BRUSSELS — The U.S. must preserve and grow the dominance of its financial sector worldwide, President Donald Trump argues in his new National Security Strategy. The 33-page document is a rare formal explanation of Trump’s foreign policy worldview by his administration, and can shape U.S. policy priorities. “The United States boasts the world’s leading financial and capital markets, which are pillars of American influence that afford policymakers significant leverage and tools to advance America’s national security priorities,” the document states. “But our leadership position cannot be taken for granted,” it continues, calling on America to leverage “our dynamic free market system and our leadership in digital finance and innovation to ensure that our markets continue to be the most dynamic, liquid, and secure and remain the envy of the world.” The strategy lists the “world’s leading financial system and capital markets, including the dollar’s global reserve currency status” as one of the U.S. key levers of power. Trump’s comments come as Europe looks to grow its own finance system to reduce the continent’s dependence on Wall Street. The EU has put forward a broad plan to boost its own finance industry by strengthening its single market for investment, and it will draft policy plans in the coming months aiming to boost its banks’ ability to compete globally. It is also creating a digital version of the euro currency, which would reduce its reliance on the dollar and on U.S. payment giants.

BUSAN, South Korea — President Donald Trump on Thursday said he had “an amazing meeting” with Chinese leader Xi Jinping, appearing to tamp down tensions that had been building for months. “Zero, to 10, with 10 being the best, I’d say the meeting was a 12,” Trump told reporters aboard Air Force One, shortly after he left South Korea on his way back to Washington. “A lot of decisions were made … and we’ve come to a conclusion on very many important points.” The agreement, according to Trump, includes a commitment from China to purchase soybeans from American farmers, curb the flow of fentanyl and postpone its export restrictions on rare earths, which are used in everything from iPhones to military equipment. “There is no road block at all on rare earth,” Trump said. “Hopefully, that will disappear from our vocabulary for a little while.” Trump said he intended to immediately lower tariffs on Chinese exports to 47 percent from 57 percent. The result pulls the two nations back from the brink and should induce a significant sigh of relief from capital markets around the world. Details remain sparse and there have been false starts and resets before, but Trump said he could sign an agreement “pretty soon” and that few stumbling blocks remained. Trump also said he plans to visit China in April and that Xi would travel to the United States after that. This was Trump and Xi’s first face-to-face meeting since the G20 summit in Osaka, Japan in June 2019, when the two countries were also in the middle of a trade war. Thursday’s summit in South Korea followed months of renewed tensions that have impeded trade between the two countries, despite several announced truces. While Trump has ratcheted up tariffs on China — at one point as high as 145 percent — and tightened export controls on high-tech goods, Beijing has responded with its own devastating pressure campaign. That includes reducing purchases of American farm goods, which fell by more than 50 percent in the first seven months of 2025. U.S. soybeans farmers, who exported a record $18 billion worth of their crop to China in 2022, have been hit particularly, with just $2.4 billion in shipments to China in January through July. Beijing also imposed new export controls on rare earth materials. Earlier this month, China added five more rare earth elements to its control list and, much more controversially, outlined a plan requiring foreign companies that use even tiny amounts of Chinese-sourced rare earths to obtain a license from Beijing to export their finished products. U.S. officials described that move as an intolerable attempt by China to control global supply chains, and Trump threatened new 100 percent tariffs to take effect on Nov. 1. But it appears both sides wanted to avoid that kind of escalation. During the weekend, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, after meeting with Chinese Vice Premier He Lifeng in Malaysia, said they believed Beijing was prepared to delay its rare earth restrictions for a year, make “substantial” purchases of American farm goods and attempt to curb shipments of fentanyl precursor chemicals to the U.S.

