BRUSSELS — The European Commission on Wednesday unveiled a €90 billion loan to Ukraine aimed at saving it from financial collapse as it continues to battle Russia while aid from the U.S. dries up. About one-third of the cash will be used for normal budget expenditures and the rest will go to defense — although countries still need to formally agree to what extent Ukraine can use the money to buy weapons from outside the EU. A Commission proposal gives EU defense firms preferential treatment but allows Ukraine to buy foreign weapons if they aren’t immediately available in Europe. While the loan is interest-free for Ukraine, it is forecast to cost EU taxpayers between €3 billion and €4 billion a year in borrowing costs from 2028. The EU had to resort to the loan after an earlier effort to use sanctioned Russian frozen assets ran into opposition from Belgium. The race is now on for EU lawmakers to agree on a final legal text that’ll pave the way for disbursements in April, when Ukraine’s war chest runs out. Meetings between EU treasury and defense officials are already planned for Friday. The European Parliament could fast-track the loan as early as next week. The financing package is also crucial for unlocking additional loans to Ukraine from the International Monetary Fund. The Washington-based Fund wants to ensure Kyiv’s finances aren’t overstretched, as the war enters its fifth year next month. The €90 billion will be paid out over the next two years, as Moscow shows no sign of slowing down its offensive on Ukraine despite U.S.-led efforts to agree on a ceasefire. “Russia shows no sign of abating, no sign of remorse, no sign of seeking peace,” Commission President Ursula von der Leyen told reporters after presenting the proposal. “We all want peace for Ukraine, and for that, Ukraine must be in a position of strength.” When EU leaders agreed on the loan, Ukrainian President Volodymyr Zelenskyy called the deal an “unprecedented decision, and it will also have an impact on the peace negotiations.” Adding to the pressure on the EU, the U.S. under President Donald Trump has halted new military and financial aid to Ukraine, leaving it up to Europe to ensure Kyiv can continue fighting. Once the legal text is agreed, the EU will raise joint debt to finance the initiative, although the governments in the Czech Republic, Hungary and Slovakia said they will not participate in the funding drive.  The conditions on military spending are splitting EU countries. Paris is demanding strict rules to prevent money from flowing to U.S. weapons manufacturers, while Germany and other Northern European countries want to give Ukraine greater flexibility on how to spend the cash, pointing out that some key systems needed by Ukraine aren’t manufactured in Europe. MEETING HALFWAY The Commission has put forward a compromise proposal — seen by POLITICO. It gives preferential treatment to defense companies based in the EU, Ukraine and neighboring countries, including Norway, Iceland and Liechtenstein, but doesn’t rule out purchases from abroad. To keep the Northern European capitals happy, the Commission’s proposal allows Ukraine to buy specialized weapons produced outside the EU if they are vital for Kyiv’s defense against Russian forces. These include the U.S. Patriot long-range missile and air defense systems. The rules could be bent further in cases “where there is an urgent need for a given defense product” that can’t be delivered quickly from within Europe. Weapons aren’t considered European if more than 35 percent of their parts come from outside the continent, according to the draft. That’s in line with previous EU defense-financing initiatives, such as the €150 billion SAFE loans-for-weapons program. Two other legal texts are included in the legislative package. One proposes using the upper borrowing limit in the current budget to guarantee the loan. The other is designed to tweak the Ukraine Facility, a 2023 initiative that governs the bloc’s long-term financial support to Kyiv. The Commission will also create a new money pot to cover the borrowing costs before the new EU budget enters into force in 2028. RUSSIAN COLLATERAL Ukraine only has to repay the €90 billion loan if it receives post-war reparations from Russia — an unlikely scenario. If this doesn’t happen, the EU has left the door open to tapping frozen Russian state assets across the bloc to pay itself back. Belgium’s steadfast opposition to leveraging the frozen assets, most of which are based in the Brussels-based financial depository Euroclear, promises to make that negotiation difficult. However, the Commission can indefinitely roll over its debt by issuing eurobonds until it finds the necessary means to pay off the loan. The goal is to ensure Ukraine isn’t left holding the bill. “The Union reserves its right to use the cash balances from immobilized Russian assets held in the EU to repay the Ukraine Support Loan,” Economy Commissioner Valdis Dombrovskis said alongside von der Leyen. “Supporting Ukraine is a litmus test for Europe. The outcome of Russia’s brutal war of aggression against Ukraine will determine Europe’s future.” Jacopo Barigazzi contributed to this report from Brussels.

