BRUSSELS — European Commission President Ursula von der Leyen’s plan to shake up how the EU spends its almost €2 trillion budget is rapidly being diluted. Von der Leyen’s big idea is to steer hundreds of billions in funds away from farmer subsidies and regional payouts — traditionally the bread and butter of the EU budget — toward defense spending and industrial competitiveness. But those modernizing changes — demanded by richer Northern European countries that pay more into the budget than they receive back from it — are difficult to push through in the face of stern opposition from Southern and Central European countries, which get generous payments for farmers and their poorer regions. A coalition of EU governments, lawmakers and farmers is now joining forces to undo key elements of the new-look budget running from 2028 to 2034, less than six months after the European Commission proposed to focus on those new priorities. Von der Leyen’s offer last week to allow countries to spend up to an extra €45 billion on farmer subsidies is her latest concession to powerful forces that want to keep the budget as close as possible to the status quo. Northern European countries are growing increasingly frustrated by moves by other national capitals and stakeholders to turn back the clock on the EU budget, according to three European diplomats. They were particularly irritated by a successful Franco-Italian push last week to exact more concessions for farmers as part of diplomatic maneuvers to get the long-delayed Mercosur trade deal with Latin America over the line. “Some delegations showed up with speaking points that they have taken out of the drawer from 2004,” said an EU diplomat who, like others quoted in this story, was granted anonymity to speak freely. The EU’s Common Agricultural Policy was worth 46 percent of the bloc’s total budget in 2004. The Commission’s proposal for 2028-2034 has reserved a minimum of roughly 25 percent of the total cash pot for farmers, although governments can spend significantly more than that. The Commission had no immediate comment when asked whether the anti-reform camp was successfully chipping away at von der Leyen’s proposal. THE ANTI-REFORM ALLIANCE The Commission’s July proposal to modernize the budget triggered shockwaves in Brussels and beyond. The transition away from sacred cows consolidated a ramshackle coalition of angry farmers, regional leaders and lawmakers who feared they would lose money and influence in the years to come. “This was the most radical budget [ever proposed] and there was resistance from many interested parties,” said Zsolt Darvas, a senior fellow at the Bruegel think tank. A protest by disgruntled farmers in Brussels during a summit of EU leaders on Dec. 18 was only the latest flashpoint of discontent. | Bastien Ohier/Hans Lucas/AFP via Getty Images The scale of the Commission’s task became apparent weeks before the proposal was even published, as outspoken MEPs, ministers and farmers’ unions threatened to dismantle the budget in the following years of negotiations. That’s exactly what is happening now. “The Commission’s proposal was quite radical so no one thought it could go ahead this way,” said a second EU diplomat.   “We knew that this would be controversial,” echoed a Commission official working on the file. A protest by disgruntled farmers in Brussels during a summit of EU leaders on Dec. 18 was only the latest flashpoint of discontent. The terrible optics of the EU’s signing off on Mercosur as farmers took to the streets on tractors was not lost on national leaders and EU officials. Commission experts spent their Christmas break crafting a clever workaround that allows countries to raise agricultural subsidies by a further €45 billion without increasing the overall size of the budget. The extra money for farmers isn’t new — it’s been brought forward from an existing rainy-day fund that was designed to make the EU budget better suited to handling unexpected crises. By handing farmers a significant share of that financial buffer, however, the Commission is undermining its capacity to mobilize funding for emergencies or other policy areas. “You are curtailing the logic of having a more flexible budget for crises in the future,” said Eulalia Rubio, a senior fellow at the Jacques Delors Institute think tank. At the time, reactions to the budget compromise from frugal countries such as Germany and Netherlands were muted because it were seen as a bargaining chip to win Italy’s backing for the Mercosur deal championed by Berlin. The trouble was instead postponed, as it reduces budget flexibility. Darvas also argued that the Commission has not had to backtrack “too much” on the fundamentals of its proposal as countries retained the option of whether to spend the extra cash on agriculture. In a further concession, the Commission proposed additional guarantees to reduce the risk of national governments cutting payments to more developed regions. | Nicolas Tucat/AFP via Getty Images ANOTHER MONTH, ANOTHER CONCESSION This wasn’t the first time von der Leyen has tinkered with the budget proposal to extract herself from a political quagmire. The Commission president had already suggested changes to the budget in November to stem a budding revolt by her own European People’s Party (EPP), which was feeling the heat from farmers’ unions and regional leaders. At the time, the EU executive promised more money for farmers by introducing a “rural spending” target worth 10 percent of a country’s total EU funds. In a further concession, the Commission proposed additional guarantees to reduce the risk of national governments cutting payments to more developed regions — a sensitive issue for decentralized countries like Germany and Spain. “The general pattern that we don’t like is that the Commission is continuing to offer tiny tweaks here and there” to appease different constituencies, an EU official said. The Commission official retorted that national capitals would eventually have made those changes themselves as the “trend of the negotiations [in the Council] was going in that direction.” However, budget veterans who are used to painstaking negotiations were surprised by the speed at which Commission offered concessions so early in the process. “Everyone is scared of the [2027] French elections [fearing a victory by the far-right National Rally] and wants to get a deal by the end of the year, so the Commission is keen to expedite,” said the second EU diplomat. Nicholas Vinocur contributed to this report.

