PARIS — France’s economy shrunk by 0.1% in the third quarter of 2026, according to fresh estimates from national statistics agency Insee, pushing the country closer to recession and further complicating the government’s efforts to stave off a debt-driven financial crisis.

Economy and Finance Minister Roland Lescure said Friday that this summer’s extreme heat and spiking energy prices were responsible for the negative growth.

In an interview with Franceinfo, he said the new figures give added urgency for lawmakers to pass the 2027 budget proposed by the government, which aims to bring the deficit down to 5% of gross domestic product next year with €43 billion in savings.

“If we don’t have the budget adjustment we put in the budget, we will hit the wall,” Lescure said.

But France’s fragmented parliament failed to pass budgets before the new year in both 2024 and 2025, and the spring 2027 presidential election may further complicate efforts to seek compromise this time around. That could force Prime Minister Sébastien Lecornu to push through the budget using a constitutional backdoor that bypasses a parliamentary vote, but it would expose the minority government to potential motions of no confidence.

Lescure insisted that adopting a budget for next year was key to “reassure markets” and relaunch growth in the last quarter of the year. The French economy contracted by 0.1% in the first quarter of 2026 and recorded no growth in the three months that followed.

That anemic growth will likely complicate the government’s pledge to bring the deficit down to 5.4% of GDP this year, as the target was based on the assumption the economy would grow by 0.5% in 2026.

“The French economy is at a standstill,” Lescure said. “It has to restart.”

Prime Minister Andy Burnham will have an unofficial goal when he meets members of Britain’s former empire next week: Avoid a fight about slavery reparations.

Good luck, as they say, with that.

His predecessor Keir Starmer’s trip to the last Commonwealth Heads of Government Meeting, at a beach resort on the Pacific island of Samoa in 2024, is still the stuff of rueful mutters in parts of Whitehall.

Lined up in a semi-circle of armchairs — “like an Alcoholics Anonymous meeting,” as one person briefed on the gathering put it — leaders from many of the 56 Commonwealth nations negotiated live over a 16-page communique on laptops and tablets. Starmer, a barrister, found himself personally redrafting a key paragraph about reparations on a screen surrounded by other leaders, said two further people briefed on the meeting.

The unusually intimate format of the leaders’ retreat meant they had no officials with them on the veranda, and Starmer had just one civil servant — No. 10’s private secretary for foreign affairs — stationed in a tent close by. His chief of staff Morgan McSweeney was woken at 4 a.m. London time by a phone call to talk about the strategy for reparations.

That, however, was never clearly resolved. The retreat dragged on hours late; some leaders left before it was even over. Starmer was frustrated and felt he had been “ambushed,” said one U.K. official involved in the 2024 trip. A second said they had blocked the incident from their memory. A third said Starmer was left “furious,” adding: “He went in blind and it was terrible for him.” A fourth said simply: “It was a disaster.” All were granted anonymity to speak frankly.

The eventual communique agreed on a “conversation towards forging a common future based on equity.” This fudge kicked the issue of reparations down the road — where it now lands in Burnham’s lap.

Britain’s new prime minister will touch down at the biennial summit in Antigua and Barbuda next week to find the issue still firmly on some Caribbean and African leaders’ minds.

At the United Nations in May, 123 countries passed a motion calling for “inclusive, good-faith dialogue on reparatory justice.” The U.K. abstained. Barbados PM Mia Mottley announced a manifesto from Caribbean leaders on the “moral, ethical and legal case” for reparations in June. Commonwealth Secretary-General Shirley Botchwey said last week that an apology for Britain’s role in the slave trade “wouldn’t hurt.”

The visit will be a test of how Burnham — who has a reputation for speaking off the cuff, especially on issues of moral justice — maintains a delicate U.K. government line that reparations are not “the answer,” as Foreign Secretary Ed Miliband told POLITICO last month. And Burnham will face that challenge in a unique spotlight: It will be his first overseas visit with King Charles III, who is the head of the Commonwealth.

POLITICO spoke to a dozen U.K. officials or politicians who were involved in the 2024 summit or the planning for Burnham’s upcoming visit. They painted a picture of acute anxiety in the British state over how to deal with calls for reparations from its former colonies; tensions between Downing Street and the Foreign Office over the handling of 2024; and serious questions in Whitehall about whether the summit is even useful for No. 10 — despite the king’s role leaving U.K. prime ministers little choice but to attend.

Burnham will not have to deal with the extreme jetlag and communications hurdles that dogged Starmer’s trip, which involved a 28-hour flight in each direction. But like Starmer, he will fly out at a time when his in-tray is crowded by other issues — not least the U.S. midterms happening at the same time and the domestic aftermath of his first budget, just unveiled this past Wednesday.

The first U.K. official quoted earlier in this story said: “There’s a sense that there can’t be a repeat of [2024] this time around.” The third U.K. official quoted above said: “I don’t understand why they’re making the same mistake. Does the prime minister really have to go?”

A No. 10 official, however, said Burnham made clear soon after taking power on July 20 that he was “very keen” to attend the summit. Miliband has “laid the groundwork so that things hopefully won’t be as tricky as they were in 2024,” this person added.

“Andy’s style is that he is an honest broker with people, and he will give an instinctive response to things,” the official said. “But the government’s position is clear that reparations are not seen as the right route. It’s a careful balancing act, but one that we’re well prepared for.”

Climate resilience fund in the works

One tactic for the current No. 10 will be to try to avoid talking about it public.

Downing Street has broken with recent precedent by deciding not to bring the usual “pack” of political journalists, taking a smaller media “pool” instead. This will limit the scope of questions that Burnham faces. (Political editors from news outlets, including POLITICO, have written to No. 10 to object to the arrangement.)

Timing could also allow the visit to slip under the radar. Burnham and Foreign Secretary Ed Miliband will be there alongside counterparts including Anthony Albanese of Australia and Mark Carney of Canada, creating a rare opportunity for them to discuss the implications of the U.S. midterm results in private. The symbolism, as “middle power” nations deal with a drift in U.S. relations under Donald Trump, would be obvious.

Officially, the agenda is to build an alliance that can boost these middle powers, along with the developing states that global summits usually overlook. 