Mario Draghi has a message to the EU’s leaders: I did my bit, now you do yours. Member countries had praised his proposals for fixing the bloc’s sagging economy when he delivered them. One year on, they’re still dragging their feet on actually following the advice — and Draghi is taking on the role of agitator. Europe has introduced few of the recommendations from his European Commission-backed plan to boost competitiveness, which includes continental-scale investments in infrastructure, a revamped energy grid providing affordable power to industry, coordinated military procurement to wean the bloc off of U.S. arms, and a unified financial sector that can pour capital into EU tech startups. Only last month, Draghi warned that governments must make “the massive investments needed in the future,” and “must do it not when circumstances have become unsustainable, but now, when we still have the power to shape our future.” DRAGGING IT OUT   It’s not the first time that the ex-European Central Bank chief has issued dire warnings on Europe’s dimming prospects. When he first presented his report in Brussels, Draghi spoke of the “slow agony” of decline. At the time, EU leaders across the political spectrum heaped praise on the MIT-trained economist’s reforming vision.  French President Emmanuel Macron said that Europe needed to “rush” to deliver the Draghi agenda. Spanish Prime Minister Pedro Sánchez threw his weight behind the reforms to avoid what he called the risk of falling behind in the most “cutting-edge technological sectors.” Even Germany’s Friedrich Merz, who disagrees with Draghi on the key issue of joint EU debt, parroted the economist when he said that Germany would “do whatever it takes” to shore up its defense sector — a reference to Draghi’s now-famous dictum on the eurozone crisis. But while leaders say they agree on the need for a more cohesive EU, behind the scenes the reform agenda is stalling. “The Draghi report has become the economic doctrine of the EU, and everything we’ve proposed since has been aligned with it,” Stéphane Séjourné, the Commission executive vice president charged with industrial strategy, told POLITICO. Still, he admitted that the “’Draghi effect’ too often fades when legislative texts are discussed by member states.”    A report by the European Policy Innovation Council think tank found that only 11 percent of the Draghi report had been acted on. In the field of energy, no actions have been completed at all. “It’s national interests, it’s national policies, sometimes it’s party political,” said MEP Anna Stürgkh, who recently authored a European Parliament study on the electricity grid. Speaking at an event about the Draghi report one year on, the Austrian Renew Europe lawmaker explained that it often came down to individual countries not wanting to share cheap energy with their neighbors.  In the field of energy, no actions have been completed at all. | Hannibal Hanschke/EPA “If they interconnect with countries that have higher energy prices, their prices will go up,” she said. “That is a fact.”  “It’s not the Commission which is not doing the banking union,” Spanish economist and former MEP Luis Garicano said at the same event, referencing the push to break down the thicket of national rules and vested interests that keeps the banking sector fragmented and country-specific. “It’s the governments that don’t actually want to allow the capital to flow from one country to the next.”  That same parochialism comes up again and again, from common debt — vetoed by so-called frugal countries like Germany and the Netherlands — to defense or to financial sector integration. It doesn’t help that countries are tightening their belts after the Covid-era spending splurge, leaving little money to pursue strategic aims. THE BULLY PULPIT    Draghi is a man used to wielding power directly, having injected hundreds of billions of euros into the eurozone economy during his tenure as ECB president. Earlier this decade he served over a year and a half as the prime minister of Italy.  In his latest incarnation as Europe’s Jiminy Cricket — the unheeded moral advisor — Draghi only has persuasion at his disposal. If on the one hand the frantic pace of events has drawn attention and bureaucratic resources away from the reform program, it’s also served as a powerful validation of his thesis. Draghi has long been a proponent of pooled sovereignty — which is to say that the EU’s member countries are more powerful when they act as a bloc, even if they lose some freedom at the national level. The problem is that it’s up to governments to decide to act. By February, Draghi was already chiding governments for putting the brakes on meaningful change during an appearance in front of the European Parliament. “You say no to public debt, you say no to the single market, you say no to create the capital market union. You can’t say no to everybody [and] everything,” he said. Now, as an intransigent U.S. embarrasses Europe on the world stage, Draghi has warned the window for change may be closing. The way that President Donald Trump got the better of EU negotiators, who were under pressure from capitals to come to a deal, was a case in point.  This was a “very brutal wake-up call,” Draghi warned at a meeting in the Italian seaside town of Rimini last month.  “We had to resign ourselves to tariffs imposed by our largest trading partner and long-standing ally, the United States,” he said. “We have been pushed by the same ally to increase military spending, a decision we might have had to make anyway — but in ways that probably do not reflect Europe’s interests.” The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. | Jessica Lee/EPA EYES ON BRUSSELS If Draghi is the brain that dreamed up the EU’s economic reform program, then the Commission’s bureaucrats are the hands charged with implementing it. The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. It’s headed by Heinz Jansen, a German official previously in the Economic Affairs Directorate, and eight staff in total. Critics argue this is a paltry number of staff to be attached to the task force, and that the EU executive could have set up a dedicated directorate. “The president attaches great importance to the implementation of the Competitiveness Compass,” a Commission spokesperson told POLITICO, referring to the EU executive’s plans to implement Draghi’s recommendations. According to officials who spoke with POLITICO, the task force mainly works on delivering wins on the ground, pooling funds and channeling them into a handful of core projects that might give Europe a shot at competing with the U.S. and China technologically. The Commission merged several programs into a new €410 billion fund to finance common industrial aims in its budget proposal, and is issuing a recommendation to governments to coordinate their investments this fall. But here, too, that will inevitably trigger tensions. “Can you really imagine a big EU country funding an industrial plant in Slovenia with its own taxpayers’ money?” asked one EU official. “There is a lack of ambition … the EU executive is taken hostage by some big countries.” “For years, the European Union believed that its economic size, with 450 million consumers, brought with it geopolitical power and influence in international trade relations,” Draghi said. “This year will be remembered as the year in which this illusion evaporated.” Jacopo Barigazzi and Nicholas Vinocur contributed reporting to the article.

