to become bigger and compete on the global stage as European champions. Piergiovanni, who joined the Commission in 2011 from a top American law firm in Brussels, knows a thing or two about European champions. In 2018, he was appointed to lead the competition department’s work on the most controversial merger of the decade, the Franco-German attempt to merge Siemens and Alstom to create a continental rail giant, which was ultimately blocked. The decision to deny the deal infuriated France and Germany while becoming the poster child of the competition directorate’s strict enforcement.  A loyal and rigorous official from Italy’s northern coastal region of Liguria, Piergiovanni will be a solid link between the top of the EU executive and the competition directorate, which recently said goodbye to its top official, Frenchman Olivier Guersent. “Don’t scratch the Rolls-Royce,” were Guersent’s parting words to his successor. The Rolls-Royce, is, of course, DG COMP, which the official described as the most prized directorate to work in, but also an area which should remain immune from political interference and corporate pressure. Giovanna Faggionato contributed to this report.

The leaders of France and Germany issued a joint call Friday for cuts to EU water pollution and chemical safety rules, in a bid to help European industry.   In a joint statement adopted at the 25th Franco-German Council of Ministers in Toulon, France, French President Emmanuel Macron and German Chancellor Friedrich Merz backed calls for a revision of REACH — the EU’s chemical legal framework — that’s focused on “reducing burdens” by “streamlining procedures.”  It comes months before the European Commission is due to present its long-delayed revision of REACH. The EU executive has signaled that the revision’s primary aim would be to simplify rules and speed up procedures for industry — to the dismay of civil society groups.  The two governments also pushed for an easing of financial constraints for Europe’s struggling chemicals industry. Merz and Macron pushed for an easing of recently-revised urban wastewater rules, which require cosmetics and pharmaceuticals companies to bear the bulk of the costs of cleaning up micropollutants in urban wastewater from the end of 2028. The Commission has already committed to producing an updated study on impacts of the extended producer responsibility scheme, following strong industry pushback.   The statement from the EU’s two biggest economies sends a strong message to Brussels to push ahead with its drive to cut red tape. “To unleash our companies’ full potential of growth and productivity it is … urgent to substantially ease the complexity and simplify the European Union’s regulatory environment,” the document states.  MATERIALS RECYCLING FOCUS  The two leaders repeated calls for better rules to facilitate the recycling and reuse of critical raw materials (CRM), as EU countries scramble to reduce dependency on Chinese minerals essential in defense and the energy transition.   Paris and Berlin committed to “work together on the design of the CRM aspects of the Circular Economy Act and coordinate their efforts” in the hope of “reaping the benefits” of the policy proposal, the draft reads.   The Circular Economy Act is expected in 2026 and aims to facilitate the transfer of materials waste between EU countries to boost recycling and reuse across European industries.   Back in 2023, the two EU countries had already pledged further cooperation on critical raw materials alongside Italy, including by setting up working groups for new extraction, processing and recycling projects.   Giorgio Leali contributed reporting.

European Commission President Ursula von der Leyen took aim on Tuesday at China’s industrial overproduction, export restrictions and its support for Russia’s war against Ukraine. In a statement to the European Parliament in Strasbourg, Von der Leyen stressed that “our relations with China must be rooted in a clear-eyed assessment of the new reality.” The remarks set the stage for a contentious summit later this month at which EU leaders will raise Beijing’s “no-limits partnership” with Vladimir Putin’s Russia. “We can say that China is de facto enabling Russia’s war economy, and we cannot accept this,” she told European lawmakers. On the economic front, the relationship between Europe and China will need rebalancing, de-risking and a diplomatic boost when it comes to climate change and environmental issues, Von der Leyen argued.  She started by complimenting China as great global civilization that over the past 50 years has become a great global power. But her praise quickly gave way to criticism, as she accused Beijing of operating outside of international rules and flooding global markets “with subsidized overcapacity — not just to boost its own industries, but to choke international competition.” China runs “the largest trade surplus in the history of mankind,” she went on to say, while European companies were finding it harder to do business on the Chinese market where they faced systematic discrimination. The increasing barriers faced by European companies in China include requiring foreign companies to keep localized staff; host research and development functions; and keep all IT data in the country, according to an EU Chamber of Commerce in China survey. “I’ve always said it: Europe is fully committed to result-oriented engagement with China,” von der Leyen said, calling on Beijing to engage in a meaningful dialogue that leads to actual change. “If our partnership is to go forward, we need a genuine rebalancing.”  For all von der Leyen’s finger wagging, the EU is looking to copy some of China’s more successful industrial policies, including its own technology transfers and procurement laws.  Under its newly revised rules on state aid, EU governments are being encouraged to include European preference criteria in their bidding processes, as well as other forms of aid, particularly as the bloc looks to create a domestic battery sector. In the Automotive Action Plan — the EU’s strategy for making its carmakers competitive — the executive has said it would look into direct support for European manufacturers. The EU is making public funds available for battery makers, including for non-EU companies so long as they are in a joint venture with a domestic partner and sharing know-how, technical expertise and technology. The EU-China summit, called to mark 50 years of diplomatic relations, will be held in Beijing on July 24. A second summit day has been canceled. President Xi Jinping is not expected to attend, and the Chinese delegation will be led by premier Li Qiang.

