Brussels Edition: High-pressure diplomacy

Welcome to the Brussels Edition, Bloomberg's daily briefing on what matters most in the heart of the European Union.EU member states are exp

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Welcome to the Brussels Edition, Bloomberg's daily briefing on what matters most in the heart of the European Union. EU member states are expected to reach a preliminary agreement on a 17th sanctions package against Russia today — on the eve of possible talks between Russia and Ukraine in Turkey. The measures, which should be formally adopted next week, are more incremental compared with previous rounds. They mostly target Russia's shadow fleet of oil tankers as well as individuals and entities that help Moscow evade energy restrictions. The additional pressure is being imposed as Ukrainian President Volodymyr Zelenskiy reinforced his intention to hold direct talks with Vladimir Putin in Turkey on Thursday, even though he said he had little hope that the Russian leader would show up. US President Donald Trump is sending Secretary of State Marco Rubio for the talks. Meanwhile, some member states are pushing the commission to explore options on how to skirt Hungary's opposition to move along Ukraine's accession process, we're told. — Jorge Valero

What's Happening

Long Road | The EU suffers from a "collective action problem" that's likely to prolong trade talks with the US,  Treasury Secretary Scott Bessent said yesterday. Although "the Italians want something that's different than the French," ultimately the Brussels and Washington are "sure" to reach an agreement, he said.  Green Flexibility | The EU will likely recognize international carbon offsets under its framework to reduce 90% of net emissions by 2040, Polish deputy energy minister Chris Bolesta told us. This could help secure member states' buy-in as foreign carbon credits are typically cheaper, he argued. Supply Chains | German Chancellor Friedrich Merz reiterated a call for the EU to scrap rules designed to make companies pursue sustainable policies in their supply chains, doubling down on a position that risks igniting conflict with his Social Democrat coalition partners. Safe Deal | Member states should reach an agreement this month on the €150 billion loan-based fund to finance defense spending, Polish finance minister Andrzej Domanski said after meeting EU counterparts. He added that "the vast majority of issues" have been resolved, although discussions are still taking place about the instrument's flexibility.  Rate Outlook | The ECB will probably cut borrowing costs again by the summer as trade tensions aren't fueling inflation, Governing Council member Francois Villeroy de Galhau said. The stop-start nature of the US trade initiatives will likely curb inflation and economic growth in the near term, fellow rate-setter Klaas Knot said.

Around Europe

Massive Boost | NATO allies have started cobbling together an agreement to significantly boost defense spending in a way that may assuage US President Donald Trump's demand to spend 5% of economic output on the military. Alliance foreign ministers will discuss the effort at a meeting in Antalya, Turkey.  Public Intervention | Banco Sabadell has held informal talks about a combination with Spanish lender Unicaja Banco to head off a hostile takeover by rival BBVA, we're told. The Spanish banking saga underscores how national governments are emerging as the main stumbling block to some of the most ambitious banking deals in the EU. Euro Division | Bulgaria's parliament speaker dismissed an initiative by President Rumen Radev to hold a referendum on euro adoption, claiming it violated the constitution and EU treaties. An assessment by the EU and ECB is expected next month, which may clear the currency change as early as January. Bond Contest | The issuance of euro-denominated bonds has become increasingly popular among countries outside the euro area, according to the European Stability Mechanism. Outstanding bonds issued by sovereigns globally exceeded €75 trillion at the end of 2024, the fund said. Its chief, Pierre Gramegna, said Monday that the region should take advantage of investor doubts in the dollar and US Treasuries. Recycling Energy | The Finnish town of Mantsala is harvesting cast-off energy from data centers to provide power to households. Last year, this covered about two-thirds of heating needs for locals, cutting their utility costs. Some of the world's biggest tech companies are now embracing heat recovery from data centers to help make the energy-intensive computing infrastructure become more sustainable

Chart of the Day

Investor confidence in Germany's economy improved as the initial shock from US tariffs fades and the new government prepares to boost public spending. An index by the ZEW institute jumped to 25.2 in May from -14 the previous month. The survey was concluded just as the US and China agreed to temporarily slash levies during a 90-day period, which may not have been fully reflected in the responses.

Today's Agenda

EU Agriculture Commissioner Christophe Hansen presents the proposal to simplify EU common farming policy NATO begins two-day informal ministers meeting in Antalya, Turkey  European Council President Antonio Costa travels to Montenegro, then to Kosovo

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