BRUSSELS — Hungary says it has asked the European Union’s top court to annul a new law banning the import of Russian gas into the bloc, filing the challenge within hours of the new law taking effect. “Today, we took legal action before the European Court of Justice to challenge the REPowerEU regulation banning the import of Russian energy and request its annulment,” Hungary’s Foreign Affairs and Trade Minister Péter Szijjártó said on X. Member countries agreed to the outright ban on Russian gas late last year in response to the country’s ongoing invasion of Ukraine. The law passed despite Hungary’s opposition. Szijjártó said Hungary’s case was based on three arguments. “First, energy imports can only be banned through sanctions, which require unanimity. This regulation was adopted under the guise of a trade policy measure,” he said. “Second, the EU Treaties clearly state that each member state decides its choice of energy sources and suppliers. “Third, the principle of energy solidarity requires the security of energy supply for all member states. This decision clearly violates that principle, certainly in the case of Hungary.” Slovakia has also said it will challenge the law in court.

STRASBOURG — Germany, the chief backer of the European Union’s Mercosur trade deal, called on Brussels to go ahead and implement it even after lawmakers voted on Wednesday to send the accord for judicial review, setting up a major clash between the bloc’s institutions and its two largest economies. The European Parliament voted by a razor-thin margin on Wednesday to pass a motion to seek a legal opinion from the Court of Justice of the EU on whether the Mercosur deal complies with the EU treaties. It was a blow for Commission chief Ursula von der Leyen, who made a last-minute appeal hours earlier to MEPs to advance the deal. The vote widened a rift between France, which has fought an epic rearguard action against the Latin American megadeal to protect its farmers, and a Germany desperate to boost industrial exporters reeling from U.S. President Donald Trump’s trade aggression. “The European Parliament’s decision on the Mercosur Agreement is regrettable,” German Chancellor Friedrich Merz said on X. “It misjudges the geopolitical situation. We are convinced of the agreement’s legality. No more delays. The agreement must now be applied provisionally.” In Paris, Prime Minister Sébastien Lecornu welcomed what he called “an important vote that has to be respected.” Foreign Minister Jean Noël Barrot chimed in: “France takes responsibility for saying no when it is necessary, and history often proves it right. The fight continues to protect our agriculture and ensure our food sovereignty.” Lawmakers will not vote on final consent to the deal until the Court of Justice issues its opinion, which could take 18 to 24 months. The court can “adjust the pace of the proceedings where institutional or political necessity makes a timely response especially important,” its press service said in a statement. DEMOCRACY VS REALPOLITIK In principle, the Commission would be allowed under the EU treaties to temporarily apply the provisions of the Mercosur deal, which would create a free-trade area spanning 700 million people and eliminate duties on more than 90 percent of goods. It’s a finely balanced, yet momentous, tradeoff between democratic accountability and realpolitik as the EU executive seeks ways to stand strong against Washington amidst the ongoing transatlantic rift over President Donald Trump’s threats to annex Greenland. Manfred Weber, the pro-Mercosur leader of the European People’s Party, backed the call by his fellow countryman Merz, for provisional application. “The European Parliament did not take a substantive position on Mercosur today; it voted on a procedural motion instead. This is an attempt to delay a much-needed agreement for ideological reasons,” Weber said in a statement. “In the current geopolitical situation, Europe cannot afford a stalemate. The agreement must now be provisionally applied so that its benefits for our economy can take effect. The European Parliament will have the final say after review by the Court of Justice of the EU.” The Commission, in a strongly worded statement, said it “strongly regretted” the decision by EU lawmakers, calling the concerns raised in the motion “unjustified.” It did not precommit to taking any action, however, saying it would now engage with EU member governments and MEPs before deciding on next steps. Olof Gill, the Commission’s top trade spokesperson, did confirm to reporters last week that the EU treaties did allow for the possibility of provisional implementation.  EU countries withdrew a resolution pledging not to sidestep the legislative process when they backed the deal on Jan. 9, sparking uproar in the corridors of the Parliament.  POWER PLAY Lawmakers argue that the Parliament, as the EU’s only directly elected institution, has the democratic legitimacy to be involved in decisions on trade deals.  A new non-binding framework agreement governing relations between the Commission and the Parliament, still to be green-lit by lawmakers, states that if the Commission intends to pursue provisional application of the deal, it should first seek the Parliament’s consent. The move to bypass Parliament would also mark a departure from established practice. Although it’s possible to provisionally apply the trade deal before the European Parliament’s consent, it hasn’t been the practice for over 10 years.  “Provisional application doesn’t take effect before the consent of the European Parliament or before the European Parliament has had the chance to express its view — and that is standard practice since the EU-South Korea agreement [in 2011],” said David Kleimann, a senior trade expert.  Even if the Commission wants to expedite implementation of the deal, it will need to wait until the Mercosur countries ratify the agreement, Sabine Weyand said in an email sent to trade lawmakers less than two weeks ago, seen by POLITICO. “On the side of the Commission we very much wish the Mercosur agreement to become a reality as quickly as possible, given its importance for the EU’s strategic autonomy and sovereignty,” she said. Asking for the Parliament’s “swift consent” on the deal as a whole, she reminded lawmakers that Mercosur countries “need to have completed their respective ratification procedures, and then notify the other side thereof” before the Commission can implement the deal in Europe.  Max Griera reported from Strasbourg and Camille Gijs from Brussels. Giorgio Leali contributed to this report from Paris and Ferdinand Knapp from Brussels.

