The Ukraine war’s spillover into the Black Sea is creating a growing European security and commercial risk: Drones are hitting ships and killing sailors, grain routes are under strain, and insurers and investors are weighing the cost of operating through Ukraine’s ports.

Five commercial vessels have been hit in Bulgarian and Romanian waters over the past week alone, leaving at least four people dead, several sailors missing and others injured. In response, Black Sea countries Bulgaria, Romania and Turkey have raised the issue at NATO, asking for more focus toward the region and joint support, according to two alliance diplomats.

“The attack within Bulgaria’s exclusive economic zone is absolutely unacceptable. It constitutes a serious breach of maritime and international law and will further jeopardise safe navigation in the Black Sea,” Bulgarian Prime Minister Rumen Radev said on X after the attacks last week.

Russia has been attacking Ukrainian ports and cities in the area since the start of its full-scale invasion. But the recent strikes have brought the spillover into NATO territory. If they continue, EU leaders will face pressure to protect Black Sea shipping and keep Ukrainian trade moving.

Those questions will be top of mind at Thursday’s European Council summit. According to draft conclusions obtained by POLITICO, leaders are expected to discuss the “immediate restoration of safe passage for grain cargo ships.”

A wider problem

Russia is not the only country using naval drones in the Black Sea. Ukraine has also used them against Russian-linked shipping. In June, a Ukrainian sea drone exploded in Romania’s Constanța port after Kyiv said it had veered off course because of Russian electronic interference.

“The Black Sea situation is quite dangerous because attacks are coming from both [sides],” said an EU shipping representative, who was granted anonymity to speak freely. “You have to worry about both.”

Attribution can also be difficult. Bulgarian Prime Minister Rumen Radev said Wednesday that investigators still have not proven that Russia is behind the strikes — although some have attributed his reticence to his broadly softer approach toward the Kremlin.

Drone operations by both Russia and Ukraine are likely to continue as long as each has the money and production capacity to sustain them, said Cristian Vlas, assistant research manager for Eastern Europe at the think tank ACLED.

Oleksii Goncharenko, a Ukrainian lawmaker and founder of the Black Sea Security Forum, told POLITICO that a “serious diplomatic initiative” was needed, bringing together Ukraine, Russia and a third-party guarantor, such as Turkey, “to restore freedom of navigation in the Black Sea.”

Grain routes under pressure

The security risk is disrupting routes that carry Ukraine’s harvest to market, with consequences for EU transport links. Black Sea ports are Ukraine’s main export gateway, handling around 95 percent of the country’s grain exports, as well as significant volumes of iron ore. Shipping traffic has fallen as the security risk has grown.

Some cargo is being rerouted to the River Danube, but capacity there has been stretched in recent months as drought pushes water levels to record lows. Operators are trying to add rail capacity, but that risks moving the bottleneck westward to Romania.

Moving more Ukrainian grain overland also risks reviving tensions with farmers in neighboring EU countries, Vlas said. Romanian farmers have worried that Ukrainian produce meant only to transit could stay on the domestic market, he added, while transport operators are already juggling competing demands for capacity.

Ukraine’s Agriculture Minister Taras Vysotskyi has warned that millions of tons of unsold grain is piling up, and that farmers who can’t sell won’t be able to afford to resow all their land.

Bulgaria is working with Romania and Turkey on a joint initiative to protect freedom of navigation in the Black Sea, which Radev plans to bring to EU leaders on Thursday.

Following the Black Sea countries’ request at NATO, military officials are likely to look into possible options such as shifting counter-drone systems to the region, the two alliance diplomats said. Radev said Sofia will convene his counterparts in Ankara and Bucharest to examine further proposals, while a senior Bulgarian official called for new joint anti-drone systems with Romania, partly financed by the EU.

Investment at risk

The attacks also threaten what had started to look like a renewed bet on Ukraine’s ports. MSC, the world’s largest container line, was among the biggest and newest investors, reportedly acquiring a majority stake in a container terminal at a port near Odesa in May.

Ukraine has also been offering investors a long-term concession at the Chornomorsk terminal near Odesa. This terminal is one of Ukraine’s largest planned port public-private partnerships and part of what is expected to be a multibillion-euro reconstruction effort involving European companies.

