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).

LONDON — Thought writing a 10,000-word dissertation was tricky? Try managing Britain’s embattled university sector.  As students pack their bags, sort their kitchenware and prepare for the time of their lives at campuses across the U.K., university officials face the headache of keeping their struggling institutions economically viable — all while politicians take potshots at them. “The underlying financial settlement for universities is not really sustainable,” warned Universities UK International Director Jamie Arrowsmith, an organization representing 141 universities.  International students provide significant income to the sector by paying considerably higher tuition fees than domestic students. However, Labour’s bid to slash migration levels means international students are in the firing line. It’s a stark contrast from Tony Blair’s New Labour government in the 2000s, which was “actively encouraging the growth of the international student population,” according to Labour peer and former Universities Minister Margaret Hodge. She recalled writing to Blair espousing how this expansion would increase the U.K.’s soft power: “If you wanted to create good diplomatic connections and promote peace across the world, those student relationships paid off fantastically.” A string of policy changes has left institutions searching elsewhere for cash, as Prime Minister Keir Starmer focuses on disadvantaged British youngsters. A white paper due this fall will outline specific higher education reforms, including calls for universities to contribute more to economic growth. The sector warns it could all be undermined if the government keeps discouraging overseas students from coming to Britain. PULLING UP THE LADDER  Britain’s universities have an enviable reputation. The QS World University Rankings in June put 17 U.K. universities in the top 100, while a London Economics report calculated higher education contributed more than £265 billion in the 2021/22 academic year. It’s little wonder students across the globe want to study here. Anxious about populist parties like Reform UK, Tory and Labour governments have seen fewer foreign students as a way to get numbers down. | Richard Baker / In Pictures via Getty Images But while international students starting in 2021/22 brought net economic benefits of £37.4 billion, they’re also counted in immigration figures — and that’s a headache for the government. Anxious about populist parties like Reform UK, Tory and Labour administration have seen fewer foreign students as a way to get numbers down.  They were banned from bringing family members on all but post-graduate research routes back in January 2024. That decision by then-Conservative PM Rishi Sunak followed 135,788 visas being granted to dependents of foreign students in 2022, nearly nine times the 2019 figure. Arrowsmith said he understood why the policy was introduced, but warned it had hit “the U.K.’s attractiveness” to prospective foreign students, particularly when “other countries have had more open and welcoming policies over the last three to four years.” Home Office figures in October 2024 showed the effect — with an 89 percent drop in visa applications for dependents between July to September 2023 and the same period in 2024. Tory peer and former Universities Minister, David Willetts, said he understood concerns about dependents, but thought it should be made clearer to voters that students are only temporary migrants. “My constituents, when I was an MP, who worried about migration, were worried about [people] coming to Britain to settle, to use the NHS,” he said. “They weren’t worried about a Chinese student doing physics for a couple of years.” Fellow Tory peer and former Universities Minister Jo Johnson concurred, saying people were more concerned with illegal immigration. “They’re a very special category of immigration that’s more akin to tourism or temporary visitors.”  Now, Labour is wearing Conservative clothing.  The Home Office marked the new academic term this week by directly contacting tens of thousands of foreign students, warning them not to outstay their visas and telling them they “must leave”  if they have “no legal right to remain.”  The immigration white paper published this May also planned to reduce the graduate visa — where international students can remain in the U.K. after finishing their qualification — from two years to 18 months in most cases. Ministers have also mooted a levy on fees universities receive from foreign students to reinvest in domestic training. A graduation student sits outside Senate House at Cambridge University. | Joe Giddens/PA Images via Getty Images Johnson, however, said the Treasury didn’t like raising money for a specific purpose, meaning the Department for Education “may be being rather optimistic” in assuming revenue would go towards skills.  Hodge was similarly sceptical: “If it were linked to encouraging international students, but recognizing there might be a cost to public services, I think I’d feel more comfortable,” she said. “At the moment, I’m not sure that it’s anything else other than raising more money.” The moves have also upset the main higher education union. “Unfortunately, the government remains wedded to a funding model that leaves international students propping up U.K. higher education,” said University and College Union (UCU) General Secretary Jo Grady in a statement to POLITICO. She added: “Their fees are essential to the financial stability of the sector, so it is economically illiterate that Labour has refused to lift the Tories’ visa restrictions.”  STRAPPED FOR CASH Though Education Secretary Bridget Phillipson insisted the government will “always welcome international students where they meet the requirements to study,” some have taken the hint — and given the U.K. a pass.  In 2023/24, 732,285 overseas students studied at U.K. higher education providers, a 4 percent drop from the 2022/23 record high and the first fall since 2012/13. The number of student visas granted also fell from its record in 2022 of 484,000 by 5 percent in 2023 and 14 percent in 2024. The drop-off was particularly acute among EU students. After Brexit, European students weren’t eligible for home student status, meaning they paid international fees and couldn’t acquire a student loan.  This led to a 50 percent drop in accepted applicants for U.K. undergraduate study from EU countries in 2021/22, which continued to fall the following two years.  Universities still need to pay their bills.  In 2022/23, U.K. higher education providers had an income of £50 billion, of which 52 percent came from tuition fees — international students paid 43 percent of that figure.  The decline “has … been increasingly difficult,” said Arrowsmith, stressing “one of the main sources of funding that was helping to mitigate the reduction in resource is … no longer quite as stable.”  Education Secretary Bridget Phillipson insisted the government will “always welcome international students where they meet the requirements to study.” | Andy Rain/EPA While international fees rose without any cap, domestic tuition fees were frozen from 2017 until this fall at £9,250. Despite rising to £9,535, the hike in employers’ national insurance contributions hampered extra savings — forcing universities to tighten their purse strings. A Universities UK survey of 60 institutions in May found 49 percent closed courses to reduce costs, up from 24 percent in spring 2024. In the same month, the Office for Students, which regulates higher education, forecast a third consecutive year of financial decline in 2024/25.  “Inflation has been particularly high,” argued Arrowsmith, “That really exacerbated the situation,” particularly when there were “increased expectations” on academic research. It’s little surprise the House of Commons’ Education Committee is investigating potential insolvency within higher education institutions.  The Department for Education reiterated that the independence of universities meant they must ensure sustainable business models. But Willetts and Hodge disagreed on whether increasing domestic fees would improve the situation. Willetts “would love to see a healthy, proper increase in the fees” to put universities “in a stronger position” rather than relying on overseas students. However, Hodge said the “incredibly expensive” university experience was “almost getting to the cost of going to bloody Eton” and the debt was “putting working-class kids off.” OUT OF THE IVORY TOWERS  To show young people university isn’t their only option, the government launched Skills England and funded a growth and skills levy supporting apprenticeships.  