The Commonwealth Secretariat — the London-based body that co-ordinates the summit — said the aim of next week’s gathering is “partnerships and investment,” including in climate and youth employment, and removing trade barriers.

Likewise, the U.K. Foreign Office has been working on a climate resilience fund for developing nations, two people with knowledge of the talks said. A third said conversations in the U.K. government had focused on mobilizing public and private finance, and improving access to finance for climate-vulnerable countries.

Three people with knowledge of the planning emphasized that this summit would be an opportunity to build on relations with countries that could discuss bilateral trade, though they did not name specific nations and no U.K. trade ministers are due at the event.

“There will obviously be trade and investment discussions with a range of partners,” said one of the three people, a U.K. government official, who also noted that the U.K. will raise the impacts of El Niño. “The bigger picture is that we want to use the Commonwealth network to deepen trade and investment links across its 56 members — that Commonwealth advantage is one of the reasons the grouping matters to the UK.”

‘Playing Scrabble with words’

But leaders at these events, known by the awkward acronym CHOGM, can raise whatever topics they wish — reparations included.

Denis O’Brien, the Irish telecoms billionaire who founded the Repair Campaign calling for financial reparations to the Caribbean in 2022, said: “The conversation has moved radically forward.” He urged Britain and other European nations to “start off with an apology and then have an engagement,” adding: “The Foreign Office and the prime minister’s office are playing Scrabble with words — and unfortunately they’re leaving King Charles, who is so highly respected in the Caribbean, in a very difficult position.”

Paul Boateng, the Labour peer who was Britain’s first Black Cabinet minister and now campaigns on the issue, said Caribbean nations “are going to be pressing it. This issue is not going to go away.” The recent UN resolution reinforced Caribbean and African nations’ argument, argued Boateng: “We can’t be seen to simply ignore it … We cannot hold the Foreign Office line that it changes nothing.”

That position cast a long shadow two years ago.

No. 10 flew to Samoa in 2024 insisting reparations were “not on the agenda,” even though the summit’s free-wheeling format meant the choice was effectively out of Downing Street’s hands. 

This message “went down like a bag of sick” with Caribbean nations who saw it as “colonial” and “arrogant,” recalled one person involved in conversations at the time.

The handling created tension between Downing Street and the Foreign Office, then led by David Lammy, who also attended, according to six other people with knowledge of the 2024 trip. 

One of the six people said No. 10 figures had expected the Foreign Office to better manage expectations among Commonwealth nations ahead of Starmer’s arrival. The person said: “No. 10 did not feel like they were well enough informed, and felt some of this could and should have been handled in advance. There was the feeling that both Lammy and the Foreign Office were institutionally pre-disposed to this sort of stuff and not shutting it down. The PM didn’t know what he was going into.”

A second person said: “​​The FCDO world does forget, sometimes, the politics of what’s going on in the U.K. It’s very institutionalized.”

A third person stressed that senior aides in No. 10 had blamed Foreign Office officials, not Lammy personally. Before Starmer left office this year, No. 10 had been drawing up plans for Starmer to skip this year’s CHOGM — and send Lammy as his representative. By then Lammy had been moved from the foreign office and was Starmer’s deputy prime minister.

Another of the six people countered that it was No. 10 that persisted, ahead of the 2024 summit, with a line that was too binary — reparatory justice, as campaigners prefer to call it, has a wide definition that includes support for climate adaptation and education — and failed to listen to Foreign Office warnings ahead of time about the strength of feeling among Commonwealth nations.

“The audit trail would completely exonerate David and the Foreign Office,” this person said. They argued No. 10 officials — who were keen to hold on to the mantle of fiscal responsibility ahead of Starmer’s first budget — had viewed the row too much through how it would be perceived by the right-wing Daily Mail newspaper.

Two other people with knowledge of the 2024 trip insisted they did not remember any significant friction between No. 10 and the Foreign Office. Lammy’s office did not immediately respond to an invitation to comment.

UK review mooted a scaled-back summit

More significantly, the 2024 summit also led to discussions in Whitehall about the set-up of CHOGM itself.

Lammy commissioned an internal review by Foreign Office officials on the Commonwealth in the wake of the 2024 summit, his former Special Adviser Ben Judah told POLITICO.

Judah said the review suggested reducing the frequency of CHOGMs to “every four or five years,” potentially aligned with the hosting of the Commonwealth Games, and seeking to remove the final communique and leaders’ retreat.

It suggested an investment conference in alternate years modeled on the Asia-Pacific Economic Cooperation forum, which could keep the Commonwealth branding but with no organizational role for the Secretariat, said Judah.

Judah suggested this would improve attendance at CHOGM, which is often patchy; India’s Prime Minister Narendra Modi does not plan to attend next week’s summit, for example, though there will be a delegation led by External Affairs Minister Subrahmanyam Jaishankar.  “The Indians think this thing is ridiculous and self-harming and just totally bizarre,” said Judah. “They’d be interested in a real investment conference, not this farce.”

A second former U.K. government official said they knew about the report, which has not been made public, adding that No. 10 figures under Starmer discussed similar concerns about the format of the Commonwealth summit after the Samoa visit.

The Foreign Office declined to respond to questions about the report when contacted by POLITICO, including when it was finalized or whether any of its recommendations were pursued. One Foreign Office official, however, stressed that it was not the U.K. government’s position and that any decisions about future CHOGM arrangements would be for Commonwealth members collectively.

The U.K. government official quoted on trade and investment earlier in this piece said: “The Commonwealth is more important to our geostrategic position now than at any time throughout its 80-year history. In today’s more divided, unpredictable world, the Commonwealth has the potential to be a powerful, values-based force for good in the world.

“This gives us a huge opportunity to drive U.K. interests and priorities — Commonwealth relationships have helped to drive global support for Ukraine, and it is hugely important for our work on climate.”

Funding pulled from reserves

Judah, however, argued that the Commonwealth Secretariat is a “broken institution” and Britain should wind down its involvement to focus on an investment summit instead.

