BRUSSELS — The U.S. must preserve and grow the dominance of its financial sector worldwide, President Donald Trump argues in his new National Security Strategy. The 33-page document is a rare formal explanation of Trump’s foreign policy worldview by his administration, and can shape U.S. policy priorities. “The United States boasts the world’s leading financial and capital markets, which are pillars of American influence that afford policymakers significant leverage and tools to advance America’s national security priorities,” the document states. “But our leadership position cannot be taken for granted,” it continues, calling on America to leverage “our dynamic free market system and our leadership in digital finance and innovation to ensure that our markets continue to be the most dynamic, liquid, and secure and remain the envy of the world.” The strategy lists the “world’s leading financial system and capital markets, including the dollar’s global reserve currency status” as one of the U.S. key levers of power. Trump’s comments come as Europe looks to grow its own finance system to reduce the continent’s dependence on Wall Street. The EU has put forward a broad plan to boost its own finance industry by strengthening its single market for investment, and it will draft policy plans in the coming months aiming to boost its banks’ ability to compete globally. It is also creating a digital version of the euro currency, which would reduce its reliance on the dollar and on U.S. payment giants.

When Goldman Sachs boss David Solomon met with Chancellor Rachel Reeves in October, he was given a list of prepared talking points by colleagues to discuss with Britain’s top finance minister. With only one thing on his mind, he ripped up the notes and warned her: Don’t hike bank taxes in the budget. Six weeks on, after Reeves delivered her second fiscal statement on Nov. 26 with no such tax increases, he needn’t have worried too much. Taxing Britain’s mammoth lenders could have raised £8 billion for the exchequer, a huge amount which would have gone a long way to plug the £30 billion hole Reeves needed to fill to stabilize the U.K.’s finances. But while some in the ruling Labour Party would have loved to see financial institutions taxed more, Reeves was never actually going to pull the trigger. Publicly and privately, the lobbying efforts by banks were intense. The CEOs of Lloyds, HSBC, and NatWest all spoke out openly against the suggestion, while other leaders, such as Solomon, issued their warnings behind closed doors. Banks couldn’t rule out a tax hike, particularly after a leaked memo revealed that former Deputy Prime Minister Angela Rayner had urged Reeves to raise the bank surcharge, an extra tax paid by banks on top of corporation tax. Certain think tanks, too, called on Reeves to go big on fat cats. But behind closed doors, as the budget approached, City figures weren’t so concerned. Many cautioned against believing stories that a bank tax was imminent, while others said they simply hadn’t been told either way — therefore weren’t expecting a surprise in the budget. Ultimately, they believed their lobbying was hugely successful toward a government intent on achieving growth and fearful of sending wealth out of the country. One senior bank executive, granted anonymity to speak freely, said bank chiefs “care about two things: How easy is it to hire and fire people in the U.K, and how much tax do we pay in this country?” For banks, their winning arguments were twofold: One, lenders pay £43.3 billion in tax every year at a 46.4 percent tax rate, higher than any other global financial center, according to data from lobby group UK Finance. Two, Reeves has been on a mission of financial deregulation since her party entered No. 10 last year. Banks argued that giving with one hand, by loosening rules, but taking away with the other, by hiking taxes, was contradictory and wouldn’t achieve the growth she so desperately wants. “Reeves has been consistent with her messaging during her tenure,” said Benjamin Toms, bank analyst at RBC Capital Markets. “The government wants to stimulate growth, and Reeves realizes that U.K. banks are the conduit for that growth.” MOVING MARKETS The message appeared to get through to Reeves, even though she declined to publicly rule out hiking bank taxes. That left rumors to intensify over the summer. Two think tanks, Positive Money and IPPR, issued reports backing a tax hike, with both recommending a windfall-style levy on bank profits. The former delivered a petition with 68,749 signatures calling for the move to the chancellor earlier this week. The IPPR report, published at the end of August, was the most impactful, knocking £8 billion off the share prices of FTSE 100 banks the day it was published, with NatWest losing £2.5 billion alone in market cap. The Treasury worked hard to separate itself from the report, with a spokesperson saying afterward that “the chancellor has been clear that the financial services sector is at the heart of our plans to grow the economy,” but it wasn’t enough to quell rumors. “Ultimately, negative press around banks slamming a bank tax and its effect on growth is considered more damaging to the economy than the taxes collected from the banks would bring in,” said Niklas Kammer, equity analyst at Morningstar. Later, it emerged that Reeves “ripped into” members of the think tank after the report was published, per one person in the room at the time. She told the IPPR to think before they publish a report next time, in front of dozens of attendees at a meeting in No. 11 Downing Street in September. While it seemed that gossip around a surcharge hike quietened down after the summer, it was immediately thrust back into the spotlight after the chancellor’s decision to rule out any income tax hikes in the budget, as Reeves began searching around for sources of income to pad her fiscal headroom. Lobbying efforts intensified after the news on income tax broke, causing banks to panic that the move would be back on the table and warn that they’d move business elsewhere. “We suggested in our conversation with government that if the surcharge was to go up, we might be able to move things to the EU,” added the bank executive. After Brexit, banks have been forced to move more of their operations to the continent, buying new offices and hiring further staff, leaving greater possibilities to shift operations away from the U.K. “It’s much easier to move at the margins now than it would have been just five years ago,” they said. But the possibility of raising taxes on banks in Britain was officially ruled out after reports circulated in the days leading up to the budget that Reeves would let them off the hook — if they praise the chancellor’s decisions. Will Howlett, financials analyst at Quilter Cheviot, said it would be a “stretch” to see banks showering the budget with praise given the other tax rises that Reeves did pursue in the fiscal event, along with the cuts to cash ISA limits. But Toms said it was likely “more accurate” that the government was requesting banks not criticize the budget rather than actively praise it. For banks reeling from a huge win, staying quiet won’t be too hard.

