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Hey there, curious minds and all-around Brussels enthusiasts!
In this eight edition of our newsletter, we unpack the European Central Bank’s most recent report on the euro’s global footprint beyond the eurozone; delve into the political tug-of-war over central banks’ balance sheets and evolving banking-supervision priorities; chart the latest strides in the EU–India Strategic Partnership; break down the newly forged US–China trade understanding and its potential market ripples; explore the EU’s freshly minted state-aid framework under the Clean Industrial Deal; and, as always, peek ahead to next week’s agenda while sharing our top recommended reads.
Strap in for a ride through the riveting world of European economic policy with us!
Written By Lukas Seelig, Moritz Pohl, Leonie Gruber, and Ruben Krebs
Editorial deadline: 15 June, 23:59
Banking and Financial Services
Written by Lukas Seelig
THE EURO’s INTERNATIONAL COMEBACK? DON’T HOLD YOUR BREATH…JUST YET
On Wednesday (June 11), the European Central Bank (ECB) dropped its annual report on the euro’s use outside the eurozone – and spoiler alert: it’s stuck in neutral. Seven years after Brussels declared making the euro a genuine rival to the “shaky” dollar its mission, nothing’s moved. The data only runs up to before Trump’s trade war kicked off, so any dollar dash since April isn’t captured – yet Lagarde is betting on chaos in Washington to tip the scales. At a speech the same day, she argued that erratic U.S. policies and legal tussles give Europe a “once-in-a-generation” chance to showcase the euro’s stability and institutional strength.
There are green shoots though: U.S. tariffs and policy flip-flops have dented the dollar – with the dollar index showcasing a real dip over the past six months – but don’t mistake that for a full collapse. BoE Governor and cotton industry in Lancashire expert Andrew Bailey reminded us recently that U.S. Treasuries remain the bedrock of global finance, and gold, not the euro, has been the real beneficiary – with central banks having bought over 1,000 tons of it in 2024, vaulting gold’s share in reserves to 20%, eclipsing the euro at 16%.
So what’s missing? A European safe-asset! ECB-backed bonds – NGEU, ESM and EIB paper – barely clear €1 trillion, dwarfed by the U.S. Treasury market’s $30 trillion. Research is unanimous: to turn the euro into a true haven, the EU needs deep, liquid Eurobonds – ideally by swapping out a quarter of national debt for EU-issued paper, creating a €5 trillion market. Incremental fixes, like the new €150 billion SAFE arms-loan scheme, are arguably crumbs by comparison.
ECB board member Isabel Schnabel – who runs the markets shop – also weighed in on this issue last week: Europe needs to crank up joint debt issuance if the euro is going global. Pointing to the hefty post-pandemic EU bond pile, she argued we need even more – and locked to “European public goods,” not splashed out to individual capitals. Her poster child? Funding shared defence priorities.
But here’s the rub: political will. Even if the math lines up, several capitals balk at mutualising debt. Until that hurdle’s cleared, the euro’s global ambitions will remain just that – ambitions.
ECB’S BUCH: SIMPLIFY SUPERVISION, DON’T SACRIFICE SAFETY
On Wednesday (June 11), ECB Supervisory Board Chair – and fellow Paderborn pride – Claudia Buch took to the mic to argue that yes, Europe’s banking rulebook is tangled, but that complexity is the price of keeping the system safe. She’s spearheading a revamp of the Supervisory Review & Evaluation Process to speed up decisions, push digitalisation, and tighten up everything from internal models to stress tests, capital calls and reporting lines. Buch didn’t stop at process tweaks though. She warned that any push for deregulatory “light touch” would backfire – hollowing out banks’ resilience and hobbling their global edge. She also flagged keeping a close eye on banks’ links to the non-bank financial sector as a hot-button issue for 2025.
On the same day, Bank of Finland board member Tuomas Välimäki warned against slashing central banks’ balance sheets too aggressively, arguing that keeping a healthy stock of reserves helps smooth out short-term interest-rate swings and supports financial stability – especially as we move beyond a decade of quantitative easing. He praised the ECB’s new “standby” bond buffer but suggested tweaking its liquidity backstop: instead of fixed-rate, full-allotment lending, he’d use competitive long-term loans. “Acting as a rate taker reduces market distortions, puts a price on extra liquidity, and reveals true reserve demand,” he explained.
Also on Wednesday, …
- the European Commission kicked off a public consultation to shape a “blueprint” for easy-access savings and investment accounts across the EU. The goal? Turn these accounts into a hassle-free gateway for everyday folks to buy stocks, bonds or fund shares – sweetened with tax perks or streamlined tax rules. In this endeavour, the Commission wants your input on best practices: What makes an account user-friendly? Which tax treatments actually move the needle? The feedback will feed into a formal recommendation on launching these accounts, due in Q3 2025.
- the Council adopted its negotiating position on the Foreign Direct Investment (FDI) screening regulation, with the final Council text including an insurance that all member states have a screening mechanism in place while not following the Commission in including financial services in the list of technology areas for which FDI screening by national authorities would be mandatory. As a reminder: the European Parliament’s position retains financial services, while also adding (re)insurance services as mandatory sectors for screening.