BRUSSELS — After its defeat by the British in the First Opium War, the Qing dynasty signed a treaty in 1842 that condemned China to more than a hundred years of foreign oppression and colonial control of trade policy.   It was the first of what came to be known as “unequal treaties,” where the bullying military and technological heavyweight of the day imposed one-sided terms to try to slash back its massive trade deficit. Sound familiar? Fast-forward nearly two centuries, and the EU is starting to understand exactly how that feels. European Commission President Ursula von der Leyen’s dash to Donald Trump’s Turnberry golf resort in Scotland last month to seal a highly unbalanced trade deal has raised fears among politicians and analysts that Europe has lost the leverage that it once thought it had as a leading global trade power.  Von der Leyen’s critics were quick to assert that accepting Trump’s 15 percent tariff on most European goods amounted to an act of “submission,” a “clear-cut political defeat for the EU,” and an “ideological and moral capitulation.” If she had hoped that would keep Trump at bay, a rude awakening was in store. With the ink barely dry on the trade deal, Trump doubled down on Monday by threatening to impose new tariffs on the EU over its digital regulations that would hit America’s tech giants. If the EU didn’t fall into line, the U.S. would stop exporting vital microchip technologies, he warned. His diatribe came less than a week after Brussels believed it had won a written guarantee from Washington that its digital rulebook — and sovereignty — were safe.  Trump can wield this coercive advantage because — just like the 19th century British imperialists — he holds the military and technological cards, and is well aware his counterpart lags miles behind in both sectors. He knows Europe doesn’t want to face Russian President Vladimir Putin without U.S. military back-up and cannot cope without American chip technology, so he feels he can dictate the trade agenda. EU Trade Commissioner Maroš Šefčovič strongly implied last month that the deal with the U.S. was a reflection of Europe’s strategic weakness, and its need for U.S. support. “It’s not only about … trade: It’s about security, it is about Ukraine, it is about current geopolitical volatility,” he explained. The trade deal is a “direct function of Europe’s weakness on the security front, that it cannot provide for its own military security and that it failed to invest, for 20 years, in its own security,” said Thorsten Benner, director at the Global Public Policy Institute in Berlin, who also pointed to failures to invest in “technological strength” and to deepen the single market.  Just like the Qing leadership, Europe also scorned the warning signs over many years. “We are paying the price for the fact we ignored the wake-up call we got during the first Trump administration — and we went back to sleep. And I hope that this is not what we are doing now,” Sabine Weyand, director-general for trade at the European Commission, told a panel at the European Forum Alpbach on Monday. She was speaking before Trump’s latest broadside on tech rules.   After its defeat by the British in the First Opium War, the Qing dynasty signed a treaty in 1842 that condemned China to more than a hundred years of foreign oppression and colonial control of trade policy. | History/Universal Images Group via Getty Images It is clear that Trump’s volatile tariff game is far from over, and the 27-nation bloc is bound to face further political affronts and unequal negotiating outcomes this fall. To prevent the humiliation from becoming entrenched, the EU faces a huge task to reduce its dependence on the U.S. — in defense, technology and finance. STORMY WATERS  The Treaty of Nanking, signed under duress aboard the HMS Cornwallis, a British warship anchored in the Yangtze River, obliged the Chinese to cede the territory of Hong Kong to British colonizers, pay them an indemnity, and agree to a “fair and reasonable” tariff. British merchants were authorized to trade at five “treaty ports” — with whomever they wanted.  The Opium War began what China came to lament as its “century of humiliation.” The British forced the Chinese to open up to the devastating opium trade to help London claw back the yawning silver deficit with China. It’s an era that still haunts the country and drives its strategic policymaking both at home and internationally. A key factor forcing the Qing dynasty to submit was its failure to invest in military and technological progress. Famously, China’s Qianlong Emperor told the British in 1793 China did not require the “barbarian manufactures” of other nations. While gunpowder and firearms were Chinese inventions, a lack of experimentation and innovation slowed their development — meaning Qing weapons were about 200 years behind British arms in design, manufacture and technology.   Similarly, the EU is now being punished for falling decades behind the U.S. Slashing defense spending after the Cold War kept European countries dependent on the U.S. military for security; complacency about technological developments means the EU now is behind its global rivals in almost all critical technologies. U.S. Trade Representative Jamieson Greer has, for his part, declared the beginning of a new world order — which he dubbed the “Turnberry system” — comparing the U.S.