HELSINKI — Europe’s easternmost countries have a blunt message for Brussels: Russia is testing their borders, and the EU needs to start paying for the response. Leaders from eight EU states bordering Russia will use a summit in Helsinki on Tuesday to press for dedicated defense funding in the bloc’s next long-term budget, arguing that frontline security can no longer be treated as a national expense alone, according to three European government officials. “Strengthening Europe’s eastern flank must become a shared responsibility for Europe,” Estonian Prime Minister Kristen Michal said Monday. The first-of-its-kind summit, spearheaded by Finnish Premier Petteri Orpo, underscores a growing anxiety among the EU’s so-called Eastern flank countries about Russia’s increasingly brazen efforts to test their defenses and stir panic among their populations. In recent months Russia has flown fighter jets into Estonian airspace and sent dozens of drones deep into Polish and Romanian territory. Its ally Belarus has repeatedly brought Lithuanian air traffic to a standstill by allowing giant balloons to cross its borders. And last week, Moscow’s top envoy Sergey Lavrov issued a veiled threat to Finland to exit NATO.  “Russia is a threat to Europe … far into the future,” Orpo told Finnish daily Helsingin Sanomat on Saturday. “There is always a competition for resources in the EU, but [defense funding] is not something that is taken away from anyone.” Tuesday’s confab, attended by Finland, Sweden, Estonia, Latvia, Lithuania, Poland, Romania and Bulgaria, comes during a critical week for Europe. On Monday several EU leaders met with U.S. officials as they strain to hammer out a peace deal in Ukraine, just three days before all 27 EU countries reconvene for a crucial summit that will determine whether they unlock €210 billion in frozen Russian cash for Kyiv. OPEN THE VAULTS At the heart of Tuesday’s discussion will be unblocking EU money.  The frontline countries want the EU to “propose new financial possibilities for border countries and solidarity-based financial tools,” said one of the government officials. As part of its 2028-2034 budget proposal, the European Commission plans to raise its defense spending fivefold to €131 billion. Frontline countries would like some of that cash to be earmarked for the region, two of the government officials said, a message they are likely to reiterate during Thursday’s European Council summit in Brussels. “Strengthening Europe’s eastern flank must become a shared responsibility for Europe,” Estonian Prime Minister Kristen Michal said. | Hendrik Schmidt/Getty Images In the meantime, the EU should consider new financial instruments similar to the bloc’s €150 billion loans-for-weapons program, called the Security Action For Europe, the same two officials said. European Commission chief Ursula von der Leyen told POLITICO last week she had received calls to set up a “second SAFE” after the first iteration was oversubscribed. The frontline countries also want to throw their political weight behind two upcoming EU projects to buttress the bloc’s anti-drone and broader defenses, the two officials said. EU leaders refused to formally endorse the Eastern Flank Watch and European Drone Defense Initiative at a summit in October amid opposition by countries like Hungary, France and Germany, who saw them as overreach by Brussels on defense, two EU diplomats said at the time. A request to reserve part of the EU budget for a specific region may also face opposition from other countries. To get around this, Eastern flank countries should link defense “infrastructure improvements to overall [EU] economic development,” said Jamie Shea, a senior defense fellow at the Friends of Europe think tank and a former NATO spokesperson. Frontline capitals should also look at “opening up [those infrastructure projects] for competitive bidding” to firms outside the region, he added. DIFFERENT REGION, DIFFERENT VIEW Cash won’t be the only divisive issue in the shadows of Tuesday’s gathering. In recent weeks Donald Trump’s administration has repeatedly rebuked Europe, with the U.S. president branding the continent’s leaders “weak” in an interview with POLITICO. Countries like Germany and Denmark have responded to growing U.S. admonishments by directly rebutting recent criticisms and formally branding Washington a “security risk”.  But that approach has rankled frontline countries, conscious of jeopardizing Washington’s commitment to NATO’s collective defense pledge, which they see as a last line of protection against Moscow. This view also reflects a growing worry inside NATO that a peace deal in Ukraine will give Moscow more bandwidth to rearm and redirect its efforts toward frontline countries. “If the war stops in Ukraine … [Russia’s] desire is to keep its soldiers busy,” said one senior NATO diplomat, arguing those troops are likely to be “relocated in our direction.” “Europe should take over [its own] defenses,” the diplomat added. But until the continent becomes militarily independent, “we shouldn’t talk like this” about the U.S., they argued. “It’s really dangerous [and] it’s stupid.” Jacopo Barigazzi contributed to this report from Brussels.