CHOGM has ended up as a “platform for the reparations campaign,” argued Judah: “There’s nothing else on the agenda because it’s not a real international organization, and it’s not a real summit with deliverables.” The Commonwealth and Secretariat, he said, has “essentially been taken over by the only countries that are still really invested in them, which are the Caribbean countries supported by a few African countries, to push the reparations agenda.”

For some, that extends to questions about the way the Secretariat spends its money.

Two people with knowledge of the situation said part of this year’s CHOGM summit is being paid for out of the Secretariat’s reserves. “There is a real sense of concern about the malaise and drift of the organization,” argued one of the two people. “Financially it’s in a dire, dire state.”

A Commonwealth spokesperson responded: “The Commonwealth Secretariat accesses reserve funds for the biennial Commonwealth Heads of Government Meeting and always with member country approval.”

Back in 2024, Starmer’s most senior aides privately raised the question about whether he should attend the Samoa summit at all. “We were overruled,” said another person who worked under him.

Whitehall officials initially assumed that Burnham would not go either, until he said otherwise. “To a lot of the Caribbean countries, the word [from officials] was that he wasn’t going to show,” said O’Brien. “I think people were taken aback by that.”

But despite Starmer’s experience in 2024, Burnham will attend. 

Among all other reasons, there is one very obvious one. “It’s very difficult for a prime minister not to go because the king goes,” said one person who worked under Starmer. “It’s important to him.”

Burnham’s ‘surer touch’

Once Burnham is in the room, campaigners hope he will at least be a listening ear.

Outside the prime minister’s Manchester office No. 10 North is a statue of Abraham Lincoln, commemorating the mill workers who refused to touch raw cotton picked by slaves.

Burnham referred to it in his first speech to the United Nations last month. “In 1862, people with little power used it to help those with none on the other side of the world,” he said. “The best change is change like that, bottom-up change led by people.”

The new prime minister “understands the importance of Manchester as the second great city of empire, and he has a surer touch than his predecessors,” argued Boateng. “We’ve got an opportunity to reset the relationship.”

What reparatory justice would look like is another matter. 

Previous estimates have suggested Britain should owe as much as £18 trillion, but the conversation is far more nuanced than talking about a single big number.

While Boateng argues that no measures should be taken off the table, he would begin with reforming the International Monetary Fund and World Bank to give more Commonwealth countries a meaningful seat at the table, and returning historic artefacts such as the Benin bronzes that are displayed in London’s British Museum. “The British Museum holds loot, literally loot. These are stolen goods,” he said.

Britain is working on debt relief too. Chancellor John Healey plans to make international finance for developing countries a key theme when Britain hosts G20 finance ministers next year. 

NGOs have urged Healey to make debt relief more generous by changing the G20’s common framework and UK domestic law, which sets the terms for 90% of debt that low-income countries owe to private lenders.

Maria Finnerty of Bond, the membership body for NGOs, said Britain “continues to play a role in enabling illicit financial flows through loopholes linked to the City of London and its overseas territories, amounting to the loss of billions from some Commonwealth countries.”

Miliband reflected all this in his POLITICO interview last month at the Labour Party Conference. While condemning the slave trade as “terrible,” he said his focus was on addressing current issues in countries “on the front line of the climate crisis, of the debt burden, of trying to reduce poverty in those countries.”

O’Brien is calling for monetary payments, however. Through the Repair Campaign, he wants to see the EU and U.K. make money available to the 15 Caribbean Community (CARICOM) countries — with a special case for Haiti — “each year for the next 75 years” for issues such as education, green energy and storm defenses to deal with climate change. 

O’Brien would not be drawn on a single figure, but suggested payments should supplement the national budget of each affected country by around 10% a year.

Asked if he had had conversations with the Foreign Office, O’Brien replied: “What do you think?

“I mean, we would like to. We’re approaching this in a very friendly way, taking a very, very sensitive period of history and trying to get results. We have the highest respect for the British government, and particularly the King. But it can’t go on forever.”

Night falls in the European capital. Everything’s quiet, but the nightmares are about to begin.

Viktor Orbán’s ghost haunts the Schuman roundabout; ash from the bonfire of red tape covers the Justus Lipsius building; Ursula von der Leyen’s chief of staff, Björn Seibert, chases after staffers demanding to know what “associate membership” for Canada actually means; and MEPs tremble at the prospect of construction workers uncovering the skeletons of political intrigues past during renovations.

Scared? You should be.

Here’s our guide to who is terrified of whom in the Brussels bubble. 

Everyone is scared of Marine Le Pen

The person haunting EU diplomats, officials and lawmakers is French presidential front-runner Marine Le Pen. Will she really halve Paris’ contribution to the EU budget, as promised? Will she pull Italian Prime Minister Giorgia Meloni away from the Brussels mainstream? And will she demand von der Leyen’s head?

The bubble had warmed (slightly) to the idea of Jordan Bardella in the Élysée Palace, after his years leading the National Rally’s European operation revealed a certain pragmatism toward Brussels — only for those hopes to be shattered when a Paris appeals court cleared Le Pen to be a candidate for the presidency.

The next ECB chief is scared of Jean-Luc Mélenchon

The European Central Bank president is the euro’s last line of defense against unorthodox national economic decisions — but that could be tested by French presidential candidate Jean-Luc Mélenchon, who is on course to reach the runoff after vowing to set billions of euros of French debt “on fire.” His incendiary plan calls on the Frankfurt-based ECB to waive interest payments on a vast tranche of French bonds — an unorthodox, perhaps impossible, maneuver that critics warn could even see France kicked out of the euro.

Now that we know Christine Lagarde will step down as ECB president in February, what France’s presidential candidates want to do about its monumental debt pile will haunt the race for her successor, with Dutchman Klaas Knot and Spaniard Pablo Hernández de Cos as the two frontrunners.

Lobbyists are scared of ChatGPT

The number of amendments lawmakers have filed has exploded since generative AI arrived, with key EU laws now facing thousands of proposed text changes. Parliament officials don’t think it’s a coincidence, with some pointing to amendments written in suspiciously bot-like language, and others saying sometimes amendments cite legislation that does not even exist.