LONDON — U.K. ministers are warning Elon Musk’s X it faces a ban if it doesn’t get its act together. But outlawing the social media platform is easier said than done. The U.K.’s communications regulator Ofcom on Monday launched a formal investigation into a deluge of non-consensual sexualized deepfakes produced by X’s AI chatbot Grok amid growing calls for action from U.K. politicians. It will determine whether the creation and distribution of deepfakes on the platform, which have targeted women and children, constitutes a breach of the company’s duties under the U.K.’s Online Safety Act (OSA).   U.K. ministers have repeatedly called for Ofcom, the regulator tasked with policing social media platforms, to take urgent action over the deepfakes. U.K. Technology Secretary Liz Kendall on Friday offered her “full support” to the U.K. regulator to block X from being accessed in the U.K., if it chooses to. “I would remind xAI that the Online Safety Act Includes the power to block services from being accessed in the U.K., if they refuse to comply with U.K. law. If Ofcom decide to use those powers they will have our full support,” she said in a statement. The suggestion has drawn Musk’s ire. The tech billionaire branded the British government “fascist” over the weekend, and accused it of “finding any excuse for censorship.”   With Ofcom testing its new regulatory powers against one of the most high-profile tech giants for the first time, it is hard to predict what happens next. NOT GOING NUCLEAR — FOR NOW   Ofcom has so far avoided its smash-glass option. Under the OSA it could seek a court order blocking “ancillary” services, like those those processing subscription payments on X’s behalf, and ask internet providers to block X from operating in the U.K.   Taking that route would mean bypassing a formal investigation, but that is generally considered a last resort according to Ofcom’s guidance. To do so, Ofcom would need to prove that risk of harm to U.K. users is particularly great.  Before launching its investigation Monday, the regulator made “urgent contact” with X on Jan. 5, giving the platform until last Friday to respond. Ofcom stressed the importance of “due process” and of ensuring its investigations are “legally robust and fairly decided.”   LIMITED REACH   The OSA only covers U.K. users. It’s a point ministers have been keen to stress amid concerns its interaction with the U.S. First Amendment, which guarantees free speech, could become a flashpoint in trade negotiations with Washington. It’s not enough for officials or ministers to believe X has failed to protect users generally.   The most egregious material might not even be on X. Child sexual abuse charity the Internet Watch Foundation said last week that its analysts had found what appeared to be Grok-produced Child sexual abuse material (CSAM) on a dark web forum, rather than X itself — so it’s far from self-evident that Ofcom taking the nuclear option against X would ever have been legally justified.   X did not comment on Ofcom’s investigation when contacted by POLITICO, but referred back to a statement issued on Jan. 4 about the issue of deepfakes on the platform. “We take action against illegal content on X, including Child Sexual Abuse Material (CSAM), by removing it, permanently suspending accounts, and working with local governments and law enforcement as necessary. Anyone using or prompting Grok to make illegal content will suffer the same consequences as if they upload illegal content,” the statement said. BIG TEST   The OSA came into force last summer, and until now Ofcom’s enforcement actions have focused on pornography site providers for not implementing age-checks.  Online safety campaigners have argued this indicates Ofcom is more interested in going after low-hanging fruit than challenging more powerful tech companies. “It has been striking to many that of the 40+ investigations it has launched so far, not one has been directed at large … services,” the online safety campaign group the Molly Rose Foundation said in September.   That means the X investigation is the OSA’s first big test, and it’s especially thorny because it involves an AI chatbot. The Science, Innovation and Technology committee wrote in a report published last summer that the legislation does not provide sufficient protections against generative AI, a point Technology Secretary Liz Kendall herself conceded in a recent evidence session.  POLITICAL RISKS  If Ofcom concludes X hasn’t broken the law there are likely to be calls from OSA critics, both inside and outside Parliament, to return to the drawing board. It would also put the government, which has promised to act if Ofcom doesn’t, in a tricky spot.  The PM’s spokesperson on Monday described child sexual abuse imagery as “the worst crimes imaginable.” Ofcom could also conclude X has broken the law, but decide against imposing sanctions, according to its enforcement guidance. The outcome of Ofcom’s investigation will be watched closely by the White House and is fraught with diplomatic peril for the U.K. government, which has already been criticized for implementing the new online safety law by Donald Trump and his allies. Foreign Secretary David Lammy raised the Grok issue with U.S. Vice President JD Vance last week, POLITICO reported.  But other Republicans are readying for a geopolitical fight: GOP Congresswoman Anna Paulina Luna, a member of the U.S. House foreign affairs committee, said she was drafting legislation to sanction the U.K. if X does get blocked. 

Just as Cyprus’ government should be concentrating on its presidency of the Council of the EU, it has to firefight controversy at home over a video circulating online that alleges top-level corruption. The furor centers on a mysterious video posted on X with a montage of senior figures filmed apparently describing ways to bypass campaign spending caps with cash donations, and seemingly discussing a scheme allowing businesspeople to access the president and first lady. One segment made reference to helping Russians avoid EU sanctions. The government denies the allegations made in the video and calls it “hybrid activity” aimed at harming “the image of the government and the country.” The government does not say the video is a fake, but insists the comments have been spliced together misleadingly. The footage appears to have been shot using hidden cameras in private meetings. Unconvinced, opposition parties are now calling for further action. Cypriot President Nikos Christodoulides hit back hard against the suggestion of illicit campaign funding in remarks to local media on Friday. “I would like to publicly call on anyone who has evidence of direct or indirect financial gains during the election campaign or during my time as President of the Republic to submit it immediately to the competent state authorities,” he said. “I will not give anyone, absolutely anyone, the right to accuse me of corruption.” In relation to the reference to payments made by businesses, he said companies “must also offer social benefits within the framework of Corporate Social Responsibility (CSR) for the state, I want to repeat, for the state. And they do so in the areas of health, welfare, defense, and many other areas.” The contentious video was posted on Thursday afternoon on social media platform X on an account under the name “Emily Thompson,” who is described as an “independent researcher, analyst and lecturer focused mainly on American domestic and foreign policies.” It was not immediately possible to find public and verifiable information confirming the real identity of the person behind the account. The video includes footage of former Energy Minister George Lakkotrypis and the director of the president’s office, Charalambos Charalambous. In the recordings, Lakkotrypis is presented as a point of contact for people seeking access to Christodoulides. He appears to walk his interlocutor through the process on payments above the €1 million campaign limit. In a written statement, Lakkotrypis said it is “self-evident” from the video that remarks attributed to him were edited in order to distort the context of the discussions, with the aim of harming Cyprus and himself personally. He added that he filed a complaint with the police. The police have launched an investigation into the video, after Lakkotrypis’ complaint, its spokesman Vyron Vyronos told the Cyprus News Agency. The video then shows Charalambous, Christodoulides’ brother-in-law, who explains gaining access to the presidential palace. “We are the main, the two, contacts here at the palace, next to the president,” he says, adding that interested parties could approach the president with a proposal and money that could be directed toward social contributions. There was no official statement from Charalambous. The video alleges that social contributions made by companies through a fund run by the first lady are being misused to win preferential treatment from the presidency. Concern over this fund is not new. The Cypriot parliament last year voted through legislation that called for the publication of the names of the donors to that fund. The president vetoed that move, however, and took the matter to court, arguing that publicly disclosing the list of donors would be a personal data breach. The court ruled in favor of the president and the names were not revealed. Stefanos Stefanou, leader of the main opposition AKEL party, said the video raised “serious political, ethical, and institutional issues” which compromised the president and his entourage politically and personally. He called on the president to dismiss Charalambous, abolish the social support fund and — after the donors have been made public — transfer its responsibilities to another institution. AKEL also submitted a bill on Friday to abolish the fund within the next three months and called for the first lady to resign as head of the fund. AKEL also requested that the allegations from the video be discussed in the parliament’s institutions’ committee. Another opposition party, Democratic Rally, said: “What is revealed in the video is shocking and extremely serious … Society is watching in shock and demanding clear and convincing answers from the government. Answers that have not yet been given.” Cyprus has parliamentary elections in May and the next presidential election is in 2028.

