The European Commission president’s big set-piece speech of the year is upon us. The State of the Union address is where Ursula von der Leyen sets out her vision for the year ahead, and it promises to be a very challenging 12 months, for her and for Europe. So we tapped into the POLITICO newsroom’s deep knowledge of the political and policy realms and have attempted to preempt her speech by writing our own version. This is what we think she’ll say. Remember, this is not the actual State of the Union but our version of it. As it says on all speeches sent to journalists ahead of time, “please check against delivery.” Madam President, Honorable members, My fellow Europeans, This comes at a pivotal moment for Europe. We live in a world that presents many challenges for our Union; challenges that we as Europeans will have to face together. It is also a time for Europeans to decide which kind of future they wish to embrace; one of unity, one of strength, one of making our continent a better, more secure place; or one of conflict and dissent, in which we let external forces dictate the direction of our lives. There are people out there who want to destroy Europe; who side not with those of us who want a peaceful, prosperous Europe, but with our enemies. I know which path I will choose. And I believe, as I am sure you do too, that the people of Europe will take the right road. That is why, as we reflect on the State of our Union, we must acknowledge the advances we have made but also build the foundations of a more stable Europe, one that is less reliant on others in critical areas. UKRAINE AND DEFENSE Mesdames et Messieurs, les députés, Russia’s brutal war against Ukraine has presented us with challenges not seen since World War Two. As a result, we must take greater responsibility for our own security. That means investing in robust defense, safeguarding our people, and ensuring we have the resources to act when needed.  The EU’s likely message to Ukraine? We are at your side. | Olivier Hoslet/EPA Investing in European defense means investing in peace and long-term stability for current and future generations. It also means boosting technological innovation, supporting European competitiveness, promoting regional development, and powering economic growth.   Our ReArm Europe plan gives member states greater flexibility to spend more on defense while ensuring that the European defense industry can produce at speed and volume. It will also allow the rapid deployment of troops and assets across the EU. Red tape needs to be slashed to reach these aims. In a first step to simplify regulations, the Commission has already proposed a Defence Readiness Omnibus that will help untangle investment rules. However, simply spending more is not enough. Member states need to spend better, work together, and prioritize European companies. The EU will support this by helping coordinate investments and making sure that defense equipment is ‘Made in Europe’.  Yet the challenges caused by Russia are great and varied, including the threats caused by hybrid warfare attacking European infrastructure, and the increasing spread of disinformation online. We already have plans for an early-warning system and rapid response teams to help hospitals fight off cyberattacks. We can only overcome these problems by working together and, rest assured, Europe will also maintain diplomatic and, in particular, economic pressure on Russia. This week we will publish the 19th package of sanctions, as we tighten the net on those who do business with Russia. Working with our partners in the U.S., we are continuing to limit Russia’s potential and showing Vladimir Putin that we are serious about bringing an end to this war. Because a predator such as Putin can only be kept in check through strong deterrence. Our boost to defense is not just for our own security but for that of our allies and neighbors, and those who share our European values and wish to join the bloc. That is why our message to Ukraine is clear: Your future is in the European Union and we have been, and will continue to be, at your side every step of the way. REVIVING THE EUROPEAN ECONOMY Meine Damen und Herren Abgeordnete, As we look to advance our goals to boost European competitiveness, we have strong foundations such as our potential to unleash vast resources and latent technological and industrial power. I asked Mario Draghi to deliver a report on how to revive the European economy. One year ago, he delivered that report and we have been delivering on his recommendations. The year since the publication of Mario Draghi’s report has been all about cutting red tape and … boosting European competitiveness. | Olivier Hoslet/EPA As part of the Commission’s plans for the next multiannual financial framework — an ambitious and dynamic budget that will help us meet the challenges of the future — we created a €409 billion cash pot to fund Europe’s industrial revival, allowing European firms to rapidly scale up and cut red tape when accessing EU funds. And after a very clear signal from the European business sector that there is too much complexity in EU regulation, we launched the Omnibus Package to simplify legislation for sustainable finance, due diligence and taxonomy rules, and save companies €37 billion a year by 2029.   