Brussels Edition: Financing the arms build-up

EU finance ministers — meeting in Warsaw on Friday and Saturday — will try to figure out how to finance the bloc's military build-up by adding more permanent instruments to its toolbox.

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Welcome to the Brussels Edition, Bloomberg's daily briefing on what matters most in the heart of the European Union. EU finance ministers are meeting in Warsaw today and tomorrow to figure out how to finance the bloc's military build-up in the face of weakening US commitment to trans-Atlantic security and the threat from Russia. They will discuss a new pan-regional tool to finance joint procurement — which would come on top of the new €150 billion loan-based instrument currently in the pipeline — as well as tweaks to the EU fiscal rules to mobilize around €600 billion from national budgets. The aim is to add more permanent instruments to the EU's toolbox. The long-term proposals are highly divisive, we are told, and many nations still prefer to implement what's on the table before coming up with new plans. UK Chancellor of the Exchequer Rachel Reeves will also be at the Warsaw talks, and will tell EU counterparts that the "changed world" with President Donald Trump in the White House means the bloc should work more closely with the UK on defense spending. — Jorge Valero and Samuel Stolton

What's Happening

Tariff Tradeoff | The EU will delay counter-tariffs in response to US duties on the bloc's steel and aluminum exports. The move comes after Trump announced a 90-day pause to his so-called "reciprocal" tariffs on nearly all EU exports. That rate will now be 10%. China Outreach | Spanish Prime Minister Pedro Sanchez said his country will work to help build "solid and balanced" relations between the EU and China. In remarks ahead of their meeting today in the Chinese capital, President Xi Jinping told Sanchez that international collaboration is needed to defend peace and stability and it's in the interest of both nations to build deeper ties. Lower Rates | European Central Bank officials are likely to cut borrowing costs twice more, though they will ultimately take their cue from Trump, according to a Bloomberg survey of economists. Respondents expect consecutive quarter-point reductions in April and June, before the deposit rate then remains at 2% at least through the end of 2026. Tech Pushback | EU digital chief Henna Virkkunen said the bloc's tech rules targeting the likes of Google and Meta should not be considered trade barriers by the US. Vice President JD Vance has claimed that the EU's regulations stifle free speech. Gas Storage | EU nations will back more flexible rules for filling gas storage before the winter, amid criticism that current targets raise prices. Gas traders want clarity on what the changes mean for their refilling efforts.

Around Europe

Ukraine Hope | Ukraine's bid for EU accession won't be dashed by any minerals deal with the US, Prime Minister Denys Shmyhal told us. A special Ukrainian technical working group will soon be dispatched to Washington for talks. German Slowdown | The German economy won't see meaningful growth this year, according to the country's leading research institutes. Along with the US president's assault on free trade, Russia's war in Ukraine presents an ongoing risks for Europe's biggest economy. P&G Probe | Procter & Gamble, the maker of Pampers diapers and Oral-B toothbrushes, faces an informal antitrust probe by EU watchdogs, we're told. Regulators have circulated questions on the US giant's conduct in Europe. Rail Boost | The EU's post-Covid recovery fund is being put to good use in Italy, where a new rail link could be an economic boost. When it's completed in 2028, the high-speed rail line will run coast-to-coast between Naples and Bari in just two hours. Heart Help | Amazon has equipped some delivery vans in Europe with defibrillators to see if drivers could speed up aid to heart-attack victims. More than 100 contract drivers took part in the experiment, with several receiving alerts from citizen responder apps.

Chart of the Day

European stocks rallied the day after Trump halted plans to implement higher tariffs on dozens of trade partners. The announcement of the 90-day reprieve provided some relief for European shares, but the bounce may prove fleeting as investors grapple with how the effective freezing of US-China trade ties will impact companies and economic growth.

Today's Agenda

All times CET 8 a.m. EU finance ministers and central bank governors hold informal meeting in Warsaw Ukraine Defense Contact Group meets at NATO HQ in Brussels, also attended by EU foreign affairs chief Kaja Kallas EU parliament delegation meets US counterparts in Washington DC EU Parliament President Roberta Metsola receives a US congressional delegation

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