Europe’s populist worries will intensify when right-wing billionaire Andrej Babiš becomes Czech prime minister today. Czech President Petr Pavel is set to appoint Babiš to the position after resolving longstanding conflict-of-interest issues related to the PM-elect’s conglomerate, Agrofert. Babiš and his future government have sparked fears in Brussels, where his opponents worry that alliances he could form at the European level may tilt Central Europe in an anti-establishment direction. Combined with Hungary’s Viktor Orbán and Slovakia’s Robert Fico, Babiš has the potential to jam up the legislative machinery in Brussels as it works on key files. Babiš regularly speaks of reviving the so-called Visegrád Four group, something both Orbán and Fico hope for, after it became largely dormant following Russia’s invasion of Ukraine. A new Visegrád grouping would likely count three rather than the four members it had after being founded as a cultural and political alliance in the 1990s. Poland’s current center-right prime minister, Donald Tusk, is staunchly pro-Ukraine and is thus unlikely to enter any entente with Orbán. Polish President Karol Nawrocki of the right-wing populist Law and Justice (PiS) party, though, has been talking up the prospects for Visegrád. Babiš’ government — his Patriots for Europe-aligned ANO party is in a coalition with the far-right Freedom and Direct Democracy and right-wing Motorists for Themselves parties — is also likely to fight against EU-level pro-environment initiatives. That could cause issues for climate files like ETS2, the Emissions Trading System for road and buildings, and Brussels’ bid to ban combustion engines. Czech President Petr Pavel is set to appoint Andrej Babiš to the position after resolving longstanding conflict-of-interest issues related to the PM-elect’s conglomerate, Agrofert. | Martin Divisek/EPA Following his decisive victory in the Czech election Oct. 3-4, however, Babiš has toned down his previous remarks about canceling the Czech ammunition initiative in support of Ukraine, raising questions about whether the campaign rhetoric will translate into actual policy reversals. The extent to which Czechia becomes another EU disrupter might become clearer later this week as Babiš travels to Brussels to take part in the European Council — assuming the rest of his cabinet is appointed by then.

Czech right-wing billionaire Andrej Babiš will be the new prime minister in Prague after announcing Thursday evening that he would dispose of a potential conflict of interest. Babiš’ ANO party won the Czech parliamentary election in October and formed a coalition with the far-right Freedom and Direct Democracy and right-wing Motorists for Themselves parties. But the proposed prime minister and coalition ministers must be green-lit by Czech President Petr Pavel before taking office. Babiš has been entangled in legal woes, both at home and abroad, concerning his agriculture business empire Agrofert, which is a major recipient of EU subsidies. “Of course, I could have left politics after winning the election and had a comfortable life, or ANO could have appointed someone else as prime minister,” Babiš said Thursday night in a video address to voters. “But I am convinced that you would perceive it as a betrayal,” he added. “That is why I have decided to irrevocably give up the Agrofert company, with which I will no longer have anything to do, I will never own it, I will not have any economic relations with it, and I will not be in any contact with it.” Babiš’ ascension to the Czech premiership further tilts Central Europe in an anti-establishment direction, as the populist tycoon joins Hungary’s Viktor Orbán and Slovakia’s Robert Fico as potential thorns in Brussels’ side on key EU files. In stepping back from Agrofert, however, Babiš made clear the importance of retaking the prime ministerial role. The holding’s shares will now be managed through a trust structure by an independent administrator. “This step, which goes far beyond the requirements of the law, was not easy for me. I have been building my company for almost half my life and I am very sorry that I will also have to step down as chairman of the Agrofert Foundation,” Babiš said. “My children will only get Agrofert after my death,” he added. In response, Pavel announced that he would appoint Babiš as prime minister on Dec. 9. Andrej Babiš has been entangled in legal woes, both at home and abroad, concerning his agriculture business empire Agrofert, which is a major recipient of EU subsidies. | Gabriel Kuchta/Getty Images “I appreciate the clear and understandable manner in which Andrej Babiš has fulfilled our agreement and publicly announced how he will resolve his conflict of interest,” Pavel said. Pavel previously noted that strong pro-NATO and pro-EU stances, along with safeguarding the country’s democratic institutions, will be key factors in his decision-making regarding the proposed Cabinet. Czech conflict of interest law bars officials (or their close relatives) from owning or controlling a business that would create a conflict with their governing function. This doesn’t mean ministers can’t own businesses, just that they must prioritize the public interest over their own. Similar rules exist at the EU level. When he was prime minister the first time round, from 2017 to 2021, Babiš placed Agrofert — which consists of more than 250 companies — in trust funds, but the Czech courts as well as the European Commission in 2021 concluded that he still retained influence over them and was therefore in violation of EU conflict-of-interest rules.