The growing pile of amendments is haunting lobbyists, parliamentary assistants and officials forced to track and sort through it all — along with the fear that AI could eventually replace them. Spare a thought, too, for the MEPs who may have to vote through the amendments one by one, with hands raised in plenary. 

Commission officials are scared of Austria’s Europe minister

Well-heeled Commission officials (and their families) are spooked by Austria’s Europe Minister Claudia Bauer, who has been leading a push to slash the Commission’s administration expenditure — which pays eurocrats’ salaries and offices — in the next seven-year budget. The campaign, backed by most EU capitals, resulted in an 8% cut to the admin budget in the latest budget proposal.

Bauer is so feared that EU officials joke they reduce their delegations’ size whenever they travel to Austria.

Jessika Roswall is scared of Stéphane Séjourné and Valdis Dombrovskis

Environment Commissioner Jessika Roswall and her department have reason to fear industry boss Stéphane Séjourné, who is taking the lead on the upcoming Circular Economy Act, despite Roswall’s official title of Commissioner “for a Competitive Circular Economy.” Making matters spookier, Roswall’s environment department now shares the Breydel building with Séjourné’s internal market and industry department, setting the stage for some chilling corridor encounters as Roswall pushes for greater environmental protection while Séjourné prioritizes industrial growth.

Roswall is also under pressure from EU simplification chief Valdis Dombrovskis to cut red tape on several environmental laws. The Latvian commissioner, who oversees the omnibus packages, wants a deal before year-end. Meanwhile, the center-right European People’s Party continues to press the Commission to reopen laws on birds, habitats, and water — the EU’s oldest nature protection laws — so they can be simplified too.

Alexander Stubb is afraid of Kaja Kallas and António Costa

Kaja Kallas has not publicly addressed the call that Finnish President Alexander Stubb made to Russia’s Vladimir Putin, but the EU’s top diplomat has made clear she dislikes such outreach. Still, if Putin offered serious talks and concessions, Kallas would be the obvious person to answer: as coordinating EU foreign and security policy is her job. “Of course I will talk if such an opportunity presents itself,” she told Estonian media in September when asked about speaking with Putin or his Foreign Minister Sergei Lavrov.

Also reaching for the phone: António Costa. EU diplomats note that the European Council president represents the bloc at the leaders’ level abroad. That institutional turf war may explain why Stubb stressed that he and Norwegian Prime Minister Jens Støre spoke only for their own countries — not for Europe.

Manfred Weber is scared of his own group …

What keeps the leader of the European People’s Party — Europe’s largest political family — up at night? Divisions within his own ranks. So far, Weber has kept a tight ship and wants to reunite his troops ahead of the 2029 EU election, which he is casting as a battle against the far right. But that may prove tricky as the EPP’s national delegations increasingly clash over whether to work with the far right or isolate them.

… and the group is scared of Ouarda Bensouag

Central to Weber’s strategy is Ouarda Bensouag, the group’s secretary-general and his chief of staff. One of his most trusted lieutenants, she has a reputation as a smart but ruthless operator who EPP staffers fear when crossing paths in the Parliament’s labyrinthine hallways.

No one is scared of the Parliament … but they should be

Parliament’s attempts to spook capitals over the next long-term budget have been borderline tragic so far: It keeps threatening to kill the budget, but nobody seems to care or believe it will.

They should care. When it comes time to pass the budget, 361 of 720 votes will be needed, and the margin could be razor-thin in a fragmented chamber that’s hostile to plans to pool farm and regional funds. The louder MEPs protest — and the longer the Council ignores them — the more determined they become to prove the threat is real.

By Max Griera, Gregorio Sorgi, Kathryn Carlson, Nick Vinocur, Jakob Weizman, Fiona McNally and Eliza Gkritsi

FRANKFURT — The race to replace Christine Lagarde has reached fever pitch after she officially announced her intention to depart the European Central Bank in February next year.

The two leading contenders are familiar figures from the eurozone’s central banking circuit: Spain’s Pablo Hernández de Cos, a measured economist with a reputation for quiet authority, and Dutchman Klaas Knot, a former hawk whose years on the ECB’s governing council left a more complicated legacy.

A recent Bloomberg survey of economists gives de Cos a slender lead: 12 respondents picked him, against nine for Knot. The survey offers a snapshot of expert preferences, not a forecast of the outcome. EU leaders will make the appointment, with national claims and other ECB vacancies likely to shape negotiations.

The choices will also be influenced by horse trading over what will likely be a package deal with the opportunity to fill the two executive board seats that will be vacant in January and May.

Softly spoken de Cos

An economist with a Ph.D. from the University of Madrid, de Cos joined the Bank of Spain in 1997, moved to Frankfurt in 2004 to be an adviser to the ECB’s executive board, before returning to the Spanish central bank. He rose through the ranks to become governor, serving from 2018 to 2024. In this role he restored the Bank of Spain’s reputation after a series of missteps before and during the financial crisis.

His achievement was implicitly acknowledged by his appointment to two terms as chair of the Basel Committee for Banking Supervision, the global standard-setter for bank regulation. He now runs the Bank for International Settlements, the institution often described as the central bankers’ central bank.

His style is low-key: a modest dove, meaning that he is more attentive than hawks to growth and employment alongside inflation. Still, when inflation surged in 2022, de Cos backed the ECB’s shift toward higher rates. Equally, he has little time for governments that put off essential pension system reforms, having published a sharp critique of the Pedro Sanchez government while at the Bank of Spain. 

His case

De Cos has long been groomed by Lagarde’s predecessor Mario Draghi, whose voice continues to carry a heavy weight in European economic debates and may influence the preference of some countries as they mull who to place at the top of the Frankfurt institution.

As France faces mounting debt pressures, de Cos’ experience as a senior Bank of Spain economist during the eurozone crisis could convince EU governments that he is the best fit. Galo Nuño, vice dean and professor of economics at IE University and a former alternate member of the ECB governing council, called it “a huge advantage.”

His challenges

The political arithmetic, however, could work against the Spaniard. France is keen to secure the role of the ECB chief economist, which becomes vacant in May 2027. Some officials may want to avoid pairing the ECB presidency and chief economist roles with candidates from highly indebted countries.