But people who work in Ukraine’s ports say the case for rebuilding is collapsing.

“No one is ready to invest and rebuild, since you know that tomorrow there will be another missile, another pack of drones,” Oleg Grygoriuk, chairman of Ukraine’s Marine Transport Workers’ Trade Union, said.

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 .”

MONACO — Ukraine is taking its war effort from the muddy Donbas trenches and halls of European power to an iconic London football stadium this week.

Originally driven from its home in 2014 by marauding Russian-backed forces, Shakhtar Donetsk — Ukraine’s top team — will take up a residency at Stamford Bridge, home of Chelsea FC, in Europe’s premier football competition Wednesday night.

As air raid sirens sounded relentlessly back home, the club’s Chief Executive Sergei Palkin and Sporting Director Darijo Srna met POLITICO in the marbled lobby of a Monaco hotel to discuss Shakhtar Donetsk’s UEFA Champions League prospects — and why they’re playing for something much bigger than on-field success. 

“At this point we are not representing just Shakhtar Donetsk. We are representing the whole country,” said Palkin, ahead of four matches in London this fall and winter. “For us, it’s also to support Ukrainian people who left their homes and moved to London, to England. And therefore, these games completely change context. It’s very important every time to send messages to support Ukraine.”

Shakhtar’s survival among Europe’s elite is emblematic of Ukraine’s own endurance against Moscow’s bombardment. Forced out of Donetsk in 2014, the club has spent more than a decade moving between temporary host cities while keeping its Champions League ambitions alive throughout the war, despite the difficulty of attracting top European signings while based in a war zone. 

Since Russia’s full-scale invasion began in 2022, Shakhtar Donetsk has played “home” matches in Poland and Germany. Club bosses are thrilled to be based in England for this season’s games against Greece’s AEK Athens, Portugal’s Sporting CP, Turkey’s Fenerbahçe and Spain’s Real Madrid. “[London] is the capital of the football world,” Palkin said.

“We don’t have pressure. We want to play football. We are 24/7 under stress in Ukraine. And we want to just go out and play for our fans, for Ukraine,” added Srna, a former star defender for Shakhtar Donetsk and the Croatian national team. 

Invest in Ukraine

Large white letters adorn Shakhtar Donetsk’s orange and black jersey bearing the name of SCM, the country’s biggest private financial and industrial investment company, owned by Ukraine’s richest man and the club owner, Rinat Akhmetov.

Russian President Vladimir Putin’s unabating assault has cost tens of thousands of lives in Ukraine, and also caused hundreds of billions of dollars worth of damage to infrastructure across the country. Ukrainian President Volodymyr Zelenskyy has crisscrossed the globe in recent months trying to maintain Western support for Kyiv, as it runs short on cash and critical air defenses. 

Closely connected to Shakhtar Donetsk, officials at SCM are appealing to Western investors that they are the key to Ukraine’s reconstruction — and that it can start already. Natalya Yemchenko, chief corporate affairs officer at SCM, said that any investment would pay an immediate dividend for Europe.

“It’s a good time to invest in Ukraine, not from the point of view of big and easy money. It’s a great time to invest from the view of strategic security issues, energy security issues [and] food security issues. It’s a very good time to create strength in Ukraine to protect Europe and to make Europe more ready for the next years,” Yemchenko told POLITICO at a separate event in Monaco.

While some of the military and reconstruction financing that has poured into Ukraine during the war has ended up in the crosshairs of anti-graft investigations — including one prominent case that ensnared a former minister in Zelenskyy’s government, and the president’s top aide Andriy Yermak — Yemchenko emphasized SCM’s commitment to anti-corruption. 

“We have zero tolerance [for] corruption inside of our business. And I would say from our experience, when you see some big cases, it means that the anti-corruption system works. It would be much worse if during the war we would not see any cases of fighting this corruption,” she said.

Russia’s hybrid campaign against Europe has sharpened SCM’s case for investment in Ukraine. The company argues that Ukraine is already Europe’s first line of defense — and that keeping its economy strong helps make the rest of the continent safer.

