LONDON — Keir Starmer is promising British voters he’ll fix the Brexit-shaped hole in the U.K. economy, but Brussels appears to have quite enough on its plate. Days after Britain’s grim growth prospects were laid bare in the U.K. budget, the country’s PM gave two speeches promising closer ties with the European Union and elevated his EU point person, Nick Thomas-Symonds, to the Cabinet. “We have to keep moving towards a closer relationship with the EU, and we have to be grown-up about that, to accept that that will require trade-offs,” Starmer said on Monday.   But European leaders are already grappling with packed in-trays as they look for an end to Russia’s war in Ukraine and confront their own domestic economic challenges — and skepticism remains as to how much room for maneuver the British PM actually has.  Starmer’s political red lines — no customs union, no single market, and no return to freedom of movement — remain in place, and ministers continue to stress that a return to full EU membership remains off the table. Even Starmer’s existing EU “reset” agenda — which aims to walk back some of the harder edges of Boris Johnson’s Brexit settlement — is not all going to plan. A push to join the EU’s SAFE loans-for-arms scheme crashed last week after the two sides failed to agree on how much money the U.K. would pay. “The same ‘how much should the U.K. contribute?’ question has been slowing down the actual implementation of basically all the reset topics,” said one EU diplomat who was not authorized to speak on the record. Despite plenty of talk in London about closer ties, the forum for putting fresh topics on the agenda would be the EU-U.K. summit that is due next year. But a date has yet to be set for that gathering. “Nobody is talking about the next summit here yet. I’m not saying it isn’t going to happen, it’s just a question of bandwidth,” another EU diplomat said. “For us the focus now is to work through our existing commitments and finalize those deals, start implementing them and then showing that the deals are bringing value. That takes time,” a third diplomat said. LIMITED SCOPE  The problem for Starmer is that his existing plan to rebuild EU ties is unlikely to move the dial on U.K. economic growth. Economists at the Centre for European Reform reckon that the government’s reset package — if delivered in full — is worth somewhere between 0.3 percent and 0.7 per cent of U.K. GDP over a decade.   Meanwhile, academics at the Bank of England and Stanford University calculate that the economic hit from Brexit could be as high as 8 percent of GDP over a similar period. “It is striking how frequently the chancellor and prime minister will now lament the costs of Brexit, without making any suggestions on how to change the status quo,” said Joël Reland, research fellow at the U.K. In A Changing Europe think tank.  “This could be read as a slow creep towards a breach of their red lines, but I suspect it is mostly about domestic political management. They are in a sticky economic situation and Brexit is a convenient thing to blame. I don’t think they’d be brave enough to risk a manifesto breach on Brexit, but I’d be surprised if ‘no single market or customs union’ is in the 2029 manifesto,” Reland said.  One British government official stressed that Labour’s red lines remain in place — but added: “We don’t think we’re at those red lines yet.”  BREAKING THE TABOO  Labour’s previous reluctance to talk about Brexit was born of a fear of upsetting Leave-leaning swing voters whom the party wanted to win over in the last election.  But that started to change over the summer.  Thomas-Symonds, the minister in charge of delivering the reset, went on the attack in a speech hosted by the Spectator, a right-wing magazine. Parties pledging to reverse Starmer’s reset were offering “more red tape, mountains of paperwork, and a bureaucratic burden,” he argued. To the surprise of Downing Street aides, the attacks landed well and drew a line between the government’s agenda and that of Reform UK boss Nigel Farage — the longstanding Brexiteer dominating in the polls — and Conservative Leader Kemi Badenoch.  It emboldened Starmer and his lieutenants. Rachel Reeves, the U.K.’s chief finance minister, used her speech at the Labour Party conference in Liverpool to talk up the benefits of improved cross-border mobility for the economy.   Ahead of last week’s difficult budget stuffed with tax rises, she waded in further, damning the effects of a “chaotic Brexit.” While the new rhetoric has yet to be backed up by a shift in policy, there are signs that some of Starmer’s close allies are starting to think bigger.  Rejoining the EU customs union was reportedly raised as an option by Starmer’s economic advisor ahead of the budget — but was rejected. “There are definitely people who have been pushing at this for a long time,” one person with knowledge of conversations in government said.  “I don’t think that will be that surprising to people, because if your primary goal allegedly is growth then that’s one of the easiest levers you can pull. Most economists would agree — it’s the politics that’s stopping it.”  Pressed on the prospect of Britain’s applying to rejoin the customs union on Wednesday, Health Secretary Wes Streeting did not explicitly rule out the idea but stressed the government’s policy was about “new partnerships and new relationships, not relitigating the past.” If Starmer opts for a risky manifesto-busting push to rejoin the customs union, diplomats say even that is unlikely to be a quick fix for the British PM.  “It would take time. Just consider how slow has been so far the progress on SPS, ETS and Erasmus,” the first diplomat quoted above said. “As of now, the U.K. needs the EU to spur its growth, not the other way around.”