But universities don’t think this should come at the expense of international students. And it seems the public agrees. British Future research found 54 percent of people thought international students enhanced the reputation of U.K. universities overseas, while 61 percent thought the government should increase or keep the amount of overseas students the same. Domestic students were supportive, too. “British students appreciated the opportunity of studying with students from other countries,” said Willetts. “It enriched the experience.” Education wonks believe focusing too much on domestic skills could come back to bite ministers — and excessive policy changes prevents what international students, and employers, want most of all: clarity. “They need certainty and stability if they’re going to make decisions,” argued Arrowsmith, stressing frequent alterations under different administrations made “prospective students think twice [about Britain] as a destination.”  The UCU echoed this and felt Britain should be open for business.  “We are also calling on universities to join us in the fight for a more open border policy that will protect the sector, help contribute tens of billions of pounds to the economy, enrich our society and bolster the U.K.’s global standing,” said Grady. A government spokesperson said: “We recognize the valuable contributions which genuine international students make to the economy and the university sector and we want them to continue to come to the U.K.” But they argued: “We are simply tightening the rules so those wishing to stay in the U.K. must find a graduate-level job within 18 months, which is fair for both students and to British workers and taxpayers.”

PARIS — François Bayrou is set to be booted out as France’s prime minister on Monday, but that doesn’t necessarily spell the end of the long political road of the canny, three-time presidential candidate. Does the 74-year-old from the Pyrenees have one more shot at the Elysée Palace in him? Is he the centrist unifier who could stop the far-right National Rally from coming to power in 2027 and reshaping Europe’s political landscape under Marine Le Pen or Jordan Bardella? When asked by reporters, he tends to observe knowingly: “That’s not how the game is played.” Bayrou is undaunted by his current poor showing in the polls. As he sees it, the pieces will only start to click in the winter of late 2026. “The criterion,” he believes, “is that in their kitchen, around family meals, at the earliest at Christmas, in February or in March, there are people who say: This one can do it.” For now, Bayrou seems unlikely to be that “one.” He is set to lose a vote of no confidence next week after failing to push through a raft of severe budget cuts he says are vital to stop France, the EU’s second-largest economy, from pitching into a Greek-style debt crisis. Bayrou’s logic is that he will ultimately be vindicated as a principled prophet on the dangers of overspending. Should his dire warnings prove prescient, every family forced to scrimp on presents for their children in 2026 or on festive staples like champagne and oysters next Christmas will see Bayrou as the guru who “told you so.” Even so, he has a lot of ground to claw back in terms of popularity. The big presidential showdown in the spring of 2027 may still be far off, but other former centrist prime ministers, namely Édouard Philippe and Gabriel Attal, currently look better placed for the race. Bayrou’s standing has not been helped by an ugly scandal this year featuring revelations that his daughter — unbeknown to him — was one of multiple children abused at a Catholic school near the city of Pau, his southwestern bastion in the Pyrenees. PYRENEAN POLITICS Bayrou, a former mayor of Pau, is proud of his regional heritage and rural origins. His father, a farmer, was crushed to death by a hay wagon. But his béarnais charm conceals the fact that Bayrou is a veteran political operator — and a strong proponent of a classical education — who has survived for decades through his talent for gauging France’s political fickle political winds. A former teacher, Bayrou draws inspiration from (and wrote a book about) Henri IV, the famously pragmatic king and fellow Pau native who converted from the Protestant faith to Catholicism to save France from the bloodshed of the wars of religion. François Bayrou, a former mayor of Pau, is proud of his regional heritage and rural origins. | Pool photo by Thibaud Moritz via EPA Bayrou was unafraid to throw his support behind the Socialist François Hollande and burn bridges with center-right President Nicolas Sarkozy before the 2012 presidential election, which Sarkozy lost. That winning bet helped him become the face of French centrism in the months that followed. Bayrou was also one of the earliest supporters of a virtually unknown young economy minister named Emmanuel Macron, who spurned the Socialist Party in 2016 to create his own centrist movement in a long-shot bid for the presidency. He has even been known to boast that Macron wouldn’t have won the presidency without his support.   Having failed to win the top job in 2002, 2007 and 2012, Bayrou surely has only one chance left. His strategy now is to depart his PM role showing he was prepared to go down fighting on a point of principle — the need to balance the books being one that he has stressed for years. Faced with the same intractably divided parliament that doomed his predecessor, Michel Barnier, as he tries to pass his budget reforms, Bayrou is confronting his fate rather than having it imposed upon him. Or, in the words of one ministerial adviser overheard moments after Bayrou announced his plans: “It’s better to die by suicide than suffer in agony.”  Bayrou will be hoping his self-immolation can set the stage for a phoenix-like resurrection.   All it would take is a dash of economic calamity.  MR. ANTI-DEBT  Since the founding of the Fifth Republic in 1958, only Jacques Chirac has succeeded in using the French premiership as a springboard to the presidency. Prime ministers tend to leave office worse off than they started, wrung dry of political capital by powerful presidents who lean on them to do the dirty work of legislating.   But Bayrou’s career-long warnings about profligate public spending could come to fruition. “He wants to be Mr. Anti-Debt,” said one high-ranking ally of the president who was granted anonymity to candidly discuss the current state of French politics.  It’s still a sheer climb. Bayrou is historically unpopular, with one poll late last month showing just 19 percent of respondents had a favorable opinion of him. He’ll need to contend with criticism that he was all talk and failed to address issues relating to French debt while holding positions of authority. Europe’s increasing disdain for career politicians and its preference for upstart populists won’t help either. Surveys show that Le Pen’s far-right National Rally, already the single largest opposition party in France’s more powerful lower house of parliament, is the most popular political movement in the country.   Bayrou’s machinations aren’t a secret within the gilded walls of the Elysée. Some of Macron’s allies question whether the prime minister is exaggerating the threat posed by France’s sky-high budget deficit for political reasons.  While there’s wide agreement that France needs to get its books in order, not everyone is concerned that Paris will need to turn to the International Monetary Fund or the European Central Bank for a bailout in the short term. ECB chief Christine Lagarde said in an interview Monday that the situation is worrying but not yet dire.  Macron himself reportedly tried to downplay the crisis at a meeting with his ministers last week, and believes the government could survive if it found a way to bring the center-left Socialists back into the fold, despite their anger with Bayrou over retirement reforms. Markets are jittery and borrowing costs are rising, but not drastically. Whether the economy runs into a real storm will determine whether Bayrou sees out his career at the center of power in Paris, or back home in Pau. Paul de Villepin contributed reporting.   

