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

The EU is rushing to get its European Defence Industry Programme, or EDIP, over the line before leaders meet in Brussels at the end of June. The instrument will serve as a vehicle for the bloc’s future defense funding. While seemingly small with just €1.5 billion from the EU budget for 2025-2027, it may grow rapidly. The commission is offering member states the option to channel unspent pandemic recovery money into the fund, we’ve learned. What’s still to be sorted is the level of openness to use those resources to buy US weapons, a thorny issue given delicate trade talks with Washington. Separately, the commission is proposing to cut red tape to accelerate the continent’s defense build-up.

— Lyubov Pronina and Andrea Palasciano

What’s Happening

Wider Conflict | US military involvement in the war between Iran and Israel would risk a wider conflict, EU top diplomat Kaja Kallas warned yesterday. After his abrupt exit from the G-7 summit, President Donald Trump met with his national security team in Washington for more than an hour yesterday, fueling fresh speculation that the US is on the verge of joining Israel’s attack on Iran.

Heated Talks | An EU proposal to ban Russian gas imports by the end of 2027 is poised to face some pushback. Some member states fear it will raise energy prices and cost companies millions of euros in legal fees. While no longer the bloc’s biggest supplier, Russia still accounts for almost a fifth of European demand.

Bond Pitch | Finance officials from across Europe are touting their bond markets as a haven from US volatility. Policymakers see an opportunity to attract more global investors and, in the process, dent the dollar’s decades-long dominance.

Trade Ties | Expanding trade ties between Australia and the EU would be “symbolically important” in an environment of rising protectionism, Australian Prime Minister Anthony Albanese said today. The two sides also plan talks on a defense agreement.

Climate Risk | The ECB sets a new chapter in its supervisory approach as it embeds climate risk into regular reviews of how well banks can absorb losses, we were told. It’s moving faster than other central banks in treating the fallout from climate change as a financial risk that has the potential to threaten bank solvency.

Around Europe

Aircraft Deal | Airbus said France and Spain agreed to fast-track some deliveries of the slow-selling A400M military transport airplane as the main nations supporting the program seek to keep production going. The company maintained its momentum at the Paris Air Show, sealing a Vietjet order for 100 A321 narrowbody jets.

Czech Supplies | The Czech Republic is prepared to extend its program to deliver heavy ammunition to Ukraine into next year as Europe rushes to bolster support to Kyiv, its top diplomat Jan Lipavsky told us. Ukrainian forces now have about one round for every two fired by Russia, up from an initial 1-to-10 ratio, he said.

Bitter Pill | Belgium backs raising the defense spending target of NATO members to 5% GDP at the alliance’s summit next week, though it’s a “bitter pill” to swallow, Prime Minister Bart De Wever said yesterday. The host of NATO’s headquarters though wants to see the “biggest flexibility’’ in what can be counted toward the goal.

Blackout Autopsy | Spain’s government said planning mistakes from the electricity grid operator and a lack of spare supply from generators were responsible for the country’s historic April blackout. The nation’s power network collapse on April 28 left more than 50 million people without electricity in Spain and Portugal.

Chart of the Day

Investor confidence in Germany’s economy improved more than anticipated as a forthcoming surge in public spending outweighs fears over looming US tariffs. An expectations index by the ZEW institute increased to 47.5 in June from 25.2 in the previous month, significantly more than the 35 median estimate in a Bloomberg survey. While Europe’s largest economy grew more than anticipated at the start of the year, economists differ on whether the momentum can be sustained.

Today’s Agenda

All times CET

• 9 a.m. EU parliament debates over upcoming NATO summit at a plenary session in Strasbourg; lawmakers will also discuss the clean industrial deal and the commission answers questions on Hungary values and pride (here’s the full agenda)
• 3 p.m. Financial services Commissioner Maria Luis Albuquerque holds a press conference with Luxembourg’s Finance Minister Gilles Roth in Luxembourg
• Defense Commissioner Andrius Kubilius attends Paris air show
• European Council President Antonio Costa attends UN Conference on Two-State Solution in New York

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