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Hey there, curious minds and all-around Brussels enthusiasts!
Welcome back to the latest edition of our nEUrds newsletter, where we dive deep into the riveting world of European economic policy with a twist of wit and a dash of insight.This time around, we break down the European Commission’s country‐specific analyses on each member’s fiscal headaches and bespoke public‐finance prescriptions, before zeroing in on the ECB’s latest quarter‐point cut to its deposit rate; unveil the EU’s ambitious rebrand of its securitization and retail investment markets; track the back‐and‐forth over the upcoming 18th Russia sanctions package; review fresh EU–US tariff tête-à-têtes; and close with defence developments. Plus, don’t miss our „Crystal Ball Gazing“ for a glimpse into the future, and „Page Turners and Screen Burners“ for your next favorite read.
Strap in for a ride through the riveting world of European economic policy with us!
Written By Lukas Seelig, Leonie Gruber, Moritz Pohl and Leonie Schade
Editorial deadline: 06 June, 23:59
Macroeconomics
Written by Lukas Seelig
SPRING SEMESTER DROPS: FISCAL FIRE-DRILLS ACROSS THE EU
On Wednesday (04 June), the European Commission (EC) published its Spring 2025 European Semester report – your and the EU’s one-stop shop for the state of play on growth, jobs and social cohesion in every Member State. Country Reports spotlight each nation’s big challenges and dish out tailored public-finance recommendations. Contextual reminder: under the EU’s Stability and Growth Pact, deficits must stay below 3% of GDP (no slacking on the budget brakes!).
Bucharest, you’re up first: the EC in this year’s edition has warned that Romania’s fiscal outlay overshot by roughly 2% of GDP, on top of an “extremely large” current-account shortfall (8% of GDP) and lagging Recovery Fund projects. If Bucharest doesn’t table concrete spending-cut plans by the 08 July finance-ministers’ meeting, the EU could block cohesion and post-pandemic funds. Flashback: net expenditure jumped nearly 20% in 2024, 5.4% in 2025 and could top 8% in 2026 – no wonder folks here in Brussels are (getting) twitchy.
Next stop, Vienna: Commissioner Dombrovskis has floated putting Austria under “strengthened fiscal surveillance” after a 4.7% deficit in 2024 and forecasts north of 4% for 2025 and 2026. Political gridlock at home hasn’t helped, and this would be Austria’s first time back in extra-watch mode since 2013. A formal decision lands in July – keep an eye on the drama. Meanwhile, Italy, Slovakia, Hungary, Poland, France and Malta have earned freeze-status after cleaning up their act, though Brussels still flags slight future slip-ups for France and Malta.
Brussels’ emergency clause for defense spending is already doing heavy lifting, underpinning positive fiscal assessments for Bulgaria, Denmark, Greece, Croatia and Lithuania. But don’t get too comfy – Cyprus, Ireland, Luxembourg and the Netherlands, formally compliant today, are teetering on the brink of rules breaches. And for the first time since 2014, Germany has exited the “macroeconomic imbalances” club.
In other macroeconomic news: Eurostat’s Friday (06 June) data dump revealed a shock upward tweak to Eurozone growth: GDP jumped 0.6% in Q1 – twice the pace first reported just weeks ago – and marks the bloc’s strongest quarterly advance in two-and-a-half years. On the back of this revision, output now sits 1.5% above its Q1 2024 level. What flipped the script? A last-minute surge in exports to the U.S., as firms raced to ship goods ahead of former President Trump’s threat of fresh tariffs (more on that below).
Digging deeper, the heavyweight behind this upgrade is … Ireland. Thanks to a cluster of U.S. multinationals domiciled there for tax perks, Ireland’s factories were churning out and exporting goods almost exclusively for the American market. That corner-of-the-data anomaly has long skewed official Eurozone stats – but this quarter, it turbo-charged the numbers. The lesson? When geopolitics meets corporate tax structures, even Eurozone-wide growth figures can get a wild twist.
Speaking of the Eurozone: in its latest move, the European Central Bank (ECB) shaved another quarter-point off its key deposit rate, bringing it down to 2%. President Lagarde flagged “exceptional uncertainty,” but noted that “most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2 percent medium-term target on a sustained basis.”