BRUSSELS — EU leaders are scrambling to come up with a deal on Greenland’s future that would allow Donald Trump to claim victory on the issue without destroying the alliance that underpins European security.  From proposals to using NATO to bolster Arctic security to giving the U.S. concessions on mineral extraction, the bloc’s leaders are leaning heavily toward conciliation over confrontation with Trump, three diplomats and an EU official told POLITICO. The race to come up with a plan follows the U.S. president’s renewed claims that his country “needs” the island territory — and won’t rule out getting it by force. “In the end, we have always come to a common conclusion” with Washington, German Foreign Minister Johann Wadephul said after meeting U.S. Secretary of State Marco Rubio, adding that their talks on the Arctic territory were “encouraging.” German Chancellor Friedrich Merz said he hopes “a mutually acceptable solution” will be found within NATO. The foreign ministers of Greenland and Denmark will meet U.S. Vice President JD Vance alongside Rubio at the White House on Wednesday. They are hoping for “an honest conversation with the administration,” according to another EU diplomat familiar with plans for the meeting. THE ART OF THE DEAL Asked to describe a possible endgame on Greenland, the first EU diplomat said it could be a deal that would give Trump a victory he could sell domestically, such as forcing European countries to invest more in Arctic security as well as a promise that the U.S. could profit from Greenland’s mineral wealth. Trump is primarily looking for a win on Greenland, the diplomat said. “If you can smartly repackage Arctic security, blend in critical minerals, put a big bow on top, there’s a chance” of getting Trump to sign on. “Past experience” — for example when EU allies pledged to spend 5 percent of GDP on defense — showed “this is always how things have gone.” On defense, NATO Secretary General Mark Rutte laid the groundwork for a deal when on Monday he said countries in the alliance were discussing ways of bolstering Arctic security. While the shape of the “next steps” touted by Rutte remain to be defined, a ramped-up investment by European NATO members is one possibility that could fit with Trump’s desire to see Europe shoulder greater responsibility for its security. On mineral extraction, details are blurrier. But a deal that guarantees the U.S. a share of profits from extraction of critical raw materials is one possibility, said the EU official. For now, capacity to extract critical raw materials from Greenland is limited. Denmark has spent years seeking investment for long-term projects, with little luck as countries have preferred obtaining minerals at a much cheaper rate on global markets. The EU is planning to more than double its investment in Greenland in its next-long term budget — including funds oriented toward critical raw materials projects. This could be a hook for Trump to accept a co-investment deal. Yet, if Trump’s real aim is the island’s minerals, Danes have been offering the U.S the chance to invest in Greenland for years — an offer refused by American officials, several diplomats said. If Trump’s push on Greenland is about China and Russia, he could easily ask Copenhagen to increase the presence of U.S troops on the island, they also say. A third EU diplomat questioned whether Trump’s real aim was to get into the history books. Trump’s Make America Great Again slogan “has become a geographical concept; he wants to go down in history as the man who has made America ‘greater’ — in geographical terms,” they said. PRESERVING NATO Above all, governments are trying to avoid a military clash, the three diplomats and EU official said. A direct intervention by the U.S. on Greenland — a territory belonging to a member of the EU and NATO — would effectively spell the end of the postwar security order, leaders have warned.  “It would be an unprecedented situation in the history of NATO and any defense alliance,” German Defense Minister Boris Pistorius said Tuesday, adding that Berlin is talking with Copenhagen about the options at Europe’s disposal if the U.S. launches a takeover. EU Defense Commissioner Andrius Kubilius and Danish Prime Minister Mette Fredriksen both said a military intervention would be the end of NATO. “Everything would stop,” Fredriksen said. NATO Secretary General Mark Rutte laid the groundwork for a deal when on Monday he said countries in the alliance were discussing ways of bolstering Arctic security. | Paul Morigi/Getty Images “No provision [in the alliance’s 1949 founding treaty] envisions an attack on one NATO ally by another one,” said a NATO diplomat, who was granted anonymity to speak freely. It would mean “the end of the alliance,” they added. Trump said “it may be a choice” for the U.S. between pursuing his ambition to take control of Greenland and keeping the alliance intact. Preserving NATO remains the bloc’s top priority, the first EU diplomat said. While both privately and publicly officials have forcefully rejected the idea Europe might “give up” Greenland to the U.S., the comments underscore how desperate governments are to avoid a direct clash with Washington. “This is serious – and Europe is scared,” said a fourth EU diplomat involved in discussions in Brussels on how the bloc responds. A fifth described the moment as “seismic,” because it signaled that the U.S. was ready to rip up a hundred years of ironclad relations.  STILL REELING While European leaders are largely on the same page that a military conflict is unconscionable, how to reach a negotiated settlement is proving thornier. Until the U.S. military strike on Venezuela on Jan. 3, and Trump’s fresh claims the U.S. needs to “have” Greenland, the Europeans were very conspicuously not working on a plan to protect Greenland from Trump — because to do so might risk making the threat real. “It’s been something we’ve anticipated as a potential risk, but something that we can do very little about,” said Thomas Crosbie, a U.S. military expert at the Royal Danish Defense College, which provides training and education for the Danish defense force. “The idea has been that the more we focus on this, and the more we create preparations around resisting this, the more we make it likely to happen. So there’s been anxiety that [by planning for a U.S. invasion] we may accidentally encourage more interest in this, and, you know, kind of escalate,” Crosbie said. But the problem was that, having spent six years studiously avoiding making a plan to respond to Trump’s threats, Europe was left scrabbling for one. Europeans are now faced with figuring out what they have in their “toolbox” to respond to Washington, a former Danish MP aware of discussions said. “The normal rulebook doesn’t work anymore.” Officials consider it the biggest challenge to Europe since the Second World War and they’re not sure what to do.  “We know how we would react if Russia started to behave this way,” the fourth diplomat said. But with the U.S, “this is simply not something we are used to.” Victor Jack, Nette Nöstlinger, Chris Lunday, Zoya Sheftalovich and Seb Starcevic contributed reporting.

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.