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

BRUSSELS ― Carlos Cuerpo wants eurozone members to wake up and lead Europe to financial union. The 44-year-old Spanish economy minister — who on Friday entered the race to head up the powerful group of eurozone countries known as the Eurogroup — is calling for a major shake-up of a body he says has become all talk and no action. “Going forward, the Eurogroup should be more about decisions,” Cuerpo, a socialist, said in an interview with POLITICO, where he outlined his proposal for sweeping changes to the body. Cuerpo argued that groups of countries ― as opposed to all the EU’s 27 states ― should lead the way to integrate Europe’s financial markets, a long-held ambition in Brussels that has repeatedly struggled to get off the ground. “If you cannot go in terms of reducing fragmentation from 27 to one, you might have to go in different steps and reduce the fragmentation by putting groups of countries together.” This is a major rupture from the incumbent Eurogroup President Paschal Donohoe, whom critics accuse of prioritizing broad consensus over actual decisions in his two terms in office. To everyone’s surprise, in October, Cuerpo launched a “coalition of the willing” ― known as the European Competitiveness Lab ― to finally make progress on a decades-old project to create U.S.-style financial markets in Europe. The EU’s biggest countries ― Germany, France, Italy, Poland, Luxembourg, the Netherlands and Spain ― have signed up to the initiative, boosting Cuerpo’s leadership credentials. He said he will empower this scheme if he’s elected as Eurogroup president. “I expect that all 27 member states would be members of the competitiveness lab at some point.” The Spaniard, however, faces an uphill battle to defeat Donohoe in next Monday’s secret vote by the eurozone’s 20 finance ministers. While many officials praised Cuerpo’s soft skills and “encyclopedic knowledge” of the European economy, others feel alienated by his more radical ideas, such as doubling the size of the EU budget or issuing common debt for defense. Donohoe is the odds-on favorite to secure a third term as he hails from the powerful center-right European People’s Party and appeals to small countries who will tip the balance of the election. Lithuanian socialist Finance Minister Rimantas Šadžius, is unlikely to make it past the first round of voting, according to several officials. | Oliver Hoslet/EPA The third candidate, Lithuanian socialist Finance Minister Rimantas Šadžius, is unlikely to make it past the first round of voting, according to several officials with knowledge of the voting procedures. A simple majority — 11 votes — is necessary to be elected as president. THE EUROGROUP’S MIDLIFE CRISIS The Eurogroup is a club of 20 eurozone ministers who meet every month to coordinate economic policy. During its heyday, it steered the eurozone through the rumble-tumble of the sovereign debt crisis, but lost influence as the euro area stabilized and a more inclusive EU-wide group of 27 finance ministers gained power. The Eurogroup has become a “bland working group” or a “think tank,” according to two EU diplomats, who, like others in the story, were granted anonymity to speak freely. A group of countries — including Spain — have questioned the usefulness of holding monthly meetings in Brussels in an informal report that was seen as mildly critical toward Donohoe’s presidency. Faced with this criticism, Cuerpo said he wants to breathe new life into stalled Eurogroup projects such as creating an EU-wide financial and banking union and strengthening the role of the euro. “We need to be very efficient in coming up with deliverables, otherwise we might be late to the party,” compared to other foreign countries. “Eurogroup needs to have a voice for these new times that actually requires us to face new challenges and call for a revamped Eurogroup.” THE ITALIAN VETO One of the thorniest issues is Italy’s veto over a plan to use money from the European Stability Mechanism — a bailout fund for countries introduced during the eurozone crisis — to rescue failing banks. Populist parties in Italy oppose ratifying the reform over the ESM’s lingering association with strict bailout conditions during the eurozone meltdown. Rome, however, is open to using these funds to provide cheap loans for defense — something that Cuerpo has endorsed in the past. In a sign of détente, Cuerpo said that “we have to help Italy help us on this [ratifying the ESM],” although he shied away from questions on using these funds for defense. “[We need] to provide the right narrative, which is sometimes also an important element around how the ESM can help us going forward in these new challenges as well.” This story has been updated to reflect Carlos Cuerpo’s formal job title as minister of economy, trade and business.

