Welcome to the Brussels Edition. I’m John Ainger, Bloomberg climate and energy reporter, bringing you the latest from the EU. Make sure you’re signed up.

The EU will unveil an ambitious five-year plan tomorrow to deter Russia and get its defenses ready for 21st-century warfare.

It will be no small feat. While the bloc’s collective defense budget has almost doubled to €400 billion since 2021, that spending remains largely uncoordinated between its 27 member states, according to a draft of the plan seen by my colleagues Andrea Palasciano and Alberto Nardelli.

To reach a state of combat readiness by the end of the decade, the commission will propose launching joint drone and air-defense projects in the coming months. It wants coordinated efforts in place by early 2026 to shepherd a raft of major projects. The goal is then to have EU members jointly purchasing some 40% of its defense equipment by the end of 2027, more than double the current rate.

At stake is not just whether Europe can see off the threat from Russia, but whether the biggest economies are ready to relinquish some of their say over defense matters in order to benefit the continent as a whole. 

Lithuanian soldiers deploy drones during a training exercise in Hohenfels, Germany, in March. Photographer: Alex Kraus/Bloomberg

The EU has traditionally played a minor role in defense, with individual governments and NATO taking the lead. It’s a dynamic that has contributed to fragmenting Europe’s wartime industries. Germany has stressed that final decisions must rest with national capitals. 

EU leaders will discuss the plan at a summit in Brussels next week, knowing that US President Donald Trump is watching closely. Just yesterday he said that Spain should “be punished” over its opposition to raising defense spending, adding that he had considered levying tariffs on its products.

And money of course remains one of the key challenges. The EU has already approved a €150 billion fund for various projects — something the commission wants completed by 2030. The plan will suggest creating an additional fund of up to €1 billion with the European Investment Bank.

The Latest

• EU leaders will highlight the importance of keeping the bloc’s industry competitive during its ambitious green transition when they meet next week, while trying to avoid a controversial discussion on the goal to cut emissions by 90% by 2040.
• Prime Minister Sebastien Lecornu won the crucial support of the Socialist Party in France’s National Assembly, significantly improving the chances of his new government surviving two no-confidence votes tomorrow.
• Italy’s latest budget will ease the burden on middle-class earners, allowing Prime Minister Giorgia Meloni to keep her promise to voters at a cost of about €9 billion  over three years.
• ECB Governing Council member Martin Kocher advised against too drastic a move to loosen bank regulation, given the market backdrop. Meanwhile his peer Gabriel Makhlouf dismissed concerns about inflation dropping below the 2% target, saying he’s more worried that it will come in above that threshold. 
• Billionaire Patrick Drahi’s Altice France rejected a €17 billion bid from a trio of French phone carriers to split struggling operator SFR in a deal that would remove a major player from the market.

Seen and Heard on Bloomberg

The ECB is more likely to lower interest rates than raise them as its next move because of the inflation outlook, Governing Council member Francois Villeroy de Galhau said in an interview with Bloomberg Television. “If there is a next move, a rate cut is more plausible,’’ he said. “There are more risks on the downside.”

Chart of the Day

Finland, which has run consecutive budget deficits since 2009, will introduce a parliamentary debt brake to fix the worsening public finances. Under the rule that’s due to be implemented from 2027, the political parties will agree before each general election on the maximum level of public deficit allowed for the upcoming government term. The incoming government will then decide on the specific measures to reduce borrowing. 

Coming up

• European Commission President Ursula von der Leyen in Western Balkans today
• EU Defense Ministers & NATO Defense Ministers meet in Brussels today
• EU Economy Commissioner Valdis Dombrovskis in Washington, meets PBOC Governor Pan Gongsheng, takes part in G-7 Finance and Central Bank Governors meeting later today
• European Commission due to present Roadmap for Defense Readiness, COP30 strategy, Pact for Mediterranean tomorrow
• EU lawmakers in the industry committee vote tomorrow on a ban of Russian oil and gas

Final Thought

Swiss voters look set to reject a new inheritance tax targeted at the super rich after the proposal sparked an intense debate. The plan, put forward by the Young Socialists group, envisions a 50% levy on assets above 50 million francs ($62 million), with any revenue raised going to measures against climate change. The government opposed it, while entrepreneurs and businesspeople warned they would leave the country if it were introduced. 

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