BRUSSELS — Politicians might talk big about breaking down the national barriers that stop Europe competing with the U.S. and China, but everywhere you look they’re doing their best to keep the ones they think matter. Take the EU’s Banking Union project, which first saw the light 15 years ago when the eurozone debt crisis nearly took the financial system down along with the single currency. Regulators have been pleading for years to let a fragmented banking market consolidate and create the kind of continent-wide institutions that can mobilize the vast sums needed to revive a stagnant economy.  But national capitals continue to hobble any deal they see as a threat to local interests — so much so that the European Commission is now investigating Spain and Italy’s interference with big domestic banking mergers. It’s increasingly impatient with what it sees as unjustified attempts to block deals that antitrust regulators have already blessed. In Spain, the government of Socialist Pedro Sánchez has imposed new conditions on Banco Bilbao Vizcaya Argentaria’s €12 billion hostile takeover bid for Catalonia’s Banco Sabadell, an extra layer of scrutiny that is only used in exceptional cases. BBVA swallowed hard and said on Monday that it will proceed with the deal, even though the government won’t let it absorb Sabadell fully for at least three years.  That deal had already been approved by Spain’s national competition authority, while the Bank of Spain recommended the deal to the European Central Bank, which is the direct supervisor of both banks.   “There is no basis to stop an operation based on a discretionary decision by a member state government” when the takeover has been cleared by the competent authorities, Commission spokesperson Olof Gill said. For six months, the Commission has been having a back-and-forth with Madrid over the deal under a procedure called the EU Pilot — an informal dialogue between the EU and countries that can lead to formal infringement procedures. That process is ongoing. “Spanish rules allow for government intervention on general interest grounds, on mergers that have already been reviewed by the competition authority, but this is extremely rare,” Pedro Callol, a Spanish antitrust lawyer, told POLITICO. The only time it has used the power, he said, was in a deal between broadcasters Antena 3 and La Sexta in 2012. ROMAN INTRIGUES There were echoes of Madrid’s behavior in a similar case in Italy, where a bewilderingly complex and politicized struggle for control of the banking system is playing out. The government of Giorgia Meloni has saddled UniCredit’s bid for rival Banco BPM with so many conditions that UniCredit now says it makes no sense to proceed. Rome did so by invoking its “golden power,” which was originally designed to stop foreign takeovers from threatening national security. That move did not go unnoticed in Brussels, where officials opened two distinct probes into the matter, led respectively by the financial services and the competition directorates. It has also triggered an exchange under the EU Pilot, and the Commission “is now assessing the reply of Italian authorities.” Competition officials in Brussels cleared the deal with conditions on June 19, rejecting Rome’s request to hand the deal back to the national antitrust authority. Competition officials also sent Rome a set of questions on its “golden power,” a Commission spokesperson told POLITICO, explaining that only in “exceptional” circumstances can a government interfere with a Brussels merger decision. National interventions in mergers aiming to protect a “legitimate interest,” they said, should be “appropriate, proportionate and non-discriminatory.” The government of Giorgia Meloni has saddled UniCredit’s bid for rival Banco BPM with so many conditions that UniCredit now says it makes no sense to proceed. | Michael Nguyen/Getty Images There are broader concerns over Rome’s entanglements in the banking sector. Government officials have spoken privately of the need to build up a third force in Italian banking that would act as a counterweight to the dominant duo of UniCredit and Intesa Sanpaolo, which they hope would bolster credit access for the small firms and households that make up a sizable bulk of the ruling coalition’s electoral base. According to Rome insiders, the government wants to build this “third pole” around Banca Monte dei Paschi di Siena (MPS), which has been under effective government control since the last in a series of expensive bailouts in 2017. The Commission only approved that