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

EU defense and foreign ministers have a lot on their plates for their meeting today in Brussels. They will sign off on new sanctions against Russia, including measures against its shadow fleet and its hybrid attack arsenal. Top diplomat Kaja Kallas is also expected to announce that the EU’s rapid deployment capacity, an initiative three years in the making to allow the bloc to quickly deploy up to 5,000 troops, is now operational, according to a senior EU official. But the bloc is also working on expanding its existing military training and civilian support missions to protect critical Ukrainian infrastructure and boost the country’s defense industry once a possible ceasefire is signed, according to this official.

—Gian Volpicelli and Andrea Palasciano

What’s Happening

Putin Call | Russian President Vladimir Putin held out the prospect of working on a potential truce with Ukraine following a two-hour call with US President Donald Trump. Putin described the call as “very frank” and “useful.” The two leaders agreed that Moscow would work on a memorandumwith Ukraine on a future peace treaty. But during their call, Trump didn’t put pressure on the Russian leader to end the war or threaten any action if he didn’t, leaving many in Europe disappointed. 

Brexit Reboot | Nearly nine years after the UK voted to leave the EU, London and Brussels announced a reboot in their relations. A deal was struck yesterday after Prime Minister Keir Starmer relaxed his stance on fishing rights — giving EU vessels access to British waters until 2038. In exchange, London secured the removal of most border checks on food and agricultural goods, British access to Europe’s new defense fund and a pledge to link the two partners’ carbon markets . 

Fund Okay | The EU’s 27 member states gave a preliminary thumbs-up to the €150 billion defense fund for countries looking to invest in ammunition, drones and the protection of critical infrastructure. The European Commission proposed the initiative in March after Trump’s pullback of US security in Europe. The commission will raise the money in capital markets and grant loans to governments that want to finance specific projects. A formal approval is expected next week.

Romanian Turmoil |  The election of a centrist president will allay the markets’ worst fears, but Romania needs to quickly fix its public finances, the country’s finance minister said. Barna Tanczos said the country’s new government will have to confront the widest fiscal gap in the EU. The election of centrist Bucharest Mayor Nicusor Dan last weekend was the culmination of months of political instability triggered by the cancellation of a previous presidential vote over suspicions of Russian interference. 

Around Europe

French Revolut | British fintech star Revolut is among foreign companies poised to invest more than €40 billion in France, as President Emmanuel Macron strives to show optimism despite economic headwinds. Europe’s largest digital bank said yesterday that it would set up a new Western European  headquarters in Paris and invest more than €1 billion in France over three years, while also applying for a French banking license.

Arms Deal | The government of Latvia is in talks with German arms maker Rheinmetall on producing defense equipment locally, as Baltic nations push to bolster their military capabilities to stave off Russian aggression. The discussions are at an early stage, but if successful they might follow an existing agreement between Rheinmetall and Lithuania, where the German weapons manufacturer is building an ammunition plant.

Populist Slump | Polish assets slipped after a stronger-than-expected showing by opposition populists in the first round of the presidential election, boding ill for the pro-European government and its centrist candidate. The zloty weakened against the euro early yesterday, Warsaw stocks fell and government bond yields hit a six-week high. Front-runner Rafal Trzaskowski narrowly won Sunday’s ballot, but nationalist candidates enjoyed a surge in support, coming in second, third and fourth places. 

Golden Danger | Gold markets could jeopardize the euro zone’s financial stability in the event of geopolitical stress, the European Central Bank said. Demand for physical settlement, the dominance of large-scale traders and opaque transactions conspire to pose a wider threat if things go awry, four economists wrote in a note. “Margin calls and the unwinding of leveraged positions could lead to liquidity stress among market participants,” the ECB experts wrote.

Chart of the Day

Euro-area inflation will fall below the European Central Bank’s target next year because of the fallout from US trade policies. According to the the European Commission’s spring forecast, consumer-price growth will slow to the 2% goal by the middle of this year and average only 1.7% in 2026.

Today’s Agenda

EU defense ministers meet in Brussels
EU Commission President Ursula von der Leyen and Budget Commissioner Piotr Serafin speak at annual EU budget conference.