Staff projections got a dovish makeover: 2025 inflation is now pegged at 2.0% (down from 2.3%), with a dip to 1.6% in 2026 before a 2.0% rebound in 2027. Growth forecasts barely budged – 0.9% next year, 1.1% in 2026 and 1.3% in 2027 – but the real headline is the tug-of-war between a cooling economy (which risks undershooting inflation in the near term) and looming trade-war shocks or fresh fiscal splurges that could reignite price pressures down the line.
Lagarde said the decision was weighed against the three key criteria – price stability, economic slack and the transmission of monetary policy – and concluded they pointed toward “inflation settling at our 2% target.” Yet she admitted that increasing global supply-chain disruption adds a fresh wrinkle to the outlook. For more on the transmission lag and the tricky balance ahead, don’t miss ECB board member Isabel Schnabel’s recent deep dive at the Dubrovnik Economic Conference.
Bottom line: every rate call from here on will be a high-wire act – monetary policymakers not only in Frankfurt will be juggling uncertain U.S. trade policies, pending fiscal plans, and the slow burn of monetary transmission. Strap in.
Banking and Financial Services
by Lukas Seelig
SECURITIZATION TALKS HEATING UP
Last Thursday (05 June), I popped into POLITICO’s Savings & Investments Union summit, where France’s Treasury DG Bertrand Dumont dropped a teaser: relaunching Europe’s securitization market could be as simple as cobbling together a coalition of willing countries to build a shared platform. Think of it like a playbook, where a handful of states team up with the EU and private players to get things rolling. No rocket science – just smart collaboration (in theory at least).
Over at the same table, DG FISMA’s Deputy Director-General Alexandra Jour-Schroeder shot down the idea that the incoming Commission needs to legislate such a new EU platform – it can happen today, no new law required. MEP Fernando Navarrete (EPP, ES) chimed in, lamenting that Europe’s yet to flex political muscle on something that’s already a game-changer in the U.S., Canada and Japan. His verdict? A securitization platform isn’t just nice to have – it’s transformative. Let’s see if Brussels can finally take the plunge when it launches the long-awaited reform of its securitisation package in the next week(s).
FINANCE EUROPE LABEL DEBUTS IN PARIS: A NEW BADGE FOR RETAIL INVESTORS
Speaking of launching things: this week in Paris, France’s Trésor rolled out the long-awaited Finance Europe label – the EU’s answer to supercharging retail capital for EU businesses. Think of it as a seal of approval: to slap the label on your fund, at least 70 percent of assets must sit in the EEA, be equity-heavy (so you’re truly backing European growth), and incentivise a proper buy-and-hold mindset. No free rides here though – there’s zero public guarantee, meaning investors carry all the upside (and downside) risk. Banks, insurers and asset managers can self-declare under a common framework, but National Competent Authorities will swoop in to yank the label if anyone tries to game the system.European Commissioner for Financial Services and the Savings and Investments Union Albuquerque gave it her seal of enthusiasm, hailing the label as a linchpin for the Savings & Investments Union’s retail-financing goals and teasing a complementary tax-incentive package on the horizon. She urged the Competitiveness Lab to double down on trickier dossiers – tax frameworks, securities law tweaks and insolvency rules – where EU sway is slimmer. Working alongside Commissioner Hoekstra, she’s crafting a September 2025 recommendation on sprucing up tax treatment for savings-to-investments pathways, banking on fast, simple regimes that actually move the needle. Keep your eyes peeled for formal proposals – both legislative and non-legislative – due in Q3 2025. You can find the presentation by French Finance Minister Eric Lombard here as well as all the accompanying documents here.
Trade
ROUND 18 AGAINST RUSSIA: ENEMIES BECOME PARTNERS
by Leonie Gruber
After having adopted the 17th sanctions package against Russia less than three weeks ago, EU officials appear determined to ramp up the pressure, planning the now 18th round. According to von der Leyen, supposedly a “hard-biting” one, according to von der Leyen. Hard-biting because, this time, the two major economic forces and current opponents on many questions, the EU and the U.S., appear to be syncing their sanctions playbooks. The goal: cut off Russia’s cash flow to force the Kremlin back to the negotiating table. During a transatlantic tête-à-tête, Republican Senator Lindsey Graham and Ursula von der Leyen agreed to “coordinate as much as possible”.