BRUSSELS ― A string of fatal drug-related shootings in the heart of the city that houses the EU’s institutions brought home just how far Brussels has fallen: bankrupt, plagued by violence and crime, and politically wrecked. In the first month and a half of the year alone, 11 shootings claimed the lives of two people and injured another four. They haven’t stopped. Unthinkable just a few years ago, the attacks betray a city in sharp decline and reveal the desperate need for some strong political leadership. But Brussels doesn’t have any. Belgium’s labyrinthine political structure contains a multilayered system of government, each with its own powers and often beset by infighting. When they work things are fine, when they don’t there’s paralysis. And they don’t get much more paralyzed than in the Brussels region where, nine months after the election, politicians are still arguing with no government in sight. It’s not just the coordination of Brussels’ crime-fighting that has been exposed by the political mess. The construction of social housing and major infrastructure projects risk being delayed. Subsidies — such as for charities, NGOs and cultural projects — are frozen. Funding for social welfare centers, police and local authority work is shrouded in uncertainty. Public debt is piling up almost as quickly as the garbage sacks on the dirty streets. “It really is the survival of Brussels, as a city, that’s at stake,” said Christophe De Beukelaer, a centrist MP. THE SCANDAL OF €4 MILLION A DAY Away from the tourist-thronged neo-gothic Grand-Place, the cute chocolate shops and flamboyant beer halls, this is a city on the brink. If the city had a government, getting Brussels’ spending under control would be its number one challenge. The capital’s debt stands at over €14 billion, without counting the €1.6 billion it’s projected to add to that this year. Belgian newspaper Bruzz calculated that the deficit ― the difference between how much it spends and brings in ― is increasing by €4 million every day. De Beukelaer, who attempted to reboot coalition negotiations last month, is scathing. In all the months since the election, politicians haven’t even come around to talking substance, he told POLITICO. “It’s just political posturing that’s blocking Brussels,” he said. “‘You’re my friend. You’re not. I want to work with you. But not with you.’ It’s immature.” A CAPITAL LIABILITY The overly complicated political architecture confuses and frustrates even Belgians themselves. If the city had a government, getting Brussels’ spending under control would be its number one challenge. | Virginie Lefour/Belga/AFP via Getty Images Put (relatively) simply, Brussels is one of Belgium’s three regions, together with French-speaking Wallonia in the south and Dutch-speaking Flanders in the north, by which the city is surrounded. All three regions have their own governments with responsibilities for matters like housing, transport and economic policy. With Belgium grappling to meet EU-mandated spending cuts, Brussels’ debt is a “liability for the whole country,” said Dave Sinardet, professor of political sciences at the Free University of Brussels. Things could get worse. The region’s credit rating could be downgraded by the summer, which would make it more expensive to borrow, further adding to the region’s debt, caretaker Budget Minister Sven Gatz has warned. Sinardet said that could at least create some pressure to finally form a government. Others are less optimistic. The centrist Les Engagés party has proposed to slash Brussels politicians’ pay by 30 percent until they form a government, and to cut it by 40 percent if there still isn’t one in place by June. FRENCH VS. DUTCH = STALEMATE For now, even the latest negotiating avenue, a minority government, looks doubtful, given that even then it would need the approval of a parliamentary majority to get to work, and for every single decision it takes after that. In the first month and a half of the year alone, 11 shootings claimed the lives of two people and injured another four. | Hatim Kaghat/Belga/AFP via Getty Images While it wouldn’t be the ideal setup to address Brussels’ challenges, “a minority government would still be better equipped than no government,” De Beukelaer said. Here’s how we’ve ended up here: While Dutch speakers outnumber French-speaking Walloons in the country as a whole, the reverse is true in Brussels. So to guarantee Dutch-speaking representation, the Brussels government has to comprise a majority from both language groups. On both sides, a set of parties have to agree to work with each other before they cut a full-blown coalition deal. After the June election, an agreement on the French-speaking side was relatively straightforward. The center-right MR became Brussels’ largest French-speaking party, and it quickly cut a deal with the Socialist Party and Les Engagés. On the other side of the linguistic divide, the Flemish Greens won the Dutch-speaking vote, and in November clinched an accord with the socialist Vooruit, the liberal Open VLD and the Flemish-nationalist N-VA, the party of Belgium’s new Prime Minister Bart De Wever.  You’ll have guessed by now that victory cries were short-lived. The French-speaking socialists refused to govern with the Flemish nationalists. The liberals of the open VLD in turn refused to govern without the Flemish nationalists.  The French-speakers are “kidding themselves” if they think they can fix Brussels’ problems without collaborating with the Flemish nationalists who head the federal government, Open VLD’s chief negotiator, Frédéric De Gucht, said. Ahmed Laaouej, the Brussels president of the Socialist Party, didn’t respond to an interview request. In an Instagram video posted last week, he called the Flemish nationalists a “separatist, anti-Brussels and anti-diversity party” and said that if it was involved in a Brussels government it would show “contempt for the Brussels region and its interests.” No one is budging. PRESSING THE NUCLEAR BUTTON While Belgium is split into three regions, Brussels itself is divided into 19 municipalities. Each has their own mayor. They manage the region’s six police forces. As crime and violence soars, Belgium’s federal government has said it wants to merge these into a single entity. Unsurprisingly, Brussels politicians have lambasted the decision. They argue the police’s real problem is not the elaborate organization but a lack of national funding, and that a merger risks alienating the police from Brussels’ citizens. And as an example of the bitter language-divide recrimination, some, such as Défi’s François De Smet, blame the new national government for imposing a Flemish-nationalist pet project against Brussels’ will. Flemish parties say it just makes sense. Like with a decision to send all police calls through a joint dispatching system, “you don’t have to be a Flemish nationalist to know that’s a better system,” Open VLD’s De Gucht said. In the stalemate, some fear Brussels’ self-determination is slipping away. The president of the MR party, Georges-Louis Bouchez, has indeed raised the threat that Brussels, if it doesn’t get its act together, could be placed under federal government control. That would be akin to pressing the nuclear button. It’s also probably impossible. Legally speaking, the idea is “fiction,” according to Sinardet. But in theory, the federal government could make additional payments to Brussels conditional on certain measures, similar to how the EU made Greece reform in return for a bailout, he said. As recently as the early hours of Friday morning there was another shooting in the south-west of the city. Sooner or later, Brussels’ chaos will force someone to act. But seemingly not yet. “I’m embarrassed by the political circus,” De Beukelaer said.