Angelika Niebler, head of the powerful center-right German delegation in the European Parliament, is being investigated for misusing EU funds, according to four parliamentary officials.  The European Parliament’s legal affairs committee will start discussing on Tuesday afternoon whether to lift the parliamentary immunity of Niebler — a member of the European People’s Party — following a request from the European Public Prosecutor’s Office. A committee hearing with Niebler herself will follow, and a final decision is not expected for several months. According to two of the four parliamentary officials, all granted anonymity to discuss the sensitive case, Niebler has been accused by EPPO of hiring assistants to chauffeur her from her hometown of Munich to Brussels and Strasbourg, as well as to private and business appointments not linked to her work as an MEP. EPPO also alleges that she got her assistants in Brussels to carry out private chores not related to her work as a lawmaker, and hired an assistant in Germany using Parliament cash to work for a former MEP colleague. The Parliament’s rules state that assistants can only help with parliamentary duties.  “The allegations are unfounded. I wish that the facts of the matter are clarified as quickly and completely as possible,” Niebler told POLITICO. “I will fully support this investigation.” A spokesperson for EPPO said the organization would “neither comment, nor do we confirm which investigations we are working on. This is to not endanger the outcome of the possible investigation.” MEPs get €30,769 a month to spend on staff, either in the Parliament in Brussels or in their local constituency office. Niebler, a longtime MEP, is a member of the Christian Social Union, the sister party of the Christian Democratic Union of Chancellor Friedrich Merz. The CSU and CDU are part of the EU’s biggest political family, the EPP. Since 2014, Niebler has co-led the CDU/CSU delegation in the Parliament along with Daniel Caspary, who is due to step down to join the European Court of Auditors at the end of the year. 