Mr. Draghi also recommended a single market for investment in the EU, and we have pushed forward plans for a Savings and Investments Union that would integrate supervision of capital markets and break down national barriers for the likes of stock exchanges and clearinghouses. The other major challenge we face is trade. The Commission has taken steps to deepen partnerships with trusted allies, partners and friends, which is an essential step in today’s uncertain geopolitical climate. We have in recent weeks secured trade deals with the United States as well as with Mexico and the Mercosur bloc of Latin American countries. I urge everyone in this House who believes in making our Union stronger to support these trade deals as they, and others, will help businesses across the continent, opening up our markets and diversifying our exports. The Mercosur deal alone opens up a market of over 280 million people for European exports, while the U.S. trade deal saves trade flows, saves jobs in Europe and opens up a new chapter in EU-U.S. relations. MIGRATION Señoras y señores diputados, Europe remains a place of safe refuge for those fleeing conflict and climate change. But I am of the firm belief that migration needs to be managed. That is why, after the launch of the Migration and Asylum Pact, we created a plan to streamline deportations, toughen penalties for rejected migrants who do not leave the bloc, and create hubs in countries outside the EU to house people awaiting deportation. Migration is often exploited by populists for political gain. But we want to create a system that supports those with a genuine asylum claim while making clear the rules on forced returns, and incentivizing voluntary returns. We also want to continue attracting talent from across the globe in areas where Europe is a world leader, such as in the life sciences and biotech spheres. Migration is a key issue for European citizens, but there are others. The latest Eurobarometer survey shows that the No. 1 issue Europeans want the EU institutions to resolve is the cost of living crisis. Across the continent, families are struggling to pay for homes, and this Commission is determined to do everything in its power to ease the pressure they are facing.  Migration is a key issue for European citizens. | Gene Medi/NurPhoto via Getty Images Early next year, we will present Europe’s first-ever European Affordable Housing Plan, which will aim to accelerate the construction of new homes, the renovation of existing buildings, and ensure no one sleeps on the streets by 2030. To do so, we will move to put in new measures to limit speculation, introduce regulations for short-term rentals in stressed housing markets, and cut red tape to boost public and private investments in the construction of new homes. People are also concerned about their energy bills and, here, the Commission is taking action. We must never forget Putin’s deliberate use of gas as a weapon, and that is why the EU will phase out Russian gas by 2027 thanks to the REPowerEU roadmap. As part of our deal with Washington, we will increase our energy imports from the U.S. over the next three years, a plan that is fully compatible with our medium- and long-term policy to diversify our energy sources and part of our commitment to the green agenda that so many in this House, myself included, fully support. That is why we have drawn up the Grids Package, which will come out later this year and aims to turbocharge investment in power networks, which is the key bottleneck in the uptake of more renewables. ARTIFICIAL INTELLIGENCE Signore e signori, deputati, The time is coming when artificial intelligence will match human thinking. That is why this week we published a report looking at the challenges and opportunities of AI. In Europe, we must take a leading role in shaping high-impact technologies. We will make sure there is smart yet strategic regulation while creating the right incentives, including funding and investment, to prevent AI and other technologies from becoming destabilizing forces. But we must not forget our traditional industries. The automotive sector is a critical pillar of the European economy, supporting more than 13 million jobs. The industry is facing increased competition from those who have benefited from unfair subsidies, and we have taken big steps to ensure this critical sector remains competitive and made in Europe. With our Automotive Action Plan, we set a strong course for building European batteries and ensuring our companies are the technological leaders in autonomous driving. At the same time, we have made big strides in maintaining our climate goals while giving our companies the necessary flexibility to stay competitive. THE EU BUDGET Panie i panowie, posłowie, We want a stronger European Union, stronger member states, and stronger regional and city governments, and we will work with local leaders — those closest to Europe’s citizens — to ensure they get the funds they need.  Cohesion Funds have helped build our Union with bridges and railways, public sports halls and libraries. Our cohesion policy is a central pillar of the European Union, and we will ensure that it continues to bridge gaps between regions, while also earmarking funds for the cities in which nearly three-quarters of all Europeans live. But we also want to protect and promote one of the most important elements of Europe, its agriculture and farmers. With our budget proposal we are safeguarding direct payments to farmers, boosting the funding available to rural communities, and giving more money to national governments to spend on agriculture. Farmers are essential to Europe, and what matters to Europeans matters to Europe. We need a continent that is united, safe and prosperous. I believe we can rise to the challenge. Long live Europe. Thanks to Victor Jack, Sam Clark, Max Griera, Pieter Haeck, Jordyn Dahl, Aitor Hernández-Morales and Helen Collis.