LONDON — If there’s one thing Keir Starmer has mastered in office, it’s changing his mind. The PM has been pushed by his backbenchers toward a flurry of about-turns since entering Downing Street just 18 months ago.  Starmer’s vast parliamentary majority hasn’t stopped him feeling the pressure — and has meant mischievous MPs are less worried their antics will topple the government.  POLITICO recaps 7 occasions MPs mounted objections to the government’s agenda — and forced the PM into a spin. Expect this list to get a few more updates… PUB BUSINESS RATES  Getting on the wrong side of your local watering hole is never a good idea. Many Labour MPs realized that the hard way. Chancellor Rachel Reeves used her budget last year to slash a pandemic-era discount on business rates — taxes levied on firms — from 75 percent to 40 percent. Cue uproar from publicans. Labour MPs were barred from numerous boozers in protest at a sharp bill increase afflicting an already struggling hospitality sector. A £300 million lifeline for pubs, watering down some of the changes, is now being prepped. At least Treasury officials should now have a few more places to drown their sorrows. Time to U-turn: 43 days (Nov. 26, 2025 — Jan. 8, 2026). FARMERS’ INHERITANCE TAX  Part of Labour’s electoral success came from winning dozens of rural constituencies. But Britain’s farmers soon fell out of love with the government.  Reeves’ first budget slapped inheritance tax on farming estates worth more than £1 million from April 2026. Farmers drive tractors near Westminster ahead of a protest against inheritance tax rules on Nov. 19, 2024. | Ben Stansall/AFP via Getty Images Aimed at closing loopholes wealthy individuals use to avoid coughing up to the exchequer, the decision generated uproar from opposition parties (calling the measure the “family farm tax”) and farmers themselves, who drove tractors around Westminster playing “Baby Shark.”  Campaigners including TV presenter and newfound farmer Jeremy Clarkson joined the fight by highlighting that many farmers are asset rich but cash poor — so can’t fund increased inheritance taxes without flogging off their estates altogether. A mounting rebellion by rural Labour MPs (including Cumbria’s Markus Campbell-Savours, who lost the whip for voting against the budget resolution on inheritance tax) saw the government sneak out a threshold hike to £2.5 million just two days before Christmas, lowering the number of affected estates from 375 to 185. Why ever could that have been?  Time to U-turn: 419 days (Oct. 30, 2024 — Dec. 23, 2025). WINTER FUEL PAYMENTS  Labour’s election honeymoon ended abruptly just three and a half weeks into power after Reeves made an economic move no chancellor before her dared to take.  Reeves significantly tightened eligibility for winter fuel payments, a previously universal benefit helping the older generation with heating costs in the colder months.  Given pensioners are the cohort most likely to vote, the policy was seen as a big electoral gamble. It wasn’t previewed in Labour’s manifesto and made many newly elected MPs angsty.  After a battering in the subsequent local elections, the government swiftly confirmed all pensioners earning up to £35,000 would now be eligible for the cash. That’s one way of trying to bag the grey vote. Time until U-turn: 315 days (July 29, 2024 — June 9, 2025).  WELFARE REFORM Labour wanted to rein in Britain’s spiraling welfare bill, which never fully recovered from the Covid-19 pandemic.  The government vowed to save around £5 billion by tightening eligibility for Personal Independence Payment (PIP), a benefit helping people in and out of work with long term health issues. It also said other health related benefits would be cut. However, Labour MPs worried about the impact on the most vulnerable (and nervously eyeing their inboxes) weren’t impressed. More than 100 signed an amendment that would have torpedoed the proposed reforms.  The government vowed to save around £5 billion by tightening eligibility for Personal Independence Payment. | Vuk Valcic via SOPA Images/LightRocket/Getty Images In an initial concession, the government said existing PIP claimants wouldn’t be affected by any eligibility cuts. It wasn’t enough: Welfare Minister Stephen Timms was forced to confirm in the House of Commons during an actual, ongoing welfare debate that eligibility changes for future claimants would be delayed until a review was completed.  What started as £5 billion of savings didn’t reduce welfare costs whatsoever.  Time to U-turn: 101 days (Mar. 18, 2025 — June 27, 2025).  GROOMING GANGS INQUIRY  The widescale abuse of girls across Britain over decades reentered the political spotlight in early 2025 after numerous tweets from X owner Elon Musk. It led to calls for a specific national inquiry into the scandal. Starmer initially rejected this request, pointing to recommendations left unimplemented from a previous inquiry into child sexual abuse and arguing for a local approach. Starmer accused those critical of his stance (aka Musk) of spreading “lies and misinformation” and “amplifying what the far-right is saying.” Yet less than six months later, a rapid review from crossbench peer Louise Casey called for … a national inquiry. Starmer soon confirmed one would happen. Time to U-turn: 159 days (Jan. 6, 2025 — June 14, 2025).  ‘ISLAND OF STRANGERS’ Immigration is a hot-button issue in the U.K. — especially with Reform UK Leader Nigel Farage breathing down Starmer’s neck. The PM tried reflecting this in a speech last May, warning that Britain risked becoming an “island of strangers” without government action to curb migration. That triggered some of Starmer’s own MPs, who drew parallels with the notorious 1968 “rivers of blood” speech by politician Enoch Powell. The PM conceded he’d put a foot wrong month later, giving an Observer interview where he claimed to not be aware of the Powell connection. “I deeply regret using” the term, he said. Time to U-turn: 46 days (May 12, 2025 — June 27, 2025).  Immigration is a hot-button issue in the U.K. — especially with Reform UK Leader Nigel Farage breathing down Starmer’s neck. | Tolga Akmen/EPA TWO-CHILD BENEFIT CAP  Here’s the U-turn that took the longest to arrive — but left Labour MPs the happiest. Introduced by the previous Conservative government, a two-child welfare cap meant parents could only claim social security payments such as Universal Credit or tax credits for their first two children. Many Labour MPs saw it as a relic of the Tory austerity era. Yet just weeks into government, seven Labour MPs lost the whip for backing an amendment calling for it to be scrapped, highlighting Reeves’ preference for fiscal caution over easy wins.  A year and a half later, that disappeared out the window. Reeves embracing its removal in her budget last fall as a child poverty-busty measure got plenty of cheers from Labour MPs — though the cap’s continued popularity with some voters may open up a fresh vulnerability. Time until U-turn: 491 days (July 23, 2024 — Nov. 26, 2025).