Listen on * Spotify * Apple Music * Amazon Music Zurück im Bundestag, zurück auf Fraktionsebene: SPD und Union starten mit zwei Pressekonferenzen in das politische Jahr. Beide liefern sehr unterschiedliche Antworten auf die wirtschaftliche Lage. Auslöser ist das neue SPD-Konzept zur Erbschaftsteuer, das Fragen von Gerechtigkeit, Wachstum und Timing aufwirft. Während die SPD eine Reform noch in diesem Jahr anpeilt, warnt die Union vor einem wachstumsfeindlichen Signal.  Rixa Fürsen und Rasmus Buchsteiner ordnen ein, warum es um mehr geht als eine einzelne Steuer: um Profilbildung zum Jahresauftakt, die Arbeitsweise der Koalition, das ausstehende Urteil des Bundesverfassungsgerichts und die Frage, wie konfliktfähig Schwarz-Rot 2026 wirklich ist. Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. Jetzt kostenlos abonnieren. Mehr von Host und POLITICO Executive Editor Gordon Repinski: Instagram: @gordon.repinski | X: @GordonRepinski. POLITICO Deutschland – ein Angebot der Axel Springer Deutschland GmbH Axel-Springer-Straße 65, 10888 Berlin Tel: +49 (30) 2591 0 information@axelspringer.de Sitz: Amtsgericht Berlin-Charlottenburg, HRB 196159 B USt-IdNr: DE 214 852 390 Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna

BRUSSELS — Germany and the Netherlands are at odds with France in seeking to ensure Kyiv will be able buy U.S. weapons using the EU’s €90 billion loan to Ukraine. EU countries agreed the crucial lifeline to Kyiv at a European Council summit in December, but the capitals will still have to negotiate the formal conditions of that financing after a European Commission proposal on Wednesday. This sets up tense negotiations with Paris, which is leading a rearguard push to prevent money flowing to Washington amid a growing rift in the transatlantic alliance. French President Emmanuel Macron is keen to give preferential treatment to EU military companies to strengthen the bloc’s defense industry — even if that means Kyiv can’t immediately buy what it needs to keep Russian forces at bay. A majority of countries, led by governments in Berlin and The Hague, respond that Kyiv must have more leeway in how it spends the EU’s financial package to help fund its defense, according to position papers seen by POLITICO. These frictions are coming to a head after years of debate over whether to include Washington in EU defense purchasing programs. Divisions have only worsened since U.S. President Donald Trump’s administration threatened a military takeover of Greenland. Critics retort France’s push to introduce a strict “Buy European” clause would tie Kyiv’s hands and limit its ability to defend itself against Russia. “Ukraine also urgently requires equipment produced by third countries, notably U.S.-produced air defense systems and interceptors, F-16 ammunition and spare parts and deep-strike capacities,” the Dutch government wrote in a letter to other EU countries seen by POLITICO. While most countries including Germany and the Netherlands support a general “Buy European” clause, only Greece and Cyprus — which currently maintains a neutral stance as it is chairing talks under its rotating presidency of the Council of the EU — are backing the French push to limit the scheme to EU firms, according to multiple diplomats with knowledge of the talks. CASH FOR KYIV EU leaders agreed last month to issue €90 billion in joint debt to support Ukraine, after Belgium and others derailed a separate plan to mobilize Russian frozen state assets. Over two-thirds of the Commission’s funding is expected to go toward military expenditure rather than ordinary budget support, according to two EU diplomats briefed on the discussions. With only a few days until the Commission formally unveils its plan, EU capitals are trying to influence its most sensitive elements. French President Emmanuel Macron is keen to give preferential treatment to EU military companies to strengthen the bloc’s defense industry. | Pool photo by Sarah Meyssonnier via AFP/Getty Images Germany broke with France by proposing to open up purchases to defense firms from non-EU countries. “Germany does not support proposals to limit third country procurement to certain products and is concerned that this would put excessive restrictions on Ukraine to defend itself,” Berlin’s government wrote in a letter sent to EU capitals on Monday and seen by POLITICO. The Netherlands suggested earmarking at least €15 billion for Ukraine to buy foreign weapons that are not immediately available in Europe.  “The EU’s defence industry is currently either unable to produce equivalent systems or to do so within the required timeframe,” the Dutch government wrote in its letter. The French counterargument is that Brussels should seek to extract maximum value from its funding to Ukraine. Critics say that boosting Ukraine’s defense against Russia should take precedence over any other goal.    “It’s very frustrating. We lose the focus on our aim, and our aim is not to do business,” said a third EU diplomat. Another diplomat said that a potential French veto can be easily overcome as the proposal can be agreed by a simple majority of member countries. GERMANY FIRST In a further point of controversy, the German government, while rejecting the EU preference sought by France, still suggested giving preferential treatment to firms from countries that provided the most financial support to Ukraine. This would play to the advantage of Berlin, which is among the country’s biggest donors. “Germany requests for the logic of rewarding strong bilateral support (as originally proposed for third countries by the Commission) to be applied to member states, too,” Berlin wrote in the letter. Diplomats see this as a workaround to boost German firms and incentivize other countries to stump up more cash for the war-torn country. Giovanna Faggionato contributed to this report.