BRUSSELS — Israel’s new ambassador to the European Union is calling on the bloc to lift the penalties it imposed on his country over the plight of Palestinians in Gaza, now that a ceasefire negotiated with a push from Donald Trump has begun. In his first interview since officially taking up the post last week, Avi Nir-Feldklein said he was “optimistic” that the ceasefire would allow for a reset in Israel’s relationship with the EU, which has been severely strained by the fallout from the humanitarian crisis in Gaza.  The ambassador conceded that it had been a “challenging” period for Israel-EU relations. But he downplayed the rift and argued there was now a window “to overcome this short, uncomfortable situation that we have between us right now and to resume the good relations that we had,” given that the peace initiative was underway.  “We cherish very much our relationship with the EU,” the ambassador said. “I’m optimistic because I believe the EU member countries, most of them, would like to see it happening and right now the Trump initiative has started in a very good way and I believe that the EU would like to be part of it. “And if you want to be part of it, you need, really, to clear the table of what is hanging above our relationship.” Last month, European Commission President Ursula von der Leyen announced plans to restrict trade with Israel and impose sanctions on “extremist ministers” in Benjamin Netanyahu’s administration. She also suspended Commission funding for support to Israel, worth a total of around €14 million, as she demanded “the horrific events taking place in Gaza on a daily basis must stop.”  EU officials have been bitterly critical of Israel over what they have described as the “man-made famine” hitting tens of thousands of Palestinians and the failure to distribute aid supplies to those who need it. Some senior figures have labeled Israel’s actions in Gaza “genocide.” A number of EU countries moved last month to recognize a Palestinian state, angering the Israeli government.  The ambassador said two issues need to be resolved to allow for a reset in relations with Brussels. First, the EU funding for cooperation with Israeli institutions that von der Leyen put on hold should be restored. “This is one topic that we hope will be off the table and those projects that were put on hold will be resumed,” he said.  The second point the Commission needs to address is the proposed suspension of parts of the EU-Israel association agreement on the Horizon Europe research program and preferential trade terms. “There’s just no reason any more for it,” he said. “This needs to be totally off the table.”  EU and U.K. officials have said they want Europe to have a seat on the “board of peace,” the body that is intended to oversee the transitional governance of Gaza by a Palestinian committee. Nir-Feldklein said it would be up to Israel’s foreign minister to discuss the question of the peace board’s composition with the EU’s top diplomat, Kaja Kallas.  “But there’s probably going to be some reluctance in Jerusalem before we clear the table” of the issues “hanging above our relations.”  TWO-STATE SOLUTION  Nir-Feldklein said the success of the Trump initiative was “extremely important” for Israel, bringing an end to the conflict and returning the Israeli hostages Hamas seized two years ago.  The EU, U.K. and other Western powers regard a two-state solution, with a Palestinian state alongside Israel, as the only viable long-term option for peace in the Middle East.  Netanyahu has flatly ruled out such an option, and the new ambassador said it would be impossible while Hamas remained active in Gaza and while Palestinians continue to deny the right of the state of Israel to exist, two issues that have not been addressed under the current ceasefire. A representative of the Palestinian mission in Brussels was contacted for comment, but did not respond.  But Nir-Feldklein did not rule out that at some point in the future, if the Palestinians take a radically different approach, a two-state solution could return as an option.  “They need to recognize Israel as a Jewish state,” he said. “What we need to see is much more sincere attitudes from the Palestinian leadership toward a future solution and then who knows? Maybe then it might be again on the table. Out of three times they rejected it, twice we were the ones putting it on the table.”  The ambassador added, “It was on the table, now it’s off the table, but you know, life far away [is] dynamic. So maybe I don’t know what — maybe after we see real sincere efforts, then it might be.”  A few years ago, even Netanyahu was saying publicly he supported a two-state solution, the ambassador said, but the Israeli prime minister now has “good reasons” not to support the concept. 

The European Union wants to boost efforts to ban conversion therapy and tackle hate against LGBTQ+ people in the face of an increase in attacks against the community. Around one in four members of the LGBTQ+ community in the EU — including almost half of trans people — have been subjected to some form of conversion therapy, whether in the form of physical or sexual violence, verbal abuse or humiliation, according to data presented by the European Commission on Wednesday. Conversion therapy is the name given to any effort to change, modify or suppress a person’s sexual orientation or gender. These numbers are “shocking,” Commissioner for Equality Hadja Lahbib said at a press conference. “This must stop.” Lahbib on Wednesday presented the LGBTIQ+ Strategy for 2026-2030 to combat growing attacks against members of the community. “It seems we are moving backwards,” she said, adding that this is a “worrying trend.” Half of EU countries currently have a national strategy for LGBTQ+ equality, and eight countries (Belgium, Cyprus, France, Germany, Greece, Malta, Portugal and Spain) have banned conversion therapy, with the Netherlands discussing following suit. Meanwhile, in the United States, the Supreme Court is considering overturning Colorado’s ban on the practice. As part of its new strategy, which is not legally binding, the Commission wants to focus on tackling hate speech against LGBTQ+ people, both online and offline, and will be coming up with a plan to combat cyberbullying. The Commission is also considering drawing up a law to harmonize the definition of online hate offenses. Several European countries have cracked down on the LGBTQ+ community. Slovak Prime Minister Robert Fico successfully pushed last month to enshrine into his country’s constitution that there are only two genders (male and female), and to ban surrogacy and adoption for same-sex couples. Hungary’s leader, Viktor Orbán, has been in a standoff with Brussels over a series of anti-LGBTQ+ laws and his unsuccessful attempt to ban this year’s Budapest Pride — an event that celebrates the LGBTQ+ community. The EU’s top court is expected to rule soon on whether these actions violate EU law, but a recent legal opinion suggests that the court is likely to side with Brussels. “The Commission will not hesitate to take further action,” including going to court, to protect people’s rights, Lahbib said, adding that there are 10 ongoing infringement procedures against Hungary for violating EU fundamental rights. The Commission has also frozen €18 billion in EU funding for Hungary as a result of these breaches. “We don’t want to punish the citizens for the actions taken by their governments,” Lahbib said, adding that in the next EU long-term budget, she proposed that frozen funds for rule of law violations be directly redistributed to civil society organizations.