BRUSSELS — If Donald Trump uses military force to take over Greenland, Denmark has options beyond NATO. The core of Denmark’s security rests on the transatlantic alliance — but that’s likely to be of little help in a confrontation with the U.S. as America dominates NATO. Instead, Denmark could trigger a little-known clause in the EU treaties: Article 42.7, the European Union’s common defense pact. While some analysts claim it’s actually stronger than NATO’s better-known Article 5 common defense provision, article 42.7 comes with a lot of caveats and unknowns. POLITICO took at look at five questions on the provision and whether it would make sense for Denmark to trigger it: 1. WHAT DOES IT SAY? “If a Member State is the victim of armed aggression on its territory, the other Member States shall have towards it an obligation of aid and assistance by all the means in their power, in accordance with Article 51 of the United Nations Charter. This shall not prejudice the specific character of the security and defence policy of certain Member States.” The clause was inserted into the Lisbon Treaty in 2009, aimed at giving EU members protection similar to that afforded by NATO. It does give neutral countries some wiggle room in opting out. For many analysts, the EU’s mutual assistance clause “is of a more compelling nature” as it states that member countries have “an obligation” to provide “all aid and assistance by all the means in their power.” NATO’s Article 5 includes the phrase “as it deems necessary” which leaves more room for national discretion. The EU version “is stronger in diplomatic language but the pool of forces is smaller than in the NATO framework,” said Alexander Mattelaer, an associate professor in international security at the Free University Brussels’ School of Governance. 2. HAS IT EVER BEEN USED? Only once. In 2015, France invoked the article in response to ISIS-led terrorist attacks. It allowed Paris to redeploy some of its troops out of Africa to use them to patrol French streets, while EU countries like Germany sent their soldiers to countries like Mali.  The request was supported unanimously by other EU defense ministers. Because the EU has no army, Paris had to negotiate with other EU countries for specific military help. 3. HOW DOES IT WORK? It would be up to Denmark to invoke it. Then, as was the case with France, it would have to be unanimously accepted by all the other member countries. But any EU response that requires unanimity means Denmark could run into problems if countries like Hungary veto its approval, two EU diplomats said. “I don’t think Denmark would invoke it without being sure it has unanimity because it would be a great risk,” said Antonio Missiroli, a former NATO assistant secretary-general who also worked at the European Commission. “Surely a country like Hungary would not take sides against the United States?” he added. There is also some ambiguity over whether it would apply to a crisis in Greenland, which withdrew from the predecessor of the EU in 1985, although it is still a part of the Kingdom of Denmark. On Sunday, EU defense chief Andrius Kubilius said 42.7 would “definitely” apply, with the European Commission last year suggesting the same. Commission spokesperson Anitta Hippe said: “Greenland is part of the territory of kingdom of Denmark and therefore in principle covered by the mutual solidarity clause in art. 42.7.” 4. WHAT HAPPENS THEN? If Denmark successfully invokes the clause, that would send a “very strong political and legal” message, said Sven Biscop, director general of the Egmont Institute think tank and a European security expert. The mechanism doesn’t require the EU itself to step in, leaving it up to the bloc’s capitals, and in particular to the country which invoked it, to determine the next steps. Options range from issuing statements in solidarity, to financial assistance and even military support, said one EU diplomat. Missiroli suggested that one of the options for Denmark could be to use this article “to ask another country to mediate.” While it’s “too early to say” what that response would look like in practice, said one European government official, “we will offer the support that we’d like to have” in a similar scenario. It could lay also the legal groundwork for proposing economic sanctions, Biscop said. Sergey Lagodinsky, a German member of the European Parliament and vice president of the Greens’ group, said the legislature should ready a “laundry list of possible countermeasures” if 42.7 is invoked, including kicking U.S. troops out of European bases, banning overflights of U.S. aircraft and restricting market access for American firms. Invoking the article could involve a limited troop deployment by the EU military committee and military staff — consultative bodies made up of the bloc’s top generals and Brussels-based military representatives, Biscop said. The probability of the EU going to war with the U.S. is zero, analysts agreed. And even if the bloc wanted to, it only has a “few dozen” military staff in Brussels, a miniature command structure able to direct “at most” 3,000 soldiers and limited experience aside from peacekeeping missions, Biscop said. However, member countries could decide on more substantial military assistance using their own resources. Meanwhile, the obligations on countries themselves remain undefined, meaning Denmark may face the “political reality” of some EU capitals making few concrete commitments to help. Because of those ambiguities over how to use the article, last month Kubilius told POLITICO he wants to open a discussion on “institutional defense readiness” this year, which could include revamping Article 42.7 to make it fully operational with a clear procedure and an integrated military command. 5. WHAT WOULD IT MEAN FOR NATO? Denmark has warned that a U.S. annexation of Greenland would spell the end of the alliance, although Trump disagrees. If the U.S. orchestrates a takeover, “it doesn’t necessarily mean … legally at least, the end of NATO, but it would mean politically the hollowing out of NATO’s credibility,” said Fabrice Pothier, CEO of Rasmussen Global, a political consultancy. That could lead to “some EU members [to] go for more EU solutions, maybe putting more flesh behind 42.7,” he added.  But that would involve creating a new security architecture for Europe without the U.S., which has been the continent’s crucial guarantor since World War II. “NATO is in charge of collective defense in the Euro-Atlantic area: it has the defense plans, command and control structures and capability targets,” said a NATO diplomat. “The EU, for its part, brings to the table its financial power, industrial policy and regulatory might.” Seb Starcevic contributed reporting. This article has been updated.