LONDON — Reform UK’s deputy leader Richard Tice has floated replacing the Office for Budget Responsibility with a rotating panel of experts to produce economic forecasts for the U.K. government.  In an interview with POLITICO, Tice attacked the OBR’s “woeful” forecasts and proposed replacing it with a revolving panel of the top economic forecasters in the country, who would produce their own estimates of the U.K.’s fiscal health. “What’s the point of them if you’re not going to do your job properly?” Tice said of Britain’s under-fire fiscal watchdog. “There is a turgid reluctance to accept the process of continuous improvement.” “If you didn’t have the OBR, what are you replacing [it with]? Well, maybe you could have a revolving panel of the top eight economic forecasters who have, twice a year, a mandate to produce their own estimate of the key six [to] eight metrics,” he added. His comments follow previous suggestions from Reform UK’s leader Nigel Farage to abolish the body, but it has not yet been clear what the party would propose to take its place. As Reform continues to top U.K. opinion polls, the development of the party’s economic agenda has been closely watched by the financial sector and beyond. The OBR has come under attack for its forecasting record from both sides of the political aisle. It faced significant scrutiny in November after its economic and fiscal outlook, which contained detailed information on the contents of Chancellor Rachel Reeves’ autumn budget, was accidentally made accessible hours before she began her official announcement. OBR Chair Richard Hughes stepped down as a result of the leak. The OBR has also been criticized for its outsized influence on government spending, given that its forecasts can have a significant impact on which policies the Treasury decides to include in the budget. “The OBR is literally telling the government how to run its policy,” Tice said. “The government comes up with an idea, and it says to the OBR ‘what’s the consequence of this?’” “[The OBR] say this is our forecast, so the government says I can’t do that or I can do that, and then you find out that the OBR forecast was useless, not worth the paper it’s written on.” Tice joins former Prime Minister Liz Truss in his criticism of the independent body. Truss, who also called for the OBR to be abolished, shunned the watchdog’s provision of an independent economic forecast and analysis for her 2022 mini budget, leading to market turmoil. One of the Labour Party’s first acts upon reaching government in July 2024 was to put in place a “budget responsibility” bill to enable the OBR to produce of its own volition a forecast on major government tax or spending plans.

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).

Europe’s biggest ever trade deal finally got the nod Friday after 25 years of negotiating.  It took blood, sweat, tears and tortured discussions to get there, but EU countries at last backed the deal with the Mercosur bloc — paving the way to create a free trade area that covers more than 700 million people across Europe and Latin America.  The agreement, which awaits approval from the European Parliament, will eliminate more than 90 percent of tariffs on EU exports. European shoppers will be able to dine on grass-fed beef from the Argentinian pampas. Brazilian drivers will see import duties on German motors come down.  As for the accord’s economic impact, well, that pales in comparison with the epic battles over it: The European Commission estimates it will add €77.6 billion (or 0.05 percent) to the EU economy by 2040.  Like in any deal, there are winners and losers. POLITICO takes you through who is uncorking their Malbec, and who, on the other hand, is crying into the Bordeaux. WINNERS Giorgia Meloni Italy’s prime minister has done it again. Giorgia Meloni saw which way the political winds were blowing and skillfully extracted last-minute concessions for Italian farmers after threatening to throw her weight behind French opposition to the deal.  The end result? In exchange for its support, Rome was able to secure farm market safeguards and promises of fresh agriculture funding from the European Commission — wins that the government can trumpet in front of voters back home. It also means that Meloni has picked the winning side once more, coming off as the team player despite the last-minute holdup. All in all, yet another laurel in Rome’s crown.  The German car industry  Das Auto hasn’t had much reason to cheer of late, but Mercosur finally gives reason to celebrate. Germany’s famed automotive sector will have easier access to consumers in LatAm. Lower tariffs mean, all things being equal, more sales and a boost to the bottom line for companies like Volkswagen and BMW. There are a few catches. Tariffs, now at 35 percent, aren’t coming down all at once. At the behest of Brazil, which hosts an auto industry of its own, the removal of trade barriers will be staggered. Electric vehicles will be given preferential treatment, an area that Europe’s been lagging behind on.  