Welcome to Better Europe’s weekly update on EU Affairs.
EU-US trade agreement: we’re friends again
Next week, the Parliament is set to vote on the EU-U.S. trade deal agreed last summer between the European Commission and Washington. After weeks of political tension including Trump’s Greenland occupation plans and fresh tariff threats, the file is back on track. The compromise hammered out by Parliament’s political groups adds safeguards: a sunset clause would see the agreement expire in March 2028 unless renewed, and a suspension mechanism could kick in if the US violates the terms. There’s also a safeguard for sensitive sectors, and an automatic penalty if Washington doesn’t follow through on its side of the steel commitments. As transatlantic trade is worth €1.68 trillion, it’s not a surprise that business groups are pushing hard for approval, warning against tariff escalation and calling for “predictability”… but that’s easier said than done, and MEPs now have to decide whether this deal brings stability or just postpones the next round of uncertainty.
MFF: big ambitions, small consensus
Six months into talks on the next Multiannual Financial Framework, the mood is cautious at best. The Commission wants a more “strategic” EU budget after 2027: less automatic national envelopes, more flexibility, more performance logic. In theory, that means aligning money with competitiveness, defence, resilience. In practice, it mostly means Member States worrying about what they might lose compared to national envelopes. This week’s Council guidelines for the 2027 budget were telling. Finance ministers called for something more “realistic” and “prudent”, with margins under the ceilings and tight control on administrative spending. Keep supporting Ukraine. Keep funding migration. But also keep an eye on NextGenEU interest costs. And please, no budgetary creativity that ends up in last-minute amending budgets. The tension is obvious: everyone wants a “policy-driven” EU budget. But there is still no clear agreement on the policy itself. More defence? Greener? More competitiveness? More cohesion? The direction isn’t clear and without a shared vision, chances are that the talks will remain stuck.
EUROGROUP: EURO IS THE NEW DOLLAR
Never waste a good crisis. Moving away from U.S. dominance in IT, defence and energy for geopolitical reasons is one thing. But actually benefiting from the fact that other global regions are also reconsidering their U.S. over-reliance, is next level. In finance, that might just happen. Since the 1970s, no one has dared to challenge the role of the dollar as the world’s reserve currency. But if Europeans by oil in the Middle East, why would the transaction be priced in U.S. dollars? And would it not make sense if the euro could replace the dollar in transactions between non-European parties? In some markets such as green bonds, already half of the issuance is in euro, and Eurogroup ministers this week confirmed they’d love to use the euro as a geopolitical tool, including with the ECB offering euro liquidity in terms of crisis — in the same way that the US Fed helped to alleviate the impact of the 2008 financial crisis in Europe. Even the IMF is looking for alternatives now that the U.S. dollar is highly volatile due to Trump’s trade tantrums. Not everyone is happy, as a strong global reserve currency would make exports from Europe more expensive. And we haven’t even discussed the digital euro…