With inflation above target and the eurozone having lived through a severe inflation shock in 2022, some leaders may prefer a candidate with a more clearly hawkish record.

Enter: Klaas Knot.  

Knot: Hawk turned pragmatist

Knot also has a strong economic background, boasting a Ph.D. from the University of Groningen. After early positions at the Dutch central bank, De Nederlandsche Bank, and the International Monetary Fund, he moved into senior roles at the Dutch Finance Ministry and returned to the DNB, which he led from 2011 to 2025. He has also chaired the Financial Stability Board, the global body tasked with monitoring risks to the financial system.

For much of Draghi’s presidency, Knot was a staunch hawk who publicly challenged the ECB’s stimulus measures. In September 2019, he called the package “disproportionate.”

His relationship with the ECB’s leadership was more harmonious under Lagarde. He supported both her pandemic crisis response package, PEPP, as well as the Transmission Protection Mechanism — a potentially more radical tool than any brought in under Draghi which allows the ECB to buy up unlimited debt of a single EU member country.

Knot remained an early advocate of raising rates when inflation took off but came to be described as a pragmatic hawk and team player.

His case

Supporters argue that a hawkish president could help the ECB support Southern European economies during a debt crisis while reassuring consumers and investors that the bank remains committed to price stability.

Knot’s former role as chair of the G20’s Financial Stability Board could also boost his case. Berenberg chief economist Holger Schmieding argued that “the question who may be best placed to deal with potential financial turbulences will likely play a key role in the choice of new ECB leaders.” This role was also Draghi’s springboard.

His challenges

Germany’s ambitions could be a stumbling block, as Northern European hawks will have had their turn with Knot. EFG Bank chief economist Stefan Gerlach said: “If Knot is appointed, then Germany can hardly argue that it is its turn to appoint the president after him.”

Some veteran governors still view Knot’s public break with Draghi as disloyal.

What happens now?

German Chancellor Friedrich Merz said a decision would be taken by year-end, with eurozone ministers set to gather under the banner of the European Council in mid-December.

When it comes who will win the race, the history could cut both ways.

Nuño, who has seen both candidates in action, said each brings monetary-policy expertise and the political pragmatism needed to manage the challenges ahead.

The choice, then, will turn on which mix of policy temperament and political arithmetic EU leaders want at the top.

LONDON — Andy Burnham became Britain’s prime minister 100 days ago on a pledge to end 40 years of neoliberalism. His first budget announced he wouldn’t do that on the front page.

Wednesday’s 150-page red book was titled “breathing space for today, fresh hope for the future”, a confession, with true British modesty, that it was a stepping stone to bigger pledges downstream.

Burnham’s top finance minister, Chancellor John Healey, unveiled 98 changes, including help for most households’ energy bills, which are due to spike this winter because of Donald Trump’s war with Iran, and a £10 billion defense package to support Ukraine.

Many of the tax tweaks were limited and technical, including an 8% cut to tariffs on soy milk. Healey’s ambition was reined in by surging global oil prices and a political choice by his boss not to blow the doors off yet.

Burnham has reviews on the creaking welfare system, devolving power to the regions and a “10-year plan” all coming before Christmas. Only then can he grind out the numbers for next year’s spending review.

The Labour MP Darren Jones, who served in the Treasury until Burnham arrived in July, called it a “steady-as-she-goes budget” that was to be expected. Many Labour MPs were happy, cheering measures for their area and pointing toward a bigger bang later on. Industry lobby groups could grasp onto something in their area of expertise.

But with U.K. growth struggling, others were less generous. Joe Shalam of the center-right Centre for Social Justice think tank called it the “fudge-it budget.” Tory leader Kemi Badenoch asked: “Is that it?”

Perhaps the trickiest response for Burnham was from Mainstream, the left-wing campaign group that helped propel him to the Labour leadership this year. “Ending 40 years of neoliberalism can only be delivered by radical action,” read a statement by the group’s interim council.

POLITICO looks at five other takeaways from Wednesday’s budget.

1) We’re in the holding pen

The chancellor’s big bazooka was to slap a much-anticipated tax rise on banks — but he surprised many by saying it will last only 15 months. It will raise less than £1 billion in its peak year.

It wasn’t the only temporary measure Healey unveiled on Wednesday. He extended existing cuts to fuel duty, a tax cut on household energy bills and a £2 cap on bus fares, but only until 2027. They will all need to be reviewed again before his next annual budget.

Likewise, some of Healey’s spending plans thin out after a few years, which suggests they may need topping up later. This applies even to the areas closest to Burnham’s heart. Budget documents suggest support to end rough sleeping will total £1.1 billion in the two years from April 2027 but only £270 million in the three years after that.

There were plenty of changes, of course, such as to writing-down allowances, property income taxes and tax on savings. Whitehall will have to find more administration cuts while tax inspectors hunt down another £3.2 billion a year. But the Institute for Fiscal Studies, a non-partisan economic think tank, called it all a “hodgepodge” of “fiddly measures” that would do little to affect growth.

Many of the more fundamental decisions were kicked down the road. Healey has committed to spending 3.5% of GDP on defense by 2035, but will only spell out how to fund it in a spending review at some point in 2027. Major reforms to the welfare system — spending on which is still rocketing — will only be decided after two reports by the Labour grandees Stephen Timms and Alan Milburn are published in November.

Healey published a “fiscal devolution roadmap” that spelled out a path to handing regional mayors full control of the business rates raised in their areas by the end of the decade, but this has an element of wait-and-see too.

Healey had a narrative for his cautious approach. “I decided on an early budget to give the country a bit of breathing space and to provide stability and direction in the face of speculation,” he told MPs Wednesday. “We’ll continue to map out that direction for Britain through the prime minister’s 10-year plan and the spending review.”

This is not the Burnham who complained Britain was “in hock to the bond markets” last year.

2) Everything is terrible, so blame the White House.

Burnham and Healey can blame Trump — up to a point.

The chancellor said the headwinds that once faced Britain are now “global economic storms,” fueled above all by the U.S. conflict with Iran. “We did not want this war,” Healey told MPs.