LONDON — Negotiations are finally underway for Keir Starmer’s much-hyped Brexit reset. Expect to relive some trauma. Six months ago, the British prime minister came to a “common understanding” with the EU at an all-smiles summit in London. The two sides — keen to move on from years of bad blood over Britain’s 2016 exit from the bloc — vowed to smooth trade in food and electricity. They’d make it easier for young people to live abroad, link their carbon markets, and cooperate more closely on defense. And they would round the harder edges off Tory Boris Johnson’s controversial Brexit settlement. The pesky details, they agreed, would be sorted out over the coming year. Six months on, getting down to brass tacks is proving tricky. And as ever, much of the disagreement comes down to money. PROLIFERATING DEMANDS The early stages of talks have been dogged by what the chair of the U.K. parliament’s European Affairs Committee calls “proliferating EU demands for U.K. cash.” Brussels wants London to pay up as part of the planned agri-food agreement. It wants payments for the Erasmus student scheme, money for the electricity trading agreement, and cash for access to the SAFE rearmament scheme. Last week, EU member states agreed among themselves that London should be paying into EU “cohesion” funds — money that would level out inequalities between different EU member states. To an extent, the U.K. was prepared for improved access to EU markets to come with a price tag. Brexit Minister Nick Thomas-Symonds has accepted that Britain would have to make contributions to cover “the cost of administration” and pay its way in schemes that involve pooling resources — though always with a “careful analysis of value for money.” But he’s also been clear that the U.K. “would not make a general contribution into the EU budget” as part of the reset. To anyone who’s read a British newspaper recently, the context in Westminster is obvious. Later this month, Chancellor Rachel Reeves will deliver a painful government budget expected to be stuffed with tax rises and spending cuts. Later this month, Chancellor Rachel Reeves will deliver a painful government budget expected to be stuffed with tax rises and spending cuts. | WPA Pool via Getty Images With Reeves digging around behind the back of the sofa for spare change, the optics — and budgetary wisdom — of forking over billions to the EU would be open to question. TAKING CARE There are even those on the EU side who are concerned that asking the U.K. to write so many cheques might have consequences for the cross-Channel relationship. Last week, a minority of member states, including Germany, Belgium, the Netherlands, and Ireland, launched a bid at an EU ambassadors meeting to tone down language on demands for British contributions to cohesion funds. The countries were concerned that pushing too hard might undermine relations to the extent that parts of the Brexit reset that they want to happen — in particular, an agreement on electricity trading — get kicked into the long grass. “We made an agreement in May, that should be the foundation for our conversation,” one cautious EU diplomat told POLITICO. Like others quoted in this article, they were granted anonymity to discuss the ongoing talks. “So we shouldn’t then in November come back and try to add to it the contributions to cohesion funds that we didn’t agree in May, even if that’s the principle that we feel is warranted. We have to take care of our relationship with the U.K.” As softly as some countries want to play it, all agree that such contributions will ultimately be necessary. “You cannot as a third country enjoy benefits that put you in a more favorable position than EU members,” a second EU diplomat told POLITICO. “Throughout the years all third countries with access to the single market have had a requirement to provide budgetary contributions to the cohesion fund … that has always been our approach.” In the end, a compromise wording asks the European Commission to “reflect upon the appropriate level of financial contribution” that London should make, while fast-tracking electricity trading talks to start by the end of the year. The hope is that the agreed position will mean talks can move along at speed, while making clear to London that it is expected to pay for any benefits it gains. PLAYING IT SAFE But there are already signs that the EU’s emphasis on Britain bringing its wallet to talks is holding things up. Talks over U.K. participation in the EU’s SAFE rearmament scheme — meant to bolster European defense in light of the war in Ukraine and Donald Trump’s ambivalence — got going in May. Six months on, the question of cash is still unresolved. Brussels wants around €4.5 to 6.5 billion in exchange for U.K. participation, according to two EU diplomats. Peter Ricketts, the veteran British diplomat who chairs the U.K. parliament’s European Affairs Committee, described the demand as “unbelievable.” “This is a loan scheme. The government are willing to contribute to the costs of running it. But a €6.5 billion fee is so off the scale that it suggests some EU members don’t want U.K. in the scheme,” he said. Downing Street said Keir Starmer told Commission President Ursula von Der Leyen on a call last week that “any deals must result in tangible benefits to the British public.” DEADLINE TIME While the wrangling over cash is holding things up, deadlines are approaching. The U.K. government has set itself the goal of getting the planned agri-food agreement online by 2027 so voters can begin to feel the benefits at supermarket checkouts ahead of the next election. Similarly, if talks on linking emissions trading systems are not concluded by the end of the year — or a temporary bridging deal struck — then British firms will start to be hit by new EU carbon border taxes from Jan. 1. In both cases, the question of cash will need to be dealt with. The hope expressed by chief EU negotiator Maroš Šefčovič is that most topics can be cleared by the time next year’s U.K.-EU summit rolls around — though no date has been nailed down. There’s likely to be “a bit of back and forth during the negotiation” and maybe even some “drama,” the second EU diplomat quoted above reckons — judging it to be “the British negotiating style.” But, ultimately, hopes are still high that the reset can deliver. “There would be absolutely no surprises,” the diplomat added. “They know us very well, we know them very well.” Jacopo Barigazzi also contributed to this report.

