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Hey there, curious minds and all-around Brussels enthusiasts!
This time around, we look back at the G7 summit in Kananaskis and unpack the new Critical Minerals Action Plan designed to shore up raw-materials supply chains; then we shift gears to the EU’s budget battlefield, covering the European Court of Auditors’ call for a simpler, more flexible Multiannual Financial Framework (MFF) with tighter links to reform and results, and the looming €800 billion NextGenerationEU repayment starting in 2028. Plus, don’t miss our „Crystal Ball Gazing“ for a glimpse into what you can expect this week!
Strap in for a ride through the riveting world of European economic policy with us!
Written by Leonie Gruber, Leonie Schade, and Janik Gast
Editorial deadline: 22 June, 23:59
Trade
G7 IN KANANASKIS: ROCKY PATHS ON TRADE AND STRATEGIC RESOURCES
Written by Leonie Gruber
This week, leaders of the Group of Seven (G7) gathered in the alpine retreat of Kananaskis, Alberta, hosted by Canadian Prime Minister Mark Carney. Against the backdrop of sweeping mountain vistas, the summit sought to serve as a springboard for major geopolitical and economic discussions—trade, inevitably, taking center stage.
In a widely circulated photograph, European Commission President Ursula von der Leyen shared a strained smile alongside former U.S. President Donald Trump’s thumbs-up. Behind the gesture, however, lies a more turbulent reality. Transatlantic trade negotiations remain gridlocked, as the EU faces increasing pressure to strike a deal before the looming July 9 deadline. Without an agreement, the U.S. has signaled its intent to raise existing 10% tariffs on EU imports -potentially escalating them to levels that could inflict serious damage on the European economy.
Despite Brussels’ readiness to maintain current tariffs and even consider reductions on U.S.-made vehicles, the proposals were deemed insufficient by Washington. “They’re either going to make a good deal, or they’ll just pay whatever we say they have to pay,” Trump asserted bluntly.
So no deal, and ongoing negotiations, even if EU negotiators hinted at a strategic ace up in their sleeves: China as a common danger to the national economy. The bloc views Beijing’s export restrictions on critical raw materials not only as retaliatory measures against the U.S., but as a broader threat to global supply chains. These restrictions, now applied indiscriminately, have intensified pressure on G7 nations to find common ground in addressing economic dependencies. Yet, the prospect of a united transatlantic front appears tenuous. Despite shared concerns over China’s market-distorting practices, Trump remains undistracted in his negotiations with the EU.
Despite these bilateral disputes, however, G7 leaders showed unity in issuing the Critical Minerals Action Plan, a framework aimed at securing supply chains for strategically important raw materials in response to China’s export restrictions. The new initiative, which builds on the Five-Point Plan from a G7 meeting in Japan in 2023, further developed under Italy’s G7 presidency in 2024, focuses on building standards-based markets, mobilizing capital, investing in partnerships and promoting innovation all along the raw materials supply chain. Among other ambitions, one goal is to develop a roadmap containing a set of criteria to ensure rules and standard based market practices – to be published before the end of the year. Multilateral development banks will be encouraged also to make further capital available for standards-based critical minerals projects, especially putting a focus on deepening cooperation with developing countries. Will this ease the dependencies on China’s raw materials?
The plan also received endorsements from non-G7 partners including Australia, India, and South Korea. However, analysts were quick to note that the statement reflected the lowest common denominator among participants -and, crucially, made no mention of China, arguably the most influential actor in the global critical minerals arena..
Macroeconomics
BIG GOALS, SMALL WALLETS
by Leonie Schade
While the Commission isn’t set to unveil its next MFF blueprint until 16 July and/or 23 July, the Brussels rumor mill is already spinning – and everybody wants to have a say!
In its analysis published on Monday, the European Court of Auditors (ECA) calls for a simplification of the EU budget, flexibility and more financial room for manoeuvre. Also on their wishlist? A clear audit mandate covering all spending under the next MFF.
The ECA wants the EU budget to be more result-oriented – linking EU funds more tightly to strategic priorities – and making sure they actually deliver. Therefore there should be better coordination between different EU funds as well as a stronger link between EU financing and reforms in the member states.