Journalists spent Wednesday trawling through the usual gloomy parade of numbers about the U.K. economy produced by the independent Office for Budget Responsibility. Britain’s projected growth in 2027 was cut from 1.6% to 1% (though Treasury officials insisted GDP per person will rise overall by the end of the decade).

Healey chose to leave himself with a smaller fiscal buffer than his predecessor Rachel Reeves, telling MPs he had used it to “absorb the impact of the Iran war.” He also raised net taxes by £7 billion a year, though this was far less than the £26 billion in Reeves’ last budget.

But the situation is so volatile that these numbers, based on market energy prices in mid-August, are probably already out of date. The OBR’s “severe shock scenario” had oil prices peaking at around $115 a barrel in the first half of 2027. They already hit that level this week.

Healey insisted that Britain is doing well in the circumstances; his ministers all point to an International Monetary Fund prediction that the U.K.’s deficit will be the lowest in the G7 by 2029.

Opposition parties, however, paint a picture of a nation where everything is just getting gloomier. The tax take was already on course to rise to a record high; Healey broke that record again on Wednesday. (It is now due to reach 38.6% of GDP.) Britain’s spending on debt interest has almost tripled since 2020.

3) Defense spending is still a big, big headache

Healey resigned as defense secretary under former Prime Minister Keir Starmer in June to protest the lack of military spending — but now faces mounting unanswered questions about his own plans.

Healey did two big new things on defense spending on Wednesday. First, he confirmed an open secret in Westminster: he plans to reach 3% of GDP by 2030 — on a path to NATO’s 3.5% by 2035 — but repeated that the details of how he’ll pay for it will only be spelled out in next year’s spending review.

Secondly and more significantly, he outlined his plan to plug a ​​£1.8 billion-a-year gap in Starmer’s defense investment plan — but provided only scant details. 

The Treasury said it will be paid for by shaving 1% off each Whitehall department’s capital budget in the coming years. However, those departments have not yet worked out what they will cut; that is a problem for another day. These questions will dog Healey for the next year.

At least one person was delighted: Volodymyr Zelenskyy. The Ukrainian president said the chancellor “made my day” with a £10 billion package of economic and military support to Kyiv. Part of the package needed special sign-off by ministers because civil servants warned they could not guarantee it would provide value for money.

4) There was something to make Labour MPs happy

Much of what Healey did unveil appeared to be aimed at preserving the “Burnham bounce” in the polls and with his own MPs. 

The chancellor called it a “budget for the working people of Britain” and Treasury analysis says it was redistributive, handing the biggest boost to the poorest households (albeit only raising their incomes by 0.6%).

Central to this was Healey’s closest thing to a “rabbit out of the hat” — a £100-per-household cash payment to people living in homes below a certain value this winter. One Labour MP enthused that the criteria for the payment (which Treasury officials say will capture 88% of the poorest households) was “absolutely brilliant” because it will capture working households and those on benefits at the same time.

There was another £1.5 billion for social and affordable housing, a “covenant” to govern new AI data centers and changes to mileage rates for self-employed workers. Burnham has prided himself on being a grassroots politician; it was a grassroots package.

How much voters will notice is another question. The IFS warned the package of “breathing space” measures was still “relatively small.” It could be swallowed by a rise in annual energy bills in January — predictions of which have recently ranged from £276 to £469.

The OBR warned there has been “virtually no growth” in real household disposable income per person over the last decade or so, and predicted “no real earnings growth in 2027” despite Burnham and Healey’s efforts to help.

5) MPs won’t stop chattering about an election

Burnham only has to call an election by mid-2029 and keeps trying to snuff out talk of going earlier — but every prime minister does this until they don’t.

His MPs were studying the budget Wednesday to work out if it makes an early general election more or less likely. It’s fair to say they couldn’t agree.

On the one hand, this cautious budget of temporary measures might suggest Burnham — who needs his own mandate for more radical changes to the electoral system or Britain’s relationship with the EU — is holding out for the country’s backing.

Others would say a cautious stepping-stone budget is hardly the eye-catching approach you would take if you were about to sell yourself to voters. Growth is set to be slow next year; Burnham needs time to turn the economy round and show he can change things.

Burnham told journalists on Wednesday: “I don’t know how many times I’ve done this now, but yes, I can rule out calling a general election in the next 12 months.” The speculation will continue anyway.

Esther Webber, Emilio Casalicchio, Sam Blewett and Charlie Cooper contributed reporting.

CORRECTION: This article was updated on Oct. 29 to better reflect the Centre for Social Justice’s ideological stance.

LONDON — U.K. Chancellor John Healey is set to deliver an unexpected increase in defense spending at his first budget on Wednesday, as Britain strains to reach its NATO commitment to spend 3.5% of GDP on defense by 2035.

Healey — who quit as defense secretary in the dying days of Keir Starmer’s government over a funding row — hopes he can show how Britain will start to reach that target now that he’s safely ensconced in the powerful Treasury.

Until last week, it was assumed that the top finance minister would defer decisions on ramping up funding until next year’s multi-year, government-wide spending review. So Wednesday’s move could represent an early win for the Ministry of Defence in Prime Minister Andy Burnham’s new government.

But with regular warnings in the press and in public about Britain’s unpreparedness for conflict, there’s much more to watch for beyond Wednesday’s headline hike. POLITICO walks through the seven key details and defense industry demands.

1) How will Healey play the numbers game?

Healey’s government-rocking resignation back in June was explicitly over a refusal in Downing Street and the Treasury to commit to spending 3% of GDP on defense by 2030.

Now that he is leading the Treasury, Healey is under pressure to deliver on that. But even that keeps Britain shy of the bigger NATO aim.

On existing plans, U.K. defense spending is set to rise to 2.7% next year and remain flat until 2030. Healey’s first move will be to fill the £4.7 billion black hole in defense funding in the Defence Investment Plan — meant to overhaul the armed forces and improve readiness — published earlier this year.

More money is now expected beyond this, briefed to the media in recent days as a “down payment” towards spending 3% on defense by 2030.

But two government officials, granted anonymity like others in this article to discuss internal thinking, said the pathway to meeting NATO’s larger, 3.5% target will only come in next year’s spending review, not the budget.