BRUSSELS — Even after most member countries backed the EU’s landmark trade accord with Latin America, opponents of the deal in France, Poland and the European Parliament are still determined to derail or delay it. As a result, even after European Commission President Ursula von der Leyen flies to Paraguay this Saturday to sign the accord with the Mercosur bloc after over 25 years of talks, it could still take months before we finally find out when, or even whether, it will finally take effect. The culprit is the EU’s tortuous decision-making process: After the curtain came down on Friday on deliberations in the Council, the intergovernmental branch of the bloc, a new act will now play out in the European Parliament. Ratification by lawmakers later this year is the most likely outcome — but there will be high drama along the way. “It has become irrational,” said an EU diplomat, speaking on condition of anonymity. “If the European Parliament refuses, we will have a European crisis.” Proponents argue that the deal with Mercosur — which groups Argentina, Brazil, Paraguay and Uruguay — is the bloc’s best shot at rallying friends across the world as the EU tries to counter Donald Trump’s aggressive moves (the latest being the U.S. president’s threats to annex Greenland). But more than 140 lawmakers are already questioning the legal basis of the agreement, concerned that it breaches the EU treaties. They want it sent to the Court of Justice of the EU for a legal review, which could delay it for as long as two years. Political group leaders agreed before the Christmas break to submit this referral to a vote as soon as governments signed off on the deal. That vote is now expected at next week’s plenary, a official with the Parliament said.  Yet while the rebel MEPs have enough votes to call a floor debate, they likely lack the majority needed in the 720-seat Parliament to pass the resolution itself.  “I don’t think that the substance of the legal challenge is going anywhere. This is fabricated, it’s a lot of hot air — both in terms of environmental [and] health provisions, in terms of national parliaments. All of this has been tried and tested,” said David Kleimann, a senior trade expert at the ODI Europe think tank in Brussels. LEGAL ROADBLOCKS  The challenge in the Parliament is only one front. The deal’s biggest opponents, Poland and France, are also fighting back. Polish Agriculture Minister Stefan Krajewski said Friday he would push for the government to also submit a complaint to the Court of Justice.   “We will not let the deal go any further,” he said, adding that Poland would ask the court to assess whether the Mercosur pact is legally sound. On the same day, protesting farmers spilled manure in front of his house. “We will not let the deal go any further,” said Polish Agriculture Minister Stefan Krajewski. | Olivier Matthys/EPA Polish MEP Krzysztof Hetman, a member of the center-right European People’s Party and a political ally of Krajewski, said the referrals of the Parliament and of member states would play out separately with the same aim in mind. “If one succeeds, the other might not be necessary,” he said, adding that while the court considers the complaint, the deal would effectively be on ice. French President Emmanuel Macron, meanwhile, is under huge pressure from his political opponents to do more to stall the deal. France, Poland, Austria, Ireland and Hungary voted against the deal last week while Belgium abstained. That left the anti-Mercosur camp shy of the blocking minority needed to kill the deal. On Wednesday, the National Assembly will vote on two separate no-confidence motions submitted by the far-right National Rally and the far-left France Unbowed. Even if opposition to the Mercosur deal remains unanimous, the two motions have little to no chance of toppling the French government: The left is unlikely to back the National Rally text, while the center-left Socialists are withholding support for the France Unbowed motion. But nothing can be ruled out in France’s fragmented parliament.  REALITY CHECK Even some of the rebel MEPs admit their challenge is unlikely to succeed — and that the Parliament might still back the overall deal in a vote later this year.  “It will be very difficult now that the Council has approved it,” said Hetman, the Polish MEP. “The supporters of the agreement know this, which is why they sabotaged the vote on the referral in November and December.” Others opponents still see a chance to topple it, and are optimistic that the legal challenge can gather enough support.  “We want to delay the Mercosur adoption process as long as possible,” Manon Aubry, co-chair of The Left group, told POLITICO before the Christmas break. She also saw signs that a majority of MEPs could come out against the deal: “I bet there are even more MEPs willing to make sure that the agreement is fully in line with the treaties.” If the judicial review is rejected, the Parliament would hold a yes-no vote to ratify the trade agreement, without being able to modify its terms.  Such a vote could be scheduled in the May plenary at the earliest, Bernd Lange, the chair of the chamber’s trade committee, told POLITICO. Lange, a German Social Democrat, said he was confident of a “sufficient” majority to pass the deal.  Pedro López de Pablo, a spokesperson for the EPP — von der Leyen’s own political family and the EU’s largest party — vowed there was a majority for the agreement in the EPP and dismissed the legal maneuvering.  “It is clear that such a move is politically motivated to delay the implementation of the deal rather than the product of a legal analysis,” he said.  Giorgio Leali contributed to this report. 

