BRUSSELS — The EU and China are in a good place to talk after last week’s trade deal on hybrid cars, but challenges remain, panelists at POLITICO’s European Resilience Summit on Wednesday agreed.

“From the Chinese business perspective this is very welcome,” said Linlin Liang of the China Chamber of Commerce to the EU, calling the understanding reached in Beijing “quite balanced from our perspective.”

An agreement to halve China’s exports hybrid vehicles to Europe was the main deliverable brought home by Trade Commissioner Maroš Šefčovič.

The two sides said in a joint statement that they would keep talking about issues such as market access for medical devices and the Foreign Subsidies Regulation, an EU measure that scrutinizes foreign subsidies that distort competition in public procurement and corporate acquisitions.

Šefčovič will hold further talks with Chinese Commerce Minister Wang Wentao in January, and they will meet again in March, as he pushes to rein in a €1 billion-a-day bilateral trade deficit.

Liang said Beijing stands ready to act if further talks go off track.

“I would like to remind all what MOFCOM mentioned: that they reserve the right to retaliate in case that things … don’t go around as agreed,” she told the panel on Europe in global trade, referring to the Chinese Ministry of Commerce.

Kathleen Van Brempt, a Belgian MEP for the Socialists & Democrats, said the most important outcome of last week’s Beijing talks was that there was “some sort of trade deal or result.”

Yet Beijing’s aggressive subsidy policies remain a hurdle, the senior trade lawmaker said, referring to a widely cited OECD study which found that Beijing’s subsidies to industry are up to eight times higher than in other countries: “It’s not normal,” she said.

Liang said that China’s export success should not be attributed solely to subsidies, and was the result of “decades of investment in innovation.”

She also said there was “a super appetite” among Chinese businesses to invest in Europe, but that they needed to assess the profitability of the EU market just like European companies.

The discussion also revealed differences between policymakers and businesses over the EU’s proposed Industrial Accelerator Act, a flagship measure aimed at steering public procurement spending toward European companies in sectors ranging from renewable energy to steel and the automotive industry.

Van Brempt, the S&D group’s lead lawmaker on the file in the trade committee, said the parliament’s three co-leads are aligned on the bill. While the center-right European People’s Party was “very divided” over the measure, she said lawmakers should be able to come to a common position.

The bill’s “Made in Europe” provision is a cause for concern for industry, meanwhile, as it risks isolating the EU from global supply chains.

“I would be careful always saying, okay, localize, put fences up,” said Holger Weintritt of German pharmaceutical company Bayer. “Let’s make sure that we still remain globally connected and look for reliable partnerships instead of isolating ourselves .”

The Commission is grappling with two goals that may be counterproductive: cutting migration and slashing development aid.

The EU executive’s argument is that a slash in development funding will likely result in people showing up at European borders in search of a better life. And that’s a problem for the bloc, since it’s looking to decrease migration numbers. On the show, hosts Zoya Sheftalovich and Ian Wishart explain how the dilemma will be unpacked at the upcoming European Council this week.

Next, a shooting near the European Parliament in Brussels has EU officials — and everyone else, for that matter — on edge.

Finally, the U.K. under Andy Burnham is at a big inflection point when it comes to redefining its relationship to the EU. But the bloc doesn’t even seem to care.

Questions? Comments? Let us know on our WhatsApp here or at +32 491 05 06 29.

European organizations have to reckon with how to keep up with the modern world without sacrificing sovereignty. Geopolitical instability, tightening regulatory expectations and the rapid adoption of artificial intelligence (AI) mean that, for many organizations, sovereignty now sits alongside resilience and business continuity in board-level risk discussions. The question they can no longer defer is how to harness the opportunities of the modern cloud without surrendering control over their own data. Answering it requires honesty about what sovereignty means, and about where it can actually be found.

A definition Europe can trust

The European Commission’s forthcoming Cloud and AI Development Act (CADA) is the right vehicle for that honesty: giving Europe a shared, enforceable definition of what “sovereign” actually means. Without such a definition, the market is filled with commercial offerings that claim the sovereignty label without delivering the substance, a practice described as “sovereignty washing.” This gap has led some organizations to treat open source as the answer. But open source software is a licensing model, not an operating model, and it doesn’t settle questions about infrastructure or jurisdiction or even reliability and access. It’s not a route out of dependency, it’s a different dependency on project sponsors and code maintainers. A definition gives policymakers a way to properly assess claims of sovereignty against a consistent standard rather than taking marketing at face value.

Europe should not wait for CADA to take effect before acting, though. European cloud service providers (CSPs) have been partnering with established technology providers to deliver real sovereign capability, without rebuilding the entire technology stack from scratch.