President Donald Trump’s Cabinet officials are scheduling their first formal calls with oil company CEOs to press them to revive Venezuela’s flagging oil production, four people familiar with the conversations told POLITICO. Calls that Energy Secretary Chris Wright and Interior Secretary Doug Burgum are planning with chief executives represent some of the first official outreach that the administration has made to the U.S. companies after months of informal discussions with people in the sector, these people said — days after President Donald Trump told reporters that “our very large United States oil companies” will “spend billions of dollars” in Venezuela. However, the companies’ executives remain wary of entering a socialist-ruled country that was plunged into political upheaval after U.S. forces took strongman Nicolás Maduro into custody over the weekend, following decades of neglect in its nationalized oil fields, according to market analysts and industry officials. Industry officials are also discussing what types of incentives would be needed to get them to return to the country, according to two industry officials familiar with the plans who were granted anonymity because they were not authorized to talk to the media. Those could include having the U.S. government signing contracts guaranteeing payment and security or forming public-private joint ventures. Even if they don’t yet have fully formed ideas for what would get them to invest in Venezuela, Trump’s insistence is difficult to ignore, said one former administration agency head who was granted anonymity to discuss the evolving matters. “Most companies have been thinking about this for a while. All of the big folks are probably thinking about it — and very, very, very hard,” the person said. “It’s a pretty powerful thing when the president of the United States says, ‘I need you to do this.’” Publicly, the White House expressed confidence. “All of our oil companies are ready and willing to make big investments in Venezuela that will rebuild their oil infrastructure, which was destroyed by the illegitimate Maduro regime,” spokesperson Taylor Rogers said in a statement. “American oil companies will do an incredible job for the people of Venezuela and will represent the United States well.” One person said the administration also “hopes” the American Petroleum Institute, the powerful trade association representing oil companies working in the United States, would form a task force to advise the White House on how best to revive Venezuelan oil production. “In nearly all cases, these calls are the first outreach from the administration on Venezuela,” the person said. API is “closely watching developments involving Venezuela and any potential implications for global energy markets,” group spokesperson Justin Prendergast said in response to questions. “Events like this underscore the importance of strong U.S. energy leadership. Globally, energy companies make investment decisions based on stability, the rule of law, market forces and long-term operational considerations,” Prendergast said. Trump told reporters on Sunday that he had spoken to U.S. oil companies “before and after” the military operation that seized Maduro and brought him to New York, where the former Venezuelan leader made his first court appearance on Monday. “And they want to go in, and they’re going to do a great job for the people of Venezuela, and they’re going to represent us well,” Trump continued. Industry executives on Monday told Reuters no such outreach had occurred to oil majors Exxon Mobil, ConocoPhillips and Chevron, all of which have experience working in Venezuela’s oil fields. Bringing Venezuela’s oil production — now around 1 million barrels a day — back to its glory-days’ height of 3 million barrels a day would require at least $183 billion and more than a decade of effort, industry analyst firm Rystad Energy said Monday. While the Venezuelan government might supply some of that money, international companies would need to spend $35 billion in the next few years to reach that goal. “Rystad Energy believes that around $53 billion of oil and gas upstream and infrastructure investment is needed over the next 15 years just to keep Venezuela’s crude oil production flat at 1.1 million” barrels a day, the firm said in a client note. “Going beyond 1.4 million [barrels a day] is possible but would require a stable investment of $8 [billion]-$9 billion per year from 2026 to 2040, on top of ‘hold-flat’ capital requirements.” ConocoPhillips spokesperson Dennis Nuss said in a statement that it would be “premature to speculate on any future business activities or investments,” but said the company is monitoring the “potential implications for global energy supply and stability” from the events in Venezuela. ConocoPhillips is continuing its efforts to collect more than $10 billion in compensation it was awarded in arbitration for the Venezuelan government’s seizure of the company’s assets in 2007, Nuss said. Exxon Mobil and Chevron did not respond to requests for comment. Oil field services companies Halliburton and Baker Hughes did not respond for comment, and SLB declined to comment. The only company to publicly indicate interest in Venezuela has been Continental Resources, a firm led by Trump ally and informal energy adviser Harold Hamm. Hamm told the Financial Times on Sunday that “with improved regulatory and governmental stability we would definitely consider future investment.” Continental, which played a key role in developing oil fracking technology, has never operated outside the United States — though it announced on Monday a deal in which it would buy assets in Argentina. People in the oil industry have said a major concern is that Venezuela is not stable enough to guarantee the safety of any workers and equipment they might send there. Companies are asking that the U.S. government contract directly with them before they commit to entering the country. “We need some boots-on-the-ground security and some financial security. That’s on top of the list,” said a second industry executive familiar with the talks who was granted anonymity to discuss private conversations. Trump’s decision to allow Maduro’s second-in-command, acting President Delcy Rodríguez, and other members of the regime to remain in charge of the country’s government has also made industry executives wary of taking on the job, this person added. Rodríguez and her family had been part of the Venezuelan government under Hugo Chávez in the mid-2000s when the regime seized the assets of foreign oil companies. Colombia, Canada, the EU and the United States have levied sanctions against her after accusing her of undermining the Venezuelan elections. “Who’s running the game here?” the second industry executive said. “If she’s going to be in charge — plus the guys who have been there all along — what guarantee can you give us that stuff is going to change? Those three issues — physical, financial and political security — have to be settled before anyone goes in.” Longtime Republican foreign policy hand Elliott Abrams, who served as Trump’s special envoy to Venezuela during his first term, said the president is “exaggerating” the likelihood that companies will return to the country, given the risk and capital required. “The president seems to suggest that he will make the decision, but that is not right — the boards of these companies will make the decisions,” said Abrams, who is now senior fellow for Middle Eastern studies at the Council on Foreign Relations. “I expect that you’ll see all of them now say, ‘This is fantastic, it’s a great opportunity, and we have a team ready to go to Venezuela,’ but that’s politics,” he added. “That doesn’t mean they’re going to invest.”

