Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union.

NATO’s foreign ministers gather in Brussels today to formally sign off on a massive weapons ramp-up that should lead to a new alliance-wide defense spending target of 5% of GDP. They will also further discussions on how to keep US President Donald Trump as happy as possible at the alliance’s upcoming summit. Europeans have insisted that a so-called US backstop is essential to deter Russia from breaching any future ceasefire deal. But the US is refusing to provide air defenses to back the “reassurance force” the UK and France are planning in a postwar Ukraine, we’ve been told. Keeping Trump happy will also be a top concern for Germany’s Friedrich Merz, who’ll be in the White House today. Trump’s determination to dial back military support for Europe will shift a massive burden onto Germany. The country is uniquely vulnerable to the president’s efforts to transform the way the world does business, and many Germans don’t have the stomach for the challenges ahead.

— Andrea Palasciano

What’s Happening

Rate Cut | The European Central Bank is set to lower interest rates for an eighth time today as President Donald Trump’s jolts to global trade dim the prospects for inflation and the economy. Another reduction is expected in September, when talks with the US should have concluded and fresh forecasts will reveal the tariffs’ full implications.

Refugee Help | The commission wants to extend temporary protection for the millions of Ukrainians who fled Russia’s invasion by another year, until March 2027. Meanwhile, it’s asking member states to prepare for what comes after, be it helping refugees return home when conditions allow or offering more secure legal status within the EU for those who want to stay.

Calling Paris | China asked France to help resolve trade differences with the EU, asking Paris to push the commission to work with Beijing to create conditions for expanding cooperation. But the EU has asks of China too. The bloc’s trade chief, Maros Sefcovic, said he raised industry-wide concerns over Chinese export restrictions on rare earths and magnets with his counterpart.

Water Measures | The EU unveiled plans to boost resilience to droughts and improve water quality across the bloc, including measures to place usage checks on the booming IT sector. The overall objective is to boost water efficiency across the bloc by at least 10% by 2030.

Around Europe

Bill Delay | Hungary may delay the adoption of a bill that was heavily criticized for its perceived aim of enabling a crackdown on dissent before elections. The bill’s stated goal is to cut off money to civil society and media receiving foreign funding after a state agency set up by Prime Minister Viktor Orban’s government deems them a threat.

Growth Boost | Germany approved a package of tax breaks for companies worth an estimated €46 billion, part of a push to revive an economy that’s forecast to stagnate for a third straight year in 2025. The government agreed on write-offs of as much as 30% for companies purchasing movable assets between the end of June this year and January 2028, pending parliamentary approval.

In Limbo | After his government collapsed, Dutch caretaker Prime Minister Dick Schoof told lawmakers they need to decide which issues to prioritize. The Netherlands is set for months of uncertainty, with parliament expected to vote on a list of subjects deemed “controversial,” which must now be avoided until after fresh elections.

Record Sales | Israel’s defense exports hit a record for a fourth consecutive year thanks largely to growing demand from Europe, even as some of its nations call for sanctions over the war in Gaza. Europe was Israel’s main market and accounted for 54% of sales.

Chart of the Day

European carbon emissions have climbed this year as a wind drought is forcing countries such as Germany to rely more on fossil fuels to power their economies. Emissions across the EU are up almost 11% so far this year compared with a year earlier. Wind and solar generation are key to the EU achieving its target of cutting fossil-fuel use for energy by 80% by 2040.

Today’s Agenda

All times CET

• 2:15 p.m. ECB rate announcement, followed by a press conference with President Christine Lagarde at 2:45 p.m.
• 3 p.m. Press conference by EU top diplomat Kaja Kallas and tech chief Henna Virkkunen on the International Digital Strategy 
• 4:30 p.m. EU defense chief Andrius Kubilius speaks in Poland
• NATO defense ministers meet in Brussels, with Secretary General Mark Rutte holding a press conference at 5 p.m.
• UK Secretary of State for Northern Ireland Hilary Benn meets Sefcovic in Brussels to discuss the recent UK-EU trade agreement

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