Given that Trump’s campaign pledge to end the war in Ukraine within hours using his brand of diplomacy didn’t work out, Senator Graham is now rallying co-sponsors for his sanctions bill – aiming to secure enough backing to override a potential presidential veto. The bill would impose tariffs of 500% tariff on goods imported from countries that still buy Russian energy resources.
The EU is set to join the wave of sanctions targeting Russia’s energy revenues, the infamous Nord Stream infrastructure, and financial institutions, as well as imposing a price cap on crude oil. This will put China and other „quiet winners“ of the Kremlin-made crisis in the crosshairs of sanctions, too.But what will this mean for the already tense U.S.-EU trade relationship? Surprisingly, they are on the same page – for now. According to the European Commission, both parties agreed that reaching a negotiated settlement to their tariff dispute within 90 days would be the best outcome.
CAN CUTTING RUSSIAN STEEL IMPORTS SHIELD THE EU FROM TRUMP?
by Moritz Pohl
While EU President von der Leyen and US Senator Lindsey Graham demonstrated unity, on 03 June, U.S. President Donald Trump signed a proclamation to double tariffs on steel and aluminum imports (25% to 50%) effective immediately – with the exception of the UK. The announcement, made just four days earlier in Pittsburgh, marks another escalation in the ongoing U.S.-EU trade conflict and further complicates negotiations for a potential trade agreement. The European Commission (EC) „strongly“ condemned the move, highlighting the unpredictability it brings to transatlantic relations. It also stressed that the EU had deliberately paused its own countermeasures to create space for continued dialogue. Now, with consultations on expanded countermeasures expected to conclude on 10 June, the EC warned that both current and additional EU measures will automatically come into force by 14 July – or earlier if necessary.
In a Reuters interview, Thyssenkrupp executive Ilse Henne pointed to one concrete response the EU could take: fully halting the remaining Russian steel imports, which still amount to 3-4 million tons annually despite earlier bans. According to Henne, this would help offset the pressure from U.S. tariffs and could turn out to becrucial for the survival of the European steel industry. Her position is echoed by EUROFER, the European Steel Association, which warns of a potential collapse in the European steel market if decisive action isn’t taken.Meanwhile, when asked about upcoming EU-U.S. engagements, European Council President António Costa reminded the press that the EU must stay focused on rebalancing transatlantic burden-sharing on defense. He cautioned against “the creation of irritants and loss of focus”—a valid point, but the EU should not shy away from a firm stance on trade. Because even Trump’s self-imposed 5% defense goal is little more than an arbitrary number casually thrown into the room.
On the sidelines of the OECD trade ministerial, trade commissioner Maroš Šefčovič indicated that Trump’s decision to double U.S. steel import tariffs to 50% came as “surprise” to the EU. Šefčovič also had a quick chat with Australian Trade Minister Don Farrell on the sidelines of the OECD meeting, indicating that the EU and Australia aim to make headway in talks on their free-trade deal in 2025. (reminder: previous talks collapsed in late 2023 over agricultural quotas). Šefčovič also mentioned the EU’s interest in a “structured cooperation” with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), helmed by Australia.
STILL US-AMERICAN STEEL? TRUMP’S ‚BLOCKBUSTER‘ DEAL
by Leonie Schade
Japanese steel giant Nippon Steel’s $14.9 billion bid to acquire U.S. Steel – the second-largest steel producer in the U.S. – is back in the headlines. While Trump calls it a ‘blockbuster agreement’, he also claims that even under Japanese ownership, U.S. Steel will remain under American control. But how? The U.S. President has not yet outlined concrete mechanisms beyond vague promises of an U.S.-majority board, an American CEO and U.S. government oversight.
Nippon Steel and U.S. Steel first agreed to the acquisition in December 2023. However, former U.S. President Biden blocked the agreement over national security concerns. The deal found new life under President Trump – reportedly under increasing pressure from Republican lawmakers in Pennsylvania and other steel-producing states who feared job losses. Several lawmakers even met Trump in person to push for stronger commitments.
Trump now presents the renegotiated deal as a victory: Nippon Steel commits to investing over $14 billion in U.S. operations within the next 14 months, to maintaining full domestic production capacity for at least the next decade, and to paying out bonuses to local workers.