Domènec Ruiz Devesa is president of the Union of European Federalists and was an MEP from 2019 to 2024. Negotiations on the EU’s 2028–2034 Multi-annual Financial Framework (MFF) have entered a new phase of political significance. Traditionally, this process follows a familiar pattern: The European Commission proposes a draft budget, the Council bargains behind closed doors, then, at the final stage, the Parliament is called in to give or withhold consent. It’s a sequence of affairs that has long placed the Parliament in a weak position before a nearly finished deal — but not this time. In a break from previous iterations, this time the Parliament intervened early and managed to secure concessions. This is a feat that should be acknowledged. However, recognizing this success shouldn’t obscure the political stakes that remain. Following the Commission’s initial proposal, the Parliament was able to assert itself at the very start of the MFF process through a joint letter from the presidents of its main political groups, expressing clear institutional expectations, financial priorities and political conditions. As a result, the Commission offered improvements regarding the role of regional authorities in the implementation of agricultural and cohesion programs, and accepted an enhanced role for the Parliament to monitor the MFF’s execution. As previously noted by this very publication, the Parliament’s unusually early involvement was able to influence the framework before the Council began its negotiations — a notable break from precedent that should be seen as a strategic gain for parliamentary democracy at the European level. It’s a move that demonstrates the Parliament can impact the overall direction of EU governance when it acts strategically and cohesively. It suggests that parliamentary authority in budgetary affairs isn’t just a legal formality but a tool that can shape policy. And even more crucially, it is an institutional win that the Parliament should take credit for. However, it’s important to note that many in the Parliament still view these changes as insufficient. As highlighted by the Socialists and Democrats, Greens and Renew Europe groups, though this early intervention demonstrates that the Parliament can influence the MFF process, the substance of these modifications doesn’t address other structural concerns regarding the budget’s size, long-term strategic priorities or governance transparency. The decisive phase still lies ahead, and the central negotiations won’t occur between the Parliament and the Commission but between the Parliament and the Council. The Council, representing member countries, traditionally holds the stronger position — especially when unanimity is required. Still, the Parliament’s consent is indispensable. So, if it is to play an equal role in shaping the bloc’s strategic future, the Parliament must be willing to use its veto power if necessary. And in order to act effectively, it must link its consent on the MFF to broader issues beyond the budget. The MFF isn’t merely a financial plan — it is the backbone of Europe’s political priorities for the coming decade. And it shouldn’t be adopted in isolation from the bloc’s strategic goals or its capacity to act. But for that to happen, three things must take place: First, the so-called “passerelle clauses” need to be activated. This would allow the Council to shift from unanimity to qualified majority voting in specific policy areas without the need for treaty reform, which is essential to overcome persistent deadlocks. Next comes European defense. Article 42 of the Treaty on European Union provides a mutual defense clause, which could potentially lead to a common defense. In an era of heightened geopolitical tension, reliance on fragmented national capabilities is untenable. However, a credible European security posture would require joint procurement as well as shared operational planning. Therefore, linking MFF funding to concrete steps in defense integration would improve European security while also reinforcing the bloc’s global credibility. Lastly, there has to be movement on treaty reform. In November 2023, the Parliament approved a proposal to reform the EU Treaties, aiming to update the institutional framework, democratize decision-making and enhance the bloc’s capacity to act — particularly in terms of enlargement. But such reform cannot advance without political pressure, as the Council has little incentive to take up the proposal unless the Parliament conditions its agreement to the MFF on progress in the reform process. The MFF negotiations thus present a strategic opportunity. They aren’t only about allocating funds or how these funds are supervised — as fundamental as this is. They’re also about determining the direction of European integration. If the Parliament approves an MFF that doesn’t support the reforms needed to strengthen a potentially larger bloc, then its moment of influence will be wasted. The achievements of the first phase show that coordinated parliamentary action can, indeed, shape outcomes. Now, the next step is to use that influence where it matters most: in negotiations with the Council. The Parliament must be strategic and firm. Only then can it ensure that the next MFF isn’t merely a financial instrument but the foundation for a more capable, united and democratic union.