For Yemchenko, the investment case is inseparable from the war. Ukraine cannot keep defending Europe if its economy fails. She said Russia’s recent attacks on businesses are meant to leave people feeling desolate.

“They would like to demotivate Ukrainian business. Shopping malls, logistics centers: They are the main target for the last two months. And I do believe that they would like to make life in Ukraine almost impossible,” she said. 

“We saw it in Mariupol, what they started to do from the very beginning. They start to create a humanitarian catastrophe. Their first target was telecoms. Then it was heating. Then water. They destroy everything connected to basic needs. Why? Because they think that people will leave cities, including Kyiv,” she added.

“And again, this war is a Ukrainian war, but to a big extent, it’s a European war, unfortunately.”

PARIS — French center-right presidential candidate Edouard Philippe accused his far-right rival Marine Le Pen of trying to force a Frexit in disguise with her euroskeptic campaign promises.

“There is something in Marine Le Pen’s proposals that has the potential to blow Europe up, or let’s say to crack it open,” Philippe said at POLITICO’s Paris Competitiveness Summit on Tuesday.

The former prime minister — who is currently the best-placed centrist candidate to challenge the front-running Le Pen, according to recent polls — said Le Pen’s plan to unilaterally demand a drastic cut to France’s contribution to the EU budget was akin to “saying you want out of Europe” without openly advocating for leaving the bloc. Le Pen had previously called for a referendum in France on leaving the EU but dropped the proposal after her crushing defeat to Emmanuel Macron in the 2017 presidential election. Her party, the National Rally, now says it wants to change the EU from within.

Philippe, a fiscal conservative who has been pitching himself as the voice of reason in a campaign dominated by populist rivals, also slammed budget plans Le Pen unveiled last week as “grotesque,” accusing her of pitching “fantasy” savings.

Le Pen’s fiscal plans have faced serious scrutiny since being presented, with many observers saying they either lack key details or overestimate savings on major proposals like immigration. Progressive think tank Terra Nova wrote in a note out Tuesday that Le Pen’s budget presentation was “riddled with errors and contradictions” as well as “botched estimates.”

“She isn’t even able to estimate the cost of the pension reform she is proposing,” Philippe said.

Le Pen said in August that her plan to bring France’s legal retirement age back down to 62 for most workers would cost €9 billion a year, and last week she said she would lay out at a later stage how she intends to fund her flagship pledge. However, the Institut Montaigne, a fiscally conservative think tank, estimated the proposal would cost €34.7 billion a year.

Philippe is hoping to convince voters that his fiscally conservative agenda is the right path in a country burdened by a ballooning public debt and a budget deficit still above 5% of gross domestic product, in breach of EU rules.

Philippe said France needed to get its finances back on track to regain credibility on the European stage after a “loss of influence” over the past few years.

Though he currently leads a crowded field of centrist candidates, Philippe’s campaign has struggled in recent weeks to gain momentum — and far-left candidate Jean-Luc Mélenchon is now challenging the former PM for second place in the polls. France’s presidential election goes to a runoff if no candidate receives more than 50% of the vote, and Le Pen’s strong poll numbers all but guarantee her a spot in the second round.

Tough on China

The former prime minister pitched a pragmatic European agenda with less regulatory burden, more focus on investment and a tougher approach to China.

Philippe had some harsh criticism for an already embattled flagship measure of the EU’s green deal, saying the 2035 combustion engine ban has been “disastrous.”

There was “a great naiveté toward China,” which ultimately benefited from Europe’s push on electric vehicles, Philippe said.

“We need to much better protect our market,” he added. “If one wants access to the European market, one has to manufacture in Europe. If a carmaker doesn’t manufacture here, then we have to slap high tariffs.”

The EU is in the process of drawing up new “Made in Europe” rules that would favor European producers over those outside the bloc, in response to trade practices by competitors like China and the United States.

Shortly before Philippe took the stage, European Commissioner for Industry Stéphane Séjourné said at the POLITICO event that a Franco-German deal trading stronger protections on the definition of Made in Europe in exchange for a loosening of combustion engine rules should be finalized “in the next few hours or in the next few days.”