-EU trade accord to the post-war financial system devised at the New England resort of Bretton Woods in 1944.    TURBULENCE AHEAD  With his attack on Monday, Trump demonstrated scant regard for the EU’s desire to bracket out sensitive issues from last week’s non-binding joint statement. The vagueness of the four-page text, meanwhile, leaves room for him to press new demands or threaten retaliation if he deems that the EU is failing to keep its side of the bargain.  More humiliation could follow as the two sides try to work out details — from a tariff quota system on steel and aluminium to exemptions for certain sectors — that still need to be ironed out.   “This deal is so vague that there are so many points where conflicts could easily be escalated to then be used as justification for why other things will not follow through,” said Niclas Poitiers, a research fellow at the Bruegel think tank.    Asked what would happen if the EU were to fail to invest a pledged $600 billion in the U.S., Trump said earlier this month: “Well, then they pay tariffs of 35 percent.”  With his attack on Monday, Trump demonstrated scant regard for the EU’s desire to bracket out sensitive issues from last week’s non-binding joint statement. | Chip Somodevilla/Getty Images It’s a danger the EU is acutely aware of.  The European Commission argues the $600 billion simply reflects broad intentions from the corporate sector that cannot be enforced by bureaucrats in Brussels. But Trump could well use the investment pledge as a trigger point to gun for higher duties.   “We do expect further turbulence,” said a senior EU official, granted anonymity to speak candidly. But “we feel we have a very clear insurance policy,” they added.     What’s more, by accepting the agreement, sold by the EU executive as the “less bad” option following Trump’s tariff threats, Brussels has also shown that blackmail works. Beijing will be watching developments with interest — just as EU-China ties have hit a new low and Beijing’s dominance on the minerals the West needs for its green, digital and defense ambitions hand it immense geopolitical leverage.  ESCAPING IRRELEVANCE But what, if anything, can the bloc do to avoid prolonging its period of geopolitical weakness?  In the lead-up to the deal, von der Leyen repeatedly emphasized that the EU’s strategy in dealing with the U.S. should be built on three elements: readying retaliatory measures; diversifying trade partners; and strengthening the bloc’s single market.     For some, the EU needs to see the deal as a wake-up call to usher in deep change and boost the bloc’s competitiveness through institutional reform, as outlined last year in landmark reports penned by former European Central Bank head Mario Draghi and former Italian Prime Minister Enrico Letta.    In response to the deal, Draghi issued a strongly-worded warning that Trump’s evident ability to force the bloc into doing his bidding is conclusive proof that it faces irrelevance, or worse, if it can’t get its act together. He also played up the failings on security. “Europe is ill-equipped in a world where geo-economics, security, and stability of supply sources, rather than efficiency, inspire international trade relations,” he said.   Eamon Drumm, a research analyst at the German Marshall Fund, also took up that theme. “Europe needs to think of its business environment as a geopolitical asset to be reinforced,” he said.  To do so, investments in European infrastructure, demand and companies are needed, Drumm argued: “This means bringing down energy prices, better putting European savings to use for investment in European companies and completing capital markets integration.”   In comments to POLITICO, French Europe Minister Benjamin Haddad also called for “investing massively in AI, quantum computing and green technologies, and protecting our sovereign industries, as the Americans do not hesitate to do.”   FREE TRADE For others, the answer lies in deepening and diversifying the bloc’s trade ties — Brussels insists the publication of its trade deal with the Mercosur bloc of South American countries is just around the corner, and it is eyeing deals with Indonesia, India and others this year. It has also signaled openness to intensifying trade with the Asia-focused CPTPP bloc, which counts Canada, Japan, Mexico, Australia and others as members.    “In addition to modernizing the [World Trade Organization], the EU must indeed focus on continuing to build its network of trade agreements with reliable partners,” said Bernd Lange, a German Social Democrat who heads the European Parliament’s trade committee.   “To stabilize the rules-based trading system, we should find a common position with democratically constituted countries,” added Lange.   Europe, said Drumm, faces a choice.  “Is it going to reinforce its position as a hub of free trade in a world where globalization is unwinding?” he asked. “Or is it just going to be a battlefield on which increasing competition between China and the United States plays out?” 