BRUSSELS — The European Union will press U.S. President Donald Trump to ensure that his ceasefire agreement does not undermine the future of a Palestinian state, according to a draft plan. A four-page document developed by the bloc’s foreign service, seen by POLITICO in advance of meetings between foreign ministers and leaders next week, reveals officials are pushing to maximize the EU’s leverage in the implementation of the Washington-brokered agreement to ensure lasting peace. With a growing number of European governments recognizing Palestinian statehood, there is a need to “reinforce a positive narrative on the two-state solution, including by highlighting the role of the EU,” the document states. The diplomatic arm of the EU, the European External Action Service (EEAS), proposes to “further activate diplomatic channels towards the U.S.” to see it implemented in a way that does not “undermine the viability” of the Palestinian Authority. Trump announced a truce brokered between Hamas and the government of Prime Minister Benjamin Netanyahu last week, paving the way for the release of all surviving Israeli hostages and a withdrawal of Israeli troops from Gaza. The EEAS is now seeking support from capitals to advocate for economic and financial barriers facing Palestinian institutions to be dropped and to increase pressure on Israeli settlers illegally annexing territory in the West Bank. It also proposes engaging with the Israeli government, Egypt, Qatar and Turkey “to continue leveraging the pressure on Hamas for a full implementation of the plan.” By the end of the year, the document proposes ensuring the flow “of aid at scale into and throughout Gaza,” and redeploying its civilian Rafah border crossing assistance mission, EUBAM, as a third-party presence to safeguard the passage of people. If member countries give the green light, the EU will also seek to “explore the monitoring and advising on transfer of goods.” Brussels also hopes to convince Israel to lift restrictions on humanitarian NGOs operating in the Palestinian territories. In the longer term, the EU wants to play a role in the removal of landmines, the reconstruction of war-torn Gaza, investment and the facilitation of trade. It intends to use Erasmus — the educational exchange scheme it had previously sought to bar Israel from — as a tool to build trust between communities. European Commission President Ursula von der Leyen announced in September that she would bring forward sanctions on Israeli ministers and seek to scale back economic cooperation with the country in response to the humanitarian crisis in Gaza. However, POLITICO reported earlier on Friday, the plans are expected to grind to a halt in the wake of the American deal, with capitals expressing skepticism about the need for the move as a result of geopolitical developments. A handful of countries that had pushed for a tougher stance expressed frustration over how long the EU had taken to put forward the plans.

The EU wants students from the bloc’s southern neighbors to join its Erasmus exchange program, it announced Thursday as part of a broader plan to bolster Europe’s presence in the Mediterranean region. The inclusion of non-EU students from countries in Africa and the Middle East is part of the “Pact for the Mediterranean”, which also includes a proposal to double the EU’s budget for this region to €42 billion. The bloc’s Mediterranean partners include Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestine, Syria and Tunisia. European Commission President Ursula Von der Leyen outlined the three sections of the pact in a statement: People, economy, and the link between security, preparedness and migration. EU foreign policy chief Kaja Kallas told journalists the pact includes more than 100 projects, ranging from support for 5G networks and improved mobile connectivity in the region, to youth-focused programs and “rail, road, maritime links to subsea cables carrying data between our nations.” The EU’s Commissioner for the Mediterranean Dubravka Šuica said the pact aims to “connect young people” and broaden the Erasmus Plus and Horizon Europe programs, calling it the “Mediterranean University.” The pact would also help universities in the region develop joint degrees and programs with their counterparts in the EU. “We will also scale up talent partnerships with Morocco, with Tunisia and with Egypt, and facilitate issuance of visas in particular for students” from these countries, Šuica said. On migration, Šuica called it the “greatest shared challenge” and a “shared opportunity” for the two sides. She said the pact will support efforts to prevent illegal departures and fight smugglers in the EU’s southern neighbors, while creating legal pathways “to address Europe’s labor needs.” “Our deeper cooperation is a strategic choice, and it is reflected in the creation of [the] new DG MENA [the Directorate-General for the Middle East, North Africa and the Gulf] and also in the … Commission’s proposal to double the budget for this region to €42 billion in the next programming period,” Šuica said. “We have so much to offer to those countries in terms of equal partnership. We are interested in the cooperation regarding energy, connectivity, critical raw materials,” Kallas added. “Our proposal is much more positive than that of the other geopolitical players, but we really need to work on that,” Kallas added, referring to competition from China and Russia in the region. Von der Leyen described the Mediterranean as a “bridge between continents for people, for goods, for ideas.” “The truth is that Europe and the Mediterranean cannot exist without each other,” she added.