BRUSSELS — The fight between Brussels and Washington over tech rules is officially high politics — and shows no sign of stopping in 2026.  Last week the United States sanctioned a former top European Commission official, alleging he was a “mastermind” of the bloc’s content moderation law. The travel ban was a sign the Trump administration is ramping up its attacks on what it calls Europe’s censorship regime.  The pressure puts Brussels between a rock and a hard place.  EU leaders like France’s Emmanuel Macron and European Parliament lawmakers dismissed the U.S. move as intimidation and even suggested considering counteraction, ramping up calls for Brussels to hold its ground and reduce the EU’s reliance on U.S. technology.  It suggests that U.S. pressure on the EU’s tech rules is now a full-blown transatlantic dispute of its own, rather than just a sideshow to trade talks, and requires an appropriate response. “The real response must be political,” said Italian Social Democrat lawmaker Brando Benifei, the European Parliament’s lead on relations with the U.S., in response to the American sanctions.  “Our sleepwalking leaders must wake up, because there’s no time left.” While the Commission condemned the U.S. move, its President Ursula von der Leyen offered a muted response, highlighting only the importance of freedom of speech in a post on X. ONLY THE START The U.S. move to impose a travel ban on Frenchman Thierry Breton, who served as the EU’s internal market chief from 2019 to 2024 and led the drafting of the Digital Services Act, marked an acceleration in the U.S. campaign against the EU’s tech rules.  Breton has borne the brunt of criticism over the EU’s tech rules, particularly following his public spat with U.S. President Donald Trump’s one-time ally, X owner Elon Musk. The tech billionaire appears to be back in the president’s good books after a bitter falling-out over the summer. A letter Breton sent in August 2024 to warn Musk ahead of an upcoming livestream featuring then-presidential candidate Trump was repeatedly shared by Trump loyalists after Breton was sanctioned.  Another four individuals were sanctioned, including two from German NGO HateAid, which Berlin’s regulators have said is a “trusted” organization to flag illegal content like hate speech.   The U.S. had previously mainly threatened the EU over its tech rules, or invoked them when the EU demanded concessions from Washington such as lower steel and aluminum tariffs in early December. But after the Commission crossed the Rubicon in early December and imposed its first-ever Digital Services Act fine on Musk’s X, Washington responded with the travel bans.  The EU executive has repeatedly said its enforcement of the DSA is not political, yet Washington insists it is nothing but.  Threats of travel restrictions from the U.S. have been trickling in since the summer, but the Commission has declined to say how it plans to protect its officials.  Both sides still have room — and face internal calls to escalate — in what is now a full-blown transatlantic dispute over the limits of free speech.  Just earlier this month, when the U.S. announced its intention to require social media disclosures from people hoping to enter the country on temporary visas, Commission chief spokesperson Paula Pinho insisted these were only plans and declined to comment on how it would protect its staff working on the DSA.  Pressured by journalists about the impact on staff working on digital rules, she said tech spokesperson Thomas Regnier had no plans to visit the U.S.  Still, the sanctions announced by the State Department may be only a warning shot.  The measures announced last week targeted a former Commission official, not someone currently in office. The U.S. still has many other tools in its arsenal, which U.S. politicians say it should use.  Missouri Republican Senator Eric Schmitt called for the use of Magnitsky sanctions, which are financial measures that can cause significant operational headaches including asset freezes and barring U.S. entities from trading with sanctioned entities.  While they are normally reserved for serious human rights violations like war crimes or the murder of Saudi journalist Jamal Khashoggi, the Trump administration has already used them to go after another person deemed to be a modern agent of censorship.  In July, the Treasury and State departments announced Magnitsky sanctions against Brazilian Judge Alexandre de Moraes, including for suppressing “speech that is protected under the U.S. Constitution.”  De Moraes has drawn the same criticism as EU officials from the Trump administration and its allies, including Musk.  COUNTERACTION The Commission also faces heat from the other side, with EU country leaders and European Parliament lawmakers demanding a more political response to the situation.  The EU’s tech rules have been a regular topic of debate at the Parliament’s plenary sessions, and several lawmakers have indicated the U.S. travel restrictions could be on the agenda for the January session.  German Greens lawmaker Sergey Lagodinsky said the EU should not rule out considering some sort of counteraction.  “Europe must respond. It must raise pressure in the trade talks and consider measures against senior tech executives who actively support the U.S. administration agenda,” he said in a statement shared with POLITICO.  Breton himself accused the EU institutions of being “very weak” in an interview with TF1. Just before the break, in a rare joint address, MEPs from four political groups called for stronger action against U.S. Big Tech companies.  “The small fine against X is a good beginning, but it comes definitely too late, and it’s absolutely not enough,” said German Greens MEP Alexandra Geese. The socialists have tried to kick off a special inquiry committee to figure out if the Commission is strong enough in enforcing the DSA, although support from other groups is lacking.  The Commission has yet to announce its decisions on the meatier part of its DSA probe into X and other platforms.  Others see the U.S. sanctions as another warning to reduce reliance on U.S. technology and build up the EU’s own technological capacity.  “Lovely, but not enough,” Aurore Lalucq, a French MEP and chair of the economic affairs committee, quipped in response to the Commission’s condemnation of the U.S. sanctions.  “We need to build our independence now. It starts with our payment systems, a sovereign cloud, and an industrial policy for digital infrastructure and social networks.”

HOW DO BULGARIANS FEEL ABOUT JOINING THE EURO? The Balkan nation is sharply divided about bidding farewell to the lev.  Text by BORYANA DZHAMBAZOVA Photos by DOBRIN KASHAVELOV in Pernik, Bulgaria Bulgaria is set to adopt the EU’s single currency on Jan. 1, but polling shows the Balkan nation is sharply divided on whether it’s a good thing. POLITICO spoke to some Bulgarians about their fears and hopes, as they say goodbye to their national currency, the lev. Their comments have been edited for length. ANTON TEOFILOV, 73 Vendor at the open-air market in Pernik, a small city 100 kilometers from Sofia What do you think about Bulgaria joining the eurozone? We are a different generation, but we support the euro. We’ll benefit hugely from joining the eurozone. It will make paying anywhere in the EU easy and hassle-free. It would be great for both the economy and the nation. You can travel, do business, do whatever you want using a single currency — no more hassle or currency exchanges. You can go to Greece and buy a bottle of ouzo with the same currency. What do you think will change in your everyday life once the euro replaces the lev? I don’t expect any turbulence — from January on we would just pay in euros. No one is complaining about the price tags in euros, and in lev at the moment. Are you more hopeful or worried about the economic impact of switching to the euro? Why? The lev is a wonderful thing, but its time has passed; that’s just how life works. It will be much better for the economy to adopt the euro. It will be so much easier to share a common currency with the other EU countries. Now, if you go to Greece, as many Bulgarians do, you need to exchange money. After January – wherever you need to make a payment – either going to the store, or to buy produce for our business, it would be one and the same. What would you like politicians and institutions to do to make the transition easier for ordinary people? The state needs to explain things more clearly to those who are confused. We are a people who often need a lot of convincing, and on top of that, we’re a divided nation. If you ask me, we need to get rid of half the MPs in Parliament – they receive hefty salaries and are a burden to taxpayers, like parasites, without doing any meaningful work. Do you think joining the eurozone will bring Bulgaria closer to Europe culturally or politically? There are 27 member states, and we will become one with them. There will be no difference between Germany and us—we’ll be much closer to Europe. I remember the 1990s, when you needed to fill out endless paperwork just to travel, let alone to work abroad. I spent a year working in