BRUSSELS ― The far-right Patriots for Europe is taking legal action after the European Parliament suspended access to millions of euros in public funds over alleged misspending. In two separate cases, the Patriots party is contesting rulings by the Parliament and the EU’s party watchdog that resulted in it losing access to more than €4 million in funds, arguing the decisions were illegitimate and the product of bias and lack of impartiality. The far-right political family, home to France’s Marine Le Pen and Hungary’s Viktor Orbán, has consistently complained of being sidelined from EU policymaking and key positions of power since the 2024 European elections, where it surged to become the third-largest group in Parliament. Mainstream politicians have kept the Patriots at arm’s length under the so-called cordon sanitaire — an informal pact to avoid cooperation with factions on the far right and far left. Now, the Patriots are also accusing EU officials of sabotaging their access to public cash earmarked for political parties. “There is a problem with certain agents of the administration of the Parliament,” said Belgian MEP Gerolf Annemans, honorary president of the Patriots party. The Patriots scored its first win on Wednesday when the European Court of Justice annulled a sanction by the party watchdog, the APPF, which had required the party to pay a €47,000 fine. The sanction came after the party wrongly referred to one of its lawmakers as being part of its board in a social media post, which the APPF took as a sign the party had lied in its entry to the authority’s register — a serious offense that could lead to all public funding for the party being withheld. The APPF ruling enabled the European Parliament to cut the Patriots party off from accessing €4 million of EU funding in 2023, documents obtained by POLITICO show. That meant a substantial cut to the party’s available budget for the 2024 elections — where other European political parties carried their 2023 funds over for the following year. Wednesday’s court ruling will allow the Patriots to try to claim part of these funds back — and will likely bolster the party’s claims of bias from the Parliament’s administration. EQUAL TREATMENT In a separate lawsuit filed mid-July, the Patriots accused the Parliament of bias and lack of impartiality after it ruled the party had misspent funds in a campaign in Czechia. The Parliament’s Bureau, composed of MEPs and tasked with taking decisions on administrative issues, ruled the Patriots should pay for that campaign with their own money and give back the EU funds spent on it, which came to €228,000. The decision violated “the principles of equal treatment and non-discrimination, as it deemed similar campaigns by other parties to be reimbursable,” the Patriot’s case document, seen by POLITICO, read. The far-right political family, home to France’s Marine Le Pen and Hungary’s Viktor Orbán, has consistently complained of being sidelined from EU policymaking and key positions of power since the 2024 European elections. | Wojtek Radwanski/Getty Images They also argue that the decision was not impartial, as the Bureau is composed mostly of center-right, liberal and left-wing lawmakers, with no far-right MEPs from the Patriots present to defend the case. On top of that, they contend the Parliament violated their rights to defense as it censored big chunks of the letter the Patriots had sent to the bureau to defend themselves. In the first version of the letter, the Patriots compared their campaign with that of another EU party. In the letter that the administration circulated in the bureau, the justification was redacted. ‘VERY GOOD LAWYERS’ The Parliament refused to comment on the ongoing judicial proceedings. The APPF “remains committed to protecting integrity of European democracy” in accordance with its obligations under EU law, it said after the ruling. These two lawsuits follow threats of a separate challenge from the Patriots group — a distinct legal entity from the Patriots party, which represents the far-right camp in Parliament. At the beginning of September, the Parliament’s budgetary control committee recommended the administration seek the reimbursement of €4.3 million from the group in reparations for alleged misspending by the now-defunct far-right Identity and Democracy. The ID group dissolved in the summer of 2024, with many of its members and staff joining the new Patriots. “We will fight it in court if necessary,” said a Patriots group official, granted anonymity to speak about sensitive matters. “We have very good lawyers, and we are sure we are right.”