SOFIA — Bulgaria’s central bank governor expects the country to keep its political and fiscal discipline, even as its entry into the eurozone transforms its ability to borrow. “Fiscal discipline has been a cornerstone of our macroeconomic framework for more than a quarter of a century, and this should remain unchanged,” Governor Dimitar Radev said in exclusive comments to POLITICO. “The convergence process should reinforce — not weaken — our long-standing commitment to fiscal stability.” Previous expansions of the eurozone have often led to boom and bust cycles in the countries joining. This is because the ECB’s interest rates have tended to be too low for such economies, given that they have lower debt and higher growth potential than the big Western European economies. While the most spectacular example was Greece, most such busts have affected countries that, like Bulgaria, were emerging from communism with stunted financial systems and controls. But fears of a debt-fueled spending spree once Bulgaria secures low interest rates and easier access to international capital markets are misplaced, Radev said. “We are fully aware that joining the eurozone implies adopting a policy framework designed for the whole area,” Radev said. “The solution is to strengthen national policies, particularly in fiscal and structural domains, to ensure resilience under a common monetary regime.” The European Commission and the European Central Bank gave Bulgaria the final approval last week to adopt the euro on Jan. 1, 2026, making it the 21st member of the currency union. It’s a historic moment for the Balkan country of 6.4 million, which first committed to the step in 2007 but faced years of delays — most recently due to a bout of inflation after the pandemic and Russia’s invasion of Ukraine. In order to join the euro, Bulgaria’s average inflation rate from April 2024 to April 2025 had to fall within 1.5 percentage points of the rate of the three EU countries with the lowest inflation. It jumped to 4 percent at the start of the year as various measures to protect the population from the inflation surge — such as VAT holidays on restaurants, bread and flour — expired. However, it fell back to an annual average of 2.7 percent through April, with the help of a substantial drop in state-directed administrative prices. The numbers may now look alright but Brussels noted that Bulgaria still faces challenges in fighting corruption and improving judicial independence. Radev made clear that Bulgaria’s new status won’t radically alter its economic philosophy. “The key challenge is not whether we can borrow more, but whether we remain committed to using debt in a prudent and growth-oriented manner,” he said. NEW PRESSURES Bulgaria’s central bank, too, will face a significant adjustment. Under the currency board regime, inflation has been kept largely in check not through interest rate policy — which Sofia has ceded — but through fiscal discipline and tax policy. The Bulgarian National Bank’s main levers have instead been bank reserve requirements, currently set at 12 percent, and the interest rate charged on those reserves, which is set at zero. But it will lose control of both those levers from next year, with potentially big consequences: The ECB’s reserve requirement is only 1 percent. That means that, other things being equal, Bulgarian banks will suddenly have a lot more money available to lend, stoking a credit boom that is already in full swing: Mortgage lending was up 26 percent in the year to April, while consumer credit was up 14 percent. The Bulgarian National Bank’s main levers have instead been bank reserve requirements, currently set at 12 percent, and the interest rate charged on those reserves, which is set at zero. | Vassil Donev/EFE via EPA Joining the eurozone and shedding the currency board removes an automatic discipline mechanism and makes the Stability and Growth Pact rules — a framework that the EU has deliberately made more flexible — the ultimate constraint on fiscal policy. Those rules are all enshrined in national law too, but in its convergence report, the ECB noted that “further progress is still desirable” to ensure that Bulgaria’s fiscal council, which is responsible for monitoring the government’s observance of the rules, can provide adequate accountability. “It is a structural characteristic of the monetary union that monetary policy is common, while fiscal policies remain national,” Radev said, acknowledging the potential asymmetries. “We should not expect the ECB to tailor policy for individual economies — the responsibility lies with national authorities to align and adapt.” DIGITAL EURO AND MONETARY INNOVATION Bulgaria is joining the eurozone at a unique juncture: the potential introduction of a digital euro. Banking associations across the bloc are fretting that this will make their members more susceptible to deposit runs and crimp their ability to lend, if designed wrongly. That could be a particular problem for Bulgaria, where