construction in Germany, and getting all the permits and visas was a major headache. Now things are completely different, and joining the eurozone is another step toward that openness. Advertisement PETYA SPASOVA, 55 Orthopedic doctor in Sofia What do you think about Bulgaria joining the eurozone? It worries me a lot. I don’t think this is the right moment for Bulgaria to join the eurozone. First, the country is politically very unstable, and the eurozone itself faces serious problems. As the poorest EU member state, we won’t be immune to those issues. On the contrary, they will only deepen the crisis here. The war in Ukraine, the growing debt in Germany and France … now we’d be sharing the debts of the whole of Europe. We are adopting the euro at a time when economies are strained, and that will lead to serious disruptions and a higher cost of living. I don’t understand why the state insists so strongly on joining the eurozone. I don’t think we’re ready. What do you think will change in your everyday life once the euro replaces the lev? Even now, when you go to the store and look at the price of bread or other basic foods, we see prices climbing. I’m afraid many people will end up living in extreme poverty. We barely produce anything; we’re a country built on services. When people get poorer, they naturally start consuming less. I’m not worried about myself or my family. We live in Sofia, where there are more job opportunities and higher salaries. I’m worried about people in general. Every day I see patients who can’t even afford the travel costs to come to Sofia for medical check-ups. Are you more hopeful or worried about the economic impact of switching to the euro? Why? I’m extremely worried. I don’t want to relive the economic crisis of the 90s, when the country was on the verge of bankruptcy. What would you like politicians and institutions to do to make the transition easier for ordinary people? No one cares what people think. Many countries held referendums and decided not to join the eurozone. I don’t believe our politicians can do anything at this point. I’m not even sure they know what needs to be done. Do you think joining the eurozone will bring Bulgaria closer to Europe culturally or politically? I feel offended when I hear this question. We’ve been part of Europe for a very long time, long before many others. We can exchange best practices in culture, science, education, and more, but that has nothing to do with the eurozone. Joining can only bring trouble. I remember years ago when I actually hoped Bulgaria would enter the eurozone. But that was a different Europe. Now things are deteriorating; the spirit of a united Europe is gone. I don’t want to be part of this Europe. Advertisement SVETOSLAV BONINSKI, 53 Truck driver from Gabrovo, a small city in central Bulgaria What do you think about Bulgaria joining the eurozone? I’m against Bulgaria joining the eurozone. We saw how Croatia and Greece sank into debt once they adopted the euro. I don’t want Bulgaria to go down the same path. Greece had to take a huge loan to bail out its economy. When they still had the drachma, their economy was strong and stable. After entering the eurozone, many big companies were forced to shut down and inflation went through the roof. Even the German economy is experiencing a downturn.. What do you think will change in your everyday life once the euro replaces the lev? I worry that there will be speculation and rising inflation. Five years ago, I used to buy cigarettes in Slovakia at prices similar to Bulgaria. Now I can’t find anything cheaper than €5 per pack. They saw their prices rise after the introduction of the euro. We’ll repeat the Slovakia scenario. Are you more hopeful or worried about the economic impact of switching to the euro? Why? We can already feel that things won’t end well — prices have gone up significantly, just like in Croatia. I’m afraid that even in the first year wages won’t be able to compensate for the rise in prices, and people will become even more impoverished. I expect the financial situation to worsen. Our government isn’t taking any responsibility for that. What would you like politicians and institutions to do to make the transition easier for ordinary people? I hope they will make an effort. We are completely ill-equipped to adopt the euro—all the stats and figures the government presents are lies. We must wait until the country is ready to manage the euro as a currency. We’re doing fine with the lev. We should wait for the economy to grow and for wages to catch up with the rest of Europe. The only thing the state could do to ease the process is to step down. The current government is interested in entering the eurozone only to receive large amounts of funding, most of which they will probably pocket themselves. The Bulgarian lev is very stable, unlike the euro, which is quite an unstable currency. All the eurozone countries are burdened with trillions in debt, while those outside it are doing quite well. Do you think joining the eurozone will bring Bulgaria closer to Europe culturally or politically? I don’t think so. We’ve been part of Europe for a long time. The only difference now will be that Brussels will tell us what to do and will control our budget and spending. Brussels will be in charge from now on. No good awaits us. Elderly people won’t receive decent pensions and will work until we drop dead. Advertisement NATALI ILIEVA, 20 Political science student from Pernik What do you think about Bulgaria joining the eurozone? I see it as a step forward for us. It’s a positive development for both society and the country. I expect that joining the eurozone will help the economy grow and position Bulgaria more firmly within Europe. For ordinary people, it will make things easier, especially when traveling, since we’ll be using the same currency. What do you think will change in your everyday life once the euro replaces the lev? The transition period might be difficult at first. I don’t think the change of currency will dramatically affect people’s daily lives – after all, under the currency board, the lev has been pegged to the euro for years. Some people are worried that prices might rise, and this is where the state must step in to monitor the situation, prevent abuse, and make the transition as smooth as possible. As part of my job at the youth center, I travel a lot in Europe. Being part of the eurozone would make travel much more convenient. My life would be so much easier! I wouldn’t have to worry about carrying euros in cash or paying additional fees when withdrawing money abroad, or wondering: Did I take the right debit card in euros? Are you more hopeful or worried about the economic impact of switching to the euro? Why? I’m more concerned that the issue will be politicized by certain parties to further polarize society. Joining the eurozone is a logical next step – we agreed to it by default when we joined the bloc in 2007. There is so much disinformation circulating on social media that it’s hard for some people to see the real facts and distinguish what’s true from what’s not. What would you like politicians and institutions to do to make the transition easier for ordinary people? The state needs to launch an information campaign to make the transition as smooth as possible. Authorities should explain what the change of currency means for people in a clear and accessible way. You don’t need elaborate language to communicate what’s coming, especially when some radical parties are aggressively spreading anti-euro and anti-EU rhetoric. Do you think joining the eurozone will bring Bulgaria closer to Europe culturally or politically? Yes, I think it will help the country become better integrated into Europe. In the end, I believe people will realize that joining the eurozone will be worth it. Advertisement YANA TANKOVSKA, 47 Jewelry artist based in Sofia What do you think about Bulgaria joining the eurozone? If you ask me, the eurozone is on the verge of collapse, and now we have decided to join? I don’t think it’s a good idea. In theory, just like communism, the idea of a common currency union might sound good, but in practice it doesn’t really work out. I have friends working and living abroad [in eurozone countries], and things are not looking up for regular people, even in Germany. We all thought we would live happily as members of the bloc, but that’s not the reality. What do you think will change in your everyday life once the euro replaces the lev? I expect the first half of next year to be turbulent. But we are used to surviving, so we will adapt yet again. Personally, we might have to trim some expenses, go out less, and make sure the family budget holds. I make jewelry, so I’m afraid I’ll have fewer clients, since they will also have to cut back. Are you more hopeful or worried about the economic impact of switching to the euro? Why? I’m terribly worried. The state promises there won’t be a jump in prices and that joining the eurozone won’t negatively affect the economy. But over the past two years the cost of living has risen significantly, and I don’t see that trend reversing. For example, in the last three years real estate prices