Even on the smaller measure, the margins for the chancellor are tight, with government spending rules and debt targets leaving little room for maneuver. Mike Martin, an MP on the House of Commons Defense Committee, told POLITICO: “They have got themselves into a straitjacket over defense spending and none of this will be resolved before the next election. This is why I think an early general election is inevitable.”

2) Will the chancellor move to funnel private capital into defense?

Britain’s defense industry has long called for more direct government spending on domestic contracts. But the sector also wants more private capital flowing into U.K. firms, and will be looking to Healey to set the conditions.

The Financial Times reported last week that Healey will allocate £15.4 billion to the country’s National Wealth Fund and £5 billion to the British Business Bank — a share of which could end up with defense companies.

Two key details to watch here are whether the government claims this money counts towards its wider defense spending commitments, or whether any cash is allocated purely for defense firms. Potential reforms to and incentives for pools of private capital, such as pension funds and venture capital funds, to invest in defense would also be welcomed by the sector in this budget — but the industry may be left waiting.

One of the government officials cited above said that a Defence Finance and Investment Strategy is slated for December, with a Defense Investment Summit coming December 1.

3) Where does Healey stand on global defense team-ups?

On Sunday evening, the Treasury disclosed that it would not join the Canadian-led Defence, Security and Resilience Bank (DSRB) — a proposed multinational financial institution with its own AAA credit rating that aims to provide cheap loans for countries to invest in defense.

The U.K. had previously considered joining the bank, or merging it with its own separate initiative, the Multilateral Defence Mechanism (MDM) — a planned scheme for joint defense procurement, stockpiling and supply chains for member countries.

But a joint statement with Ottawa said that the institutions will now work in partnership.

The MDM currently has £400 million allocated from June’s Defence Investment Plan, while none of the other member nations — the Netherlands, Finland and Poland — have confirmed whether they have contributed capital to the project.

Now that uncertainty over Britain’s membership of the DSRB has gone, the government will be looking to flesh out its plans for its own MDM.

4) Can the chancellor slash energy and manufacturing costs?

Two industry figures told POLITICO that one of the biggest barriers to doing defense business in Britain — making it less attractive than other nations — is the country’s comparatively high energy costs.

However, slashing costs for energy-intensive industries, including the industrial base of the defense sector is expensive, and schemes aimed at reducing costs — such as the British Industrial Competitiveness Scheme – already exist. Measures reportedly under consideration this time around appear to focus more on reducing households’ energy costs than on supporting businesses.

A third industry figure predicted that ministers would not offer immediate support for business energy bills because “every possible option” for instant help “is too expensive.” But a defense industry investor said the Treasury is, however, looking at reducing the financial burden of machinery — which they said is a key issue for small firms wanting to ramp up production as part of the supply chain.

5) What does Buy British actually mean?

The government has been consulting with the defense sector and wider British industry over what exactly constitutes a British company under its plans to implement a new “Buy British” scheme.

The plan aims to bring together Andy Burnham’s pledges of re-industrialization and more evenly-spread growth across the country, and comes after the EU proposed its own Made in Europe procurement plan to try and boost the bloc’s own firms.

The push is also designed to build sovereign capability, which has become increasingly important to Britain amid fears that the U.S. is an unreliable ally. The recent row over Ukraine’s constrained access to the Starlink satellite system has exacerbated such concerns.

Early suggestions indicate the government will take a broad definition — in a potential boost for multinational defense giants. Rupert Pearce, the Ministry of Defence’s National Armaments Director, told a recent industry event that, from his perspective, French defense company Thales, which has a headquarters in the U.K., “is a British company.”

6) Will Healey move further on AI and hybrid defenses?

Ahead of the budget, Healey’s Treasury announced a series of AI-specific policies with potential defense applications.

These include £165 million for AI-driven detection and surveillance of biological threats — a move first teased by the boss of Britain’s MI5 intelligence service.

The government will also put £60 million into its Sovereign AI fund to invest in British tech companies, including autonomous systems, robotics, and advanced manufacturing.

Watch to see whether the chancellor waves around more promises of boosting British resilience to malign actors on Wednesday.

7) Will Donald Trump even notice?

Britain’s comparatively slow progress on defense spending has already caught the eye of the Trump administration.

Warren Stephens, the U.S. ambassador to the U.K., warned earlier this year that Britain must make “sustained investment” in defense, rather than focusing on “other spending priorities,” and warned against “backloading” defense spending to a later date. 

A lack of a meaningful movement on defense spending — or at least eye-catching claims from opposition parties that Healey has fumbled it — could grab the attention of Trump’s team this time around. The timing is tricky: the Pentagon is currently undertaking a review of American military assets stationed in mainland Europe and the U.K.

France has become the new sick man of Europe just in time for its next presidential election.

After two weekends that saw hundreds of thousands of protesters hit the streets demanding the government increase teacher salaries, fix run-down schools and help subsidize the rapidly rising cost of living, the European Union’s second-biggest economy is being dragged into a vicious cycle of twin fiscal and social crises that are fueling each other.

“France is on the brink of a financial crisis,” former Prime Minister Michel Barnier told POLITICO. “We need to send a signal to the markets.”

Authorities were able to prevent the type of rioting and looting this past weekend that marked the first round of demonstrations Oct. 17-18, but financial markets are spooked. Even before the demonstrations began, investors were dumping French debt or demanding historically high returns because of the government’s failure to significantly cut a stubbornly high budget deficit, bring down €3.5 trillion of debt, jumpstart growth and reform an unsustainable pension system.

The prospect of a presidential runoff next spring featuring far-right front-runner Marine Le Pen and her far-left rival Jean-Luc Mélenchon, who is in the mix for second place according to most polls, is further scaring investors. Both candidates want to spend billions to lower the retirement age.

The rioting, for now, is estimated to have cost tens of millions of euros, much of which will be covered by insurance. But the chaos is pouring fuel on an already explosive situation by sending worrying signals to investors, especially if the civil unrest continues. The Yellow Vest protests of 2018 to 2020, which came early in President Emmanuel Macron’s tenure, cost the French economy 0.1% of gross domestic product, with shops reporting losses of €2 billion.