With the European Green Deal and the Clean Industrial Deal, the EU set a clear course for the economic transition, serving Europe’s strategic interests of competitiveness and growth while also tackling climate change. For the EU to reach its industrial decarbonization and competitiveness objectives, the Draghi report identifies an annual investment gap of up to €800 billion. High-quality, reliable and comparable corporate disclosures, including on sustainability risks and impacts, are key to inform investment decisions and channel financing for the transition. EU rules on corporate sustainability reporting have been expected to fill the existing data gap. While simplification as such is a helpful aim, it looks like the Omnibus initiative is going too far. With the current direction of travel, confirmed by the Council in its agreement on 24 June, the Omnibus is likely to severely hinder the availability of comparable environmental, social and governance (ESG) data, which investors need to scale up investment for industrial decarbonization and sustainable growth, thus impairing their capacity to support the just transition. > The Omnibus is likely to severely hinder the availability of comparable > environmental, social and governance (ESG) data, which investors need to scale > up investment for industrial decarbonization and sustainable growth. The European Commission introduced the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy to respond to real needs, voiced over the years by investors and businesses alike. These rules were intended to close the ESG data gap, bring clarity and structure to the disclosures needed to allocate capital effectively for a just transition, and foster long-term value creation. These frameworks were not meant as ‘tick-box compliance exercises’, but as practical tools, designed to inform capital allocation, and better manage risks and opportunities. Now, the Omnibus proposal risks steering these rules of course. Although investors have repeatedly shown support for maintaining these rules and their fundamentals, we are now witnessing a broad-scale weakening of their core substance. Far from delivering clarity, the Omnibus initiative introduces uncertainty, penalizes first movers, who are likely to face higher costs due to adjusting the systems they put in place, and undermines the foundations of Europe’s sustainable finance architecture at a time when certainty is most needed to scale up investment for a just transition to a low-carbon economy. THE COST OF DOWNGRADING SUSTAINABILITY DATA The EU’s reporting framework is a critical enabler of investor confidence, for them to support the clean transition, and resilience building of our economy. It aims to replace a fragmented patchwork of voluntary disclosures with reliable, comparable data, giving both companies and investors the clarity they need to navigate the future. Let’s be clear: streamlining corporate reporting is a goal that is shared by investors and businesses alike. But simplification must be smart: by cutting duplications, not cutting corners. The Omnibus is likely to result in excluding up to 90 percent of companies from the scope of CSRD and EU Taxonomy reporting, if not more, should the council’s position, which includes a €450 million turnover threshold, be retained. This would significantly restrict the availability of reliable data that investors need to make investment decisions, manage risks, identify opportunities and comply with their own legal requirements. Voluntary reporting is unlikely to bridge this data gap, both in terms of the number of companies that will effectively report and regarding the quality of information reported. Using basic, voluntary questionnaires that were designed for very small entities would result in piecemeal disclosures, downgrading data quality, comparability and reliability. Market feedback has already demonstrated that it is necessary to go beyond voluntary reporting to avoid these shortcomings. This is precisely why EU regulators designed the CSRD in the first place. As a result of the Omnibus initiative, investors will likely focus on a limited number of investee companies that are in scope of CSRD and provide reliable information — limiting the financing opportunities for smaller, out-of-scope companies, including mid-caps. This will also restrict the offer and diversity of sustainable financial products — despite the clear appetite of end investors, including EU citizens, for these investments. This runs counter to the objectives of scaling-up sustainable growth laid down in the Clean Industrial Deal, and of mobilizing retail savings to help bridge the EU’s investment gap as proposed in the Savings and Investments Union. CUTTING DUE DILIGENCE BLINDS INVESTORS The CSDDD is also facing significant risks in the current institutional discussions. Originally, the introduction of a meaningful framework to help companies identify, prevent and address serious human rights and environmental risks across their value chains marked an important step to accelerate the just transition to industrial decarbonization and sustainable value creation. For investors, the CSDDD provides a structured approach that improves transparency and enables a more accurate assessment of material environmental and human rights risks across portfolios. This fills long     standing gaps in due diligence data and supports better-informed decisions. In addition, the CSDDD provisions to adopt and