The EU is considering granting Moldova a big step forward in its bid to join the 27-member bloc ahead of parliamentary elections there in late September ― putting it ahead of Ukraine for the first time. Under the scenario being studied by EU officials, European countries would vote to open a first “negotiating cluster” for Moldova — a key legal step on the path to membership — early next month after a meeting of EU ministers, according to three diplomats and an EU official. Such a move would grant a powerful electoral boost to President Maia Sandu, whose party is campaigning on a pro-EU platform and faces determined efforts from Russia to sway the vote in Moscow’s favor. “A way needs to be found to open the first cluster,” said Siegfried Muresan, a conservative EU lawmaker who chairs the EU-Moldova Association Committee in the European Parliament. “It would send a signal to Russia. It would take away the argument for the narrative of the Russians, which is to say that there is no progress on the path to EU membership.” But allowing Moldova to move forward while leaving Ukraine on hold risks angering Kyiv, whose EU membership bid has moved in lockstep with Moldova’s since both countries received an initial green light from the European Council in 2023. “There is a danger here of sending the wrong signal to Ukrainians,” said a Ukrainian diplomat. “At a time when future peace is being discussed in Alaska, we need to keep the perspective of EU membership as strong as possible.” Both Moldova and Ukraine have undertaken far-reaching reforms to join the EU, completing all the necessary steps to open a first negotiating cluster, according to a spokesperson for the European Commission. “There is no objective reason to block Cluster 1,” the spokesperson added in an emailed comment. POWERFUL MESSAGE The problem is that Ukraine’s bid is being blocked by Hungary, whose prime minister, Viktor Orbán, has made opposing Kyiv’s entry into the bloc a key plank of his own bid for reelection next year. So while Moldova could win approval from all 27 member countries for opening a negotiating cluster at an informal General Affairs Council gathering on Sept. 1, Ukraine is unlikely to get unanimous backing. This has put pro-enlargement countries, including EU presidency holder Denmark, in a bind. If they keep Moldova’s candidacy strictly tied to Ukraine’s, they are unable to move forward with either. Allowing Moldova’s to move forward before Sept. 28 would send a powerful message to pro-EU voters in Moldova — but could infuriate Ukrainians. Allowing Moldova’s to move forward before Sept. 28 would send a powerful message to pro-EU voters in Moldova — but could infuriate Ukrainians. | Dumitru Doru/EPA According to an EU diplomat closely following the process, several options are under consideration to show Ukraine that its candidacy is moving forward even if no negotiating cluster is opened — including granting Kyiv access to the Horizon Europe program or the Erasmus student exchange program. “There are a lot of things we can do to bring Ukraine closer to Europe in other ways than the formal negotiation procedure,” the EU diplomat said. “The key thing is to keep pushing forward and make clear that Hungary’s opposition is not seen as legitimate, and that the real carrot is the end of the process.” HISTORIC MOMENT Diplomats and officials also stressed that circumstances could rapidly change, notably in light of Donald Trump and Vladimir Putin’s meeting in Alaska on Friday. If the leaders strike a deal and determine that EU membership for Ukraine is a crucial part of it, Trump could prevail on Orbán to lift his opposition to Kyiv’s accession. Advocates of keeping the two bids coupled argue that Europe shouldn’t risk demoralizing Ukrainians who are committed to joining the EU, and that a better strategy would be to push Trump to force Orbán to lift his blockade. “This a historic moment and you have to look at this situation in its totality. EU membership is a crucial part of any peace deal,” added the diplomat.

