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

Spain is pushing back against NATO’s proposal to raise the defense spending target to 5% of a country’s gross domestic product, setting up a potential confrontation with US President Donald Trump, who wants Europe to pay more for its security. In a letter to NATO chief Mark Rutte, Spanish Prime Minister Pedro Sanchez opposed the proposed increase, which the alliance aims to formalize at next week’s summit. The meeting of NATO members comes amid growing concerns over Russia’s war in Ukraine and Trump’s threats to scale back US security commitments in Europe unless allies significantly boost military expenditure.

— Gian Volpicelli

What’s Happening

Making Progress | The EU is continuing intensive trade talks with the US ahead of a July 9 tariff deadline set by Trump and is “making progress,” according to EU Economy Commissioner Valdis Dombrovskis. “Our preference is to find a mutually acceptable solution,” Dombrovskis said after a meeting of euro-area finance ministers.

More Easing | The ECB is more likely to further loosen policy if it makes a move in the coming months, according to Governing Council member François Villeroy de Galhau. Villeroy said any policy move would likely be toward more accommodation, barring major shocks like possible new military developments in the Middle East.

X Scrutiny | Elon Musk’s $33 billion xAI takeover of X is under EU scrutiny as regulators assess whether to fine the company under the Digital Services Act. The commission has sent X questions about its corporate structure, which could affect fine calculations. A penalty for X’s alleged violations may be announced before the EU's summer break, though no final decision has been made.

Google Case | An EU court adviser backed a record €4.1 billion fine against Google for abusing Android’s dominance, saying the company’s legal arguments were weak. While the adviser’s opinion is non-binding, the EU’s top court often heeds such advice. Google warned that a ruling following that opinion could harm Android users and deter investment.

Around Europe

Soaring High | Space company Eutelsat is raising €1.35 billion from the French government and others to expand its satellite fleet and compete with Elon Musk’s Starlink. Seen as vital for European sovereignty, Eutelsat’s OneWeb service is the continent’s strongest alternative to the US-dominated satellite internet market. 

Romanian Premier | Romania’s pro-EU parties are getting close to a deal to form a government that will aim to curb the bloc’s widest budget deficit, and centrist President Nicusor Dan is expected to nominate a prime minister today. The National Liberal Party proposed Ilie Bolojan as premier, while the Social Democrats backed a coalition but declined to name a candidate.

Russian Brawl | President Vladimir Putin’s top economic officials squabbled over the state of Russia’s economy at an event in St. Petersburg. Economy Minister Maxim Reshetnikov said that Russia is on the verge of recession, while Bank of Russia Governor Elvira Nabiullina downplayed such fears and suggested the economy was undergoing a necessary adjustment.

Gibraltar Powers | The EU and UK agreed to give Spain new powers over the issuance of residency permits, visas and asylum in Gibraltar, as part of a deal to settle the post-Brexit border arrangements for the British territory. The new system will allow Madrid to ensure the EU’s visa-free Schengen area will be fully preserved once border protections are removed.

Chart of the Day

Increasing power demand to cool homes in Spain is putting pressure on energy prices after the country’s grid boosted its reliance on gas generation in the wake of a massive blackout. The output of Spanish gas-fired power plants has jumped 58% since the April 28 nationwide outage. This is being done to better stabilize the network, with cheaper wind generation curtailed to balance the power mix. 

Today’s Agenda

• Commission President Ursula von der Leyen co-chairs conference on Africa investment with Italian Prime Minister Giorgia Meloni in Rome
• EU finance ministers attend Ecofin meet in Luxembourg
• Parliament President Roberta Metsola visits Łódź, Poland

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