implement corporate transition plans including science-based climate targets, in line with CSRD disclosures, are providing an essential forward-looking tool for investors to support industrial decarbonization, consistent with the EU’s Clean Industrial Deal’s objectives. By limiting due diligence obligations to direct suppliers (so-called Tier 1), the Omnibus proposal risks turning the directive into a compliance formality, diminishing its value for businesses and investors alike. The original CSDDD got the fundamentals right: it allowed companies to focus on the most salient risks across their entire value chain where harm is most likely to occur. A supplier-based model would miss precisely the meaningful information and material risks that investors need visibility on. It would also diverge from widely adopted international standards such as the OECD guidelines for Multinational Companies and the UN Guiding Principles. The requirement for companies to adopt and implement their climate transition plans is also at risk, being seen as overly stringent. However, the obligation to adopt and act on transition plans was designed as an obligation of means, not results, giving businesses flexibility while providing investors with a clearer view of corporate alignment with climate targets. Watering down or downright removing these provisions could effectively turn transition plans into paperwork with no follow-through and negatively impact the trust that investors can put in corporate decarbonization pledges. Additionally, the council proposal to set the CSDDD threshold to companies above 5,000 employees, if adopted, will result in fewer than 1,000 companies from a few EU member states being covered. Weakening the CSDDD would add confusion and leave companies and investors navigating a patchwork of diverging legal interpretations across member states. A SMARTER PATH TO SIMPLIFICATION IS NEEDED How the EU handles this moment will speak volumes. Over the past decade, the EU has become a global reference point in sustainable finance, shaping policies and practices worldwide. This is proof that competitiveness and sustainability can reinforce, not contradict, one another. But that leadership is now at risk. > How the EU handles this moment will speak volumes. Over the past decade, the > EU has become a global reference point in sustainable finance, shaping > policies and practices worldwide. The position taken by the council last week does not address some of the major concerns from investors highlighted above and would lead to even more fragmentation in reporting and due diligence requirements across companies and member states. While the window for change is narrowing, the European Parliament retains the capacity to steer policy back on track. The recipe for success and striking the right balance between stakeholders’ concerns is to streamline rules while preserving what makes Europe’s sustainability framework effective, workable and credible, across both sustainability reporting and due diligence. Simplify where it adds value, but don’t dismantle the tools that investors rely on to assess risk, allocate capital and support the transition. What the market needs now is not another reset, but consistency, continuity and stable implementation: technical adjustments, clear guidance, proportionate regimes and legal stability. The EU must stand by the rules it has put in place, not pull the rug out from under those using them to finance Europe’s future. --------------------------------------------------------------------------------

All 27 European Union member countries have agreed to push for radical cuts to ethical supply chain rules, setting the stage for tense negotiations with other EU institutions later this year. It continues a growing trend of cutting back environmental laws to reduce the regulatory burden on business and boost the bloc’s sluggish economy. On Monday evening, EU ambassadors endorsed the Council of the EU’s position on the first omnibus simplification bill, a proposal for sweeping cuts to EU green rules that is one of the first major bills of Ursula von der Leyen’s second term as European Commission president. Green groups and some European lawmakers already considered the Commission’s original proposal too weak — now, member countries want it to be even laxer. The Council’s final position adopts a French proposal to just ask companies with more than 5,000 employees and €1.5 billion in net turnover to police their supply chains for environmental and human rights abuses. The threshold on the current proposal is 1,000 employees and turnover of €450 million. If endorsed by the EU as a whole, this would mean that fewer than 1,000 European companies would be subject to the law, called the Corporate Sustainability Due Diligence Directive. EU countries in the Council also agreed that companies should only have to assess their direct suppliers — and not their entire supply chain, as originally stipulated. They also want to postpone the deadline by which EU countries must transpose the directive into national law by a year. Denmark, which will take on the presidency of the Council of the EU in July, will run negotiations with the European Parliament and Commission on this. It comes just days after the Commission announced it would kill anti-greenwashing legislation days before negotiations on the law with Parliament and Council were due to conclude, causing uproar among some groups in Parliament.