On artificial intelligence, Philippe aligned himself with Macron, advocating for European sovereignty in the field and the need to regulate what he described as “an instrument of power.”

“What I see is an AI world making money for the U.S. with European savings and European data, and that bugs me,” he said.

EU capitals must be able to intervene to stop new legislation from Brussels if they say it’s too burdensome for governments and businesses, the leaders of Germany, Italy and Belgium wrote on Monday.

In a letter addressed to European Council President António Costa and seen by POLITICO, the three leaders said the bloc needs an “emergency brake” mechanism to help boost its flagging economic competitiveness.

German Chancellor Friedrich Merz, Italian Prime Minister Giorgia Meloni and Belgian Prime Minister Bart de Wever also called to “significantly accelerate planning and approval procedures,” suspend “certain regulatory areas for a specified period” under a new “priority rule.”

“We call for further ambitious simplification packages to decisively advance the cutting of red tape in the European Union,” they wrote, adding that the Commission must ease the burden “first and foremost” on small and medium-sized businesses.

“More broadly,” the letter reads, “our common objective should be to prevent unnecessary regulatory burdens and related costs from causing permanent losses of European industrial capacity and further weakening investment and competitiveness.”

Coming days before an EU leaders’ meeting, the call echoes demands first stated in March after a summit focused on European competitiveness, and it comes amid worsening signs for the bloc’s industrial sector.

Leaders will debate the EU’s long-term budget, energy prices, and support for Ukraine when they gather in Brussels on Thursday for a two-day European Council summit.

BRUSSELS — Ryanair has accused rivals Lufthansa and Air France-KLM of trying to ground the low-cost carrier by alleging that its ownership structure violates EU rules.

The two legacy airlines, which face growing competition from budget carriers, belong to the European Network Airlines Association, a lobby group that has filed a legal challenge over Ryanair’s share ownership.

“Now they’re in the Irish High Court seeking to have our license suspended and Ryanair grounded,” Ryanair CEO Michael O’Leary said Thursday in Brussels.

The association confirmed to POLITICO that it has spent months urging EU and Irish aviation authorities to investigate whether Ryanair complies with the bloc’s ownership and control rules.

Under those rules, airlines must be majority-owned and effectively controlled by EU nationals or entities to hold an EU operating license. ENAA argues that Ryanair no longer meets those requirements, pointing to the airline’s March announcement that only 30% of its shares are held by EU nationals. O’Leary, an Irish citizen, holds 4% of the stock.

When the Irish Aviation Authority seemed “reluctant to engage on the matter,” ENAA took the matter to court. If Ryanair loses the case, it could be forced to change its ownership structure. The carrier’s operating license would only be suspended if it does not comply with the verdict.

Ryanair has rejected the allegations, arguing that its non-EU shareholders do not have voting rights, which means the airline is under EU control.

In an emailed statement, Ryanair accused its rivals of attempting “to restrict competition and choice for EU air travel” by challenging its operating license.

Grounding risk seen as remote

Augusto Viansson Ponte, a London-based director at Alton Aviation Consultancy, doubted that the legal case would be easily dismissed, but also said it was unlikely that Ryanair would lose its operating license.

“ENAA’s request is sufficiently well-founded to justify examination, but it is way too early to say that Ryanair is violating the rules,” he said.

Regardless of the legal outcome, Viansson Ponte said that a “likely first step would be corrective measures, not immediate grounding.”

Even if the court rules against the budget airline, Ryanair would have several options to address any compliance problems, the analyst said. 

“Ryanair could restrict non-EU [share] purchases, facilitate transfers of shares to EU investors, implement targeted share buybacks or restructure its licensed subsidiaries for example,” he said, adding that the process “should be manageable” for the airline.

Enemies in court, friends in Brussels

Despite their spat, Ryanair, Lufthansa and Air France-KLM all belong to the Brussels-based Airlines for Europe (A4E) lobby, and all are pushing for a reform of the Air Services Regulation, which sets the rules for operating in the EU, including ownership and control.

The lobby’s members jointly support providing “more flexibility … and tackle the risks linked to this change,” they said in feedback to the Commission.