The Italian organizers announced Monday they are cancelling the concert of pro-Kremlin conductor Valery Gergiev after a political outcry. Gergiev, who is a staunch supporter of Russian ruler Vladimir Putin, was slated to perform at the major Un’Estate da Re festival at the vast 18th century Royal Palace of Caserta, near Naples, on July 27. It would have been his first concert in the European Union since Russia’s full-scale invasion of Ukraine began three years ago. Putting Gergiev on the line-up drew plenty of criticism last week. The performance “risks sending the wrong message,” said Italy’s Culture Minister Alessandro Giuli. Yulia Navalnaya, the wife of late Russian opposition leader Alexei Navalny, also spoke out against it. Gergiev supports Russia’s annexation of Ukraine’s Crimea Peninsula in 2014 and conducted nationalistic concerts after Russia occupied the Georgian region of South Ossetia in 2008. After Putin launched his full-scale invasion of Ukraine in 2022, major opera houses and festivals across Europe cut ties with Gergiev. Ukraine and several countries inside the EU have consistently banned prominent pro-Kremlin opera singers from performing, arguing they are a part of Russia’s propaganda machine and shouldn’t be seen separately from the Kremlin’s imperialist agenda. The European Commission also got involved, pushing a Spanish organizer to make sure no EU funding was flowing to concerts that had Gergiev on the program.

Donald Trump’s trade war is forcing Ireland to confront the fragile foundation of its economic miracle. One economist saw it coming. In the summer of 2024, just after taking up an economic advisory role to Ireland’s government, Stephen Kinsella, professor of economics at the University of Limerick, warned that the next crisis wouldn’t be homegrown — it would come from Washington. “The most obvious source,” he said, “would be the election of Donald Trump.” If Trump moved to block U.S. multinational investment in Ireland, the shock, he said, would make Ireland’s earlier period of austerity “look like an episode of the Care Bears.” Within months, Kinsella’s prediction began to materialize. Trump returned to the White House. He publicly called Ireland a “tax scam” and launched a trade assault that threatened the Irish exports of American pharmaceutical giants like Pfizer. Meanwhile, the EU — eyeing retaliation — has considered targeting big tech firms also based on the island, such as Apple, and reviewing services imported from the U.S. From every angle, Ireland’s unusually buoyant economy suddenly looked exposed. This has much to do with Ireland’s recent economic success being linked to the fortunes of U.S. multinationals. Such corporations, many of them with market valuations exceeding Ireland’s own GDP, employed an estimated 620,000 people across a workforce of 2.9 million in 2024, according to Ireland’s National Statistics Office. Even more stark: Just 10 international corporations account for over half of all corporate tax receipts — and they make up more than a third of total Irish government revenue. “It’s the highest reliance on corporate income among developed countries,” said Aidan Regan, political economy professor at Dublin’s University College and a vocal critic of the Irish model. The risk is not just economic slowdown, but a systemic shock. As Kinsella told a business podcast: “We are an economy that is very strangely structured, a beautiful freak.” And: “To lose the top three biggest, most concentrated players [would] basically wipe us out.” Kinsella declined to be interviewed for this story because of his government advisory role. But his analysis is shared by many including the country’s Fiscal Council, a statutory body set up to monitor Irish fiscal policy. DISAPPEARING WINDFALL In April, the Fiscal Council warned the government not to use corporate windfalls to fund permanent spending, because of the risk they could “easily disappear.” The source of these Irish corporate revenues is no mystery. What appear to be pharmaceutical exports or imports of digital services are in substance the effects of massive U.S. firms shifting their profits to Ireland, via intangible assets like intellectual property. Dublin is also lobbying hard within the EU to shield U.S. firms. | Mairo Cinquetti/NurPhoto via Getty Images The data tells the story. Corporate tax receipts began surging in 2015, following OECD-led reforms that curbed