Listen on * Spotify * Apple Music * Amazon Music What do Donald Trump’s culture war, Moldova’s EU ambitions, and Czechia’s upcoming parliamentary election have in common? They all reveal how Europe is being tested — and sometimes humiliated. In this episode of EU Confidential, host Sarah Wheaton speaks with Paweł Zerka, senior policy fellow at the European Council on Foreign Relations, about his new report. It argues that Trump is waging a deliberate culture war against Europe — trying to weaken the continent, polarize its politics, and strip it of its dignity. We also bring you a dispatch from Moldova, where POLITICO’s Gabriel Gavin reports on last weekend’s election and what it means for the country’s EU path. And we also zoom in on Czechia’s election with political marketing scholar Anna Shavit in Prague, who unpacks Andrej Babiš’ comeback campaign — and his oddly revealing “shovel theory” of leadership. Further readings: Reality show: Why Europe must not cave in Trump’s culture war, by Paweł Zerka EU must unblock Moldova’s membership bid, government urges after historic vote, by Gabriel Gavin Pro-EU party secures majority in high-stakes Moldovan election, by Gabriel Gavin

Europe acknowledges the need to acquire more military equipment jointly. Collective procurement is not only a question of scale and efficiency, but also of interoperability, fiscal prudence and strengthening the continent’s defense industrial base. Yet, according to the EU’s own metrics, only 18 percent of defense acquisitions are currently made jointly — far below the benchmark of 35 percent. The problem is not only political will. Defense procurement requires a financial backbone: institutions capable of arranging contracts, securing loans, mitigating risk and guaranteeing delivery.  The debate around the European Parliament’s European Defence Readiness 2030 report highlights precisely this gap — between the battlefield urgency on Europe’s eastern flank and the institutional ability to mobilize capital at speed. The EU recognizes the role of access to capital. Through the SAFE Regulation, member states receive the means to rapidly scale up their investment via common procurement. The European Commission has recently tentatively allocated €43.7 billion in loans to Poland, as part of over €150 billion in requests submitted by 19 member states. National sovereignty and allied cooperation Defense spending remains, by EU Treaties and by practice, a core competence of member states. Ministries of defense and finance retain control of procurement, deciding when and how to buy tanks, missiles or aircrafts. Yet national sovereignty does not preclude European solidarity. Recent violation of Polish airspace by Russian drones underscores the immediacy of the threat of Russian aggression. Multiple intelligence assessments pointing to a window of 2028 as a potential milestone for Moscow’s capabilities threatening a full-scale attack on the EU leaves little doubt: Europe must be ready to defend itself. > Multiple intelligence assessments pointing to a window of 2028 as a potential > milestone for Moscow’s capabilities threatening a full-scale attack on the EU > leaves little doubt: Europe must be ready to defend itself. Prof. Marta Postuła, First Vice President of the Management Board, Bank Gospodarstwa Krajowego Via Polish Development Bank This urgency is compounded by the limited availability of off-the-shelf military equipment in Europe. Domestic producers, already stretched by support for Ukraine and long-term procurement cycles, cannot simply deliver entire brigades of tanks or missile systems within months. For immediate needs, allied suppliers — particularly the United States and South Korea — remain indispensable. Their industrial scale provides Europe with the breathing space to build capacity while ensuring that equipment is deployed without delay. Against this backdrop, cooperation with allied third-country defense suppliers is not a deviation from European autonomy, but a necessary pillar of strategic resilience. By leveraging trusted partners’ industrial capacities while localizing parts of the production and supply chains, EU members can both accelerate readiness and anchor new defense ecosystems within Europe. Poland’s financial innovation in defense procurement Poland offers a striking case study. Confronted with the immediate threat posed by Russia after the invasion into Ukraine, Warsaw faced the need to rearm at unprecedented speed and scale. Traditional budget channels were insufficient. To bridge the gap, the government established the Armed Forces Support Fund, operated by Bank Gospodarstwa Krajowego (BGK), Poland’s national development bank. BGK created an innovative financing mechanism, combining state guarantees with international debt instruments, to secure cost-effective, large-volume funding for defense contracts. By mid-2025 BGK had raised the equivalent of over 172 billion złoty (approximately €40 billion) to finance contracts with suppliers from the United States, South Korea, the United Kingdom, Sweden and Norway. > BGK created an innovative financing mechanism, combining state guarantees with > international debt instruments, to secure cost-effective, large-volume funding > for defense contracts. Incorporating market-based financing