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European Affairs ministers meet today in Brussels to share initial feedback on the Commission’s contentious proposal for the EU’s long-term budget. Germany swiftly rejected the plan unveiled on Wednesday, saying the €2 trillion headline figure was too high at a time when many nations are striving for fiscal consolidation. Speaking during a visit to London yesterday, Chancellor Friedrich Merz said the EU must do more with the money it has and rejected a proposed levy on companies, setting up a clash with Commission president and fellow German Christian Democrat Ursula von der Leyen. Another point of contention is likely to be a €400 billion crisis tool, set to be backed by joint borrowing — a controversial mechanism that has long met resistance from Berlin and like-minded fiscal hawks.

— Michal Kubala

What’s Happening

Russia Sanctions | Slovakia accepted guarantees from the Commission to limit the fallout from a planned cutoff of Russian gas and will lift its veto on the bloc’s 18th sanctions package on the Kremlin, according to Prime Minister Robert Fico, paving the way for the measures to be approved as early as today. While Slovakia did not oppose the sanctions themselves, it had been blocking the latest package since June.

Pension Funds | The EU’s climate chief, Wopke Hoekstra, told us the bloc expects to attract some of the biggest pension funds, including Dutch and Danish giants, to help bankroll a revamp of Europe’s outdated power grids. The Commission’s budget proposal includes a €410 billion fund to help Europe compete with the US and China and help modernize power grids that are key to the green transition.

Spanish Warning | EU watchdogs warned Spain that its conditions for BBVA’s bid for rival Banco Sabadell — which hindered the deal — breached the bloc’s single market rules that allow freedom of movement of capital unless there are exceptional circumstances. It echoed a similar warning recently aimed at Italy over apparent national interference in bank deals.

Bid Standoff | UniCredit CEO Andrea Orcel has signaled he may walk away from a deal with Banco BPM, due to regulatory obstacles and government opposition. Italy’s market regulator is weighing a suspension of UniCredit’s takeover bid for BPM, after an Italian court challenged some of the requirements imposed by the government.

Gulf Ties | The Council is expected to give the green light today to launch negotiations between the EU and six gulf states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — with the aim of concluding bilateral accords. “Through the Strategic Partnership Agreements, we aim to take our cooperation to the next level,” according to Commissioner for the Mediterranean Dubravka Šuica.

Around Europe

Banker’s Backing | Francois Bayrou’s €43.8 billion effort to narrow France’s budget deficit goes in the right direction, according to the country’s central bank chief, who praised the government’s deficit plan as a step toward reining in runaway debt. Amid fierce political backlash, the French prime minister’s plan includes spending freezes, tax hikes and even scrapping two public holidays.

Nordic Stance | Scandinavian finance ministers said the EU shouldn’t rule out any options and move fast and stand firm in negotiations with the US on trade tariffs set to hit August 1. More countries are joining France in calling for an activation of the powerful anti-coercion tool if Trump follows through on his threat of 30% tariffs on the EU, we reported this week.

Nordic Connections | Iceland will start talks with the EU on a defense partnership, according to Prime Minister Kristrun Frostadottir. Talks on the tie-up, which would cover cooperation on critical infrastructure, dual-use defense investments and hybrid threats, are expected to be concluded by the end of the year, Frostadottir said during a visit by von der Leyen yesterday.

Cabinet Overhaul | With Ukraine aiming to boost wartime spending and strengthen ties with the Trump administration, Ukrainian President Volodymyr Zelenskiy delivered the biggest government shake-up since Russia’s full-scale invasion. Deputy Prime Minister and Economy Minister Yulia Svyrydenko was appointed as the new premier in a cabinet stacked with presidential loyalists, many with experience of working with officials in Washington.

Loan Strains | Executives at Russia’s biggest banks are quietly weighing state-backed bailouts amid concerns over bad loans, according to documents we’ve seen. The quality of banks’ loanbooks appears worse than official data suggest and while any bailout request hinges on further deterioration, pressure on the country’s financial system appears to be mounting.

Chart of the Day

The European Central Bank can delay its final interest-rate cut of the current cycle until December without investors concluding in the meantime that easing is over, according to our latest survey of economists. A majority continues to expect the final quarter-point reduction in the deposit rate, to 1.75%, will come in September after a pause next week. At the same time, half of respondents think the ECB can sit out three meetings before traders assume borrowing costs are at their floor. That’s longer than before, due to uncertainty over trade.

Today’s Agenda

All times CET

• 10 a.m. European Affairs Ministers meet in Brussels
• 9 a.m. Informal meeting of Competitiveness minister (research, innovation and industry) continues in Copenhagen
• Commissioner Jessika Roswall participates in the 20th African Ministerial Conference for Environment (AMCEN-20) in Nairobi (July 17-18)

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