Tuesday, March 4, 2025

Brussels Edition: Germany’s defense bazooka

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

Germany will unleash hundreds of billions of euros for defense and infrastructure investments in a dramatic shift that rips up its ironclad controls on government borrowing. The country's main centrist parties — and likely next coalition government — agreed to launch a €500 billion infrastructure fund to invest in priorities such as transportation, energy grids and housing. Chancellor-in-waiting Friedrich Merz also said Germany will amend the constitution to exempt defense and security outlays from limits on fiscal spending. The decision to so drastically change the country's so-called debt brake in just a few weeks is a more radical move than most Berlin watchers had anticipated. The announcement came the same day that the European Commission said it plans to extend €150 billion in loans to boost defense spending. Separately, the European Investment Bank will propose expanding its mandate to include projects dedicated for military use.

Zoe Schneeweiss and Samuel Stolton

What's Happening

Turbocharging EVs | The EU will reveal further support today to help carmakers after agreeing earlier this week to allow them more leeway to meet carbon dioxide emissions targets.  The plan includes proposals to boost demand for electric vehicles among skeptical citizens, something Belgium has managed to do with this simple trick.

Peace Plan | As EU leaders mull over ways to boost Ukraine's security this week, President Volodymyr Zelenskiy expressed regret over his dramatic falling out with Trump last week. Hours later, Trump said he received an "important letter" from Ukraine's leader looking to smooth over the clash, but held back from lifting a US pause on military aid or announcing a revived minerals deal. 

Trading Rules | A planned poll by EU regulators about changes to banks' trading rules could outline potential concessions for lenders, according to documents we've seen. Their implementation had been derailed after the US failed to agree on its own capital rules.

Satellite Shares | Shares of French satellite firm Eutelsat more than tripled this week after European leaders pledged to ramp up defense spending amid concerns over US military commitment to Ukraine. Ukraine's Starlink terminals, while funded by Europe, are owned by billionaire Trump ally Elon Musk's SpaceX. 

Around Europe

Romania Race | A former Romanian prime minister said he'll enter a contentious presidential race, potentially jeopardizing an effort to unite behind a single candidate and defeat a far-right frontrunner. Victor Ponta told us he would campaign as an independent on the Donald Trump-like slogan "Romania first." 

Greenland Independence | Greenland's independence from Denmark has shot to the top of the agenda, as the island readies for elections. Trump has said Greenland is crucial for US national security, and citizens are now weighing their options.

Hungarian Rates | Hungary's new central bank leadership sees no room to cut interest rates because of a resurgence of inflation, we're told, cooling speculation that monetary easing may resume at a brisk pace later this year.

Serbia Brawl | Serbia's national assembly was plunged into disarray, with opposition deputies throwing smoke grenades and firing pepper spray. Three deputies were injured in the brawl. The chaos ensued during a session confirming the resignation of Prime Minister Milos Vucevic. 

Caffeine Hit | Europe's supermarkets are running low on coffee. The global coffee crunch, caused by a huge rally in prices, is rippling through the supply chain, squeezing roasters and hitting consumers.  

Chart of the Day

As the EU bolsters its defense capacities, shares in the sector are rallying. Six out of the top 10 performing stocks in the Stoxx 600 this year are defense firms, with a Goldman Sachs basket for the industry surging over 60% in 2025. Stock valuations have been boosted to all-time highs, putting the sector at an 80% premium to the broader European market, with investors betting on a revenue surge over the next few years.

Today's Agenda

All times CET

  • 9:45 a.m. EU telecoms ministers meet in Warsaw, Poland
  • 10:45 a.m. Parliament president Roberta Metsola meets World Bank president Ajay Banga, who also meets EU commissioners
  • 4:45 p.m EU industry commissioner Stéphane Séjourné holds a press conference with Renault CEO Luca de Meo
  • EU home affairs ministers meet in Brussels
  • EU's top diplomat Kaja Kallas meets World Health Organization's Tedros Adhanom Ghebreyesus
  • EU jobs chief Roxana Minzatu meets LinkedIn CEO Ryan Roslansky and Cisco CEO Chuck Robbins
  • EIB's Group Forum in Luxembourg, with EU financial services commissioner Maria Luis Albuquerque attending

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