President Donald Trump declared the far-reaching, disruptive actions of his first 40 days in office as the first wave of a “common sense revolution,” blaming Democrats during his joint address to Congress on Tuesday for lingering problems and claiming credit for a wrecking ball approach that is roiling Washington and the world. “America’s momentum is back,” Trump said in a stemwinder that lasted an hour and 40 minutes. “Our spirit is back. Our pride is back.” While most presidents use such addresses to tout new programs, unveil ambitious initiatives or whip legislation, Trump offered a laundry list of all that he had obliterated — pacts with foreign governments, regulations, diversity initiatives. Boasting about his early flurry of executive orders, Trump said that everything — withdrawing the U.S. from climate treaties, the World Health Organization and the UN human rights council; slashing the federal government, freezing regulations and all foreign aid — was an effort “to restore common sense, safety, optimism and wealth.” “The people elected me to do the job, and I’m doing it,” he continued, declaring it a “a time for big dreams and bold action.” On a day that saw the stock markets dip following Trump’s imposition of 25 percent tariffs on Canada and Mexico — and in the midst of a high-stakes diplomatic staredown with Ukraine that has allies anxious — Trump promised that it was all part of a plan to enrich the country and force neighbors to crack down on the drug trade. “My administration has launched the most sweeping border and immigration crackdown in American history. And we quickly achieved the lowest numbers of illegal border crossers ever recorded,” Trump said. “The media and our friends in the Democrat party kept saying we needed new legislation. We must have legislation to secure the border. But it turned out that all we really needed was a new president.” Trump last year urged Republicans to thwart a bipartisan border bill to deny former President Joe Biden a win, just months before the election. His taunting of his predecessor typified a speech that was full of all the familiar Trumpian self-congratulation, hyperbole and withering partisan attacks. Trashing the man who defeated him in 2020 as “the worst president in American history,” Trump blamed his predecessor for illegal immigration, stubborn inflation and, specifically, the high price of eggs, and said his first month in office is the best ever. “Do you know who number two is?” Trump asked. “George Washington.” Opening his speech by recounting his victory in last November’s election, Trump drew shouts and protests from the Democratic side of the aisle. One lawmaker, Rep. Al Green, (D-Tex.), was removed from the chamber after continuing to shout back at the president in protest of the Republican plan to cut Medicaid. Trump groused that there was “nothing I can do” to make Democrats “stand or smile or applaud” him, claiming that his victory amounted to a “mandate like has not been seen in many decades.” Describing the Republicans’ reconciliation bill as a package of “tax cuts for everybody,” he sarcastically suggested that Democrats should vote for the proposal they have derided as a giveaway for corporations and the wealthy. “I’m sure you’re going to vote for those tax cuts because otherwise I don’t think the people will ever vote you into office,” Trump said. His dismissal of the opposition party, who he needled and mocked throughout the speech, prompting several Democrats to walk out of the House chamber mid-speech, came as Republicans may need Democratic votes to avoid a government shutdown. And it underscored an inclination that has thus far defined Trump’s second term — an even greater indifference to countenancing establishment views or bipartisan buy-in for his MAGA agenda. While declaring that lowering costs for families was his top priority, Trump devoted only a few lines to the subject. Claiming he was “working hard” to get the price of eggs back down, he implied that the job was in the hands of his secretary of Agriculture, who he addressed directly like he might have done in a boardroom scene from ‘The Apprentice.’ “Secretary, do a good job on that one,” he said, pointing at Brooke Rollins. He continued with the reality-show style theater throughout the speech, signing an executive order renaming a wildlife refuge after a woman who was murdered by an undocumented immigrant, naming a pediatric cancer patient in the balcony an honorary Secret Service agent and admitting a star student, also in attendance, into West Point. Trump devoted more time to defending his and Elon Musk’s chainsaw-styled slasher approach to reducing the size of the federal bureaucracy. After thanking Musk, who he described as “the head of DOGE (the Dept. of Government Efficiency),” Trump drew laughs as he listed several of the aid programs he had cut: “a $3.5 million consulting contract for lavish fish; monitoring, $1.5 million for voter confidence in Liberia; $14 million for social cohesion in Mali; $59 million for illegal alien hotel rooms in New York City.” And he mischaracterized “shocking levels of incompetence and probable fraud in the Social Security program,” suggesting that payments were being made to thousands of deceased individuals, a debunked claim that Trump has made repeatedly. Musk, who attended the address Tuesday night, has had to scramble to rehire several of the critical employees he indiscriminately fired, including those who oversee the country’s nuclear weapons. And the tech billionaire has acknowledged making a number of mistakes. But Trump framed DOGE’s work as part of his economic agenda. “By slashing all of the fraud, waste and theft we can find, we will defeat inflation, bring down mortgage rates, lower car payments and grocery prices, protect our seniors, and put more money in the pockets of American families,” Trump said. He also touted $1.7 billion in new investments in America since he took office and defended the controversial approach with tariffs that has shaken the stock market and angered allies in Canada and Mexico. Trump demanded that those countries “do much more” to tackle the flow of illegal drugs to America, which he has used as his rationale for the tariffs — despite almost no fentanyl having entered the U.S. from Canada. In a nod to the political risk of those policies, Trump spoke directly to American farmers, who required a $29 billion bailout by Trump following tariffs in his first term. But he offered no specifics. “I love the farmer,” he declared. “Our farmers are going to have a field day right now.” Tariffs, Trump said, “are about making America rich again and making America great again. And it’s happening. And it will happen rather quickly. There will be a little disturbance. But we’re okay with that. It won’t be much.” Losses on the major stock indexes this week following Trump’s imposition of 25 percent tariffs on Canada and Mexico wiped out all gains for the S&P 500 since Election Day. Turning to foreign policy some 80 minutes into his speech, Trump returned to the brash imperialism outlined in his inaugural address, vowing to wrest control of the Panama Canal away from the Chinese and suggesting that a looming independence vote in Greenland would ultimately result in the U.S. taking it away from Denmark. “One way or the other we’re going to get it,” Trump said. He blamed Biden for the messy 2021 withdrawal from Afghanistan, the war in Gaza that he said wouldn’t have happened on his watch and for spending too much money backing Ukraine after Russia’s 2022 invasion. Just more than 24 hours after pausing all U.S. military aid to Ukraine in an effort to pressure President Volodymyr Zelenskyy to sign an economic agreement with the U.S. and engage in peace talks with Russia, Trump read a letter Zelenskyy wrote him Tuesday expressing regret over last week’s blow-up in the Oval Office and desire to achieve peace. “I appreciate that he sent this letter,” Trump said, offering nothing further about whether the agreement to share profits from Ukraine’s rare earth minerals was still on the table. He criticized Europe for spending more on Russian energy than aid to Ukraine and called out Democrats — and Massachusetts Sen. Elizabeth Warren, in particular — for criticizing his approach of pressuring Ukraine while accepting a number of Russian conditions and even parroting Kremlin talking points. “Do you want to keep it going for another five years?” he said, looking at the Democratic side and keying on Warren. “Yeah, yeah, you would say — Pocahontas says yes.”