EU countries must back plans that would strip them of their powers to police stock exchanges and other key institutions if they are serious about building a U.S.-style financial market, the EU’s finance chief told POLITICO. “If we don’t do anything different from the past, we will hardly get to any different result,” Financial Services Commissioner Maria Luís Albuquerque told POLITICO in an interview. “So if there is support, well, let’s walk the talk then.” The Portuguese commissioner’s challenge to the rest of the EU could fall flat. EU treasuries are already up in arms over the controversial power grab, which would shift supervision of large, cross-border financial services companies, such as stock exchanges and crypto companies, from the national level to the EU’s securities regulator in Paris. “It’s going to be a difficult discussion, of course, but these are the ones worth having, right?” Albuquerque said. “What I have been hearing since I arrived is tremendous support for the savings and investments union. Well, this is about delivering it.” The European Commission is primed to propose a sweeping package of financial markets reforms on Dec. 3, including the supervision plans, in a bid to revive Brussels’ faltering decade-long campaign to create a U.S.-style capital market. According to plans first reported by POLITICO, as well as draft documents outlining the proposal, the supervision plan would considerably strengthen the European Securities and Markets Authority (ESMA) to police the likes of Nasdaq Europe and Euronext. The draft also proposes making the future watchdog independent of meddling EU capitals. Although the main aim of a single watchdog is to boost the EU’s economy by making it easier for finance firms to operate and invest across the EU’s 27 countries, having money flowing so freely around the bloc would also create new risks without strong oversight. In the event of a meltdown of a firm, such as a clearinghouse, that operates across multiple countries, an EU watchdog could be quicker to jump on the problem than a group of national supervisors acting independently. The focus on boosting Europe’s capital markets has gathered pace since the pandemic’s bruising impact on national budgets, compounded by the EU’s desperate bid to keep pace with the economic powerhouses of the U.S. and China. With strained public finances in the EU’s member countries and the loss of London as the bloc’s financial center post-Brexit, policymakers are trying to unlock €11 trillion in cash savings held by EU citizens in their bank accounts to turbocharge the economy. Having a vibrant capital market would also offer EU startups the chance to raise cash from risk-minded investors, rather than approaching the bank with a cap in hand. “We need a single market,” Albuquerque said. “We need the scale, the opportunities that that brings, because that’s the only thing that can deliver on our ambitions.” TROUBLE AHEAD Political negotiations on the proposal are set to be fraught. Smaller countries that depend on their financial services industries, like Ireland and Luxembourg, oppose the plans as they fear ceding oversight or finance firms relocating to be closer to ESMA — an added boon for the French. Others argue that the move for an EU watchdog will distract from the bigger picture of encouraging savers to invest in the markets. “If the European Commission wants to be successful in this aspect of enlarging the pool of investable capital, this is what you need to do,” Swedish Finance Minister Niklas Wykman told POLITICO. “If we’re stuck in a never-ending discussion about how to organize supervision … that will not take us closer to our objective.”  Sensing the challenges ahead, Albuquerque said she was open to compromise to ensure the proposals don’t land dead on arrival. “I’m not saying that we will have to find an agreement which is exactly like the Commission proposal,” she said, adding that “if there is a better alternative, I’m all for it.” CORRECTION: This article was updated on Nov. 17 to clarify that policymakers are specifically targeting the €11 trillion held in bank accounts in cash.