into defense expenditure necessitates close coordination with the State Treasury and a proactive investor relations strategy. BGK has developed significant expertise in this area, working closely with the Ministry of Finance to align bond issuance strategies and investor communications. This includes joint non-deal roadshows and regular engagement with major investors. By establishing yield curves in  złoty, euros and the U.S. dollar through the issuance of highly liquid benchmark securities, BGK enhances its ability to flexibly supplement financing defense expenditure with bond market instruments. The fund’s design offers important lessons for Europe. It blends flexibility, sovereign backing, and transparency while drawing on global financial markets. BGK has relied extensively on export credit agencies in supplier countries, ensuring financing conditions aligned with the payment structures of Poland’s contracts. This has enabled Warsaw not only to secure rapid delivery of equipment but also to negotiate significant offsets — embedding parts of production and technology transfer inside Poland. This focus on cost-effectiveness led to financing arranged at rates comparable to — or even below — State Treasury bonds, a result previously thought unattainable by any bank, including state development institutions. Two recent agreements illustrate the model’s significance In July 2025 BGK signed a new framework with the Export-Import Bank of Korea and Korea Trade Insurance Corporation, extending its capacity to finance Poland’s acquisition of Korean heavy equipment. These contracts have gone beyond simple purchase orders. They combine direct financing, credit guarantees and technology transfer, ensuring that segments of the supply chain — from components to maintenance hubs — are localized in Poland. This strengthens both Poland’s and the EU’s defense autonomy, while anchoring South Korea as a trusted industrial partner. In parallel, BGK has become an active borrower under Washington’s Foreign Military Financing (FMF) program, a rare privilege usually reserved for close allies. To date, Poland has secured more than $15 billion in loans and guarantees under FMF, with the most recent $4 billion tranche signed in July 2025. These funds are channeled directly into purchases under the US Foreign Military Sales framework, covering advanced systems from air defense to artillery. Crucially, offsets negotiated under these contracts ensure partial production and servicing in Poland, effectively localizing parts of the supply chain within the EU. Together, these examples illustrate how alliance-based procurement can serve a triple function: accelerating access to critical capabilities while embedding industrial benefits in Europe and anchoring defense through trade partnerships. Towards a European defense financing architecture The Polish case underscores a broader truth: defense procurement requires dedicated financial vehicles, not ad hoc budget reallocations. Here, National Promotional Banks and Institutions (NPBIs) — state-owned banks already active in infrastructure and industrial financing — can play a transformative role across the EU. NPBIs are uniquely positioned to deliver what Europe now needs most: speed, trust and cost-effective financing. Backed by sovereign mandates, they operate with the full confidence of national governments, which allows them to channel money into defense budgets without the political friction that accompanies private lenders. Because they combine sovereign guarantees with market instruments, they are also able to secure capital more cheaply than ministries or agencies acting alone — a critical advantage, as member states face both higher interest rates and tighter fiscal space. > NPBIs are uniquely positioned to deliver what Europe now needs most: speed, > trust and cost-effective financing. Equally important is their agility. Unlike supranational institutions, which often operate with long lead times, NPBIs can structure loans, guarantees or even bond issuances in line with the payment calendars of procurement contracts. This flexibility ensures that funds flow precisely when needed, securing delivery schedules for complex, multi-year defense projects. NPBIs also bring the capacity to absorb and distribute risk. By offering guarantees to defense manufacturers, they give industry the confidence to scale up production, expand supply chains and invest in new facilities. This risk-sharing function is especially valuable for Europe’s fragmented defense industry, where smaller firms often hesitate to commit capital without visibility on future orders. Their cross-border potential should not be overlooked. While firmly anchored in national sovereignty, NPBIs can cooperate under EU frameworks to finance pooled orders — whether for air defense systems, ammunition or mobility assets. Regional clusters of member states could rely on their national institutions to co-finance joint purchases, balancing respect for national control with the benefits of collective scale. In effect, NPBIs represent the missing link between European-level political commitments and the financial realities of procurement. They are not abstract instruments, but practical engines capable of turning collective ambitions into bankable contracts.