ANTWERP, Belgium — Only a rearguard weekend fight by senior European Commission officials prevented the rollback of major green finance rules this week, documents seen by POLITICO show, highlighting bubbling tensions over Brussels’ drive to weaken EU environmental laws. On Wednesday, the Commission presented a sweeping policy package responding to industry concerns that high energy prices and proliferating green reporting obligations were hampering their ability to compete with China and the United States.  The slate of proposals includes significant cuts to recently passed green legislation, exempting most of the EU’s companies from reporting on their environmental impact and climate risk exposure, and on whether their activities align with the bloc’s sustainability criteria. Climate campaigners and many lawmakers swiftly decried the decision.  But until a few days ago, the EU executive was planning even more severe rollbacks. Drafts circulated within the Commission on Friday show that Brussels wanted to render its green finance classification entirely voluntary and weaken related sustainability standards.  The drafts sparked a backlash from some EU commissioners, two Commission officials with knowledge of the discussions told POLITICO, eventually resulting in the milder revisions that were published on Wednesday.  “What we wanted to do is simplify in such a way that we reach our [climate] goals … without undoing what we’ve done in the previous mandate,” Teresa Ribera, the Commission’s climate and competition chief, told reporters at an industry conference in Antwerp Wednesday afternoon.  Without identifying anyone in particular, she acknowledged: “It was also true that of course, there were some that would have liked to get rid of absolutely everything and go even faster” in scrapping green rules applying to companies.  Behind closed doors, officials were more frank.  “There was a huge fight over the weekend,” said one of the officials, granted anonymity to disclose details of internal discussions. “It was exhausting, but we got the most balanced version possible.”  SIGNIFICANT HARM  The 11th-hour spat reveals a growing divide within Brussels over how far the EU should go in yielding to industry’s demands to strip back green rules after Commission President Ursula von der Leyen made slashing red tape a core promise of her second term. Von der Leyen’s top targets were two regulations holding companies accountable for environmental damage across their supply chains as well as the EU Taxonomy, a classification system underpinning the bloc’s green finance rules. A slate of proposals unveiled Wednesday makes significant changes to these three laws. But in Friday’s drafts for proposals to streamline those regulations, “the entire Taxonomy reporting tool would have been voluntary, and even the fundamental ‘do no significant harm’ principle was questioned,” the official said. That was a no-go for some commissioners.  Ursula von der Leyen’s top targets were two regulations holding companies accountable for environmental damage across their supply chains as well as the EU Taxonomy, a classification system underpinning the bloc’s green finance rules. | John Thys/AFP via Getty Images The EU Taxonomy determines which economic activities can be considered green. The point of the law is to redirect investments toward environmentally-friendly companies by getting them to report on how they meet the EU’s specific definition of “sustainable.”   That includes the “do no significant harm” principle, which states that their activities should not contravene the EU’s six environmental objectives such as reducing planet-warming emissions.  According to the drafts, the Commission tried to drastically water down that principle so that some companies’ activities could still count as “sustainable” — and thus receive capital from sustainable finance funds — “even when they cause harm to one of the other objectives, provided that the harm caused is not significant.” On Wednesday, the Commission confirmed it would be making such a change, but only for one of the six objectives, pollution prevention.  The Commission also wanted to make compliance with the Taxonomy voluntary for all companies, including financial market participants like banks, citing cost concerns for mandatory reporting.  “The proposal aims to introduce an opt-in regime for Taxonomy reporting to reduce administrative and financial burdens on undertakings while maintaining transparency and promoting sustainable investments,” the draft read. “The opt-in regime also applies to financial market participants in relation to their product level Taxonomy disclosures.” In the proposal published Wednesday, the number of companies that are required to report under the Taxonomy has been reduced by 85 percent.  The Taxonomy fight was not the only debate. As POLITICO reported, commissioners last week also argued over a rule forcing companies to measure and report the environmental damage they cause, with two officials saying that initial drafts had scrapped those obligations.  