banks play an even larger role in financing the economy than in most parts of the eurozone, due to the lack of a domestic capital market. While Radev dismissed concerns that the digital euro would complicate Bulgaria’s entry, he acknowledged it adds “a layer of strategic thinking, particularly in the payments and technology domains.” He added that Bulgaria is participating actively in Eurosystem discussions about the digital euro’s design, advocating a model that preserves financial stability and protects privacy. “Any digital euro must respect European values, including the right to privacy,” he said, calling for a “calibrated approach” to avoid creating a surveillance tool. He argued that Bulgaria’s experience under the currency board — which has enforced conservative reserve management and strict liquidity practices among commercial banks — positions it well to manage the risks associated with a future digital euro. A CONSERVATIVE FORCE As Bulgaria prepares to take its seat at the table in Frankfurt, Radev signaled that the BNB will keep a cautious, stability-focused approach to monetary policy. While avoiding the traditional ‘hawk’ or ‘dove’ labels, Radev made clear he will side with policies that strengthen resilience, reduce fragmentation, and safeguard price stability in the euro area. “I lead one of the more conservative central banks, and we have no intention of revisiting that stance,” he said.

PARIS  —  The European Union’s former chief Brexit negotiator Michel Barnier is accusing his former boss Ursula von der Leyen of overseeing an “authoritarian drift” during her tenure leading the European Commission. In a new tell-all book out Wednesday chronicling his time in Brussels and brief stint as France’s prime minister, the 74-year-old said the drift “has increased a notch in the last six years with Ursula von der Leyen, who wants to decide everything.” Speaking to POLITICO before the book’s release, Barnier said that under von der Leyen, commissioners increasingly behaved like “super technocrats” rather than politicians. “There isn’t enough listening [in the Commission]. There isn’t enough listening to the people,” he said. Von der Leyen has long been accused of sidelining critics, promoting allies, governing through close aides and employing a Machiavellian divide-and-rule strategy during her years running the EU’s executive arm, which is made up of representatives from the bloc’s 27 member states. Barnier singled out excessive regulation and slow progress on integrating capital markets across the EU as major failures of the Commission during the von der Leyen years. The former French prime minister did, however, credit von der Leyen with successfully responding to the crises she faced, which have included the Covid pandemic and Russia’s invasion of Ukraine. Though Barnier and von der Leyen belong to the same political family, the conservative European People’s Party, they have bad blood that dates back to the last days of the Brexit negotiations. According to Barnier, von der Leyen sidelined him as talks with then-British Prime Minister Boris Johnson reached the endgame in 2020. “I thought it would be normal, after the work I’d done, to be by her side in the last hours. But it was not the case,” he said. A spokesperson for the European Commission declined to comment. FISHY BUSINESS Barnier’s book, “What I Have Learnt from You,” mostly chronicles his long political career in Brussels and Paris, though there are brief mentions of his short stint leading France’s government last year. Barnier lasted just three months in that job, the shortest prime-ministerial tenure in modern French history. With the release of his book, his name is increasingly being mentioned in the French press as a possible, albeit long-shot, contender for the presidency in 2027. In Brussels, Barnier is best known for his work leading the Brexit task force and his catchphrase aimed at the British: “The clock is ticking.” Michel Barnier lasted just three months in that job, the shortest prime-ministerial tenure in modern French history. | Pool Photo by Francisco Seco via EPA As the Brexit deadline neared, Barnier wrote, von der Leyen appeared ready to sacrifice European fishermen in her quest to secure a trade deal with the United Kingdom. He observed that fishing became “a secondary, possibly even marginal” topic for her. Barnier goes on to describe how he had to get French President Emmanuel Macron to threaten to veto the deal if von der Leyen failed to get an agreement on fishing. Von der Leyen, he writes, also ignored his departure from the Commission in 2021. “Decidedly, we do not have the same concept of work and human relationships,” he said. Barnier, however, praised the EU-U.K. reset agreement signed last month, which will make it easier for British food to be imported and extended the fishing agreement for EU trawlers. “It’s a good idea, it’s in the common interest. We’ll need to get the details but on fishing it is balanced and correct,” he said.

