The European Commission is considering tying pension reform to cash payouts from the EU’s next €2 trillion budget as it attempts to protect member countries’ finances from a looming demographic crisis. Three EU senior officials told POLITICO that the EU executive’s economic and finance legislative arms are looking into buttressing countries’ creaking state pension systems by recommending retirement savings policies to individual countries. If EU capitals ignore these country-specific recommendations, or CSRs, then they might not get their full share of the EU’s seven-year budget from 2028. “Our job in the Commission is to help countries do the difficult stuff,” said a senior Commission official, who, like others quoted in this story, spoke on the condition of anonymity to speak freely. “CSRs would be well suited to do it” by “linking reforms to investment.” The EU faces a toxic cocktail of high debt, an aging population and declining birthrates. Combined, they will cripple any public “pay-as-you-go” pension system that relies on taxpayers to provide retirees with a source of income. That’s a problem today as well as tomorrow. Over 80 percent of EU pensioners relied on a state pension as their only source of income in 2023. That overreliance has left one in five EU citizens above the age of 65 at risk of poverty, the equivalent of 18.5 million people. Brussels’ goal is twofold: Alleviate the pressure on the state coffers to keep pensioners afloat, and help create a U.S.-style capital market by putting people’s long-term savings to work. The idea, while well-intended, would be politically difficult and has deputy finance ministers wincing at the thought. Pension policy lies well outside of the EU executive arm’s legal reach. Even then, the risks of tying EU funds to politically toxic issues could spell disaster for governments, especially when democracy’s most loyal participants are above the age of 50. “You can’t buy pension reform,” said a deputy finance minister. “It’s going to hit the nerve of what democracy is about.” Over 80 percent of EU pensioners relied on a state pension as their only source of income in 2023. | Dumitru Doru/EPA Pension reform also has a habit of bringing protesters onto the streets. In Brussels, police clashed with trade unions on Tuesday, who were demonstrating over austerity measures that include raising the age of retirement from 65 to 67 by 2030. Belgium got off lightly when compared to France, which witnessed months of protests in 2023 when President Emmanuel Macron raised the retirement age from 62 to 64. Even then, France’s recently reinstated prime minister, Sébastien Lecornu, announced Tuesday that he’d put Macron’s pensions reforms on ice to overcome a parliamentary crisis that’s made it impossible to pass a budget. Postponing the reforms could cost Paris up to €400 million next year at a time when the government tries to tighten its belt and reduce the country’s ballooning debt burden. The Commission’s focus would stop short of setting retirement age or mandating monthly payouts to pensioners. Brussels’ reform plans instead home in on incentivizing citizens to save for retirement and encouraging companies to offer corporate pension plans to employees. CSRs are part of an annual fiscal surveillance exercise that the Commission uses to coordinate economic policies across the bloc. These recommendations are negotiated with EU capitals in a bid to fix a country’s most pressing economic problems. The Commission doesn’t consider this coercion, just sound economics. “If it’s on pensions, then so be it,” a second senior Commission official said. POST-PANDEMIC CARROTS AND STICKS EU capitals have had a habit of ignoring CSRs in the past. That could change if the Commission adds cash incentives, an idea that was born out of the EU’s €800 billion post-pandemic recovery fund. The Commission also saw an opportunity to incentivize governments to enforce costly reforms to modernize the bloc’s economy by setting targets that’d unlock EU funds in tranches. For countries like Spain, these included pension reform. The carrot and stick strategy proved such a hit within the Berlaymont that it wants to use the same system in the next EU budget, especially if it helps add teeth to CSRs. Not everyone’s a fan. The mountains of paperwork that governments had to amass to prove they’d met the Commission’s demands slowed progress, leaving hundreds of billions of euros on the table. “We don’t know why the Commission is so fond of this model,” said another deputy finance minister, who poured cold water on the idea. “[Pension reform is] hugely controversial. I highly doubt anyone’ll do it.” Giorgio Leali contributed reporting from Paris.

