Welcome to Better Europe’s weekly update on EU Affairs.
MEPS TELL ECB TO CONSIDER GEOPOLITICAL RISKS AND CHALLENGE DIGITAL EURO
While over the past years MEPs mostly battled over how much climate change should influence the European Central Bank’s policy decisions, this week’s discussion in plenary clearly moved on to a much broader set of geopolitical concerns. The debate was heated, with MEPs divided over whether the ECB should prioritise everyday citizens or prepare for geopolitical shocks. ECB President Christine Lagarde acknowledged these challenges, arguing for a cautious, data-driven approach. She also highlighted the role of the digital euro in strengthening Europe’s financial autonomy, drawing the anger of some ECR MEPs who had tabled amendments to challenge the decision to develop a digital euro in the first place. Others insisted that it must coexist with physical cash and win public confidence before being introduced, stressing the importance of public trust and control. In the end, the vote saw only 378 votes in favour and shows the fault lines between political groups, with mostly EPP and ECR support for the final compromise. While the document is just a non-legislative opinion reflecting on the ECB’s own Annual Report because the ECB’s mandate is defined in the Treaties, the presence of the ECB President in plenary shows that MEPs are keen to put more pressure on the institution.
EU TO CHOOSE BETWEEN BUDGET CUTS AND ROLLING OVER JOINT DEBT
The EU is bracing for a budget battle as it faces the repayment of €300 billion in joint Covid debt from 2028, which was guaranteed with the EU budget and formally could end up consuming up to 20% the budget. Commission President Ursula von der Leyen is opposed to extending the EU bonds as it would be a strong precedent for a permanent EU debt. The alternative would be new “own resources”, such as on carbon emissions, multinational profits, and a financial transaction tax, none of which is expected to provide sufficient funding. The Carbon Border Adjustment Mechanism (CBAM), championed by budget Commissioner Piotr Serafin, is a potential source of revenue, but remains controversial. Northern European countries, including Germany and the Netherlands, oppose increased contributions without major budget cuts, while Spain, France and Poland argue for a larger central budget. The Commission plans to overhaul budget allocations, shifting the focus from traditional sectors such as agriculture to strategic areas such as defence and innovation. However, the proposal has faced criticism over the effectiveness of consolidating funds into single national pots. To manage expectations, the Commission this week published a paper on “The road to the next EU budget”, outlining a vision structured around single national plans of key reforms and investments, a European competitiveness fund and an undefined external action programme. However climate action is barely mentioned and transport conspicuously absent, raising fears that defence investments could cannibalise other priorities. Consultations with Parliament’s groups have started this week, with the Commission expected to unveil its proposal this summer.
PARLIAMENT DIVIDED OVER HOW TO BALANCE GROWTH AND SUSTAINABILITY
The Parliament’s debate on the Competitiveness Compass, led by Commissioner Stéphane Séjourné and Council President Adam Szłapka, highlighted the common goal of boosting EU competitiveness but also revealed deep divisions on how to achieve it. The session saw lively exchanges between MEPs from different political groups. The debate focused on the balance between economic growth and sustainability. While all agreed on the need to combine decarbonisation with competitiveness, disagreements arose over investment strategies and regulatory approaches. MEPs from the EPP, such as Christian Ehler (EPP, Germany), argued for significant deregulation to simplify rules and boost innovation. Left-wing groups warned against weakening social and environmental protection. The debate also underlined the need for a distinct European competitiveness model, emphasising innovation in AI, biotech and clean technologies. MEPs called for targeted support for sectors such as the automotive and energy-intensive industries, and for tackling high energy costs. The proposal for a 28th regime to simplify EU-wide rules drew both support and concern over its potential impact on labour law. Overall, the debate highlighted the EU’s commitment to competitiveness, while grappling with how to balance economic goals with social and environmental responsibilities.