Josep Borrell Fontelles is the former EU high representative for foreign affairs and security policy. Guy Verhofstadt is a former prime minister of Belgium and president European Movement International. Domènec Ruiz Devesa is a former MEP and president of the Union of European Federalists. It’s become tradition for pro-Europeans to chart their political course from Ventotene, where Altiero Spinelli wrote the manifesto “For a Free and United Europe.” Recalling that spirit has never been more urgent than it is now. Our union appears dangerously fragmented and weak, stuck in a hostile internal and external environment. Home to just 5 percent of the global population and a widening economic gap with other major powers, Europe isn’t just facing up to a world of continental empires but is at real risk of becoming America’s vassal. This became apparent after the nonreciprocal concessions made to U.S. President Donald Trump on defense spending and trade, as well as Europe’s acceptance of a junior role in handling the war in Ukraine. Moreover, from Gaza to Nagorno-Karabakh, the EU’s involvement in conflicts abroad has become largely irrelevant, either due to its lack of credible international standing or unity. Domestically, European Commission President Ursula von der Leyen’s second term has been counterintuitively marked by the undoing of the Green Deal — the flagship project of her first term — as if climate change isn’t getting worse. The Commission has also proposed an underwhelming Multiannual Financial Framework with no real increase, thus sacrificing cohesion policy to new priorities in defense products and research. Meanwhile, the Euroskeptic and Europhobic populist far right has never been stronger in member countries or EU institutions. The current EU chiefs suffer from a lack of long-term political vision, leadership and unity. For now, an unlikely alliance of Trump sympathizers and nostalgic Atlanticists appear to be dominating both the European Council and the Commission. Thus, the prevailing line has been to flatter and appease the U.S. president in the hopes of damage control, in turn fostering our political, strategic and even economic dependency on Washington — and it’s hardly working. For Trump, contracts only bind the other party — not him. And far from avoiding punitive tariffs or strengthening his support for Ukraine, agreeing to spend 5 percent of GDP on defense and buy more U.S. weapons and natural gas hasn’t even increased his commitment to collective security. Instead, from minerals deals to weapons sales, this has largely become a purely transactional affair based on advancing U.S. economic gains — and luck. Paradoxically, the lack of serious engagement from Russian President Vladimir Putin in starting a negotiated settlement is preventing Trump’s attempted delivery of a deal on Moscow’s terms. Pool photo by Sergey Bobylev/Sputnik/Kremlin via EPA It should be clear by now that Trump isn’t, and never will be, an ally. His America constitutes a huge geopolitical, economic and cultural shock to Europe. But becoming a U.S. protectorate isn’t inevitable — especially given increasingly indignant public opinion over the series of concessions and humiliations we’re witnessing. There is an alternate path. A reinvigoration of a pro-European majority in the bloc’s three institutions — particularly the European Parliament — could still lead to the self-determination of our destiny. The Parliament has the constitutional role of controlling the Commission and could call for a new direction, as it holds the power to censure it. For a start, the Parliament could block the reduction of tariffs on U.S. products — a move that would surely be popular with voters and would signal that Europe’s readiness to stand up to blackmail. Furthermore, we need to strengthen our political union, overcome the veto-cracy that allows Hungarian Prime Minister Viktor Orbàn to block the EU’s military assistance to Ukraine, and build our own defense system — one that isn’t reliant on the U.S. and can instill fear in the Kremlin. Once again, these decisions will be quite popular with most EU citizens. As former European Central Bank President Mario Draghi said, we won’t be a geopolitical power just by relaunching our internal market and competitiveness agenda. We need to become a federal union that isn’t constrained by unanimity requirements or a lack of proper competencies in foreign and security policy. Leading member countries should immediately take the initiative to start activating its common defense clause and reform the Treaties in alliance with the Parliament, which holds the power to veto the budget. Otherwise, a coalition of the willing should launch a new “European Defense Community” with a parliamentary and fiscal dimension, and is open to all member countries interested in joining. If no action is taken, and we wait for the next crisis to improvise on hard decisions, Europe as a political project risks dying.