LONDON — Europe enters a pivotal week for the future of its security after a summit in London that delivered plenty of promises but few concrete answers. A group of world leaders — including Volodymyr Zelenskyy of Ukraine but not U.S. President Donald Trump — spent Sunday afternoon in the palatial surroundings of the U.K. capital’s Lancaster House chewing over the history-changing question of whether America is still at the heart of the western defense alliance. “There was a renewed sense of urgency” to safeguard the continent’s collective security after the shocking scenes witnessed in Washington on Friday, according to one European diplomat close to the discussions. That was a reference to Trump’s vicious verbal assault on Zelenskyy at the White House, which left European leaders wondering whether the U.S. still sees itself as an ally. Shortly after the stunning 15-minute scolding, EU foreign policy chief Kaja Kallas even suggested that America no longer led the “free world;” and while the temperature cooled over the weekend, the nagging doubts haven’t gone away. U.K. Prime Minister Keir Starmer, who organized the March 2 summit before the Trump-Zelenskyy spat, said on Sunday that Europe “must do the heavy lifting” when it comes to protecting Ukraine from Russian expansionism from now on, indicating the reality of a reduced American presence on the world stage. After ingratiating himself with the U.S. president earlier in the week Starmer sees himself as something of a bridge-builder, and Britain along with France and Ukraine are now to draw up a peace plan and then present it to Trump — a marked change from previous assumptions that the U.S. would take the lead. The prospective plan includes a U.K.-French-led peacekeeping force, which Starmer called a “coalition of the willing” — an echo of the U.S.-led group of countries that invaded Iraq in 2003. Who else is in that coalition is still up in the air. “A number” of countries signed up to the peacekeeping force behind closed doors at the summit, Starmer said, adding that it needed U.S. backing to work. He declined to say which governments had committed. He said the U.S. was still “a reliable ally” and that “we agree with the president on the urgent need for a durable peace, now we need to deliver together.” ALL EYES ON THURSDAY’S MEETING OF EU LEADERS But governments are also coming round to the view that an increased role in Ukraine’s future security means greater military capacity, and in turn the financing to pay for it. Those realities are likely to be front and center at a meeting of the EU’s 27 national leaders in Brussels on Thursday. Despite leading Sunday’s charge, Starmer and the U.K., of course, won’t be in attendance. Speaking to French daily Le Figaro after the summit, French President Emmanuel Macron demanded that NATO countries invest more in their armies. “For the past three years, the Russians have been spending 10 percent of their GDP on defense,” he said. “We need to prepare what comes next, with an objective of 3 to 3.5 percent of GDP.” U.K. PM Keir Starmer said on Sunday evening that Europe “must do the heavy lifting” when it comes to protecting Ukraine from Russia. | Pool photo by Toby Melville/WPA via Getty Images NATO’s current spending target is an annual 2 percent of gross domestic product, but many European governments don’t even manage that, much to Trump’s annoyance. France just sneaks over the line at 2.1 percent. In order to massively jolt European defense budgets the French president urged the bloc to raid centralized EU programs “that aren’t being used.” “We need to give a mandate to the [European] Commission to use innovative funding,” he said. “That means either common borrowing, or the European Stability Mechanism [the bailout fund created in the wake of the eurozone debt crisis] … in a first instance we need €200 billion to be able to invest.” As she left the summit, European Commission President Ursula von der Leyen said now was the moment to “urgently rearm Europe.” It all points toward Thursday’s gathering being a critical moment. A historic announcement on defense budgets was possible, said the European diplomat, speaking on condition of anonymity. But that won’t be easy given that some leaders, notably Hungarian Prime Minister Victor Orbán, are more supportive of Russian President Vladimir Putin than of any plan to defend Europe from him. NATO chief Mark Rutte, who also attended the London summit, said some countries had pledged to “ramp up” defense spending ― but again, details about which ones, and by how much, remain elusive. TALK IS CHEAP Europe’s defense industrial base already has limited capacity, meaning defense spending increases could be slow to yield actual results. Beyond the increased rhetoric from European leaders, the lack of detail is glaring. Crucially, there are also no details of what any peace plan would actually contain or how Starmer and Macron will be able to get buy-in from the White House. A second European diplomat noted that Zelenskyy desperately needs to find a way to create a relationship with Trump and sign the U.S.-Ukraine minerals deal, which was supposed to have been finalized last week. The diplomat said the current situation “involves U.K. and France stepping up to lead,” but that “the logic is also that the minerals deal will give the U.S. a commercial stake and business interests physically on the ground so provides a degree of protection.” President Zelenskyy desperately needs to find a way to create a relationship with Donald Trump and sign the U.S.-Ukraine minerals deal. | Pool photo by Toby Melville/WPA via Getty Images And this says nothing about how Europe will get Putin to the table to negotiate their prospective peace plan. The Kremlin has already ruled out the presence of a NATO peacekeeping force in Ukraine. Given the public celebrations by Putin’s allies at Trump’s numerous slapdowns of Zelenskyy, the Russian president could hold out for a White House-led approach. After Sunday’s summit, Zelenskyy told Sky News there had been communication between the White House and his administration since Friday’s televised argument, but “not on my level.” He also reiterated his vow to resign if Ukraine was given NATO membership. Another attendee of Sunday’s summit ― and likely a crucial player at the next gathering on Thursday ― Polish Prime Minister Donald Tusk sounded bullish in calling for Europe to end its reliance on U.S. security guarantees. “Five hundred million Europeans are asking 300 million Americans to protect them from 140 million Russians,” he said. “Can you count? Count on yourself. Start counting on yourself,” he said. Clea Caulcutt contributed to this article from Paris.