BUSAN, South Korea — President Donald Trump on Thursday said he had “an amazing meeting” with Chinese leader Xi Jinping, appearing to tamp down tensions that had been building for months. “Zero, to 10, with 10 being the best, I’d say the meeting was a 12,” Trump told reporters aboard Air Force One, shortly after he left South Korea on his way back to Washington. “A lot of decisions were made … and we’ve come to a conclusion on very many important points.” The agreement, according to Trump, includes a commitment from China to purchase soybeans from American farmers, curb the flow of fentanyl and postpone its export restrictions on rare earths, which are used in everything from iPhones to military equipment. “There is no road block at all on rare earth,” Trump said. “Hopefully, that will disappear from our vocabulary for a little while.” Trump said he intended to immediately lower tariffs on Chinese exports to 47 percent from 57 percent. The result pulls the two nations back from the brink and should induce a significant sigh of relief from capital markets around the world. Details remain sparse and there have been false starts and resets before, but Trump said he could sign an agreement “pretty soon” and that few stumbling blocks remained. Trump also said he plans to visit China in April and that Xi would travel to the United States after that. This was Trump and Xi’s first face-to-face meeting since the G20 summit in Osaka, Japan in June 2019, when the two countries were also in the middle of a trade war. Thursday’s summit in South Korea followed months of renewed tensions that have impeded trade between the two countries, despite several announced truces. While Trump has ratcheted up tariffs on China — at one point as high as 145 percent — and tightened export controls on high-tech goods, Beijing has responded with its own devastating pressure campaign. That includes reducing purchases of American farm goods, which fell by more than 50 percent in the first seven months of 2025. U.S. soybeans farmers, who exported a record $18 billion worth of their crop to China in 2022, have been hit particularly, with just $2.4 billion in shipments to China in January through July. Beijing also imposed new export controls on rare earth materials. Earlier this month, China added five more rare earth elements to its control list and, much more controversially, outlined a plan requiring foreign companies that use even tiny amounts of Chinese-sourced rare earths to obtain a license from Beijing to export their finished products. U.S. officials described that move as an intolerable attempt by China to control global supply chains, and Trump threatened new 100 percent tariffs to take effect on Nov. 1. But it appears both sides wanted to avoid that kind of escalation. During the weekend, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, after meeting with Chinese Vice Premier He Lifeng in Malaysia, said they believed Beijing was prepared to delay its rare earth restrictions for a year, make “substantial” purchases of American farm goods and attempt to curb shipments of fentanyl precursor chemicals to the U.S.

Nearly two years ago, Argentina’s newly appointed punk-haired President Javier Milei stood up on a podium in front of global elites in Davos and accused them of letting their societies drift into socialism and poverty. He went on to argue that the “main leaders of the Western world have abandoned the model of freedom for different versions of what we call collectivism,” and that all market failures were by-products of state intervention. This week, however, Davos had the last laugh: U.S. Treasury Secretary Scott Bessent threw Milei a $20 billion lifeline to help Argentina defend a currency that is collapsing despite nearly two years of shock therapy programs that had had supply-side economists and investors in raptures. “Argentina faces a moment of acute illiquidity,” Bessent posted on X. “The international community — including the IMF — is unified behind Argentina and its prudent fiscal strategy, but only the United States can act swiftly. And act we will.” The rescue act, which many have described as a country-to-country bailout, is an abrupt departure from the usual playbook of international financial diplomacy, an unusually direct intervention in a sphere normally reserved for multilateral institutions. In a strong signal that this was the result of political will, rather than financial apparatchiks just trying to keep the system stable, the money will be directly extended by the Treasury, rather than by the Federal Reserve, in the form of a currency swap. It stands to entangle the fate of the U.S. economy intimately with that of resource-rich Argentina, and tie the Trump administration directly to Milei’s shock therapy programs. At the same time, it reasserts U.S. influence in a region that China has increasingly penetrated through growing trade ties. For Europe, the corollary is that access to dollar liquidity, the essential backstop of the world financial system for nearly a century, is being politicized, and may increasingly depend on how closely its policies align with those of the U.S. “Europe should be concerned about the politicization of the swaps,” one former New York Federal Reserve official told POLITICO. The episode “underscores the need for