BRUSSELS ― The European Commission is devising a scheme to transfer almost €200 billion in Russian immobilized assets to rebuild Ukraine at the end of the war. Brussels is testing the appetite of national capitals for moving the assets into riskier investments that could generate more profits for Ukraine and amp up pressure on Russia as it refuses to stop the fighting, several officials told POLITICO. Supporters also see the scheme as a step toward potentially seizing the assets and handing them over to Ukraine as a punishment for Russia’s refusal to pay post-war compensation. “We are advancing the work on the Russian frozen assets to contribute to Ukraine’s defense and reconstruction,” the Commission President Ursula von der Leyen said on Thursday, in her strongest remarks so far on the subject. Crucially, this option would fall short of immediately confiscating the assets, which a majority of EU countries oppose due to financial and legal concerns. Talks will come to a head on Saturday when the EU’s 27 foreign ministers debate the option for the first time during an informal gathering in Copenhagen, Denmark. During the discussion, ministers should look at “further options for the use of revenues stemming from Russian immobilized sovereign assets,” according to a preparatory note seen by POLITICO. With Ukraine facing an estimated €8 billion budget shortfall in 2026, EU countries are looking for new ideas to continue funding the war-battered country amid squeezed domestic budgets and no room to issue EU-wide debt. Despite its economic predicament, Europe faces increased pressure to step up in the face of U.S. disengagement from Ukraine and faltering attempts by President Donald Trump to reach a peace deal. “We hear that it’s more difficult to raise money [from national finances or the EU budget],” said Kerli Veski, the undersecretary for legal and consular affairs at the Estonian foreign ministry. “[But] we have those assets there and the logical question is how can we and why don’t we use those assets.” THE CONFISCATION CAMP Baltic countries bordering Russia and several others have long been pushing on the EU to confiscate the assets altogether. Within the Commission, Latvian Economy Commissioner Valdis Dombrovskis and Estonian Foreign Policy Chief Kaja Kallas have been advancing this idea. Within the Commission, Estonian Foreign Policy Chief Kaja Kallas has been advancing this idea. | Jonathan Raa/NurPhoto via Getty Images But this option continues to be met with resistance from Western European countries, including Germany, Italy and Belgium. The latter is particularly exposed to the legal and financial risks because it hosts Euroclear, the financial institution that holds the bulk of the Russian assets.   As a compromise, G7 countries in 2024 agreed to funnel a total of €45 billion in profits generated by investing the assets to Ukraine, while leaving the underlying assets untouched. Nevertheless, the EU’s €18 billion share of the loan will be entirely paid out by the end of the year ― prompting calls to generate additional revenues within a short timeframe. As a workaround, the Commission’s lawyers are looking into transferring the assets into a “special purpose vehicle” backed by a number of EU and potentially foreign countries. Officials compared the mooted new fund to the European Stability Mechanism (ESM), a money pot to bail out countries that is only backed by eurozone members and was set up outside the EU treaties. The potential fund for Ukraine would also be open to G7 countries, including the U.K. and Canada, that are in favor of confiscating the assets, said an EU official, although the details are still being hammered out. Overall, this new structure would give the EU greater control to hand over the assets to Ukraine when the time is right. Under the current rules, a single country can effectively hand the assets back to Moscow by vetoing the renewal of sanctions, which comes up for a vote every six months. Hungary’s pro-Russia and pro-Trump government is seen as the likeliest to take this course. Shifting the funds to a new body with potentially no unanimity requirements would stave off Hungary’s threat. BUY LOW, SELL HIGH Transferring the assets into a new fund would also allow them to be placed in riskier investments capable of generating higher returns for Ukraine. That would be a change from the current rulebook, which compels Euroclear to invest the assets with the Belgian central bank, which offers the lowest risk-free rate of return available. Skeptics, including Euroclear CEO Valérie Urbain, worry, however, that EU taxpayers would have to bear the brunt of any losses resulting from the riskier operations. To share the legal and financial burden, Belgium wants other EU countries to assume liability for the assets under the Commission’s proposed plan. “Belgium is not alone here. We need to support and be taking part in mitigating that risk,” said Veski. “It’s not a question of letting Belgium deal with it [while] we watch from the sideline.” The Belgian government has recently warmed to the Commission’s plan, said an EU official and a senior non-Belgian diplomat, while countries farther away from Russia, such as Spain, are also backing the idea. Jacopo Barigazzi contributed reporting.

Listen on * Spotify * Apple Music * Amazon Music Just when we thought we could get a break for the summer, geopolitics had other plans. This week on EU Confidential, host Sarah Wheaton is joined by POLITICO colleagues Jordyn Dahl, Gabriel Gavin and Jan Cienski for a catch-up on what moved while the bubble was at the beach. From Alaska to the White House: Did anything real shift on Ukraine beyond choreography? We break down the EU-U.S. tariff framework and turn to Gaza — where Brussels is grasping for some sort of leverage — and how the politics split across capitals.