Ukraine is getting another recovery fund, but this time, it’s coming from Europe. European Commission President Ursula von der Leyen announced the creation of the European Flagship Fund for the Reconstruction of Ukraine on Thursday during a speech at the Ukraine Recovery Conference in Rome. “[It will be] the largest equity fund globally to support reconstruction. It will, together with the private sector, kickstart investment in energy, transport, critical raw materials, dual-use industries,” von der Leyen said. “We are taking a stake in Ukraine’s future by leveraging public money to bring large-scale private sector investments and help the rebuilding of the country,” she added. As for who will contribute to the fund, von der Leyen named Italy, Germany, France, Poland and the European Investment Bank and added, “I trust others will be eager to join. The people of Ukraine are ready to drive their country’s economy into the future. The time to invest is now.” She did not specify how much the fund aims to collect. Ukraine needs at least $40 billion in external financing in 2026, as it continues to allocate most of its state budget to defense needs, Ukrainian Finance Minister Serhii Marchenko said Wednesday. Ukraine needs regular and predictable external support to maintain the financial stability it has achieved with its partners since 2022. This also lays the foundation for the country’s successful reconstruction,” Marchenko added. Russia’s ongoing full-scale invasion has devastated towns and cities across Ukraine and shows no sign of ending as the Kremlin’s military continues to bombard the country on a nightly basis. In April, Ukraine’s government signed a deal with the Trump administration to establish an American-Ukrainian Reconstruction Investment Fund, which will draw on cash from Ukraine’s natural resources development projects. While in Rome, von der Leyen also celebrated that Europe has become the largest donor for Ukraine, providing €165 billion and planning to keep supporting Ukraine at least until 2028. “This year alone, we will cover 84 percent of the external financing needed. As part of this support, I can announce €1 billion payment in macro financial support. I can also announce a payment of more than €3 billion from the Ukraine facility,” von der Leyen said. Over the next decade, Ukraine needs an estimated $524 billion (around €450 billion) for reconstruction caused by relentless Russian attacks, the Ukrainian economy ministry reported in February. Ukrainian President Volodymyr Zelenskyy said investments in reconstruction are beneficial not just for Ukraine but for Europe too, as Kyiv can share its robust and cost-effective military technologies that could strengthen the EU in the face of Russian aggression.

PGE Group, Poland’s largest electricity and heat producer, has unveiled its ambitious new strategy for 2035. The strategy outlines an estimated €55 billion in investments aimed at transforming Poland’s energy landscape. It prioritizes energy grids, new flexible gas power plants, renewable energy sources and advanced energy storage systems, all while integrating modern heating solutions. Crucially, the strategy reinforces PGE’s commitment to achieving climate neutrality by 2050, with an interim target of reducing CO2 emissions by 75 percent by 2035, including from existing coal-based units. > Crucially, the strategy reinforces PGE’s commitment to achieving climate > neutrality by 2050, with an interim target of reducing CO2 emissions by 75 > percent by 2035. In an exclusive interview, Dariusz Marzec, the CEO of PGE, discusses the courage and responsibility required to follow through with a transformative action plan in a turbulent environment. PGE’s new strategy that lasts for 2035 is entitled: ‘Energy of secure future. Flexibility.’ Why is flexibility so important? Flexibility is essential.Nowadays, power systems are highly dependent on intermittent renewables. At midday — when the renewable(RES) generation is at the highest level — demand for dispatchable capacity drops substantially, but then in the evening after the sunset we can observe a rapid rise of demand. Flexibility is a tool to match variable demand with variable production. For this reason, we can use storage, power-to-heat solutions and flexible dispatchable gas generation. So, flexibility will allow us both to match demand and reduce price volatility. What kind of assets do you need for that? By 2035 we plan to develop 4 GW of offshore wind power plants and another 4 GW onshore. To enable more RES deployment we plan to increase our distribution grid capacity by up to 11 GW. To keep our power system stable we are also investing massively in energy storage. In 2035 we intend to operate energy storage facilities with a capacity of more than 18 GWh. We are building one of the largest lithium-ion energy storage facilities in Europe in Żarnowiec. All this will help us decrease CO2 emissions by 75 percent