The Commission did not immediately respond to a request for comment on Wednesday. CENTRIST SPLIT  The fight inside the Commission is likely to carry over into the European Parliament, potentially igniting one of Europe’s most sensitive political issues: the taboo on using far-right votes to pass legislation.  Last year, von der Leyen relied on votes from parties across the center in the Parliament to win a second term. But on Wednesday, parliamentarians from across that centrist coalition — except her own center-right European Peoples’ Party (EPP) — lined up against the proposals to water down regulations. “This does nothing to actually improve companies’ competitiveness; the only apparent goal is the blind scrapping of regulations,” said the Greens’ Bas Eickhout.  “ These proposals are crude and badly thought-out, risking actually creating bureaucracy and uncertainty,” said Socialist MEP Lara Wolters. Even the centrist group Renew, which has presented itself as a bridge-builder, was giving the corporate reporting revisions short shrift. “These seem to be tailor-made proposals for German companies,” said French MEP Pascal Canfin. That leaves the Commission with two choices to pass its legislation. Either it slogs through protracted negotiations with the centrist parties, or it uses what French far-right leader Jordan Bardella calls the parliament’s “alternative majority” — the EPP joined with hard-right conservatives, nationalists and neo-fascist parties. Speaking to POLITICO earlier in February, Canfin said using that ring-wing majority to pass the first legislative proposal of von der Leyen’s second term would put the Commission and the Parliament into uncharted territory. After decades of centrist consensus-building, Canfin said, it would mean “they have opened Pandora’s box.” In Antwerp, EU Climate Commissioner Wopke Hoekstra, an EPP politician, said he was “confident” the reforms would win a centrist majority.  But Ribera, a Spanish Socialist, appeared to issue a warning to von der Leyen when asked about her own political family’s criticism of the rollbacks.  “We are counting on the different political families that are convinced of the importance of building the European dream together to remain united, not only in identifying the challenges but also in providing solutions,” she told reporters in Antwerp.  “There may be one political family … that has a bigger say in the parliamentary landscape, but there are many others,” she added. “And it would be a big mistake not to take into account this plurality.”  Leonie Cater contributed reporting.

BRUSSELS — Two months into her second term, European Commission President Ursula von der Leyen is gearing up to set fire to reams of environmental red tape that she played a central role in crafting. Slashing regulation is one of the mantras of the new Commission as Europe’s beleaguered industries — rapidly falling behind their American and Chinese rivals — appeal to Brussels to lighten the EU’s notoriously heavy regulatory load. On Wednesday the European Commission will present a broad framework of objectives, collectively named the competitive compass, intended as a strategic shift to catalyze business. One of its first concrete measures will be an “unprecedented simplification effort,” to be presented next month. The keystone will be legislation that streamlines the rulebook on how companies report their compliance with the EU’s green regulations. The big idea is to reduce paperwork so the companies can focus on growth, innovation and competitiveness. This simplification means, however, that von der Leyen will essentially be taking a scythe to laws she introduced in her first term — some of them barely a year old. Von der Leyen insists the package will not change the environmental objectives of the rules, but only make them more efficient. Unconvinced, opponents warn it is a dangerous backtrack on the EU’s green agenda that plays too readily into the hands of conservative forces, including those within the center-right European People’s Party, von der Leyen’s own political family. “This could be an extremely problematic precedent” and a possible “first step in the deregulation wave across Europe” said Tsvetelina Kuzmanova, EU sustainable finance lead at the Cambridge Institute for Sustainability Leadership — voicing concerns shared by many green groups. SIMPLIFICATION, NOT DEREGULATION Originally announced last November, the “omnibus” legislation will reopen and simplify a number of existing laws at once. The proposal, expected to land Feb. 26, will deliver on a promise von der Leyen made ahead of her reelection to reduce reporting obligations by at least 25 percent in the first half of 2025. Two of the laws targeted in the legislation — the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) — require companies to report on the environmental impacts and exposure to climate risks of their own activities as well as those of their supply chains.  Once fully implemented, the rules will force businesses large and small to collect and publish data on their greenhouse gas emissions, how much water they use, the impact of rising temperatures on working conditions, chemical leakages, and whether their suppliers — which are often spread across the globe — respect human rights and labor laws.   