Crypto News: Brussels Edition: Crisis with deep roots

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

The crumbling of Germany's governing coalition is in part the culmination of a 15-year-long competitiveness crisis during which the country's largest companies moved over €650 billion outside its borders. Almost 40% of the outflow came since 2021, the year center-left leader Olaf Scholz became chancellor. Now, Donald Trump's return risks causing even more capital to flee Germany's ailing economy, as companies consider investing in the US to dodge his threatened tariffs. Against this backdrop, Scholz is rejecting opposition calls for a no-confidence vote next week, as he tries to stave off an election until March to give his party time to recover. But even as former Finance Minister Christian Lindner struggles to explain his sacking, Christian Democrat leader Friedrich Merz is already warming up to finally take power.

—Gian Volpicelli

New Tools | The EU is poised to test new ways to finance investments in its militaries and in clean-tech innovation to steel itself for a second Trump presidency. The bloc "will explore the development of new instruments" to raise funding for future needs, according to a draft declaration EU leaders aim to adopt today in Budapest. The document doesn't identify fresh funds to cover the bloc's mammoth investment gap.

Keep Trying | France is hoping to join forces with Poland to block the EU-Mercosur trade deal, we're told. Prime Minister Michel Barnier's cabinet wants to persuade Warsaw to join forces with Paris as the commission hopes to wrap up the deal by year's end. Officials are skeptical that the ploy will work.

Think Again | Italy and the Czech Republic are demanding the EU recognize a "broader array" of solutions beyond electric vehicles and hydrogen-powered cars as part of the bloc's plan to end the sale of combustion engine cars in 2035. Rome and Prague are urging the European Commission to bring forward a review of the plan from 2026 to next year.

No Concessions | Ukraine's Volodymyr Zelenskiy pushed back against suggestions that Kyiv consider making concessions to Moscow, after Trump's election cast uncertainty over future US support for Ukraine. But Hungarian Prime Minister Viktor Orban's top aide told us that Trump should call Vladimir Putin and push toward a cease-fire in Ukraine.

Still Engaged | Just after getting off the phone with Trump, Denmark's Prime Minister Mette Frederiksen told Bloomberg TV that the call left her reassured that the US will continue to work with Europe on geopolitical issues after the president-elect takes office. She said she had no feeling "about a US moving away from Europe or a US moving away from" its responsibility. Watch the interview.

Lost Moment | Ireland's snap election was called as the main opposition Sinn Fein is in crisis mode, with leader Mary Lou McDonald's popularity plummeting. After rioters torched Dublin's city center last year during anti-immigrant protests, the left-wing Sinn Fein hasn't pushed the kind of far-right rhetoric that's become a vote winner for others.

Flood Culprits | Climate change and excessive real estate development worsened the impact of the calamitous floods that struck Spain's Valencia region, killing more than 200 people. The episode is a cautionary tale of climate change and political failure. But it is also a story of how decades of regulatory neglect and underinvestment in critical infrastructure created the ideal conditions for a preventable disaster.

Crypto Bets | France's gambling regulator is scrutinizing whether cryptocurrency-based predictions platform Polymarket complies with its rules, following a surge in user demand around the US presidential election. The probe started after a trader on the platform made large bets in favor of Trump winning the race. The trader — known as Fredi9999 — could pocket a profit of around $79 million.

Taking Charge | Sweden has promised to bolster its fledgling battery industry with new funds for research and a scheme to retain the skills of workers made redundant by Northvolt. Energy Minister Ebba Busch wrote that funds for research and innovation would total 715 million kronor (€61.3 million) over four years.

Russia-exposed stocks rallied from Turkey to eastern Europe as Trump's election victory prompted investors to position for moves toward a resolution of the war in Ukraine. Shares in Vienna-based Raiffeisen Bank jumped as much as 10% yesterday. Hungary's OTP Bank, which also has Russian operations, touched back-to-back record highs in the past two sessions.

EU leaders hold informal summit in Budapest
Economy Commissioner Paolo Gentiloni attends the 15th edition of the Salone della Giustizia in Rome
EU competition chief Margrethe Vestager meets Danish media organization lobbying group DPCMO in Copenhagen

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