in just ten years due to rapidly decreasing generation of energy from coal. In some locations these old coal power plants are being replaced by flexible gas power plants. By 2035 we plan to operate 10 GW of them, however, they are not meant to work at full capacity all the time. > To keep our power system stable we are also investing massively in energy > storage. In 2035 we intend to operate energy storage facilities with a > capacity of more than 18 GWh. We are building one of the largest lithium-ion > energy storage facilities in Europe in Żarnowiec. How do you plan to finance these investments? How are banks looking at your projects taking into account that you spend €5 billion to €6 billion for the EU Emissions Trading System each year to cover emissions from coal assets? Yes, indeed, financing would be a challenge, but we have number of options and alternatives on the table. We can rely on currently available sources of financing for the energy transition, such as the Modernisation Fund, Recovery and Resilience Facility, and resources provided under the current Multiannual Financial Framework. Investments in the energy sector require long-term planning and a stable outlook, while most of the aforementioned funds are set to expire in the coming years. What we need is to ensure continuation of these funds to enable us to meet the 2035 targets. For example, only recently we signed 25-year loan agreements with the Polish Development Bank (BGK) for expanding distribution networks, which amounted to approximately €2.8 billion in March 2025 from the National Recovery and Resilience Fund. > Investments in the energy sector require long-term planning and a stable > outlook, while most of the aforementioned funds are set to expire in the > coming years. Our first offshore wind farm project, Baltica 2 — backed with a Contract for Difference — will cost around €7 billion. Of this amount, €3.5 billion, PGE’s share, has already been secured from financial institutions such as BGK, the Export and Investment Fund of Denmark, the European Investment Bank, the European Bank for Reconstruction and Development, and a large group of commercial banks. The gearing level achieved is approximately 75 percent, while the remaining equity contribution has been secured with a loan funded from the National Recovery and Resilience Fund. The key to successfully finance the project lies in the evaluation framework and its ability to generate stable, predictable and secured income — in other words, the project must be bankable. This guarantee is ensured through support mechanisms such as the Contract for Difference for offshore wind farms, the Capacity Market for gas and energy storage, and a dedicated mechanism to support flexibility in both power and heating systems. To better adapt to the local specifics we need a flexible state aid framework that more accurately reflects the actual costs of individual investments below the notification threshold. Moreover, capacity mechanisms should be recognized as an integral part of the energy market, and their implementation should be seen as essential in the volatile power system, serving as a preventive measure to avoid blackouts. Is this the main reason that you are planning to operate 10 GW of gas-fired capacity? Speaking about natural gas, we have to make a distinction between power and combined power and heat generation. Natural gas will be needed to decarbonize our district heating systems — here we have no alternatives to deliver heat at the required temperature, which is approximately 130 degrees Celsius. And yet in power system gas-fired capacity is also needed. According to the European Resource Adequacy Assessment, Europe will need an additional 50 GW in gas-fired capacity to ensure its energy security. Yet, here again, the district heating can contribute to the power system – in Poland almost 20 percent of electricity comes from combined heat and power. Still, you need to plan how to phase out coal, and that will have a negative impact on your balance sheet. How long do you want to keep coal assets? Today coal-fired power plants work for a much shorter periods of time than years ago, but they are still needed. In 2035 coal power plants will not have to produce anything at all, but they must be available as some kind of insurance policy — the cost of which we must cover for our security. Let me use an example, lignite mining in Belchatow is expected to end in 10-12 years, and in Turow a little later. Analyses are underway on how this 5-GW power gap will be secured after the coal deposits in Belchatow are exhausted. This location has gigantic grid assets and qualified engineering and technical staff to draw on. That’s why I am sure that this region will continue to be involved in energy. We will study the possibility of putting up a nuclear power plant there, while in the case of Turow we are considering putting up both a gas unit and a small modular reactor.