the rest of the world to prepare for dealing with a dollar crunch without the Fed[to turn to],” added the official, who was granted anonymity to speak freely. CHAINSAW ECONOMIC MASSACRE Milei was explicitly elected in 2023 on the promise that he would take a chainsaw to Argentine government excesses. Positioning himself as the defender of freedom, once in office, he initiated a bold economic agenda focused on radical deregulation, welfare cuts, and liberalization. Within months, the country’s welfare bill had been slashed by nearly half, with the government balancing the books (before interest payments) for the first time since 2008. But it was Milei’s initial move in December 2023 to devalue the official peso exchange rate by nearly 50 percent that rocked markets the most. The hope was to better align the peso with its black market (i.e., real) rate before slowly introducing a floating exchange rate, with sliding bands. Throughout, the International Monetary Fund, the world’s lender of last resort for countries, championed Milei’s policies, which allowed Argentina to return to capital markets earlier than expected. “The agreed ambitious stabilization plan is centered on the establishment of a strong fiscal anchor that ends all central bank financing of the government,” the lender cooed in January 2024. EGG ON THE IMF’S FACE? Except things didn’t go exactly as planned. Rather than stabilize, the peso just kept depreciating, especially after Trump’s tariff announcement in April destabilized global markets. The declines threatened to make imports more expensive for ordinary Argentinians just as Milei’s disinflationary successes were beginning to become entrenched. The road to that point evolved predictably enough. In the immediate aftermath of Milei’s great devaluation, inflation hit 25.5 percent, spiking to 276 percent by February 2025. But, as social welfare cuts began to bite, inflation predictably turned into disinflation. By June 2024, monthly price rises had slowed to 5 percent, and by July-August, inflation had hit single digits for the first time in years. The International Monetary Fund (IMF) and independent observers were quick to credit Milei’s strict fiscal surplus, monetary tightening, and peso stabilization. But by April, the peso’s soft float was proving increasingly challenging to defend. Trump’s “Liberation Day” tariffs, which set a baseline rate of 10 percent for all countries, had hit Argentina’s export-dependent economy hard. Capital started to flow out amid fears that a global slowdown would crush demand for its agricultural and mineral exports. The Argentinian central bank moved to defend the peso, burning through scarce dollar reserves. Markets began to doubt that Milei’s agenda would survive, fearing that a sharp, uncontrolled depreciation would rekindle inflation just as prices were calming down. To avert a currency crisis, Argentina turned to the IMF and was granted $20 billion through the agency’s Extended Fund Facility (EFF). But despite an initial positive impact on the peso, the depreciation picked up speed again. From the perspective of both the IMF and the U.S., the failure of Milei’s reforms stood not just to unravel Argentina once again, but to delegitimize the ideological foundations of the free-market system he had touted as infallible if deployed correctly. PROXY ECONOMIC WAR WITH CHINA As confidence in Milei’s program faltered, focus shifted to whether the U.S. would make dollar support conditional on the cancellation of a pre-existing $18 billion swap line with Beijing. U.S. Special Envoy for Latin America Mauricio Claver-Carone publicly dubbed the facility “extortionate.” In September, Bessent confirmed negotiations between the U.S. and Argentina for a direct dollar swap line, reinforcing speculation that the U.S. was trying to supplant Chinese influence in the region. The news had an immediate positive effect on the peso, breaking its fall. After peaking at over 1,475 pesos, the dollar was back at 1,421 by late Friday in Europe, helped by news that a dollar-support package from Washington was imminent. How long-lasting that effect will be is yet to be determined. For now, Bessent and the IMF appear resolute that it’s just a matter of time until Milei’s policies will deliver the stability they’ve been promising. Rather than framing the U.S. swapline as a bailout, Bessent is treating the intervention as a trading play. “This is not a bailout at all, there’s no money being transferred,” he told Fox News on Thursday. Under a swap line, two parties agree to exchange up to a certain amount of their currencies, on the understanding that it will be reversed at some time in the future. “The ESF has never lost money, it’s not going to lose money here,” Bessent went on, arguing that the peso is “undervalued”. He added that Milei remains a great U.S. ally who is committed to getting China out of Latin America, and said the U.S. was going “to use Argentina as an example.” Not everyone is convinced that Milei’s policies will deliver the goods. “They’ve done this over and over and over again,” said Steve Hanke, a professor at Johns Hopkins University and a veteran of various currency reform and stabilization packages. He argued that the package will provide “a little bit of a temporary band aid, but it won’t last very long.”