The proposal, expected to land Feb. 26, will deliver on a promise von der Leyen made ahead of her reelection. | Martin Bertrand/Hans Lucas/AFP via Getty Images The simplification package will also review the EU Taxonomy, a classification system which outlines which economic activities are considered green by EU standards, also introduced in the last mandate.  It is not yet clear exactly how the omnibus legislation will change these rules. A Commission spokesperson told POLITICO that “other files are being considered” beyond the reporting, due diligence and taxonomy rules.  ‘COMPLETELY UNREASONABLE’ These laws, part of the European Green Deal, were designed to push investment toward the greenest companies and put Europe at the forefront of a worldwide green revolution. But they have become the target of widespread criticism for increasing compliance costs for European companies compared to other jurisdictions, where environmental regulation is weaker and governments have shown little sign of following Europe’s lead. “The number of data points [in] this directive is completely unreasonable,” especially for mid-size companies, which don’t have the same financial resources as large businesses to cover compliance costs, Florence Naillat, deputy general delegate at METI, a business lobby representing the interests of about 6,200 mid-size companies in France, told POLITICO back in November. METI had estimated that the cost of compliance with the CSRD could be as high as €800,000 in the first two years of implementation for an average mid-sized French firm. This is exactly the kind of problem the Commission aims to address by simplifying the rules. “The importance of simplifying EU rules is widely recognized across political lines,” said a Commission spokesperson, adding that simplification was “crucial to achieving the European Green Deal’s ambitious goals.” NOT FAR ENOUGH But many powerful groups want the Commission to go much further than the proposed omnibus package. In a position paper published last week, the EU’s biggest corporate lobby, BusinessEurope, listed 68 “proposals for the reduction of regulatory burden” in which a vast number of new environmental laws are named as potential targets, from EU rules on reducing packaging waste to its produce safety laws, echoing calls from center-right lawmakers for a broad overhaul of EU regulation. EU member country heads of government across the political spectrum have also warned that regulation is crippling the bloc’s economy, and many have put pressure on the Commission to go further. France’s centrist government, for one, wants the EU to indefinitely delay its due diligence law, while also echoing Germany’s socialist Chancellor Olaf Scholz’s request to delay the implementation phase of the corporate sustainability reporting obligations by two years.  For CISL’s Kuzmanova, the focus on delays “is very telling” and indicates that “this is not about competitiveness and providing support to European businesses … delaying is not simplifying. It is not making anyone’s life easier.”  DEREGULATION FEARS It’s perhaps no surprise, then, that the European Commission referred to the omnibus as the first of several simplification packages targeting environmental legislation in the EU, fuelling fears that the simplification agenda will lead to a broader unravelling of environmental rules.  The first clue is that the European People’s Party — von der Leyen’s own political family, which had asked for a simplification package during her campaign — want the laws to apply only to “the largest companies with more than 1,000 employees.” The group is also calling for a two-year delay of the EU’s carbon tariffs on imported products, the Carbon Border Adjustment Mechanism.  Another concern is that the simplification package targets rules that have not even been fully implemented. The CSRD, for example, which passed in 2023, only began to apply to a limited number of Europe’s largest companies last year, with the first reporting deadline arriving this month. Other companies are to be brought under the regime in stages: Large listed companies have until 2025; small and mid-sized companies until 2026: while non-EU companies will report in 2028. “Changing the EU reporting framework that has only recently been adopted and is yet to be fully implemented would create more legal uncertainty,” lawmakers from the Greens group in the European Parliament told von der Leyen in a letter dated Jan. 13.  Not all companies support the simplification package either, with some arguing that messing with the implementation of the rules would be worse. “Investment and competitiveness are founded on policy certainty and legal predictability,” and the omnibus “risks undermining both of these,” big consumer brands like Unilever, Nestlé and Primark warned in a statement dated Jan. 17. The NGO community, meanwhile, has warned of a misunderstanding over just how much information companies are expected to disclose. “The European Commission still lacks proper feedback from all relevant stakeholders and Member states on the application of new legislation,” the letter from the Greens adds. 