have doubled. There isn’t a single person who isn’t complaining about rising costs. What would you like politicians and institutions to do to make the transition easier for ordinary people? There is nothing they can do at this point. Politicians do not really protect Bulgaria’s interests on this matter. The issue is not only about joining the eurozone but about protecting our national interests. I just want them to have people’s well-being at heart. Maybe we need to hit rock bottom to finally see meaningful change. Do you think joining the eurozone will bring Bulgaria closer to Europe culturally or politically? Not really. That’s up to us, not to Europe. I just want Bulgarian politicians to finally start creating policies for the sake of society, not just enriching themselves, to act in a way that would improve life for everyone. Advertisement KATARINA NIKOLIC, 49, AND METODI METODIEV, 53 Business partners at a ‘gelateria’ in Sofia What do you think about Bulgaria joining the eurozone? Metodi: For a small business like ours, I don’t think it will make much difference, as long as the transition to the new currency is managed smoothly. I can only see a positive impact on the economy if things are done right. I’m a bit saddened to say farewell to the Bulgarian lev — it’s an old currency with its own history — but times are changing, and this is a natural step for an EU member. Katarina: I have lived in Italy which adopted the euro a long time ago. Based on my experience there, I don’t expect any worrying developments related to price increases or inflation. On the contrary, joining the eurozone in January can only be interpreted as a sign of trust from the European Commission and could bring more economic stability to Bulgaria. I also think it will increase transparency, improve financial supervision, and provide access to cheaper loans. What do you think will change in your everyday life once the euro replaces the lev? Metodi:  I don’t think there will be any difference for our business whether we’re paying in euros or in leva. We’ve been an EU member state for a while now and we’re used to working with both local and international suppliers. It will just take some getting used to switching to one currency for another. But we are already veterans — Bulgarian businesses are very adaptive — from dealing with renominations and all sorts of economic reforms. I’m just concerned that it might be challenging for some elderly people to adapt to the new currency and they might need some support and more information. Katarina: For many people, it will take time to get used to seeing a new currency, but they will adapt. For me, it’s nothing new. Since I lived in Italy, where the euro is used, I automatically convert to euros whenever Metodi and I discuss business. Are you more hopeful or worried about the economic impact of switching to the euro? Why? Metodi: The decision has already been taken, so let’s make the best of it and ensure a smooth transition. I haven’t exchanged money when traveling in at least 10 years. I just use my bank card to pay or withdraw cash if I need any. Katarina: I remember that some people in Italy also predicted disaster when the euro was introduced, and many were nostalgic about the lira. But years later, Italy is still a stable economy. I think our international partners will look at us differently once we are part of the eurozone. Advertisement What would you like politicians and institutions to do to make the transition easier for ordinary people? Metodi: I think the authorities are already taking measures to make sure prices don’t rise and that businesses don’t round conversions upward unfairly. For example, we may have to slightly increase the price of our ice cream in January. I feel a bit awkward about it because I don’t want people to say, “Look, they’re taking advantage of the euro adoption to raise prices.” But honestly, we haven’t adjusted our prices since we opened three years ago. I’m actually very impressed by how quickly and smoothly small businesses and market sellers have adopted double pricing [marking prices in lev and euros]. I know how much work that requires, especially if you’re a small business owner. Katarina: It’s crucial that the state doesn’t choke small businesses with excessive demands but instead supports them. I believe that helping small businesses grow should be a key focus of the government, not just supervising the currency swap. My hope is that the euro will help the Bulgarian economy thrive. I love Bulgaria and want to see it flourish. I’m a bit more optimistic than Metodi, I think the best is yet to come. Do you think joining the eurozone will bring Bulgaria closer to Europe culturally or politically? Metodi: I think so. Despite some criticism, good things are happening in the country, no matter who is in power. We need this closeness to truly feel part of Europe. Katarina: The euro is a financial and economic instrument. Adopting it won’t change national cultural identity, Bulgarians will keep their culture. I’m a true believer in Europe, and I think it’s more important than ever to have a united continent. As an Italian and Serbian citizen, I really appreciate that borders are open and that our children can choose where to study and work. In fact, our gelateria is a great example of international collaboration: we have people from several different countries in the team.

LONDON — British students will once again be able to take part in the EU’s Erasmus+ exchange scheme from January 2027 — following a six-year hiatus due to Brexit. U.K. ministers say they have secured a 30 percent discount on payments to re-enter the program that strikes “a fair balance between our contribution and the benefits” it offers. The move is one of the first tangible changes out of Keir Starmer’s EU “reset,” which is designed to smooth the harder edges off Boris Johnson’s Brexit settlement while staying outside the bloc’s orbit. In an announcement on Wednesday Brussels and London also confirmed they were formally beginning negotiations on U.K. re-entry into the EU’s internal market for electricity. Both sides hope the move, which was called for by industry in both sides of the Channel, will cut energy bills while also making it easier to invest in North Sea green energy projects — which have been plagued by Brexit complications. They also pledged to finish ongoing talks on linking the U.K. and EU carbon trading systems, as well as a new food and drink (SPS) deal, by the time they meet for an EU-U.K. summit in 2026. The planned meeting, which will take place in Brussels, does not yet have a date but is expected around the same time as this year’s May gathering in London. The announcements give more forward momentum to the “reset,” which faltered earlier this month after failing to reach an agreement on British membership of an EU defense industry financing program, SAFE. The two sides could not agree on the appropriate level of U.K. financial contribution. The pledge to finalize carbon trading (ETS) linkage next year is significant because it will help British businesses avoid a new EU carbon border tax — CBAM — which starts from Jan. 1 2026. While the tax, which charges firms for the greenhouse gas emissions in their products, begins on Jan. 1, payments are not due until 2027, by which time the U.K. is expected to be exempt. But it is not yet clear whether British firms will have to make back payments on previous imports once the deal is secured, and there is no sign of any deal to bridge the gap. WIDENING HORIZONS EU Relations Minister Nick Thomas-Symonds, who negotiated the agreement, said the move was “a huge win for our young people” and would break down barriers and widen horizons so that “everyone, from every background, has the opportunity to study and train abroad.” European Parliament President Roberta Metsola welcomes British Minister for the Constitution and European Union Relations Nick Thomas-Symonds. | Ronald Wittek/EPA “This is about more than just travel: it’s about future skills, academic success, and giving the next generation access to the best possible opportunities,” he said. “Today’s agreements prove that our new partnership with the EU is working. We have focused on the public’s priorities and secured a deal that puts opportunity first.” The expected cost of the U.K.’s membership of the Erasmus+ program in 2027 will be £570 million. Skills Minister Jacqui Smith said Erasmus+ membership is “about breaking down barriers to opportunity, giving learners the chance to build skills, confidence and international experience that employers value.” Liberal Democrat Universities Spokesperson Ian Sollom also welcomed U.K. re-entry into the exchange scheme but said it should be a “first step” in a closer relationship with the EU. “This is a moment of real opportunity and a clear step towards repairing the disastrous Conservative Brexit deal,” he said. “However while this is a welcome breakthrough, it must be viewed as a crucial first step on a clear roadmap to a closer relationship with Europe. Starting with negotiating a bespoke UK-EU customs union, and committing to a youth mobility scheme for benefit of the next generation.”