“The potential way forward is to allow institutional investors from selected third countries to hold a limited percentage of shares … which would count towards the EU share of ownership,” the joint position adds. 

If EU lawmakers adopt the proposal, “that would allow a greater access to liquidity in those markets for airlines,” said easyJet CEO Kenton Jarvis, whose company is set to be acquired by U.S. investment firm Apollo.

However, the legal battle between the Irish budget airline and legacy carriers may fracture A4E. O’Leary threatened on Thursday at an A4E press conference to leave the lobby group unless the legal case is dropped by the end of the year. 

A4E later acknowledged that its members “may have differing views on certain issues, [but] we share a common interest in advancing our collective work for the benefit of European passengers, particularly in an increasingly complex and costly regulatory environment.”

Neither Lufthansa nor Air France-KLM commented on O’Leary’s threat to leave A4E.

The growing popularity of far-right parties across Europe is sparking worries in NATO that they could weaken public support for rearmament and military aid to Ukraine as risks grow of a confrontation with Russia.

In France, Italy, Belgium, Germany, Poland and Romania, these parties are looking to turn voters’ cost-of-living concerns into opposition to aid for Kyiv, and rejection of higher national defense budgets and a greater role for the EU in defense — although each party has often sharply diverging views on those issues.

France’s National Rally leader Marine Le Pen last month called for limiting aid to Ukraine, saying: “financially, we can’t do it anymore.”

Roberto Vannacci, a former general and MEP who leads the far-right National Future party, which is increasingly challenging Prime Minister Giorgia Meloni, called for a rethink of defense spending. “Let’s evaluate whether this military spending is justified: in my opinion, it isn’t, especially at a time when commodity prices are hitting record highs,” he said last week.

The challenge for Europe’s mainstream parties is how to sustain support for higher defense budgets even if that means competing with welfare and other priorities.

“People are struggling with the rising cost of living across the board … so there’s room for populistic rhetoric about how much should we support Ukraine financially, or how much should we invest in defense,” said Janne Kuusela, permanent secretary at Finland’s defense ministry.

The dilemma is sharpening as several large NATO members, including France, Italy and Poland, face elections in 2027, when far-right parties stand a real chance of coming to power. Many countries are also beginning talks on next year’s budgets.

For NATO, a spending slowdown would complicate efforts to meet the alliance’s target of spending 5% of GDP on defense and security by 2035. Four NATO diplomats, granted anonymity to speak freely, said the risk is a growing concern, though some said its effects may not be clear until next year’s budget cycle.

“We’re already in a situation where we need to catch up” with Russia, said a NATO military official. “So far, we’re on a positive trajectory — if someone closes the faucet, there’s a risk of losing capabilities.”

Turning the tide

European countries and Canada are expected to spend $634 billion on core defense needs this year, an 11% hike relative to 2025. But public support has limits.

In eight European countries, an average of 46.2% of respondents said they would not back higher defense spending if it meant higher taxes, while 35.5% were in favor, according to an August poll assessed by the European Council on Foreign Relations and shared with POLITICO. More people were opposed to increasing taxes to finance military spending in Germany, France, Italy, Spain and Poland. Respondents in the Netherlands, Sweden and the U.K. were more likely to accept higher taxes for military spending.

Protests against higher defense spending have taken place in Rome, Brussels and Madrid this year, with demonstrators criticizing cuts to funding for hospitals, universities and social services.

Support for Ukraine is declining as well, according to NATO’s internal polling from this spring, falling from 59% in 2025 to 55% this year, with lethal aid the least popular form of support.

Far-right pushback on defense varies across Europe and falls broadly into three categories: opposition to military aid for Ukraine; rejection of EU-level defense projects; and criticism of defense spending more broadly. Yet all threaten to halt the continent’s effort to rearm rapidly and jointly — and limit Russia’s aggression against Ukraine.

France’s National Rally and Romania’s Alliance for the Union of Romanians oppose aid to Kyiv. Poland’s Law and Justice and the Dutch Party for Freedom resist EU-level defense projects. Alternative for Germany and Italy’s National Future criticize increased spending more broadly.