Ursula von der Leyen Mercosur is a bittersweet triumph for European Commission President Ursula von der Leyen. Since shaking hands on the deal with Mercosur leaders more than a year ago, her team has bent over backwards to accommodate the demands of the skeptics and build the all-important qualified majority that finally materialized Friday. Expect a victory lap next week, when the Berlaymont boss travels to Paraguay to sign the agreement. Giorgia Meloni saw which way the political winds were blowing and skillfully extracted last-minute concessions for Italian farmers after threatening to throw her weight behind French opposition to the deal. | Ettore Ferrari/EPA On the international stage, it also helps burnish Brussels’ standing at a time when the bloc looks like a lumbering dinosaur, consistently outmaneuvered by the U.S. and China. A large-scale trade deal shows that the rules-based international order that the EU so cherishes is still alive, even as the U.S. whisked away a South American leader in chains.  But the deal came at a very high cost. Von der Leyen had to promise EU farmers €45 billion in subsidies to win them over, backtracking on efforts to rein in agricultural support in the EU budget and invest more in innovation and growth.   Europe’s farmers  Speaking of farmers, going by the headlines you could be forgiven for thinking that Mercosur is an unmitigated disaster. Surely innumerable tons of South American produce sold at rock-bottom prices are about to drive the hard-working French or Polish plowman off his land, right?  The reality is a little bit more complicated. The deal comes with strict quotas for categories ranging from beef to poultry. In effect, Latin American farmers will be limited to exporting a couple of chicken breasts per European person per year. Meanwhile, the deal recognizes special protections for European producers for specialty products like Italian parmesan or French wine, who stand to benefit from the expanded market. So much for the agri-pocalpyse now.  Mercosur is a bittersweet triumph for European Commission President Ursula von der Leyen. | Olivier Matthys/EPA Then there’s the matter of the €45 billion of subsidies going into farmers’ pockets, and it’s hard not to conclude that — despite all the tractor protests and manure fights in downtown Brussels — the deal doesn’t smell too bad after all.  LOSERS Emmanuel Macron  There’s been no one high-ranking politician more steadfast in their opposition to the trade agreement than France’s President Emmanuel Macron who, under enormous domestic political pressure, has consistently opposed the deal. It’s no surprise then that France joined Poland, Austria, Ireland and Hungary to unsuccessfully vote against Mercosur.  The former investment banker might be a free-trading capitalist at heart, but he knows well that, domestically, the deal is seen as a knife in the back of long-suffering Gallic growers. Macron, who is burning through prime ministers at rates previously reserved for political basket cases like Italy, has had precious few wins recently. Torpedoing the free trade agreement, or at least delaying it further, would have been proof that the lame-duck French president still had some sway on the European stage.  Surely innumerable tons of South American produce sold at rock-bottom prices are about to drive the hard-working French or Polish plowman off his land, right? | Darek Delmanowicz/EPA Macron made a valiant attempt to rally the troops for a last-minute counterattack, and at one point it looked like he had a good chance to throw a wrench in the works after wooing Italy’s Meloni. That’s all come to nought. After this latest defeat, expect more lambasting of the French president in the national media, as Macron continues his slow-motion tumble down from the Olympian heights of the Élysée Palace.  Donald Trump Coming within days of the U.S. mission to snatch Venezuelan strongman Nicolás Maduro and put him on trial in New York, the Mercosur deal finally shows that Europe has no shortage of soft power to work constructively with like-minded partners — if it actually has the wit to make use of it smartly.  