some abuses elsewhere but left key loopholes intact. As a result, many companies chose to anchor their royalty-generating assets in Ireland, where the tax on such income is a minuscule 6.25 percent. According to EU Tax Observatory research, Ireland is still leads the global rankings for corporate profit shifting. “Ireland is both in a very privileged position and a very precarious position,” Regina Doherty, a former Irish government minister who is now a member of European Parliament with the center-right European People’s Party, told POLITICO last month. Her party, Fine Gael, has been part of coalitions that governed Ireland through a series of shocks, including the post-2008 financial crisis, Brexit, and the pandemic — but the Trump shock may be the most serious of them all. “Certainly [this] is the most challenging time that I can remember in my political and adult career,” Doherty said. To guard against potential vulnerabilities, Irish officials have scrambled since Trump came to power to build relationships with U.S. state governors and congressional figures, hoping to soften Washington’s stance. When Taoiseach Micheál Martin met Trump in the Oval Office in March, he leaned on talking points from the Irish American Chamber of Commerce, describing the U.S.–Ireland relationship as a “two-way street.” Ireland is now the sixth-largest investor into the United States — a fact increasingly invoked as evidence of a balanced partnership. But Dublin is also lobbying hard within the EU to shield U.S. firms. Doherty warned that introducing a bloc-wide digital tax would be “incredibly damaging for the Irish economy” and said Ireland would “continue to advance that view with EU partners.” The EU is negotiating to avoid tariffs, including on sectors such as pharmaceuticals which Ireland’s corporate revenues depend on. But it is also considering a tax on digital firms to get more revenues for its own budget. FORTRESS IRELAND Even as it defends U.S. multinationals abroad, Ireland is scrambling to fortify its economy at home. Speaking at the Global Ireland event last month, Frances Ruane, chair of the National Competitiveness and Productivity Council, said that dealings on the U.S. front require patience — but at home, they “need to move more quickly.” Ireland, she said, must invest in infrastructure and scale its indigenous economy, particularly energy grids and data centres, if it’s to ensure its economic miracle does not go to waste. Ruane also called for expanding R&D tax credits for domestic firms and for tapping into new common strategic EU funding programs. “What really matters is that the small countries make sure their voice is heard so that this does not become a concentration,” she said, referring to the risk of larger countries capturing the lion’s share of EU support. At the same event, Martin echoed this push, unveiling new bilateral strategies for deepening ties with Germany and France. Still, he stressed that “even if others step back, Ireland will continue to engage” with the U.S. “at all levels.” Whether that strategy is enough to shield Ireland from a global reordering of corporate geography remains to be seen. Back in Dublin, however, the domestic political class has been absorbed by other matters — like a parliamentary feud over whether pro-government independents can ask questions during sessions with the Taoiseach. Meanwhile, the underlying model of Ireland’s prosperity is beginning to wobble. On the surface, the island’s economy continues to perform at an incredible growth rate. In the first three months of the year, it notched up a massive 9.1 percent rise in GDP, according to the country’s statistics agency. But the figures may be misleading. Economists and even Irish Finance Minister and Eurogroup President Paschal Donohoe say the effect was largely due to large multinationals rushing through exports to front-run Donald Trump’s April 2 U.S. tariff announcement. When the distorting effects of multinationals are stripped out of official data, the quarterly growth rate comes in at a decidedly more modest 0.8 percent, according to official figures. “It frustrates me to see what our political system is doing while Trump is unleashing an existential threat to the future prosperity of the Irish economy,” said Jim Power, an independent economist. “I’m hoping that the gravity of the threat to the Irish economy will drive policy in a better direction.”