The best time to plant the sovereign tree was 10 years ago

If Europe wants to grow its industrial base, it has to support the ecosystem as it is now, not as it may in 10 years’ time. CADA’s own roadmap assumes roughly five to seven years to triple the EU’s data-center capacity. Providers who have already built capacity by blending EU capabilities with proven non-EU technologies would have to spend the intervening years relinquishing their growth. It is scale, not a shortage of skills or innovation, that is the biggest practical obstacle facing a stronger European cloud market. This is precisely why partnership with proven technology sources deserves a central place in the sovereignty debate rather than being treated as a second-best option.

Partnership shortens that timeline considerably, letting European CSPs deliver sovereign, scaled services now instead of waiting for domestic capacity to catch up organically. In Italy, IPZS, owned by the Italian Ministry of Economy and Finance, is using this model to build a modern Digital Application Platform for the Italian EUDI wallet, a foundational EU digital identity initiative. It provides a live example of that model working in Europe today, at the scale and speed the policy window demands.

It is through scale that the local industrial base can deliver sovereign capabilities, compete, capture market share, and invest in developing and integrating home-grown technologies. Hoping for the alternative to happen, that is for a European technological stack to fully emerge and be adopted, is the equivalent of putting the cart before the horse.

The rules need to allow for a model that’s already working

Providers, such as evoila, are now operating well beyond Europe’s borders, alongside Uniserver. This shows the model working at a broader scale, combining local operational and jurisdictional control with proven technology. Sovereignty spans jurisdictional, technological, operational and supply-chain dimensions, and a partnership model can address all four while drawing on technology already proven at scale, rather than asking every layer to be rebuilt from first principles by a single European provider.

Alongside its cloud platform, developed in-house and operated from data centers in Europe under EU jurisdiction, IONOS also offers customers a dedicated VMware-based private cloud. It is also operated within the EU and designed to provide European data sovereignty and operational control.

Broadcom’s role in that model is deliberately narrow. It supplies the VMware cloud software layer to the CSP, while the CSP itself runs the infrastructure and holds the customer relationship, so that no European customer data passes through Broadcom or is subject to its access. Trust, in this model, follows the architecture rather than the brand. If CADA’s tiers implicitly assume that sovereignty can only be delivered by a fully European-built stack, CADA would shut out precisely the route that is already allowing Europe to scale fastest: partnership between local operators and proven technology providers.

The path forward

Europe does not have to choose between moving quickly and building sovereignty. The two are compatible, provided the legislation is calibrated to recognize it. As the European Parliament and European Council work on CADA, the priority should be for it to recognize and reward the partnership models already delivering sovereign capability across Europe today.

The above column is sponsor-generated content.

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BRUSSELS — Germany and its allies rebuffed Ireland’s plan to downsize the bloc’s next seven-year budget, arguing that the proposed cuts are not enough.

On Saturday, the Irish presidency of the Council of the EU, which is steering the talks, proposed cutting around 8% from the bloc’s total budget from 2028 to 2034 in a bid to assuage a German-led camp demanding reductions of several hundred billions euros.

But Dublin’s hopes of facilitating a deal were immediately dashed by German Chancellor Friedrich Merz, one the key players in the negotiations as his country contributes to approximately one-quarter of the bloc’s common budget.

“We are still a long way from an agreement. The amount of the new proposal is not a basis for an agreement. The EU budget must be affordable for those who bear the brunt of the financing,” Merz wrote in a statement on Saturday.

Germany leads a group of six “frugal” countries — Sweden, Denmark, the Netherlands, Finland and Austria — which contribute 40% of the Union’s common budget.

Most frugal countries criticized Ireland’s proposed €159 billion in cuts in current prices from the Commission’s nearly €2 trillion proposal, saying they were insufficient.

Sweden’s Europe minister Jessica Rosencrantz described the negotiating document, or negobox, on X as a “wildly unaffordable increase,” as the overall amount would still be higher than the current budget.

Austrian Europe Minister Claudia Bauer echoed that criticism, saying that the new budget remained “miles away from an Austrian yes.”

Tensions will come to a head during a summit of EU leaders next Thursday and Friday, where they will discuss the negobox.

EU governments are racing to reach a budget deal among themselves by the end of the year — before elections in France, Italy and Poland in 2027 threaten to derail negotiations.

But Dutch Finance Minister Eelco Heinen warned on Saturday that “at this rate, there will be no deal by the end of the year.”

Ireland’s Minister of State for European Affairs Thomas Byrne, who leads the negotiations, dismissed criticism and described the proposal as a balanced compromise.

“The negotiating box acts to bridge the many differences between the Member states,” Byrne told reporters on Saturday.