LONDON — Keir Starmer thought he had an enduring trade pact with the U.S. to lower tariffs. Donald Trump appears to have other ideas. A flurry of new tariff announcements on pharma, trucks and movies have left British officials scrambling to keep up — and exposed holes in the trade deal Starmer and Trump struck in May. “I think it was a better deal for you than us, but these are minor details,” Trump told Starmer during a press conference amid the pomp of his second State Visit earlier this month, which saw the U.K. roll out a grand carriage procession with King Charles III, 1,300 troops, 120 horses and a fighter jet flyover. Under the terms of the May deal, the U.S. lowered tariffs on British car exports to 10 percent, but the U.K. has failed to negotiate a long-promised zero-tariff rate for steel and aluminum. And now, other threats are emerging. LATEST PILL PRESSURE  Trump has threatened to slap a 100 percent tariff on pharmaceutical imports unless firms have begun construction on U.S. plants. While the EU insists it has capped its pharma tariff exposure at 15 percent, the U.K. position is less clear cut. The May trade pact, trumpeted by ministers at this week’s Labour Party conference, left the door open to “preferential treatment” on tariffs — but only if Westminster improves conditions for American pharma in the U.K. That means one of Trump’s long-running gripes is back in play: the National Health Service’s price watchdog, NICE. Under the first Trump administration, U.S. firms criticized the regulator’s cost-effectiveness tests, which often force pharma companies to slash prices before patients can access new drugs. Trump has decried what he called the unfair treatment of American patients — who pay more for drugs than those abroad — writing a letter to major pharmaceutical companies, demanding price cuts in line with “most favored nation” rates.  Britain’s pharma heavyweights have been quick to show they’re willing to honor Trump’s reshoring requests. GSK is already building an $800 million facility in Pennsylvania, while AstraZeneca unveiled a $50 billion U.S. investment plan stretching to 2030.  Since they are either “breaking ground” or have manufacturing facilities already “under construction” — terms Trump explicitly defined when clarifying who would qualify for exemptions — these British pharmaceutical giants seem to be exempt under these terms. “It looks like some of the bigger companies [in Britain] might be okay, subject to where they are with their building,” said former government trade adviser Allie Renison. Those firms may seek solace from the White House’s confirmation on Wednesday that it is pausing its plan to enact the tariffs, as it attempts to negotiate agreements with major firms to avoid higher duties on their name-brand products — like the deal it announced with Pfizer Tuesday. But the Trump administration is expected to negotiate hard — and there is still lingering uncertainty over rules of origin terms for the industry. The impact of Trump’s tariff threats on British pharmaceutical giants like AstraZeneca and GSK “needs to be seen in the much wider picture of U.S. demands given conditionality on agreeing tariffs and exemption for firms building U.S. sites,” said Mark Dayan, Brexit program lead at the Nuffield Trust. “For the U.K., this is bound up in the requirements in the Economic Prosperity Deal,” he said. Not only does this tie pharmaceutical tariffs to essentially paying more for medicines — the trade deal also states exemptions are contingent on Britain’s compliance with supply chain security requirements. The industry runs on a sprawling global supply chain, with active ingredients, packaging and distribution separated across multiple countries. Trying to figure out where an active pharmaceutical ingredient comes from is challenging.  London is currently locked in talks with the U.S. government over NHS drug pricing. Science Minister Patrick Vallance has hinted the health service will need to pay more if Britain wants to stay attractive for investment.  “There is a question of how much money the NHS can put into this, how much goes on price,” he said, warning tariffs could make things worse if London doesn’t make “offers in this direction.” Speaking at the POLITICO pub on the sidelines of the Labour Party conference, New Trade Secretary Peter Kyle labeled pharma companies “hard negotiators, [who] know how to use the media and the press to do it.” ”We are tough negotiators too, and we are in the process of negotiating lots of different arrangements and agreements and investments in pharma,” he added. Starmer’s chief business adviser Varun Chandra flew to Washington this week, to try to head off tariffs — potentially in exchange for higher NHS spending on drugs ahead of the Wednesday deadline.  But the issue is politically sensitive for Starmer’s government.  “This is more sensitive than hormone-treated beef frankly,” Renison said, referring to the U.S.’s long-standing efforts to fo. “I think the government probably needs to be careful about being seen to connect the dots between U.S. pressures in this space and saying there’s a rationale for increasing the amount the NHS has to pay for it.” TRUCKING ALONG Trump’s spree of recent Truth Social posts also included threats to impose 25 percent tariffs on U.S. imports of heavy trucks. When it comes to the new tariff policy “there’s quite a lot of unknowns with this,” said a U.K. auto industry representative, pointing to the fact that “it’s just a post on Truth Social” at the moment without an executive order from the White House or initiation of an investigation by the U.S. Trade Representative’s Office. Britain’s auto industry also only exports a small amount of Heavy Goods Vehicles to the U.S., but “we’re not quite clear on how they’re defining a heavy truck,” they said. “Businesses need as much certainty as possible on tariffs,” said William Bain, head of trade policy at the British Chambers of Commerce, citing research by the industry body showing 60 percent of U.K. goods exporters are concerned about their customers paying higher prices. Bain and the BCC plan to “urge” the U.K. government “to continue dialogue on tariff reduction with the U.S. administration in the interests of both U.K. businesses and their U.S. consumers.” SITTING COMFORTABLY?  