The discussion surrounding the digital euro is strategically important to Europe. On Dec. 12, the EU finance ministers are aiming to agree on a general approach regarding the dossier. This sets out the European Council’s official position and thus represents a major political milestone for the European Council ahead of the trilogue negotiations. We want to be sure that, in this process, the project will be subject to critical analysis that is objective and nuanced and takes account of the long-term interests of Europe and its people. > We do not want the debate to fundamentally call the digital euro into question > but rather to refine the specific details in such a way that opportunities can > be seized. We regard the following points as particularly important: * maintaining European sovereignty at the customer interface; * avoiding a parallel infrastructure that inhibits innovation; and * safeguarding the stability of the financial markets by imposing clear holding limits. We do not want the debate to fundamentally call the digital euro into question but rather to refine the specific details in such a way that opportunities can be seized and, at the same time, risks can be avoided. Opportunities of the digital euro:  1. European resilience and sovereignty in payments processing: as a public-sector means of payment that is accepted across Europe, the digital euro can reduce reliance on non-European card systems and big-tech wallets, provided that a firmly European design is adopted and it is embedded in the existing structures of banks and savings banks and can thus be directly linked to customers’ existing accounts. 2. Supplement to cash and private-sector digital payments: as a central bank digital currency, the digital euro can offer an additional, state-backed payment option, especially when it is held in a digital wallet and can also be used for e-commerce use cases (a compromise proposed by the European Parliament’s main rapporteur for the digital euro, Fernando Navarrete). This would further strengthen people’s freedom of choice in the payment sphere. 3. Catalyst for innovation in the European market: if integrated into banking apps and designed in accordance with the compromises proposed by Navarrete (see point 2), the digital euro can promote innovation in retail payments, support new European payment ecosystems, and simplify cross-border payments. > The burden of investment and the risk resulting from introducing the digital > euro will be disproportionately borne by banks and savings banks. Risks of the current configuration: 1. Risk of creating a gateway for US providers: in the configuration currently planned, the digital euro provides US and other non-European tech and payment companies with access to the customer interface, customer data and payment infrastructure without any of the regulatory obligations and costs that only European providers face. This goes against the objective of digital sovereignty. 2. State parallel infrastructures weaken the market and innovation: the European Central Bank (ECB) is planning not just two new sets of infrastructure but also its own product for end customers (through an app). An administrative body has neither the market experience nor the customer access that banks and payment providers do. At the same time, the ECB is removing the tried-and-tested allocation of roles between the central bank and private sector. Furthermore, the Eurosystem’s digital euro project will tie up urgently required development capacity for many years and thereby further exacerbate Europe’s competitive disadvantage. The burden of investment and the risk resulting from introducing the digital euro will be disproportionately borne by banks and savings banks. In any case, the banks and savings banks have already developed a European market solution, Wero, which is currently coming onto the market. The digital euro needs to strengthen rather than weaken this European-led payment method. 3. Risks for financial stability and lending: without clear holding limits, there is a risk of uncontrolled transfers of deposits from banks and savings banks into holdings of digital euros. Deposits are the backbone of lending; large-scale outflows would weaken both the funding of the real economy – especially small and medium-sized enterprises – and the stability of the system. Holding limits must therefore be based on usual payment needs and be subject to binding regulations. -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany * The ultimate controlling entity is Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. , Schellingstraße 4, 10785 Berlin, Germany More information here.

BRUSSELS — France and Italy can breathe a sigh of relief after the EU’s statistics office signaled that the financial guarantees needed to back a €210 billion financing package to Ukraine won’t increase their heavy debt burdens. Eurostat on Tuesday evening sent a letter, obtained by POLITICO, informing the bloc’s treasuries that the financial guarantees underpinning the loan, backed by frozen Russian state assets on Belgian soil, would be considered “contingent liabilities.” In other words, the guarantees would only impact countries’ debt piles if triggered. Paris and Rome wanted Eurostat to clarify how the guarantees would be treated under EU rules for public spending, as both countries carry a debt burden above 100 percent of their respective economic output. Eurostat’s letter is expected to allay fears that signing up to the loan would undermine investor confidence in highly indebted countries and potentially raise their borrowing costs. That’s key for the Italians and French, as EU leaders prepare to discuss the initiative at a summit next week. Failure to secure a deal could leave Ukraine without enough funds to keep Russian forces at bay next year. The Commission has suggested all EU countries share the risk by providing financial guarantees against the loan in case the Kremlin manages to claw back its sanctioned cash, which is held in the Brussels-based financial depository Euroclear. “None of the conditions” that would lead to EU liability being transferred to member states “would be met,” Eurostat wrote in a letter, adding that the chances of EU countries ever paying those guarantees are weak. The Commission instead will be held liable for those guarantees, the agency added. Germany is set to bear the brunt of the loan, guaranteeing some €52 billion under the Commission’s draft rules. This figure will likely rise as Hungary has already refused to take part in the funding drive for Ukraine. The letter is unlikely to change Belgium’s stance, as it wants much higher guarantees and greater legal safeguards against Russian retaliation at home and abroad. The biggest risk facing the Commission’s proposal is the prospect of the assets being unfrozen if pro-Russia countries refuse to keep existing sanctions in place. Under current rules, the EU must unanimously reauthorize the sanctions every six months. That means Kremlin-friendly countries, such as Hungary and Slovakia, can force the EU to release the sanctioned money with a simple no vote. To make this scenario more unlikely, the Commission suggested a controversial legal fix that will be discussed today by EU ambassadors. Eurostat described the possibility of EU countries paying out for the loan as “a complex event with no obvious probability assessment at the time of inception.”