While some see the deal as a boon for the U.S. American steel industry, others, including the United Steelworkers union, remain opposed to the deal. They point to past dumping practices and Nippon Steel’s past involvement in joint ventures in China. On Thursday, Nippon Steel and the U.S. administration requested an eight-day extension of the pause in their legal proceedings.The outcome of the deal matters for the EU as well: if it goes through, the venture could reshape global steel trade dynamics and fuel EU debates on foreign ownership of strategic sectors from foreign takeovers. In March 2025, the Commission took a first step with its communication on a Steel and Metals Action Plan, highlighting the sector’s strategic role in Europe’s industrial future and identifying it as a key area for action.
Defence
by Lukas Seelig
On Monday (June 2), Brussels gave the green light to a 33/33/33 joint venture between BAE Systems, Leonardo and Japan Aircraft Industrial Enhancement to spearhead the Global Combat Air Programme. The goal? Develop a sixth-generation fighter for Italy, the U.K. and Japan – with an eye on future exports. After sizing up the impact on Italy’s domestic market and wider EEA competition, the Commission concluded there’s no overlap that would stifle rivals, clearing the deal unconditionally .
Meanwhile in Madrid, Defence Minister Margarita Robles signaled Spain won’t block NATO’s new – and Trump-pushed – 5%-of-GDP defense target, but for now is holding firm at 2%. She noted Spain would “obviously” ramp up if needed, even as Madrid already boosted its budget by €10.4 billion to hit the current 2% mark. Fun fact: Spain logged just 1.3% of GDP on defense in 2024 – lowest in NATO – so keep an eye on those figures if the 5% debate heats up.
And speaking of belt-loosening, Denmark’s PM Mette Frederiksen told EU audiences on Tuesday (03 June) she’s ready to abandon Copenhagen’s usual frugality on the next Multiannual Financial Framework (2028–34). With Russia’s war on Ukraine still raging, Frederiksen argued the EU needs heftier coffers to bolster collective defense – just as Denmark prepares to chair budget talks under its upcoming EU presidency. Watch for a big push to turn those words into euros.
What else was on?
The Polish Financial Supervision Authority (UKNF) published a backdated to February 2025 list of simplification proposals on EU financial services regulation, notably covering capital markets and securitisation.
On Monday (02 June), Mark Branson, President of the German Federal Financial Supervisory Authority (BaFin), highlighted the benefits of centralised supervision for systemically relevant companies.
On Monday (02 June), the U.K. published its 10-year strategic defense review (SDR), including – among other things – recommendations for Britain to expand its nuclear capability, while increasing its shipbuilding and underwater surveillance. See the relevant materials here, here, here, here and here.
On Tuesday (03 June), the European Central Bank published a blog post on addressing banks‘ exposures to private market funds, calling on banks to adjust their risk management frameworks to address potential hidden and cross-sectoral vulnerabilities.
On Wednesday (04 June), the European Central Bank and the European Commission published their convergence report, confirming Bulgaria’s eligibility to be the 21st member of the currency union from 2026.
On Thursday (05 June), Soledad Núñez, deputy governor of the Bank of Spain (BdE), spoke on the current challenges for the banking sector, including economic uncertainty, regulatory complexity, calling – among other things – for simplifying Level 2 legislation.
On Thursday (05 June), German Chancellor Friedrich Merz’s completed his first visit to U.S. President Donald Trump, with it having been largely praised for avoiding controversy and for Merz’s composed appearance. The visit came amid escalating tariff tensions and the prospect of a new trade deal, with Merz later declaring himself “extremely satisfied”, indicating that Trump had accepted an invitation to visit Germany. A small but notable detail: the Chancellery might want to double-check the gift protocol next time.
On Friday (06 June), financial counsellors met with their defense colleagues to listen to the European Investment Bank (EIB) explain what has been done so far under the bank’s Security and Defence Industry Action Plan (SDIAP). Reminder: the SDIAP was unveiled in April 2024 with the aim to improve financing conditions for European projects.
Crystall Ball Gazing
Tomorrow – on 09 June – the U.S. and China will hold their next round of trade talks in London. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer will meet with their Chinese counterpart, Vice Premier He Lifeng. Reminder: In May, both the U.S. and China agreed to lower triple-digit tariffs to 30% and 10%, respectively.
On 10 June, Government officials will resume their talks on the legislative proposal for the digital euro.
On 11 June, ambassadors could approve the final compromise text on the review of the foreign direct investment screening regulation.
Page Turners and Screen Burners
The European Parliament’s Committee on Economic and Monetary Affairs published the amendments to its own-initiative report on financial stability here.
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