Any trade deal should be seen as a win-win proposition for both sides, and that is just not the way U.S. President Donald Trump and his art of the geopolitical shakedown works. It also has the incidental benefit of strengthening his adversaries — including Brazilian President and Mercosur head honcho Luiz Inácio Lula da Silva — who showed extraordinary patience as he waited on the EU to get their act together (and nurtured a public bromance with Macron even as the trade talks were deadlocked). China  China has been expanding exports to Latin America, particularly Brazil, during the decades when the EU was negotiating the Mercosur trade deal. The EU-Mercosur deal is an opportunity for Europe to claw back some market share, especially in competitive sectors like automotive, machines and aviation. The deal also strengthens the EU’s hand on staying on top when it comes to direct investments, an area where European companies are still outshining their Chinese competitors. Emmanuel Macron made a valiant attempt to rally the troops for a last-minute counterattack, and at one point it looked like he had a good chance to throw a wrench in the works after wooing Italy’s Meloni. | Pool photo by Ludovic Marin/EPA More politically, China has somewhat succeeded in drawing countries like Brazil away from Western points of view, for instance via the BRICS grouping, consisting of Brazil, Russia, India, China and South Africa, and other developing economies. Because the deal is not only about trade but also creates deeper political cooperation, Lula and his Mercosur counterparts become more closely linked to Europe. The Amazon rainforest  Unfortunately, for the world’s ecosystem, Mercosur means one thing: burn, baby, burn. The pastures that feed Brazil’s herds come at the expense of the nation’s once-sprawling, now-shrinking tropical rainforest. Put simply, more beef for Europe means less trees for the world. It’s not all bad news for the climate. The trade deal does include both mandatory safeguards against illegal deforestation, as well as a commitment to the Paris Climate Agreement for its signatories. 

PARIS — France’s inability to block the EU-Mercosur trade deal on Friday allows opposition parties to twist their knives into an already weakened Emmanuel Macron for the rest of his presidency. Hostility to the landmark agreement — largely over the vulnerability of farmers to exports from South America — unites French politicians across the spectrum, and they now need someone to blame. France’s Europhile president failing to stop the accord is a humbling reflection of the fading power of Paris in the EU, where it was long notorious for its exceptionalism and veto power. Jordan Bardella, head of the far-right National Rally and front-runner for the presidency in 2027, accused Macron of being a hypocrite by pretending to oppose the deal and “betraying French farmers” by not doing enough to stop it. Bardella said the National Rally would submit a motion of no confidence against the government. The far-left France Unbowed submitted its own motion Friday morning after France was “humiliated” in Brussels, party heavyweight Mathilde Panot said. While those efforts are unlikely to succeed, parliamentary debates on the trade deal will again remind the French public that Macron could not to stand up to Brussels. The more center-leaning political forces are calling on French authorities do to more in the coming days to stop the deal, rather than take down the government. Leaders from the conservative Les Républicains and the Socialist Party, ideological opponents, both urged Macron’s government to take the fight against the trade deal to the Court of Justice of the European Union. “We have abdicated, abandoned our food sovereignty,” Les Républicains leader Bruno Retailleau, another likely presidential hopeful in 2027, said Thursday. French farmers who descended Thursday on Paris to vent their fury parked tractors outside the Arc de Triomphe and the National Assembly, where they confronted both National Assembly President Yaël Braun-Pivet and Agriculture Minister Annie Genevard. One held a poster saying that European Commission President Ursula von der Leyen “really takes us for idiots.” Frédéric-Pierre Vos, a National Rally lawmaker who represents a rural district in northern France, stood alongside them and slammed the Mercosur deal as “a sacrifice of French agriculture to save the German car industry.” With the deep unpopularity of the agreement at home, Macron has been left in the uncomfortable position of having to oppose the deal, while trying to defend the concessions he obtained.   Writing on X, Macron said Thursday he was fighting for “farming sovereignty” and hailed pledges from the European Commission to increase the budget for the Common Agricultural Policy in the next EU budget.  An Elysée official on Thursday also told reporters that “a number of advances” had been made on the trade deal, including clauses that would protect European farmers and consumers from sudden floods of goods from Latin America. The French president also tried to strike a defiant tone, insisting “the signature of the agreement is not the end of the story” in his statement online.   But for Macron, the sting of this loss is likely to last.   His political opponents — especially the National Rally — are sure to seize on the vote as a public humiliation for France ahead of local elections in March and next year’s presidential race. Victor Goury-Laffont contributed to this report.