The European Commission plans to make it easier for banks to invest in resold debt, known as “securitization,” under draft proposals to revise rules for the practice seen by POLITICO. The Commission will publish its revision of the EU’s securitization rules in a legislative package on June 17. This will include changes to the Capital Requirements Regulation, the Securitization Regulation, and two secondary laws, the Liquidity Coverage Requirement Delegated Act and the Solvency II Delegated Act. Under the draft plans here and here, the EU executive intends to change how capital requirements for banks investing in securitization are calculated to make them more “risk-sensitive” — in practice making it easier and more attractive for banks to engage in the practice. The plans also seek to loosen due diligence and reporting rules. The revamp forms part of the EU’s push to deepen and integrate its capital markets to generate more capital to invest in businesses under its “savings and investments union” plan.

BRUSSELS — The EU has long promised to tear down the barriers splintering its capital markets — but behind every delay lies a web of national interests and industry players profiting from the patchwork. But now, Brussels’ top financial official is signaling that the era of diplomatic restraint regarding such forces may be coming to an end. “We have been complacent, we have been settling for less,” the EU’s financial services commissioner, Maria Luís Albuquerque, told a room full of lobbyists and top officials in Warsaw last week, according to the text of a speech released by her office. The stakes have arguably never been higher. There’s broad consensus among policymakers that mobilizing private investment will be key to shaking off economic stagnation in Europe and delivering on the Commission’s defense agenda. Yet despite more than a decade of lofty ambitions and repeated political pledges, efforts to advance the capital markets union have consistently stalled. Albuquerque isn’t just reciting the party line on the bloc’s broken markets. Since taking office in December, the former Portuguese finance minister — and ex-Morgan Stanley insider — has publicly called out the vested interests holding EU markets back.  “We have endured — and even reinforced — persisting barriers that hurt us all, even if some have an immediate gain. Not anymore,” Albuquerque said, at the Eurofi conference. The object of her frustration are market players who are happy to preserve the status quo to fill their own coffers. In Warsaw, Albuquerque called out players in the bloc’s financial plumbing, including trading infrastructure, post-trading and asset management. As well as firms, she’s targeting protectionist behavior by national governments who keep markets fragmented to retain decision-making power, so that their own economies can benefit more in the short term.  BROKEN PARTS European equity markets, stock exchanges and financial plumbing known as post-trade infrastructure are a “complex patchwork,” which creates “a huge obstacle to building bigger and better capital markets,” the think tank New Financial wrote in a 2021 report on markets fragmentation. For as long as so many players remain in the market, the report said the EU “can tinker at the edges with the detail of regulation,” but “not much will change.” European equity markets, stock exchanges and financial plumbing are a “complex patchwork,” which creates “a huge obstacle to building bigger and better capital markets,” according to a New Financial report. | Kirill Kudryavstev/AFP via Getty Images To compare, U.S. equity markets are more than double the size of the EU’s, while having a small fraction of the exchanges for listings and trading that Europe has. The report found, for example, that the EU has 20 times as many post-trade venues as the U.S. American markets also benefit from just one non-profit company, the DTCC, being responsible for all the clearing and settlement of equity trades. In the EU, on the other hand, there are 295 trading venues, 14 clearinghouses and 32 central securities depositories. Most equity trading takes place in domestic exchanges. And while there are bigger exchange groups in the EU now, like Euronext and Nasdaq, the national exchanges within those groups are still separate, meaning the market is still fragmented.  IMF research often cited by the Commission calculates the damage of single market barriers to the EU as equivalent to a tariff of over 100 percent. In short, the barriers are real, self-imposed, and sacrifice long-term overall gains for the EU’s economy in favor of short-term gains for smaller players within the single market.  A LOBBYING STORY “Behind every barrier and behind every source of fragmentation, there is someone who is making money from the fragmentation,” the Commission’s top financial services official, John Berrigan, said at a conference in Brussels in March. He said the reasons for defending the entrenched interests are linked to the EU’s overall integration. The benefits of removing blockages are “diffuse” across the EU, making them harder to see and therefore fight for, whereas the loss of revenue to players benefiting from a source of fragmentation can be “quite concentrated.” “So those people speak out and they speak loud,” Berrigan said. One of the most heavily lobbied proposals in recent history sought to break down market barriers. The Commission’s Retail Investment Strategy, put forward in 2023, aimed for two major strides to boost the number of citizens investing — introducing accessible value-for-money benchmarks so investors across the EU could see how much bang they were getting for their buck, and banning kickbacks paid by asset managers to investment advisors in return for directing investors towards their products.  