Divided Union

The EU is split between frugal countries pushing for cuts across the board and a rival camp of southern and eastern states, the Friends of Cohesion, opposing reductions to farmers’ subsidies and regional payouts known as cohesion policy.

These areas account for almost half of the total budget and are politically sensitive because of pressure from farmers’ lobbies and regions.

In a concession to the 17 Friends of Cohesion, Ireland left the agriculture and regional budgets untouched and focused cuts on other priorities such as competitiveness, defense and development aid.

“There was a strong support for heading one [agriculture and cohesion] from almost all of the member states, including some of the countries who would be considered to be net contributors” to the budget, Byrne told reporters.

Reactions to the negobox from the Friends of Cohesion were more conciliatory than those of their frugal peers.

“It’s an excellent starting point to have recovered the money for the CAP [Common Agricultural Policy], but we’re still not satisfied,” said Italy’s Agriculture Minister Francesco Lollobrigida.

Poland’s Europe minister Ignacy Niemczycki welcomed the fact that his country “continues to receive the largest allocation,” but noted that the “change in the overall size of the budget does not match the EU’s ambitions.”

The frugals were also are disappointed that the cuts disproportionately target innovative policies such as defense and competitiveness, which they favor.

“They’re cutting the future to protect the past,” said one EU diplomat from the frugal camp.

BRUSSELS — The bloc’s next seven-year budget suffered a €159 billion cut from the Commission’s original proposal, according to a new plan unveiled Saturday.

The Irish presidency of the Council of the EU, which is steering the talks, proposed cutting around 8% to the bloc’s total budget from 2028 to 2034 to appease a German-led camp demanding major cuts.

The Irish negotiating document, or negobox, envisages cuts of €122 billion in current prices from the previous negobox presented by the Cyprus presidency in June. It sets the scene for fraught discussions among the EU’s 27 leaders during a summit next week.

The bloc is split between frugal countries demanding cuts of several hundred billions to the nearly €2 trillion proposal on the table and a rival camp of southern and eastern states, known as the Friends of Cohesion, opposing reductions.

In a concession to the Friends of Cohesion, Ireland shielded farmers’ subsidies and regional payouts, that account for half of the total budget and are politically sensitive, from any cuts.

Instead, the bulk of the reductions came from foreign aid which was cut by €38 billion; competitiveness which was axed by €75 billion and the EU’s administrative costs which were reduced by €10 billion.

Dublin also scrapped a rainy day fund, known as the “EU Facility cushion,” that allowed the European Commission to deploy cash to tackle unforeseen emergencies throughout the seven-year budget cycle.

Ireland’s Minister of State for European Affairs Thomas Byrne, who leads the negotiations, defended the proposal as a balanced compromise between 27 countries.

“We protected … the traditional policies of the Union, which are very important for the European Union and the single market. But we also very much look to the future,” Byrne told reporters.

However, Ireland’s proposal is unlikely to satisfy the frugals, who have warned against disproportionate cuts to new EU-wide priorities such as competitiveness, defense and development funding.

“The Irish proposal is a disappointment and not even close to a landing zone. The steep increase in MFF spending compared to today is unaffordable and financially not viable at all. By favouring policy priorities of the 20th century the proposal fails to prepare the EU for the 21st century,” an EU diplomat said.

They added: “This negobox is no basis for an agreement among member states. We urgently need more financial realism and less financial La La Land.”

Germany and its allies criticized the previous Cyprus Council presidency for cutting only €32 billion in the last negobox in June.

The new negobox will also be a hard sell to the European Parliament.

“The Irish Presidency has delivered little progress, no meaningful new solutions and a weaker budget,” the European People Party’s budget negotiator Siegfried Mureșan wrote in a statement shortly after the proposal was published.

He added: “Parliament is not bluffing: the budget proposed by the Irish Presidency will not receive our consent.”

The EU’s 27 ambassadors will react to the negobox during a meeting on Sunday, where they will also prepare the leaders’ discussion on Thursday.

Governments are racing to agree on a budget deal among themselves by the end of the year, before elections in France, Poland and Italy threaten to disrupt the negotiations.

Tax tweaks

The Irish presidency made no major changes to a package of five new EU-wide taxes, or own resources, that were proposed by the Commission last year to generate a total of €66 billion for the budget.

This comes as a disappointment for countries such as France, which had been pressuring Dublin to add the European Parliament’s proposed levies on digital giants, online gambling and crypto firms to the negobox to increase the potential revenue.  

Some of the Commission’s ideas — including a corporate tax, known as CORE, and a levy on polluting firms (ETS) — have been challenged by EU governments for more than a year of negotiations and are seen as unlikely to come to fruition.

Despite pressure to drop the most criticized options, Ireland has kept the five taxes on the table and merely suggested technical changes to overcome opposition.