The right’s political foes warn that opposition plays into the Kremlin’s hands. “The pressure from the right doesn’t actually come from the right, but largely from Moscow,” German Defense Minister Boris Pistorius said. Parties such as National Rally and the AfD have longstanding ties with Russia, though they have sought to shake off their links in recent years.

Defense spending pressure

The political risk varies by country. Le Pen is a front-runner to become French president, while the AfD has made gains at the regional level but is unlikely to take national office soon.

Far-right gains are putting centrist parties under pressure to defend higher spending or consider cuts to retain public support.

“There is a risk that the formally pro-European mainstream across Europe might be too timid to spend … as would be necessary on defence,” said Paweł Zerka, senior policy fellow at the ECFR.

While Le Pen’s National Rally has indicated that she would respect France’s current trajectory of increasing military spending, Italy’s Meloni last week proposed spending €8 billion less on defense than the government’s initial proposal amid pressure from her far-right coalition partner, the League. Meloni last week proposed spending €8 billion less on defense than the government’s initial proposal amid pressure from her far-right coalition partner, the League.

“You can’t spend on weapons what you can’t spend on pensions, excise tax relief, or utility bills,” Claudio Borghi, a League senator, said last week.

In Poland, President Karol Nawrocki, backed by the right-wing Law and Justice party, tried but failed to block access to nearly €44 billion in EU SAFE defense loans, saying the scheme risked making Poland dependent on Brussels and saddling future generations with debt.

Pressure to rethink defense spending could make it harder for NATO members to fund the capabilities officials say are needed to deter Russia, as capitals begin talks this month on determining the alliance’s war plans, which are due by 2029.

A slowdown by larger members such as France and Italy would have broader effects because they account for a greater share of defense investment and aid to Kyiv, one of the NATO diplomats said.

“If bigger countries stop making progress, then NATO will stop making progress,” the diplomat said. “You weaken NATO, you weaken Europe’s ability to defend itself, and you make Ukraine … more vulnerable.” 

It could also affect the sum earmarked for defense in the EU’s next long-term budget if talks stretch on into next year, said Guntram Wolff, a senior fellow and defense economics analyst at the Bruegel think tank.

“Nationalists are all only interested in their country, they don’t want to work together with other European countries,” said German lawmaker Marie-Agnes Strack-Zimmermann, who chairs the European Parliament’s defense committee.

This article has been updated.

BRUSSELS — Germany’s push to exempt a national champion from future EU oversight could imperil a ministerial deal to integrate the bloc’s financial markets and compete with Wall Street.

Over the coming days, finance ministers will discuss the most contentious parts of their countries’ positions on Brussels’ “market integration and supervision package” of bills, or MISP. They’ll begin with a dinner on Thursday in Luxembourg, as the Council moves toward its official negotiating position.

The hope is that ministers will then sign off on the compromise deal, brokered by Ireland in its role as leader of the EU’s rotating presidency, at the ministerial Ecofin gathering on Friday. This would be a major step forward for the EU’s 10-year bid to create a U.S.-style capital market.

But a push by Germany to exclude one of Europe’s biggest stock exchanges from central EU oversight could turn dinner into a food fight.

This exemption remains in the current compromise position among EU capitals after Berlin refused to give up local supervision of its stock exchange behemoth Deutsche Börse over fears of job losses and ceding power to a bloc-wide entity, despite central supervision being one of the key tenets of the MISP package.

It’s sparked protests from smaller countries, which feel the compromise would disproportionately benefit their larger neighbors — and could scupper the entire deal.

The carveout is “polluting the whole debate” by giving a “huge gift to Germany” while other countries receive nothing in return for their support, one diplomat said.

Another went further. “No deal is better than a bad deal,” a senior EU official said ahead of Friday’s meeting.

One market

Securing a deal on MISP this year is central to the “One Europe, One Market” plan that the EU’s three political leaders in Brussels agreed to in April. EU governments have invested significant political capital into MISP in a bid to turn the bloc into an investment hub where innovative companies can find investors without having to leave for deeper pockets on Wall Street.

Getting sign-off from the EU’s 27 governments would be a major coup for Dublin, which is chairing legislative negotiations in Brussels until the end of the year.