The Italian government is satisfied with new funding promised by Brussels to European farmers and is signaling that it may cast its decisive vote in favor of the EU’s huge trade deal with the Latin American Mercosur bloc. Ahead of Friday’s vote by EU member countries, Foreign Minister Antonio Tajani said Rome was happy with the European Commission’s efforts to make the deal more palatable. Agriculture Minister Francesco Lollobrigida also said the accord represented an opportunity — especially for food exporters. “Italy has never changed its position: We have always supported the conclusion of the agreement,” Tajani said on Wednesday evening. Yet they stopped short of saying outright that Italy would vote in favor of the deal. Instead, within sight of the finish line, Rome is pressing to tighten additional safeguards to shield the EU farm market from being destabilized by any potential influx of South American produce. Rome’s endorsement of the accord, which has been a quarter century in the making and would create a free-trade zone spanning more than 700 million people, is crucial. A qualified majority of 15 of the EU’s 27 countries representing 65 percent of the bloc’s population is needed. Italy, with its large population, effectively holds the casting vote. France and Poland are still holding out against a pro-Mercosur majority led by Germany — but they lack the numbers to stall the deal. If it goes through, Commission President Ursula von der Leyen could fly to Paraguay to sign the accord as soon as next week. The bloc’s other members are Brazil, Argentina and Uruguay. ‘AN EXCELLENT OPPORTUNITY’ Italy praised a raft of additional measures proposed by the Commission — including farm market safeguards and fresh budget promises on agriculture funding — as “the most comprehensive system of protections ever included in a free trade agreement signed by the EU.” Tajani, who as deputy prime minister oversees trade policy, has long taken a pro-Mercosur position. He said the deal would help the EU diversify its trade relationships and boost “the strategic autonomy and economic sovereignty of Italy and our continent.” Even Lollobrigida, who has sympathized in the past with farmers’ concerns on the deal, is striking a more positive tone. At a meeting hosted by the Commission in Brussels on Wednesday, Lollobrigida described Mercosur as “an excellent opportunity.” The minister, who is close to Prime Minister Giorgia Meloni and is from her Brothers of Italy party, also said its provisions on so-called geographical indications would help Italy promote its world-famous delicacies in South America. It would mean no more ‘Parmesão,’” he said, referring to Italian-sounding knockoffs of the famed hard cheese. ONE MORE THING … Lollobrigida said Italy could back the deal if the farm market safeguards are tightened. The EU institutions agreed in December to require the Commission to investigate surges in imports of beef or poultry from Mercosur if volumes rise by 8 percent from the average, or if those imports undercut comparable EU products by a similar margin. Even Francesco Lollobrigida, who has sympathized in the past with farmers’ concerns on the deal, is striking a more positive tone. | Fabio Cimaglia/EPA “We want to go from 8 percent to 5 percent. And we believe that the conditions are there to also reach this goal,” Lollobrigida told Italian daily IlSole24Ore in an interview on Thursday. Meloni pulled the emergency brake at a pre-Christmas EU summit, forcing the Commission to delay the final vote on the deal while it worked on ways to address her concerns around EU farm funding. In response Von der Leyen proposed this week to offer earlier access to up to €45 billion in agricultural funding under the bloc’s next long-term budget. Giorgio Leali reported from Paris and Gerardo Fortuna from Brussels.