bailout on the condition that Rome reduce its influence over the bank as quickly as practicable. With the conditions having been fulfilled, MPS is now on the hunt for acquisitions — with the backing of the government, which is still its largest shareholder, owning an 11.7 percent stake. At first, Meloni’s government aimed to merge MPS with BPM, which bought a large stake in the Tuscan lender last year. When that was derailed by UniCredit, the government changed tack, supporting a surprise €12.5 billion bid by MPS for Milan-based investment bank Mediobanca. The target rejected the offer outright as having “no industrial rationale” and as being structured so as to create significant conflicts of interest at the shareholder level — an implicit complaint about the offer’s political dimensions.   Both the EU executive and Milan prosecutors are now reportedly probing Rome’s handling of its sale of the MPS stake last November amid suggestions that it favored investors close to the government. VESTED INTERESTS AND COMPETITIVENESS CONCERNS The Commission’s frustration is due in part to the notion that banking consolidation, and the broader completion of a single market for financial services, is urgently needed to boost the bloc’s overall competitiveness. EU financial services chief Maria Luís Albuquerque is taking every chance to emphasize that Europe needs bigger banks to compete with U.S. and Chinese rivals. Currently, JPMorgan alone is worth as much as the eurozone’s eight biggest banks put together. Any move to stop such consolidation must be “proportionate and based on legitimate public interests,” spokesperson Gill said. Rome’s three-party coalition may be keeping its cards close to its chest regarding its broader plans, but Spanish politicians haven’t even been trying to mask their motives. Jordi Turull, secretary-general of the Junts per Catalunya party that props up Pedro Sánchez’ minority government in Madrid, complained to TV3 that the Spanish National Commission of Markets and Competition and European authorities had only presented “technical reasons” for allowing BBVA to take over Sabadell. “Now is the time for politics,” he said, arguing that “there are enough reasons” for the government to get involved. Sánchez’ fragile minority government cannot pass legislation — nor a national budget — without the support of Catalan political parties that consider Sabadell’s independence a matter of regional pride. BBVA’s bid to take over the bank, which was founded in Barcelona over 100 years ago, has consistently faced broad political opposition in Catalonia. Separatist and unionist politicians have rallied around the bank, arguing the deal would reduce Sabadell’s presence in the region, particularly in already underserved rural area (they appear to have forgiven Sabadell’s rapid relocation of its domicile to the legal safety of Valencia when Catalonia pushed for independence back in 2017). GERMAN ROADBLOCKS Next in line for Commission scrutiny could be Germany, which is anything but keen for UniCredit to swallow Commerzbank, the country’s second-largest private sector bank. UniCredit CEO Andrea Orcel’s team received permission from the ECB in March to raise its stake to 29.9 percent. It currently holds 9.5 percent directly, and another 18.5 percent indirectly through derivatives, and has warned that converting those rights into physical shares still requires several other approvals, including from the German Federal Cartel Office. But the new government in Berlin hasn’t signaled any greater willingness to allow a takeover than the previous one under Olaf Scholz. Berlin is still Commerzbank’s biggest shareholder, with a stake of 12 percent, and Chancellor Friedrich Merz told reporters in Rome last month that he didn’t see any need to discuss the deal with his Italian counterparts as it was not in the works for now. Such roadblocks are giving Commerzbank the time to mount a vigorous defense. New CEO Bettina Orlopp announced a radical package of measures in February to improve profitability and get the bank’s market value up to a level where UniCredit would struggle to mount a full takeover. That package included some 3,300 job cuts in Germany — precisely the kind of thing that Commerzbank’s unions had been hoping to avoid when they lobbied the previous government to stop a takeover. UniCredit is still holding on to the option of launching a full takeover, but in March accepted that any such process is likely to last well beyond the end of this year. Aitor Hernández-Morales contributed to this report.