- Fernando Restoy – Chair of the BIS Financial Stability Institute – spoke on weaknesses in the current regime for managing banks‘ liquidity risk, putting forward a tiered framework integrating existing regulatory liquidity requirements with banks‘ operational readiness to access central bank liquidity.
COMMMISSION EYES CENTRALISED SUPERVISION FOR NON-BANKS
On Thursday (12 June), Commissioner Maria Luís Albuquerque signalled that Brussels is mulling a “more centralised approach” to policing non-bank players – think ESMA grabbing the reins on key supervisory decisions. The tweak is part of a broader governance review of EU finance watchdogs, with the Commission keen to streamline decision-making at the EU level. Albuquerque didn’t stop there: she flagged plans to explore EU-wide oversight for critical market infrastructures – central counterparties, depositories and trading venues – and big cross-border outfits like asset managers. Why? Because leaving supervision “rooted solely in national practices” risks new barriers that fracture the single market. Upcoming proposals will target smoother trading and post-trading interoperability, easier cross-border fund distribution, and the groundwork for market-driven consolidation and scale.
FRIDAY FLASH: COMMISSION WARNS OF STABILITY RISKS, DELAYS FRTB, WITH COUNCIL LOCKING IN NSFR RELIEF and GREEN-LIGHTING „PRE-PACK“ INSOLVENCY
On Friday (12 June),
- the Commission released its 2025 Financial Stability and Integration Review, highlighting three key risks to financial stability: the risk of a disorderly repricing in major financial market asset classes, debt sustainability concerns in the non-financial private sector and sovereign financing risks and debt sustainability concerns.
- the Commission also signed off on its second Delegated Act for the Fundamental Review of the Trading Book – Brussels’ upgrade to risk rules that better match banks’ capital charges with real-market exposures – pushing the go-live back to January 1, 2027. The extra runway isn’t a slip-up; it’s a purposeful salute to global alignment, ensuring EU banks stay on par with their U.S. and U.K. peers amid continuing uncertainty over those jurisdictions’ own FRTB rollouts. Next stop: Council and Parliament sign-off before it lands in the Official Journal.
- the Council agreed to extend – and effectively make permanent – the softer liquidity treatment for securities financing transactions and unsecured loans under six months within the Net Stable Funding Ratio (NSFR) of the Capital Requirements Regulation. The deal, adopted as-is, keeps the existing transitional regime in place through 28 June 2025, before kicking in on 29 June 2025, and mandates the EBA to review its impact every five years. In a nutshell: today’s looser NSFR haircuts have earned a right to stay.
- the Council also green-lit it’s negotiating mandate on the Commission’s Insolvency Directive revamp – complete with a pan-EU “pre-pack” tool that lets struggling firms line up part-or-full business sales before formal insolvency kicks in. On top of that, every Member State will need to set up creditors’ committees under a harmonised rulebook covering who sits on them, what powers they wield and even the personal liability they carry.
- Luis de Guindos – Vice-President of the ECB – spoke on financial integration in the EU and underscored the importance of deep and integrated equity markets to provide necessary financing to complete the banking union.
- Frank Elderson – Member of the Executive Board of the ECB – underlined that effective supervision must stay within a clear prudential mandate, prioritizing capital, liquidity, governance, operational resilience and structural risk drivers.
Trade
CHARTING NEW PATHS: THE LATEST IN EU-INDIA PARTNERSHIP
by Moritz Pohl
At the end of February, President von der Leyen visited New Delhi, announcing that an EU–India free‑trade deal could be wrapped up as early as this year. After relaunching formal talks in 2022, both sides report “substantial progress” in the eleventh round (May), with a twelfth round set for July. If concluded by end‑2025, it would rank among the EU’s largest trade agreements. India is the EU’s ninth-largest partner (and vice‑versa), with €124 billion in goods and nearly €60 billion in services exchanged in 2023.
A recent Euractiv analysis takes a clear-eyed look at EU–India trade ties, warning that India is unlikely to replace China as the world’s manufacturing powerhouse anytime soon. While the EU sees closer cooperation with New Delhi as part of its broader “de-risking” strategy, structural barriers – like high tariffs, deep-rooted protectionism, and diverging climate standards – continue to weigh on negotiations. Agriculture remains a sticking point, and India’s push for exemptions from the EU’s green policies, including CBAM, adds further complexity.
On a parallel front, the Commission has slapped countervailing duties (3.7–8.1 percent) on Indian optical‑fibre cables, underscoring a tougher stance on unfair subsidies.
Beyond trade, the EU and India agreed last week to deepen trilateral cooperation under Global Gateway, aligning on Sustainable Development Goals and climate action. Early priorities include digitalisation for sustainable growth and digital financial inclusion, building on the 2023 Trade & Technology Council.
A DONE DEAL?
by Leonie Gruber
Hopes were high when Trump announced in capital letters on his platform Truth Social that “the deal with China is done”. After a phone call between him and China’s President Xi Jinping on 05 June and intense trade talks in London between Chinese and American high officials, lingering uncertainties began to ease. Although the previous Geneva trade truce had marked a turning point in a period of tit-for-tat tariff escalations between the two biggest economies, it had left both sides grappling with unanswered questions about the path forward.