On Monday the White House issued a presidential notice saying that in mid-October, it will slap 25 percent tariffs on the value of imported kitchen cabinets, vanities and upholstered furniture and 10 percent duties on softwood lumber. This is one British sector, however, which is sheltered by the May deal. The administration said that U.K. tariffs will be leveled at 10 percent, in addition to the original “most-favored nation” rates, per the terms of the deal. THE BIG HITTER The president has also decided to revive an earlier bugbear, vowing to impose yet another 100 percent flat tariff on “any and all movies that are made outside of the United States.  “Our movie making business has been stolen from the United States of America, by other countries, just like stealing ‘candy from a baby,’” he wrote on Truth Social earlier this week.  Paul Fleming, general secretary of Equity, the British union for performers in film, television and radio, said Trump’s threats have already complicated talks with U.S. studios.   “We saw some delays in investment when President Trump last raised this threat, but there is a pipeline of work in the U.K. which will benefit both Hollywood and U.K. studios,” he said. While he dismissed the latest threat as “erratic,” Fleming warned it was creating “an unhelpful level of uncertainty” during contract negotiations.

BRUSSELS ― The European Commission wants EU governments to provide citizens with simple and transparent digital accounts for investing their savings, and to change tax rules to boost investments, according to a recommendation unveiled Tuesday. This is an existential challenge for the European Union, which has record levels of savings ensconced in citizens’ bank accounts but is unable to put that money to work providing necessary capital to its businesses, as its global rivals are doing. “We actually want to develop the European economy so that we can guarantee that our welfare state continues to function well — but that requires economic growth,” European Financial Services Commissioner Maria Luís Albuquerque told journalists, including POLITICO, on Tuesday. She added: “This is all about economic growth, about making it so that every person, every company, wherever in Europe, actually has the same opportunities … This is the European dream.” The Commission recommends applying tax breaks and other fiscal incentives — the best that exist under each country’s national laws — to investing in bonds, stocks and funds. Theoretically, the initiative could motivate citizens to move part of the deposits they hold in banks to investments with higher returns in the long term. Ideally, a government would make the investment offering as competitive as its own government debt. Such investments are usually seen as safer and essential for highly indebted states, but do not boost capital to businesses — at least, not directly. Yet the Commission has very little power to turn these ideas into reality. “This is a member state competence, clearly,” said Albuquerque. “We will monitor developments, and we will also be using the European semester to monitor how this is evolving,” she said, referring to the main tool the Commission uses to oversee countries’ fiscal policies. “This is not the kind of project that you can impose top-down,” Albuquerque said. “This has to have the buy-in of everyone involved.” The Commission recommends that products that are too complex or too risky, such as crypto-assets, be excluded; and that no geographical restrictions, such as a European preference, are imposed. However, a recurring concern among financial firms and governments is that American financial companies will take advantage of any such change. Stéphane Boujnah, CEO of pan-European stock exchange Euronext, said that foreign financial players are looking “with gluttony at the European open bar.” This summer, seven European countries — led by France — launched a European label for investment products with at least 70 percent of their portfolio assets invested in European companies. Speaking of the initiative, Albuquerque said: “We have no evidence if that works.” She added: “Having no geographical restrictions and having interesting tax incentives genuinely lead to a good outcome, and that good outcome translates into people having more opportunities.” However, the financial services chief acknowledged there is a natural domestic bias when it comes to people choosing investment opportunities. “Diversification is important as a risk management tool … people should invest in different sectors, in different areas, and in different geographies,” she said. “But there is naturally a domestic bias, because we prefer to invest in what we know best, and typically we know best what is closer to us,” Albuquerque pointed out. The commissioner said that EU financial firms as well have a role to play to ensure they get the most from the initiative. The financial sector needs to “come up to the challenge. We also need our markets to be developed. We also need more products,” she added. Obviously, it is up to investors to decide if they want to offer made-in-EU products.