BRUSSELS — Spain has urged the EU to break one of its biggest taboos and force governments to become liable for each other’s debt — to double the bloc’s spending power. Madrid’s center-left government demanded a repeat of the EU’s joint borrowing scheme, used in a limited way from 2021 to finance post-Covid recovery programs and due to expire next year, as a permanent way of super-sizing its central budget. While the idea of more joint debt is popular in Spain, France and Italy, it has long been strongly opposed by Germany and other mainly northern European countries, which don’t want to be on the hook for other governments with higher borrowing costs. With the EU organizing its budget over a seven-year period, the Spanish government set out its priorities ahead of the first official meeting of EU commissioners on Tuesday evening, where they will begin the arduous task of sketching out the 2028-2034 version. “A common loan-based mechanism financed by joint borrowing would sustain strategic investments and finance European public goods,” the government wrote in an informal document seen by POLITICO. Spain is the first major European country to officially outline how the EU’s next seven-year budget should look. The Commission is expected to put forward its proposal this summer. The EU’s total budget currently stands at €1.2 trillion which, on a yearly basis, is under one percent of its total economic output. SLIPPERY SLOPE An even more controversial idea Spain is pushing consists of postponing when the EU’s €300 billion debt is paid back to try to improve cash flow. The move is designed to create more space for the Commission to fund common priorities including the transition “toward a green economy” which, according to Spain, deserves more money. “This reprogramming will alleviate short-term fiscal pressures, ensure liquidity in the EU bonds market and allow continued investments for the future European economic model,” the document reads. But the so-called frugal countries see this idea as a slippery slope toward creating a “fiscal union” where the Commission permanently takes on debt on behalf of its 27 members. The EU’s budget commissioner dismissed this option during his hearing with EU lawmakers in November.   Instead, he suggested introducing EU-wide taxes to repay the bloc’s post-Covid debt. In 2021, the Commission proposed new duties on domestic and foreign carbon emissions, and on the profits of multinationals; together the measures were expected to generate €36 billion annually from 2028. The EU’s total budget currently stands at €1.2 trillion which, on a yearly basis, is under one percent of its total economic output. | Kirill Kudryavtsev/Getty Images But national governments opposed the idea on the grounds the revenues are already being levied at the national level. In its document, Spain supports new EU-wide taxes that “do not detract from member states’ existing revenues” but rather increase the size of the EU budget. To allow even more spending, Madrid suggested using part of the €422 billion held by the European Stability Mechanism, the eurozone’s bailout fund, to tackle the economic fallout from the Russian invasion of Ukraine. “As shown by the pandemic and Russia’s war of aggression against Ukraine, what constitutes a threat to stability is not confined in the financial realm but also present in the real economy,” the Spanish government wrote.

BRUSSELS — In a city where even the curve of a banana can spark rulemaking, the mere whisper of “deregulation” has long posed an existential quandary. But shifting political tides across the Atlantic may finally force Brussels to confront this taboo. Thanks in no small part to the election of Donald Trump, those yearning to rewrite — or torch — the financial rulebooks now have an excuse to reframe the debate. Just don’t call it deregulation. The preferred European euphemism is “competitiveness.” With Trump reportedly considering shrinking, merging, or removing banking regulators in the U.S. altogether, and ally Elon Musk calling for the elimination of the Consumer Financial Protection Bureau (CFPB) as part of sweeping government cuts, the stage is set for a frenzy of deregulation on Wall Street — if not beyond. In November, many were caught off guard when European Commission President Ursula von der Leyen signaled a similar gear shift for Europe with her red-tape-slashing agenda for her second five-year term. European institutions now have little choice but to pay close attention. The head of the French central bank, François Villeroy de Galhau, warned in November that “a wind of deregulation” was blowing from across the Atlantic, cautioning that it could reshape the global regulatory landscape. Wim Mijs, head of EU banking lobby the European Banking Federation, told POLITICO that EU banks were alert to Trump’s “aggressive deregulation agenda” and his potential distancing of America from multilateral institutions where global finance rules are agreed.   Yet in Europe it’s competitiveness, not deregulation, that has become the catch-all term for such responses, thanks in large part to the publication of two landmark reports this year by former Italian prime ministers Enrico Letta and Mario Draghi. François Villeroy de Galhau warned in November that “a wind of deregulation” was blowing from across the Atlantic, cautioning that it could reshape the global regulatory landscape. | Gabriel Bouys/Getty Images Responding to President Joe Biden’s massive spending programs — dubbed Bidenomics — both reports called for a radical shakeup in how Europe’s financial markets operate to better compete with the United States and China. Trump’s renewed push for deregulation has only added substance to their findings, putting further pressure on Europe to adapt or risk falling behind. BETWEEN A ROCK AND A HARD PLACE All of this poses an awkward conundrum for the bloc’s financial regulators, none of whom wish to be held responsible for another financial crisis, but who risk looking out of touch amid the industry-pleasing push for lighter regulations. On one hand, loosening rules could help Europe stay competitive; on the other it risks undermining safeguards meant to prevent another financial crisis.  