BERLIN — U.S. President Donald Trump is using the leverage of American military strength to weaken the European Union, said center-right European People’s Party (EPP) leader Manfred Weber. “For the first time, we have a president who, as we saw this summer, is weakening Europe’s economic power by playing the military card,” Weber said on German public television Wednesday night, referring to earlier talks on a trade deal between the EU and the U.S. “Trump clearly used this method to divide Europe and weaken [European Commission President] Ursula von der Leyen’s position in the talks.” Weber suggested Europe is too militarily dependent on the U.S. — and too weak on its own — to push back against the demands of the Trump administration and, at the same time, confront the threat posed by Russian President Vladimir Putin. “We are naked in a world of storms, because we have not prepared ourselves for today’s world,” the EPP leader said. “We were in a weak position during the trade deal … because half of Europe — the Balkans, Poland, Romania — are simply really afraid of Putin. And the only thing that can protect them at the moment is American military power.” Europeans, Weber added, are now facing the hard reality of being “unable to defend ourselves against the drones that are coming.” Moscow has been accused of violating NATO airspace on several occasions in recent weeks, including in Poland and Estonia, in what constitutes a new phase of escalating tensions between the West and Russia. Major Danish airports were briefly closed early Thursday morning due to what authorities said were drones. On trade, Weber said he would have liked to see the EU and its chief negotiators show more self-confidence in talks with Trump over the summer, including by not backing down on the bloc’s digital tax for U.S. tech giants. But, he added, this was unrealistic due to the bloc’s military dependence on the U.S. Weber called on the leaders of the EU’s 27 member countries to strengthen the bloc and show more visionary leadership. “If we had a [Helmut] Kohl and a [François] Mitterrand today who created the euro back then, they would be paving the way for a European army,” he said. “That kind of leadership, that kind of visionary approach, is lacking at the moment.” Today, he went on, this is the job of German Chancellor Friedrich Merz and French President Emmanuel Macron. “It must be said that all of our top politicians are so caught up in national politics, so under pressure … that unfortunately, we do not have a generation of leaders in office right now who are capable of taking the big steps that are needed,” he added.

BRUSSELS — The Polish government aims to complete work on a digital tax by the end of the year, despite threats by U.S. President Donald Trump against countries with such a tax. “Work is currently underway to prepare the draft bill, which is expected to be completed by the end of 2025,” a spokesperson for the Polish Digital Ministry said in written remarks shared with POLITICO when asked about Trump’s comments. On Monday, Trump threatened to impose tariffs on countries with a digital tax. Digital taxes are “designed to harm, or discriminate against, American Technology,” Trump said in a post on his social network, Truth Social. However, the ministry said in the remarks, the Polish digital tax would not be “aimed at entities from any specific country.” “It is intended to apply to all relevant market participants.” As it stands, Warsaw intends to introduce a 3 percent digital tax rate on companies whose global revenues exceed €750 million, effectively targeting larger U.S. tech companies. The goal of such a tax is to ensure that tech companies “generating revenue from the Polish market pay fair taxes in Poland.” Earnings from the tax would be used to support the development of Polish technology and the creation of quality Polish media content. Services that could fall in scope are marketplaces, digital targeted advertising and data transfer services. Efforts to come up with a Polish digital tax, led by left-leaning Digital Affairs Minister Krzysztof Gawkowski, could face resistance from Karol Nawrocki, Poland’s Trump-loving president.

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 has dropped plans to levy a tax on digital companies, a move that hands victory to Donald Trump and U.S. tech giants like Apple and Meta. With the EU and the U.S. embroiled in the final stretch of negotiations over a trade deal, Brussels removed the digital tax option from its ― supposedly unrelated ― list of proposed taxes for bringing in revenue during its next seven-year spending program, according to a document circulated on Friday seen by POLITICO. With only days to go until the budget plan is unveiled, top EU officials are locked in high-stakes talks to decide which levies will feature in the Commission’s proposal, to be published on Wednesday, for the budget starting in 2028. The document, which still could be revised by officials before publication, set out a list of possible taxes but did not quantify how much money each one would likely generate. Deciding against a digital levy would be a major turn-around for the EU, which as recently as May floated taxing tech giants as a way of paying back the bloc’s debt. The idea was mentioned in a document on the next budget discussed by the EU’s 27 commissioners. The U-turn could be a strategic move by the EU, which is desperate for advantageous terms on trade with the U.S. President Donald Trump threatened tariffs against Canada as payback for their digital levies. WHAT THE NEW EU TAXES COULD BE The issue of the EU raising its own taxes has always been a sensitive one, with national governments wary of giving the bloc too much power to extract money from their voters and too much autonomy over how it spends it. The vast majority of EU funds comes from governments’ contributions. But with politicians increasingly demanding Brussels tighten the purse strings, the Commission is on the lookout for new sources of cash. According to Friday’s document, instead of a digital levy it wants to propose three new taxes targeting electric waste, tobacco products and large companies in the EU with a turnover of over €50 million. The aim is to generate from €25 to €30 billion per year that will be used to repay EU joint debt that was used to finance its post-Covid recovery. The Commission will propose an EU-wide levy on tobacco products such as cigarettes and cigars. These goods are currently being taxed by individual countries, who keep the revenues for themselves. The EU’s idea comes amid a push to introduce new taxes on e-cigarettes and vapes that are opposed by Italy, Greece and Romania. | Tolga Akmen/EPA The EU’s idea comes amid a push to introduce new taxes on e-cigarettes and vapes that are opposed by Italy, Greece and Romania. While not opposing the proposed new taxes, Sweden said that handing part of its national revenues to the EU is “completely unacceptable.” The Commission also suggests taxing discarded electrical equipment. Wednesday’s proposal is expected to also confirm proposals from 2021 to levy a carbon border tax ― a popular idea among countries ― and a take share of the revenues generated by the emissions trading scheme (ETS). This idea is politically sensitive among Eastern European countries who are most affected by ETS. In a concession to critics, the Commission suggested that only a small share of ETS revenues will flow to the EU budget, while the rest would stay with national governments. It added that a controversial plan to extend the scheme to buildings and road transport ― known as ETS2, which will come into force in 2027 ― won’t be funneled into the EU budget. National governments will have to unanimously approve the new taxes over two years of fraught negotiations that will start after the Commission makes its proposal.