VILNIUS — Europe shouldn’t be squeamish about seizing frozen Russian assets to help Ukraine keep fighting, according to Lithuanian central banker Gediminas Šimkus. In an interview with POLITICO last week, the European Central Bank policymaker said a victory for Russian aggression could undermine trust in the euro just as much as, if not more than, reputational damage from seizing the Kremlin’s money. EU government leaders will meet in Copenhagen this week to discuss, among other things, a contentious new plan to help Ukraine sustain a war that has drained it of both money and man power. There are growing signs that, having shied away from controversy last year, they are now more willing to take the risk, in a world where U.S. support for Ukraine can no longer be relied on. Attempts to take control of assets belonging to the Central Bank of Russia have been met with opposition not just from the Russian government, but also from the ECB. ECB President Christine Lagarde is concerned that seizing cash, which enjoys sovereign immunity, would deter other countries from holding their reserves in euros. That would frustrate the EU’s ambition to make the euro a truly global reserve currency, something that would expand Europe’s economic clout and help to make it cheaper for its governments and companies to invest. It would, however, provide cash-strapped EU capitals with a way of continuing to provide a financial lifeline to Ukraine without asking their own voters or the financial markets for money. Breaking with the thinking of top management, Šimkus, who also sits on the ECB’s highest decision-making body, said that focusing only on arguments about the international role of the euro misses the point. Failing to provide Kyiv with the resources it needs to continue defending itself, he cautioned, would have grave consequences for the stability of the single currency. If Ukraine were to lose the war, the risk of the conflict spilling into neighboring EU countries would surge. That scenario would shake foreign investors’ confidence in the euro far more than any fallout from the use of sanctioned cash, Šimkus argued. “Wouldn’t we end up with an outcome that creates more risks for the euro?” he said, adding that while the security of property rights are important to the creation of a global reserve currency, so are many others, such as capital markets depth, geopolitical uncertainty and the institutional ability to evolve by implementing reform. “We can’t focus only on one aspect.” PRESSING NEED Kyiv’s capability to defend its territory is increasingly dependent on outside financial help, its coffers drained by three and a half years of fighting its bigger, richer neighbor. Kyiv formally requested a new program with the International Monetary Fund earlier this month and the two sides are currently thrashing out the details of how it might look. Last week, Bloomberg reported that the IMF estimates it will need $65 billion to get it through to the end of 2027. Ukrainian Finance Minister Serhiy Marchenko said recently that the country needs between $150 billion and $170 billion in external financing to keep going for the next four years. The IMF is likely to fund only a small part of that. Ukrainian Finance Minister Serhiy Marchenko said recently that the country needs between $150 billion and $170 billion in external financing to keep going for the next four years. | Pool photo by Hannah McKay via Getty Images “It’s important that Europe finds ways to provide resources to Ukraine to defend its freedom and its country, [even] through the seizure of Russian assets,” Šimkus said. At their meeting in Copenhagen on Oct.1, EU heads of government will discuss how to contribute to Ukraine’s war effort. According to a draft obtained by POLITICO, the European Commission has floated the idea of swapping €140 billion of Russian cash held by Brussels-based clearing house Euroclear with zero-coupon bonds issued by the EU. The cash would then be loaned out to Kyiv in tranches. Germany’s Chancellor Friedrich Merz gave the thumbs up to the idea in an op-ed published Thursday by the Financial Times — although he said that the loan should only finance military aid. Šimkus said the decision of what to do with the money is in the hands of politicians, but he welcomed the Commission’s attempt to break the impasse on one of the thorniest problems since the beginning of the war. Finally, he said, “there is a real step forward.”

Mario Draghi has a message to the EU’s leaders: I did my bit, now you do yours. Member countries had praised his proposals for fixing the bloc’s sagging economy when he delivered them. One year on, they’re still dragging their feet on actually following the advice — and Draghi is taking on the role of agitator. Europe has introduced few of the recommendations from his European Commission-backed plan to boost competitiveness, which includes continental-scale investments in infrastructure, a revamped energy grid providing affordable power to industry, coordinated military procurement to wean the bloc off of U.S. arms, and a unified financial sector that can pour capital into EU tech startups. Only last month, Draghi warned that governments must make “the massive investments needed in the future,” and “must do it not when circumstances have become unsustainable, but now, when we still have the power to shape our future.” DRAGGING IT OUT   It’s not the first time that the ex-European Central Bank chief has issued dire warnings on Europe’s dimming prospects. When he first presented his report in Brussels, Draghi spoke of the “slow agony” of decline. At the time, EU leaders across the political spectrum heaped praise on the MIT-trained economist’s reforming vision.  