However, six diplomats close to the negotiations gave contrasting views on whether a deal would be possible this week. According to one, anywhere from eight to 17 countries could band together to block an agreement.

The diplomats did concede that the countries opposing the carveout are not unified in their position, however, as they all want different things from a potential deal. But the Deutsche Börse issue remains the most contentious.

After the German government made it clear it would not support a deal on the package unless Deutsche Boerse was carved out, the EU’s six biggest economies came up with a plan over the summer to exempt the exchange from EU-wide supervision by the new “supercop” European Securities and Markets Authority.

The German state of Hesse, Deutsche Boerse’s current supervisor, has consistently opposed giving up the role, fearing job losses and waning influence if the exchange giant is instead overseen by ESMA. The carveout, based on trading thresholds and geographical footprint, would also benefit Spain’s main stock exchange and another German trading platform, Tradegate.

In practice, scoping out the German giant would hollow out the ambition of the MISP plan. Moving to a central supervision model for the EU’s biggest exchanges and other financial plumbing firms like clearinghouses and central securities-depositories has been the thorniest political issue throughout negotiations.

Although ESMA would still oversee large firms such as the stock exchange group Euronext and Nasdaq’s European arm, the watchdog would have fewer staff and less funding, and ultimately be less powerful if it were not responsible for supervising Deutsche BBörse 

The Belgian government in particular isn’t taking the plan lying down. According to two diplomats close to the talks, Belgium’s prime minister, Bart De Wever, could raise the subject at the European Council later this month if a majority of ministers push the carveout through.

Central to the Belgians’ frustration is the fact that their finance giant, the securities-depository group Euroclear, will move to ESMA supervision, while Belgium was shut out of talks among the “E6” supergroup of the bloc’s largest economies, according to multiple diplomats involved in the group’s formation.

If big countries won’t give up the Deutsche Börse carve-out, small countries could win changes to ESMA’s governance structure in exchange for supporting a deal, according to three of the diplomats. They want national finance watchdogs to have more influence in ESMA’s decision-making, while some also want changes to the authority’s funding structure. Large countries want ESMA to be overseen by an independent, powerful executive board akin to the European Central Bank’s. 

“It’s MESS, not MISP,” one diplomat quipped to POLITICO. 

Giovanna Faggionato contributed reporting.

DUBLIN — Ireland will create a new national savings system to spur tax-free investments in stocks and bonds, the government announced Tuesday as the centerpiece of its next tax-cutting budget.

The measure is designed to woo at least some of the more than €170 billion currently resting in Irish savers’ bank accounts, most of which is earning paltry rates of interest, into riskier investments with much higher potential returns.

The move represents Ireland’s national riposte to pressure from several other European Union countries to boost consumer investment in stocks and bonds on a union-wide basis. Ireland is among the EU members resistant to creating a proposed “Savings and Investments Union” regulated from Brussels, not Dublin.

Presenting his 2027 budget, Finance Minister Simon Harris told lawmakers that residents would be able to open Irish Investment Accounts starting in July. He said individuals could use those accounts to invest in stocks, bonds and exchange-traded funds (ETFs), many of which are listed on the Dublin stock exchange, via a list of state-approved banks and brokers.

The first €50,000 in each account would not be taxed, while any balances above that would be charged 1% on the excess amount, he said. This means a fund valued at €100,000, for example, would face an annual tax liability of €500.

Under the plan, most investors would take a few years to grow their accounts to the €50,000 threshold. Annual contributions to each account would be capped at €12,000, Harris said, underscoring the center-right government’s aim to spur investment by middle-class savers, not the wealthy.

This approach, he said, “strikes a balance between encouraging small-scale investment, while ensuring that those with greater means continue to make a fair contribution.”

Investment firms offered a muted welcome, noting that Harris’ regime retained significant disincentives.

“Today was the government’s chance to get Ireland investing, and it has missed it,” said Michael Healy, chief executive of online trading and investment platform IG Consumer.

Healy dismissed Ireland’s plans as “fundamentally flawed,” as they will tax all balances above €50,000, regardless of whether they have recorded any gains that year. “Someone could face a tax bill even when their investments have fallen in value — effectively paying tax on losses,” he said.