The EU’s new finance commissioner, Maria Luís Albuquerque, highlighted the dilemma when she revealed during her confirmation hearing that she doesn’t “like the word deregulation.” “[The finance sector] needs regulation because of the consequences when it fails,” Albuquerque said. But she appealed to both sides, saying the EU needs to “put the brakes on legislation temporarily” and to think carefully about how to make future legislation more fit for purpose. Thus far, despite the eagerness of industry, Albuquerque has proved more regulatorily hawkish than hoped. In political negotiations she has criticized the dilution of new rules to the point they no longer deliver on the goals of original proposals. Hence, some say, the appeal of the “competitiveness” moniker: It’s direct enough to be impactful, but vague enough to be plausibly deniable. “The beauty of a political buzzword is that it is used in every political speech without attaching any meaning,” Mijs said, adding that often “nobody knows [what meaning is intended], but it feels good.” Those worried about a deregulation cycle triggering a destabilizing race to the bottom should look to the bigger picture, finance executives say. Many have quietly worried for some time about the complexity of the EU regulatory environment. Frédéric de Courtois, deputy CEO of French insurer AXA and president of the EU insurance lobby, told POLITICO that complexity stood to make the bloc “too risk-averse, too cautious.” “I’m not saying that we should compete with the U.S. on deregulation. I’m saying that we are not isolated and that we need to have good regulation that doesn’t impact negatively our competitiveness,” de Courtois said. Sandro Pierri, CEO of BNP Paribas’ asset management wing, said for asset managers, who are bound by fiduciary duty — a commitment to provide the best returns for their clients — the current regulatory burden obliges them to invest elsewhere whether they like it or not. | Philippe Huguen/Getty Images To his mind, Trump’s return could be a positive trigger if it encourages Europe to change. “We just need to stop regulating,” he said. BE CAREFUL WHAT YOU WISH FOR For Mijs, regulatory simplification of this kind is urgently needed to make finance rules more workable. “[In the EU] we die by beautiful intentions because we start with something that is simplifying and it’s good,” he said. “At the end of the process, we have built something that is like a spaghetti of rules that is incomprehensible.” Regulatory fatigue is also top of mind. In total, about 50 new financial services laws have been passed in the last five years, many of these being positioned for secondary rulemaking in the years to come. For instance, the latest rules on the use of outside IT providers by finance firms have the industry bracing for a deluge of follow-up technical rules, legitimizing industry claims that compliance will hinder corporate investment. Sandro Pierri, CEO of BNP Paribas’ asset management wing, said for asset managers, who are bound by fiduciary duty — a commitment to provide the best returns for their clients — the current regulatory burden obliges them to invest elsewhere whether they like it or not. “Our job is to simply make sure that we deploy the capital in the best possible way for the clients. … It’s a policy job to create the conditions for us to allocate more to Europe,” he said. EU countries have also been calling on the Commission to slash red tape. In October, France, Germany and Italy co-wrote a letter asking for a pause on finance rules, saying the EU should “shift gears and regain its capacity to compete in the global arena” and “put stronger emphasis on the competitiveness of the financial sector, particularly banking.”  To the surprise of many — especially those who drafted the original legal texts now on the chopping block — finance executives may be about to get what they want. Since coming out in favor of simplification in November, von der Leyen has announced a plan to consolidate three of the EU’s flagship environmental disclosure laws in a sweeping legal text scheduled to be published in February. THE BASEL DILEMMA And yet, regulators are not the only ones who are worried about putting the profitability of the finance sector ahead of its safety. Thierry Philipponnat, chief economist at the NGO Finance Watch, said the “competitiveness” agenda was increasingly being used as an excuse to avoid completing the crucial work necessary to prevent another financial crisis. “Recent moves to delay and dilute vital regulatory protections reflect a worrying trend where ‘competitiveness’ is repeatedly used as a pretext to weaken essential safeguards against financial risks,” he said. Now, with Donald Trump returning to the White House in a matter of weeks, the future of the rules looks uncertain — which creates a dilemma for the EU. | Chip Somodevilla/Getty Images This applies especially to global banking rules known as the Basel 3 standards. While the EU, U.K. and other countries have enacted the global rules in national legislation, the U.S. has delayed doing so following massive lobbying from the banking industry. Now, with Trump returning to the White House in a matter of weeks, the future of the rules looks uncertain — which creates a dilemma for the EU. Should the bloc push ahead with Basel 3 for the sake of banking stability and risk giving U.S. banks a competitive edge in the process? Or should it change direction and contribute to a broader weakening of standards? In a sign that regulators may be looking to stay the course, the EU and U.K. have hinted at a coordinated response if the proposals are ripped apart in the U.S. Villeroy de Galhau, speaking in Paris in November, called for a compromise that would simplify EU rules without necessarily upending global standards, explaining that “simplifying does not mean deregulating.” The Commission’s job will be “to find the fine line between a race to the bottom and the objective to stay competitive,” said AXA’s de Courtois. The industry, as a whole, is not opposed to such an outcome. No matter how onerous the EU’s suite of incoming rules may be — from the Basel package to clearing updates to cyber rules for finance — industry more often than not prefers certainty over uncertainty. In this case, compliance with well-forecast rules is preferable to the limbo of new rules being torn up and renegotiated. One thing everyone can be sure of is that even if things end up getting substantially watered down, nobody will be keen to call the move deregulation.