French President Emmanuel Macron said that Europe needed to “rush” to deliver the Draghi agenda. Spanish Prime Minister Pedro Sánchez threw his weight behind the reforms to avoid what he called the risk of falling behind in the most “cutting-edge technological sectors.” Even Germany’s Friedrich Merz, who disagrees with Draghi on the key issue of joint EU debt, parroted the economist when he said that Germany would “do whatever it takes” to shore up its defense sector — a reference to Draghi’s now-famous dictum on the eurozone crisis. But while leaders say they agree on the need for a more cohesive EU, behind the scenes the reform agenda is stalling. “The Draghi report has become the economic doctrine of the EU, and everything we’ve proposed since has been aligned with it,” Stéphane Séjourné, the Commission executive vice president charged with industrial strategy, told POLITICO. Still, he admitted that the “’Draghi effect’ too often fades when legislative texts are discussed by member states.”    A report by the European Policy Innovation Council think tank found that only 11 percent of the Draghi report had been acted on. In the field of energy, no actions have been completed at all. “It’s national interests, it’s national policies, sometimes it’s party political,” said MEP Anna Stürgkh, who recently authored a European Parliament study on the electricity grid. Speaking at an event about the Draghi report one year on, the Austrian Renew Europe lawmaker explained that it often came down to individual countries not wanting to share cheap energy with their neighbors.  In the field of energy, no actions have been completed at all. | Hannibal Hanschke/EPA “If they interconnect with countries that have higher energy prices, their prices will go up,” she said. “That is a fact.”  “It’s not the Commission which is not doing the banking union,” Spanish economist and former MEP Luis Garicano said at the same event, referencing the push to break down the thicket of national rules and vested interests that keeps the banking sector fragmented and country-specific. “It’s the governments that don’t actually want to allow the capital to flow from one country to the next.”  That same parochialism comes up again and again, from common debt — vetoed by so-called frugal countries like Germany and the Netherlands — to defense or to financial sector integration. It doesn’t help that countries are tightening their belts after the Covid-era spending splurge, leaving little money to pursue strategic aims. THE BULLY PULPIT    Draghi is a man used to wielding power directly, having injected hundreds of billions of euros into the eurozone economy during his tenure as ECB president. Earlier this decade he served over a year and a half as the prime minister of Italy.  In his latest incarnation as Europe’s Jiminy Cricket — the unheeded moral advisor — Draghi only has persuasion at his disposal. If on the one hand the frantic pace of events has drawn attention and bureaucratic resources away from the reform program, it’s also served as a powerful validation of his thesis. Draghi has long been a proponent of pooled sovereignty — which is to say that the EU’s member countries are more powerful when they act as a bloc, even if they lose some freedom at the national level. The problem is that it’s up to governments to decide to act. By February, Draghi was already chiding governments for putting the brakes on meaningful change during an appearance in front of the European Parliament. “You say no to public debt, you say no to the single market, you say no to create the capital market union. You can’t say no to everybody [and] everything,” he said. Now, as an intransigent U.S. embarrasses Europe on the world stage, Draghi has warned the window for change may be closing. The way that President Donald Trump got the better of EU negotiators, who were under pressure from capitals to come to a deal, was a case in point.  This was a “very brutal wake-up call,” Draghi warned at a meeting in the Italian seaside town of Rimini last month.  “We had to resign ourselves to tariffs imposed by our largest trading partner and long-standing ally, the United States,” he said. “We have been pushed by the same ally to increase military spending, a decision we might have had to make anyway — but in ways that probably do not reflect Europe’s interests.” The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. | Jessica Lee/EPA EYES ON BRUSSELS If Draghi is the brain that dreamed up the EU’s economic reform program, then the Commission’s bureaucrats are the hands charged with implementing it. The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. It’s headed by Heinz Jansen, a German official previously in the Economic Affairs Directorate, and eight staff in total. Critics argue this is a paltry number of staff to be attached to the task force, and that the EU executive could have set up a dedicated directorate. “The president attaches great importance to the implementation of the Competitiveness Compass,” a Commission spokesperson told POLITICO, referring to the EU executive’s plans to implement Draghi’s recommendations. According to officials who spoke with POLITICO, the task force mainly works on delivering wins on the ground, pooling funds and channeling them into a handful of core projects that might give Europe a shot at competing with the U.S. and China technologically. The Commission merged several programs into a new €410 billion fund to finance common industrial aims in its budget proposal, and is issuing a recommendation to governments to coordinate their investments this fall. But here, too, that will inevitably trigger tensions. “Can you really imagine a big EU country funding an industrial plant in Slovenia with its own taxpayers’ money?” asked one EU official. “There is a lack of ambition … the EU executive is taken hostage by some big countries.” “For years, the European Union believed that its economic size, with 450 million consumers, brought with it geopolitical power and influence in international trade relations,” Draghi said. “This year will be remembered as the year in which this illusion evaporated.” Jacopo Barigazzi and Nicholas Vinocur contributed reporting to the article.