It suggested phasing in ETS contributions for poorer countries that are overwhelmingly hit by the tax, and increasing EU budget contributions from a levy on carbon imports that is accepted by most governments.

Tensions on own resources will come to a head during Thursday’s leaders’ discussions. The president of the European Council, António Costa, said he intends to “fix” a package of potential taxes that are acceptable to governments during that meeting.

This article was updated.

BRUSSELS ― EU governments expect the proposed size of the bloc’s next seven-year budget to be slashed by €100 billion to €200 billion from the previous plan announced in June, 12 EU diplomats told POLITICO.

Ireland, which holds the presidency of the Council of the EU and is steering the talks, will unveil the proposal on Saturday, setting the scene for fraught discussions among EU leaders at their summit next week.

The bloc is split between so-called frugal countries — Germany, Austria, the Netherlands and others — that want to slash several hundred billion euros from the nearly €2 trillion proposal on the table, and a rival coalition of southern and eastern countries, the Friends of Cohesion, that opposes the cuts.

Dublin is expected to cut the budget by between €100 billion and €200 billion as a goodwill gesture to the German camp, the diplomats said. However, the Irish plan to shield agriculture and regional spending from major cuts as a concession to the Friends of Cohesion.

At next week’s summit, EU leaders will react to the latest numbers, known as the “negobox” because it gives governments something to negotiate on, and signal early whether an agreement is possible by the end of the year.

Governments are rushing to secure a deal among themselves before national elections in France, Poland and Italy in 2027 threaten to derail the negotiations.

As a neutral broker in the discussions, Ireland hasn’t publicly disclosed its intentions on the negotiating document. 

Dublin’s European Affairs Minister of State Thomas Byrne told the European Parliament earlier this week that EU member countries have made “substantial progress” toward an agreement. But he warned: “we cannot satisfy everybody.”

Germany and its allies criticized the previous Cyprus Council presidency for cutting only €32 billion in the last negobox in June.

Ireland’s looming cuts

The frugals’ calls for budget savings have ignited fears among the Friends of Cohesion. 

The 17 countries — including heavyweights Italy, Spain and Poland — issued a joint statement last week opposing cuts to agriculture and cohesion. 

In a concession to this camp, Ireland is expected to propose budget savings in other policy areas. Governments are bracing for major reductions to the Global Europe fund, the EU’s €200 billion pot of development aid and external relations cash, and the €410 billion European Competitiveness Fund to boost the bloc’s industrial capacity. 

Cuts to administrative costs, with €118 billion earmarked for the EU’s institutions and staff, are also popular among EU governments, though they will yield fewer savings.

However, frugals have warned against shielding agriculture and cohesion from a smaller budget. They argue instead that more money should be steered away from traditional priorities towards new challenges such as defense and competitiveness.

“We are very concerned that Ireland would decide to smash funding for research and external action, which is a major issue for development, our economic interests and migration,” said one EU diplomat, granted anonymity like others in this article to speak frankly about their expectations for the sensitive negotiations.

Tax game

Another sensitive issue is EU-wide taxes — known as “own resources” — to finance the budget and reduce national contributions.

In 2025, the European Commission proposed five new levies that are expected to generate €66 billion per year. During negotiations, governments opposed levies that would overwhelmingly affect their economies.

Several European governments lobbied Ireland to remove a corporate tax, known as CORE, that is unpopular across the bloc. But Dublin is expected to refrain from doing so, and keep the Commission’s five levies in the negobox.

To make CORE more palatable, Dublin might exempt small and medium enterprises from the scope of the levy. It could also make tweaks to a tobacco levy that is opposed by many.

Instead, the European Parliament’s proposed taxes on digital levies, online gambling and crypto firms are expected to be left out entirely from the negobox.  

An EU diplomat criticized these incremental changes as “disappointing and minimal.”

Trade Commissioner Maroš Šefčovič is kicking off his visit to China today — and the stakes are high.

On today’s show, Zoya Sheftalovich and Sarah Wheaton discuss the most important topic on the agenda: Europe’s trade deficit with China. France and Germany are finally on the same page and want Brussels to get tougher on unfair trade. So can we expect results from the meeting?

Next, EU development ministers are meeting in Dublin to discuss the future of Europe’s development policy. But the timing is unfortunate, as governments prepare another round of cuts to the next long-term budget.

Finally, a mysterious death at a Russian anti-plague lab has an unexpected connection to Zoya’s own family.

Questions? Comments? Let us know on our WhatsApp here or at +32 491 05 06 29.

Articles mentioned in this episode:

• EU toughens China stance ahead of Šefčovič’s Beijing visit.
• EU-China trade talks zero in on cars.
• WHO seeks clarity on second pneumonia case in Russia amid plague fears.