The kickbacks “generate conflicts of interest and can lead to the mis-selling of financial products, suboptimal asset allocation, and poorly performing investment products,” according to the NGO Better Finance. The trouble is, the finance industry makes money from the practice. Governments, heavily lobbied by asset managers, insurers, and others who benefit from the kickbacks, pressured the Commission into removing the ban before the text was even officially proposed back in 2023. A final agreement on the proposal still hasn’t happened.  Another proposal, for an EU ticker tape which would publish data on the prices and volume of traded securities in the EU, improving overall price transparency and competition, was hollowed out after — again — pressure from governments lobbied by their stock exchanges, whose business model of distributing that data for a premium price would be threatened by the tape. Under the political deal on that legislation, a weaker version of the ticker tape with less valuable information will still be set up, but stock exchanges are already forming consortia to bid to run the tape, meaning competition may be diluted. IMF research often cited by the Commission calculates the damage of single market barriers to the EU as equivalent to a tariff of over 100 percent. | Florian Wiegand/Getty Images Those are just two examples of many, but the pattern is clear — new EU initiatives which would deepen capital markets are hollowed out or ditched after governments, in thrall to their national finance industry champions, say no.  THE RULES Then there’s the stubborn issue of the rules and who enforces them. Although most agree that having a single rulebook and a single supervisor for EU capital markets actors would make the market more integrated, governments won’t give up their ownership of the rules and their supervision, with high-level summits on the issue ending in stalemate.  They also engage in “gold-plating” — when countries roll out EU rules differently at the national level. This is often to protect national investors or domestic economic interests, a fact that creates barriers for foreign entrants, damaging competition, according to a 2024 report by the Polish capital markets lobby group CFA Poland. The report singles out Germany, Spain, and Italy as high gold-plating countries, while it said investment hotspot Luxembourg gold-plates the least. The Commission wants to change this, planning to convert directives — EU laws which can be interpreted nationally in different ways — to regulations. The latter, unlike the former, have to be rolled out the same way across the EU, something that should help to centralize more supervision at the EU level. But governments are already pouring cold water on that idea. Polish finance minister Andrzej Domański, who is currently chairing EU-level talks as the head of the six-monthly rotating presidency, said there is “absolutely no room” for centralizing supervision, and that EU countries would only “accept” better “coordination” between existing national supervisors. Ultimately, the Commission can talk tough on breaking down vested interests that are keeping the EU’s capital market undersized and fragmented — but national governments will still need to be the ones who move to break down any barriers.

United States President Donald Trump’s trade policies are raising the chances that the next financial crisis will occur “sooner than expected,” Germany’s incoming Chancellor Friedrich Merz warned. “The next financial crisis is sure to come. We just don’t know when and why,” Merz told German newspaper Handelsblatt in an interview. “President Trump’s policies increase the risk that the next financial crisis will come sooner than expected,” he said. The tariff regime announced by Trump has sent markets reeling in the last 10 days over widespread fears of a looming recession. Trump eventually paused part of the measures and then on Friday exempted smartphones, computers and other electronics from his reciprocal duties.   Merz’s center-right Christian Democratic Union struck a deal with the center-left Social Democratic Party for a coalition government last week, setting their sights on starting their work on May 6 as pressure from the U.S. is mounting. Merz’s goal is a new transatlantic free trade agreement with zero tariffs; but he also wants to negotiate trade deals with countries like Canada, South Korea and India. He lamented the fact that the EU-U.S. Transatlantic Trade and Investment Partnership negotiated in the 2010s never got to the finish line. Germany is open to importing American gas, he said. Europe must present a united front against the U.S., and seize the opportunity to move forward with key reforms, he said. A top priority is unifying capital markets, where there will be a “new dynamic” in the coming months, following discussions Merz has had with France’s Emmanuel Macron, Poland’s Donald Tusk and the U.K.’s Keir Starmer. Merz also reiterated some agreement with Trump, saying the EU hasn’t been spending enough on defense. “We have been free riders of the Americans,” Merz said.