While the Commission is pushing on new own resources and favors increasing contributions from the member states, also the European Parliament is calling for a larger overall budget as well as member states like Italy and Spain. Their argument? The EU’s current spending cap just is not enough to cope with the growing number of crises and challenges – from defence to climate to competitiveness. Another looming concern: how to manage the repayment of the €800 billion borrowed for the NextGenerationEU fund. Starting in 2028, it could eat up €30 billion a year – roughly a fifth of the EU budget.
Germany says Nein – and is making its red lines crystal clear in its new position paper. Berlin rejects the idea of significantly increasing the size of the MFF relative to the EU’s economic output – there is no appetite for higher German net contributions. New on the German side? France – after previously floating the idea of doubling the EU budget, Paris has now pivoted – joining Berlin in rejecting higher net contributions and protecting national wallets.
And what does Berlin want? The EU should review its current spending and refocus on priorities that deliver European added value. In line with the ECA and the Commission, they call for a simpler and more flexible budget that can be more easily shifted across priorities. And what are those priorities? According to the German position paper: security and defence capability, as well as EU competitiveness. But Germany wants these goals funded from the traditional budget – not through new common debt – rejecting a repetition of the NGEU model. That may well be a polite nein for defence bonds.
While remaining open to the Commission’s proposal of new own resources and generally supporting its idea of competition funds, Berlin draws the line when it comes to substantial reforms like the Common Agricultural Policy (CAP).
With the Commission’s proposal just weeks away, the stage is set for another classic EU budget battle!.
What else was on?
On Monday (16 June), the European Securities and Markets Agency (ESMA) released its annual report for 2024, notably stressing ESMA’s contribution to an EU move to a shorter settlement cycle (T+1). Also on Monday, Christine Lagarde – the President of the European Central Bank – spoke on U.S. tariffs and EU-China relations, notably highlighting the intrinsic linkages between EU and US supply chains.
On Tuesday (17 June), the European Central Bank launched Eurosystem Collateral Management System (ECMS), replacing 20 national systems with a unified platform for managing collateral in credit operations. On the same day, Ursula von der Leyen spoke on the challenges facing Europe’s financial sector, pointing to fragmented capital markets limiting entrepreneurs’ access to risk capital, as well as stressing that regulation and tariffs create uncertainty that disrupts investment and innovation. Also on the same day, Lagarde spoke on the path for the Euro to gain global status, highlighting the need to support strategic industries like defence.
On Wednesday (18 June), Sharon Donnery – Member of the European Central Bank’s Supervisory Board – called on banks to maintain strong credit underwriting frameworks, grounded in thorough assessments of creditworthiness and aligned with their risk appetite. On the same day, negotiators have reached a deal on T+1, i.e. the EU’s move to reduce the amount of time it takes for financial securities trades to settle, known as T+1.
On Thursday (19 June), European Central Bank President Christine Lagarde said that Ukraine needs to ensure that legal and financial reforms are fully implemented if it hopes to achieve deeper economic integration with the EU.
Crystall Ball Gazing
Today, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) will hold this year’s second monetary dialogue with Lagarde, discussing the quarterly assessment of the ECB’s monetary policy, the ECB Governing Council’s decision to lower the three key ECB interest rates by 25 basis points, the developments and challenges for ECB’s monetary policy of stablecoins and crypto-assets.
Also today, Brussels will host the 20th EU-Canada Summit, with leaders expected to unveil a new Security and Defence Partnership. Trade will also take center stage, with talks aimed at deepening investment ties, advancing full ratification of CETA, and reaffirming a shared commitment to “sustainable, fair and open trade”. A press conference with President Costa, Commission President von der Leyen, and Canadian Prime Minister Carney is scheduled for 7 p.m.
On Wednesday, we can expect a final trilogue under the Polish Council Presidency on the , where we understand that negotiators from both the Parliament and the Council are intending to reach a high-level political deal on the file.
On the same day – and across the pond – we can expect a board meeting of the Federal Reserve to take up a proposal aimed at easing capital requirements for the nation’s largest banks, with participants going to discuss revisions to rules governing the capital buffer that market participants must have available to absorb potential losses and remain solvent during times of economic upheaval.
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