LONDON — Brexit reset talks took a step forward on Wednesday as the European Commission outlined its negotiating plans on agri-food standards and carbon emissions trading. The Commission published draft proposals for its negotiating position in the two policy areas — which are among a handful set for discussions. The plans will now be scrutinized by EU governments. The publication of the proposals represents the first movement in talks since the May 19 summit, where Keir Starmer pledged to “reset” Britain’s relationship with the EU and set out a slate of negotiating objectives. Under the Commission’s proposals for a sanitary and phytosanitary (SPS) agreement, the U.K. would apply “at all times the full body of” relevant EU rules on “sanitary, phytosanitary, food safety and general consumer protection rules applicable” to agri-food products. It would also cover “the regulations of live animals and pesticides, the rules on organic production and labelling of organic products, as well as marketing standards applicable to certain sectors or products.” While London would have no “right to participate in the Union’s decision-making” of those rules, the EU would “consult the United Kingdom at an early stage of policy-making” so it could give its input. The U.K. would have to apply new EU rules within a set deadline or face legal action under the agreement. The British government would also make a financial contribution towards “the functioning of the relevant Union agencies, systems and databases to which the United Kingdom would gain appropriate access” through the proposed agreement. EMISSIONS TRADING The Commission’s proposed plan for linking the EU and U.K. emissions trading systems would also “ensure the dynamic alignment of the United Kingdom with the relevant European Union rules to avoid risks of carbon leakage and competitive distortions.” The plan says that the sectors covered by linked emissions trading should include “electricity generation, industrial heat generation (excluding the individual heating of houses), industry, domestic and international maritime transport and domestic and international aviation.” It would also create a procedure to “further expand the list of sectors” in the future. The agreement would “require that the cap and reduction pathway of the United Kingdom are at least as ambitious as the cap and reduction pathway followed by the Union” but also “not constrain” the EU and U.K. from “pursuing higher environmental ambition, consistent with their international obligations.” Under the Commission’s proposal, the U.K. would get a mutual exemption from the EU’s Carbon Border Adjustment Mechanism (CBAM). In some policy areas, the European Commission must obtain legal mandates from EU member states before it starts negotiating on their behalf. Further mandates are expected in other areas covered by the U.K.-EU reset, for example on electricity trading. Some policy areas do not require mandates, either because they are an EU competence or because one already exists. For example, negotiations about the U.K. joining the Erasmus exchange program are likely to be covered by a provision in the existing trade agreement allowing U.K. participation in EU programs.

BRUSSELS — Suspending part of the EU-Israel Association Agreement could be on the cards over the country’s breaches of its human rights obligations in Gaza. A leaked draft of the European Union’s list of potential measures, drawn up by the European External Action Service and seen by POLITICO, presents a series of options including the “full suspension” of the EU-Israel Association Agreement, which provides for close ties on trade and other areas of cooperation. Other proposals include the partial suspension of the pact, “i.e., the political dialogue” between Brussels and the government of Prime Minister Benjamin Netanyahu, which would require the unanimous support of all 27 member countries. However, the review finds, “the suspension of the trade chapter” of the agreement “would withdraw the trade preferences for Israeli products to enter the EU market and could be decided by qualified majority vote in the Council,” which would be more likely to pass. A potential ban on all imports from illegal settlements in the West Bank would require full agreement from member states. However, the document states that individual capitals could implement this policy at the national level. Alternative suggestions include barring Israel from EU programs for students and scientists, such as Erasmus and Horizon, or limiting technical cooperation and memoranda of understanding. The EU’s top diplomat, Kaja Kallas, was tasked with drawing up proposals following a meeting of European leaders in June, focusing on what steps could be taken against Israel despite opposition from steadfast allies like Hungary and Germany. Earlier Thursday, Kallas said an agreement had been reached to ensure aid reached Gaza, hailing cooperation with the Israeli government and saying the bloc hoped to see deliveries of supplies made in the “coming days.” | Shawn Thew/EPA That came after an EEAS review — first seen by POLITICO — determined “there are indications that Israel would be in breach of its human rights obligations under Article 2 of the EU-Israel Association Agreement.” “In response to the terrorist attacks of 7 October 2023, Israel launched an intense military campaign, involving the use of weapons with wide area effects in densely-populated areas, and severe restrictions on the entry and distribution of essential goods and services into Gaza,” the assessment found. The paper will be discussed by foreign ministers from across the EU at a summit on Tuesday. Earlier Thursday, Kallas said an agreement had been reached to ensure aid reached Gaza, hailing cooperation with the Israeli government and saying the bloc hoped to see deliveries of supplies made in the “coming days.”