A new year, a new European Commission — but the same old fights. From reviving European markets to keep pace with China and the U.S. to advancing digital and green initiatives, Brussels faces a pivotal year of economic and financial challenges. Here’s POLITICO’s rundown of the key finance policy battles shaping 2025: THE ‘SAVINGS AND INVESTMENTS UNION’ The EU’s long-stalled capital markets union has been rebranded as the Savings and Investments Union — but the name change hasn’t made it any less contentious. Two major legislative efforts are already in play: a revamp of the EU’s retail investment rules (RIS), and its attempt to patch up holes in bank crisis management rules (CMDI). Both have been watered down in negotiations, frustrating the Commission. With RIS, Brussels faces a tough choice: scrap and rewrite the proposal or settle for a diluted version likely to require further revision soon. Meanwhile, efforts to revive the market for resold debt, known as securitization, are stirring memories of the 2008 financial crisis. Southern EU nations remain wary, while industries like insurance — whose massive pools of investment the Commission wants to attract to the securitization market — are largely indifferent. The Commission is also weighing ideas like consolidating financial markets and creating simple EU investment products, though many member states remain resistant. DEFENSE SPENDING For years, Western European countries largely ignored calls from anti-Russia hawks to boost their military expenditure. But Russia’s invasion of Ukraine in 2022 and the prospect of a second Donald Trump presidency have reignited EU defense debates. While most countries agree on the need for stronger defense capabilities, the challenge lies in funding. Debt-laden nations like Italy and France that fall short of NATO’s defense spending target of 2 percent of gross domestic product have little room to increase their military budgets without making cuts to other sensitive areas. They prefer issuing common EU debt to finance defense — an idea firmly opposed by fiscally conservative states like Germany and the Netherlands. The European Commission must navigate a path that satisfies hawks, southern nations far from Ukraine, and fiscal hardliners. Commission President Ursula von der Leyen has taken prospective amendments to another level by announcing a bumper “omnibus” law that is expected to merge a number of green rules together. | Buda Mendes/Getty Images THE EU’S LONG-TERM BUDGET  Negotiations over the EU’s next seven-year budget will start in earnest this summer when the European Commission will formally put forward its proposal for 2028-2035.  While the amounts under actual negotiation are negligible, the final outcome is seen as a bellwether of a country’s power in Brussels.  As a result, EU power brokers are already dusting off their abacuses and assembling coalitions. Hawkish Eastern European and Nordic countries including Poland and Sweden are keen to boost EU spending on defense, while Southern ones such as Italy and Greece would prefer more cash to stem migrant arrivals from Africa.  In 2025, EU countries will set their red lines for the negotiations. But if the past is anything to go by, leaders will squabble over the details till the eleventh hour. THE GREEN RULES BONFIRE Green finance rules were already set to dominate the 2025 agenda, with tweaks to the Sustainable Finance Disclosure Regulation widely expected to iron out kinks in a text that has hugely impacted industry. But now Commission President Ursula von der Leyen has taken prospective amendments to another level by announcing a bumper “omnibus” law that is expected to merge a number of green rules together. The package is already sparking political fights over which laws to include, with the finance sector bracing for an intense legislative battle. THE ‘OPEN FINANCE’ REVOLUTION  Lawmakers are debating key financial reforms, including a financial access data bill and payment sector rules, pitting Big Tech against traditional finance. The data bill would force insurers and other financial firms to share customer data with third parties, in a bid to foster innovation. While consumer advocates are wary of Big Tech’s growing role, policymakers have added oversight provisions for major digital platforms designated as “gatekeepers.” Green finance rules were already set to dominate the 2025 agenda. | Christopher Furlong/Getty Images However, there is no formal prohibition on their entering the financial data market directly to offer new products. PAYMENT PROVIDERS VS. DIGITAL PLATFORMS On payments, the biggest fight centers on fraud liability. Payment providers want digital platforms held partly responsible for fraud on their systems given that online communication channels have become a key tool for fraudsters, a move the online platforms strongly oppose. So far, the EU executive has stayed neutral, arguing payment reform may not be the best way to address the issue. As a result, governments and lawmakers will have the last word.

Time to get nerdy about financial services. Portuguese Commissioner-designate for the sector, Maria Luís Albuquerque, faces her turn for a grilling by the European Parliament on Wednesday. The hearing, and the vote which follows, will decide the EPP candidate’s political future, as well as chart the course for the next five years of EU financial services policy.  The former Portuguese finance minister was a surprise winner of the brawl for the FS portfolio, beating out strong competition from Ireland and Austria to win the nomination. So far, she’s kept her cards close to her chest on her policy direction, giving little away in her written responses to MEPs’ questions ahead of the hearings, so today’s Q+A should give us more answers.  For where Albuquerque fits in policy-wise with the other future commissioners (they hope), see our story here. We’ll be bringing you all the live action from 9 a.m. CET on Nov. 6.  You can watch the hearing live here. Background reading:  * How the hearings work  * Who’s most likely to get the chop  PS. If you want to follow more of the action from the hearings, our reporters will be bringing you blow-by-blow updates from all 26 commissioner interviews here.