BRUSSELS ― The European Commission is set to tighten the screws on countries that breach democratic norms by linking billions of euros in payouts to adherence to European standards. It means that governments, notably Hungary, which have fallen foul of EU rule-of-law standards through crackdowns on judicial and media freedoms, risk losing substantial funding from the EU’s centralized budget. The EU’s 2028-2034 spending plan, scheduled to be published next Wednesday and marking the start of at least a couple of years of laborious negotiations, will extend the link between payments and democratic backsliding, according to a document seen by POLITICO. Previously, only parts of the €1.2 trillion budget have been linked. The move is likely to exacerbate tensions between the Commission and Hungarian Prime Minister Viktor Orbán, who faces the very real prospect of losing power after 15 years in an election slated for 2026. He’s had a turbulent relationship with EU policymakers and fellow governments, which have criticized what they see as his Russia-friendly and authoritarian policies. While the EU has taken action against Hungary and already withheld some funding ― and Orbán has made life difficult by threatening to block European efforts to sanction Moscow ― the next budget “will provide for a streamlined and harmonized conditionality system for all EU funds allocated to member states,” according to the document. The Commission wants to move away from the current system where “member states with particular issues could be tempted to shift some investments between programs to avoid being subject to a particular condition,” it states. Several EU countries supported tightening the link between the rule of law and funding in their submissions to the Commission ahead of the budget proposal. After its publication, governments will begin negotiations with each other on a final text ― but this is a lengthy process that is not expected to conclude until 2027. “The Conditionality Regulation must be applied to all EU funding,” Finland wrote in its position paper on the new budget, seen by POLITICO. But Hungary retorted in its own document that these rules “allowed for exerting arbitrary political pressure in policy areas unrelated to the protection of the Union’s budget.” Slovakia, which has also been criticized over rule-of-law issues, echoed these arguments in its own submission. OUT OF OFFICE Hungary is already losing out on €18 billion in funding that was suspended over its breaches of European law in the past few years. Orbán, who is campaigning on an anti-EU platform, is unlikely to make moves to claim back the payments before he faces the public vote. According to an EU diplomat, the Commission is exploiting Orbán’s domestic weaknesses ― he is trailing behind his conservative pro-EU rival Péter Magyar in the polls ― to propose stricter rules. With national capitals not expected to vote on the new rules until 2027, there’s a chance Orbán might be out of office before the budget is approved. Commission officials are confident that a Magyar-led government would mend ties with Brussels and implement the EU-required reforms to access blocked funds. Viktor Orbán, who is campaigning on an anti-EU platform, is unlikely to make moves to claim back the payments before he faces the public vote. | Oliver Matthys/EPA Under the plan, the budget would contain a direct link between a government’s breach of the rule of law and the related payment that is put on hold, an EU official said. This means that while farmers’ subsidies will be untouched by a government’s authoritarian drift, a student exchange program might suffer if there have been breaches of academic freedom. The Commission wants to keep the money flowing to the recipients of EU funding ― such as NGOs or universities ― regardless of whether a government complies with the rule of law. The overall idea is that civil society shouldn’t bear the brunt of a leader’s misdoings. Renew, the European Parliament’s liberal group, wants to take this a step further. It supports directly handing the frozen EU funds to civil society, effectively bypassing the central government. This new system, known as “smart conditionality,” would mark a change from the current rules, where frozen funds are handed back to the EU’s 27 countries collectively after an expiration date. “We set clear conditions: No EU money for autocrats, but continued support for civil society,” Valérie Hayer, the chair of Renew, said on Thursday. “She [Commission President Ursula von der Leyen] made a commitment. Now it’s up to her to keep her word.” However, “smart conditionality” has been criticized on the grounds that it reduces the incentives for national governments to carry out the required reforms. Commissioners are expected to iron out this issue during emergency talks on the budget slated for the weekend.