So, what about that new deal? As usual, all that glitters is not gold, and details remain foggy. According to the BBC, the U.S.’s main concern and reason to recommence the negotiations was China’s power to cut exports of its magnets and rare earth minerals, essential for the production of everything from smartphones to electric vehicles. Beijing’s agreement to ease restrictions on these exports was seen as a key concession. Trump in turn made concessions on visas for Chinese students and relaxing certain export controls on semiconductors and advanced technologies related to artificial intelligence.
So, is this the happy ending policymakers were seeking? Not quite. While the announcement marks a notable shift in tone and tactics, the underlying power dynamics remain unchanged. With China’s near monopoly on the export of rare earths, its influence in future negotiations looms large. For now, the world watches and waits, as another chapter unfolds in the complex saga of U.S.-China economic relations.
Industrial Policy
by Ruben Krebs
BRUSSELS DIVIDED: THE BIG DEBATE ON CLEAN-TECH SUBSIDIES
Brussels found itself at the center of a growing political row last week, as the European Commission debated whether to relax state-aid rules and allow direct operating-cost subsidies for clean-tech manufacturers – a decision that could redefine the future of Europe’s green industries.
Initially planned to avoid subsidy races for energy within the EU, the new state aid framework is a crucial part of the Clean Industrial Deal released in February, which aims at combining climate protection with industrial competitiveness. A new subsidy regime following the deal marks a shift in the EU’s competition policy, as industrial competitiveness now receives higher priority. Competition Commissioner Teresa Ribera stated on the new regime that it would support achieving the Deal’s ambitions.
Now, Industry Commissioner Stéphane Séjourné is proposing an even more flexible framework. His push aims to subsidise the production costs of clean energy technologies – as an exemption from the state-aid regime – to ensure global competitiveness of European manufacturers, particularly in light of the EU striving to meet its target of producing 40% of its clean-tech needs domestically by 2030. Several industry groups already raised support, arguing that without stronger industrial policy tools, Europe risks falling behind China and the U.S. in the clean-energy race.
However, Ribera is now pushing back, warning that such subsidies could distort the single market, as member states have different scopes for fiscal policy action. The central concern is a subsidy race between EU member states which would fragment the internal market rather than strengthen it.
The controversy has already led to Séjourné’s draft being quietly shelved – a symbol of the EU’s balancing act between staying competitive against global giants like China and the U.S., and keeping fair competition at home. All eyes are now on Brussels, with a new framework expected by the end of the month.
What else was on?
On Tuesday (11 June), the EBRD launched its InvestEU programme in Bulgaria’s financial sector, mobilising over €300 million in green finance to support the country’s sustainable transition.
On Tuesday (11 June), the European Commission adopted the Ocean Pact, pledging over €1 billion to protect marine biodiversity and promote a sustainable blue economy.
On Thursday (12 June), the OECD presented its 2025 Economic Survey of Germany in Berlin, with Secretary-General Cormann handing the report to Economy Minister Reiche, endorsing the government’s reform agenda to boost growth.
Crystall Ball Gazing
Yesterday, the G7 Leaders’ Summit kicked off in Kananaskis, Alberta, under the Canadian Presidency – marking the 50th anniversary of the inaugural G7 meeting. Lasting until tomorrow, key topics on the agenda include the “protection of our communities and the world”, “building energy security and accelerating the digital transition” and “securing the partnerships of the future”.
From today (16 June) to Wednesday (19 June), another week of European Parliament sessions will take place in Strasbourg. On the sidelines, the Parliament’s ECON- and BUDG-Committee’s will hold a Recovery and Resilience Dialogue with the Commissioners for Cohesion as well as Economy and Productivity. Other highlights include a Commission statement on the upcoming NATO summit on 24- 26 June 2025.
Tomorrow (17 June), the European Parliament’s SEDE-Committee will see the presentation of the Defence Omnibus with Andrius Kubilius, European Commissioner for Defence and Space.
Tomorrow (17 June), Commissioner’s will also get a presentation of the review of the Securitisation Framework as well as a presentation of the fifth omnibus on defence.
Tomorrow (17 June), Financial Services attachees will also meet to prepare for trilogues on the crisis management and deposit insurance (CMDI) scheme.
On Wednesday (18 June), the first first political trilogue on T+1 will take place, coming after Member States met last Wednesday in Council working group format.
On Friday (20 June), Economic and Financial Affairs ministers will discuss the recently published Spring package (analyzed in the last nEUrds edition).
Page Turners and Screen Burners
The European Commission published a stocktaking report on the green and digital transition in tourism, highlighting how the co-creation process and key actions have mobilised a broad range of stakeholders.
The Bank on International Settlements published a bulletin on investment patterns in an increasingly uncertain global landscape.
The European Parliament’s Think Tank published a study assessing the fragmented landscape of financial sector taxation across Member States, highlighting diverging national approaches to financial transaction taxes (FTTs), value added tax (VAT) exemptions, windfall profit taxes, and corporate income taxes.
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