“It is clear that protests have an impact on markets,” Eric Lombard, who served as economy and finance minister last year, told POLITICO.

Given that current Prime Minister Sébastien Lecornu’s proposed budget for 2027 already includes €43 billion in savings, leaving little room for more cuts, the government is faced with an impossible choice: Borrow more money and saddle the next generation with billions of euros in interest payments, or hope the protests die out on their own.

“We have a knife to our throats, and we can feel the drops of blood on our jugular,” said a government minister who was granted anonymity to discuss the current situation.

“We need to show that we’ve heard the outrage. But we have little margin for maneuver given the market situation.”

Playing with fire

Mario Monti, who faced a similar situation as Italian prime minister and managed to avert a financial crisis in 2011 with spending cuts and a pension reform, told POLITICO that “things can go very fast.”

Back then, the spread between Italian and German 10-year bonds — an indicator that measures how risky one country’s debt is compared to historically safe Germany — shot up from around 150 basis points to more than 500 within a few months, Monti recalled. The spread between French and German debt was 169 basis points when markets closed on Friday, while the yield on France’s benchmark 10-year bond hit 5.14% the previous day, the highest level since 2002.

France has long been seen as the EU’s “spoiled child,” Monti said, taking advantage of its political and economic weight to bend or break the bloc’s fiscal rules. But few had thought a country that big and powerful would end up on the front line of a European debt crisis.

While the ability of the European Central Bank to buy government bonds on the secondary market under certain conditions gives it a powerful tool to avert a eurozone crisis, Monti says French voters must recognize that a sovereign debt crisis in their country is no longer the stuff of fiction.

“The major problem is that the public is not concerned enough with this risk,” Monti said. “France is not psychologically ready to view itself as the target of a crisis or even as the starting point of a crisis that could spread.”

That malaise isn’t just economic: Many indicators show France has lost confidence in itself.

According to a poll last month, 9 out of 10 French people are pessimistic about the future and believe their children will be worse off than themselves. A pan-European study conducted earlier this year found that only half of French respondents feel pride in the democratic system, compared to two-thirds of Germans and close to 70 percent of Britons.

That pessimism has pushed voters toward more extreme candidates like Le Pen — whose economic platform has been panned by some economists as unrealistic and unserious — and Mélenchon, who wants to set French debt “on fire.” According to POLITICO’s Poll of Polls from earlier this month, Le Pen enjoys the support of 34% of voters while Mélenchon has 15% — meaning nearly 50% of the electorate intends to vote for an anti-establishment figure. Center-right candidate Edouard Philippe, arguably the best-placed mainstream figure to take on Le Pen, has tried to sell himself to voters as a candidate of fiscal discipline who is unafraid to address tough truths. But his campaign has struggled to find its footing.

Doom loop

The officials, lawmakers and diplomats POLITICO spoke with all agreed that France was not at risk of a Greece-like scenario forcing the government to stop paying officials and creditors. But it could very well experience a crisis similar to the one in Italy when Monti replaced Silvio Berlusconi in 2011.

“We are not yet a banana republic which risks filing for bankruptcy,” said veteran centrist lawmaker and budget expert Charles de Courson.

But during rioting earlier this month, in front of the shattered window of an already ransacked supermarket in Paris’ hipster 11th arrondissement, a man with no apparent connection to the shop was encouraging passers-by to go in and steal what they needed. A few meters away, the owner of a Chinese restaurant locked the door behind each client to make sure the rioters couldn’t get in.

These are scenes one would expect in a country on the verge of a sovereign debt crisis, not a member of the G7. Watching from Brussels, Washington or New York, diplomats and economists recognize that Paris will likely fail to bring its budget deficit down to 3% of GDP by 2029 as it previously promised to the EU.

De Courson said France has “lost all credibility” with its European partners when it comes to fiscal issues. Lombard, the former economy minister, said “we failed to honor our commitments,” but held out hope that things could change.

“On behalf of the French people, we made commitments to get the finances back on track, but we didn’t keep them. I was very much in favor of honoring my commitments. But collectively, we didn’t do that,” Lombard said. “So we put ourselves in a position of weakness.”

ORLEANS, France  — Far-right leader Marine Le Pen shed her anti-establishment radicalism on Sunday to portray herself as the guardian of France in her first presidential campaign rally in Orléans, south of Paris.

With polls showing her as the front-runner ahead of the scheduled April 2027 presidential election, Le Pen sought to reassure voters by promising to safeguard France as the country seethes with social unrest and stares down a looming debt crisis.

“Even if today the words that spring to mind are ruin, decline … riots and even chaos … we believe in our people and in France,” she said.

In a speech lasting over an hour, Le Pen told thousands of supporters that she was not aiming for a “revolution” but rather “a real change in power” that would spark a new “Renaissance” in the country.

“We’re not saying: It was better before,” she said. “We say: It was good before and it will be better tomorrow.”

Le Pen also played her usual refrains, promising to restore public order in France, strengthen the country’s borders and expel undocumented migrants if she came to power.

Le Pen and her allies have spent days pushing back against accusations by rivals that the far-right National Rally has helped deepen divisions in France amid the turmoil and disorder sparked by recent student protests. In her address, the four-time presidential candidate refrained from attacking political opponents and pitched her party as the one offering French citizens a brighter future.

“My protective vision will benefit all,” she said.

The eurozone’s second-largest economy is facing a cocktail of crises including cost-of-living protests, difficulties adopting a state budget and a spiraling debt and deficit. The dire situation has spooked the markets, with France’s borrowing costs climbing above 5% last week for the first time since 2002.

According to a senior National Rally official, Le Pen wanted to use her speech to cast herself in a presidential role and to reassure voters hesitant about supporting her. “People mostly agree with our ideas, but some still think it’s a gamble to vote for us,” the official said.

Tensions overflowing

Le Pen’s rally was also a show of force, with over 8,500 supporters gathering in a conference hall in Orléans, many carrying French flags and chanting “Marine, présidente!”

According to POLITICO’s most recent Poll of Polls from mid-October, if the election were held today Le Pen would get 34% of the vote compared to 16% for center-right candidate Edouard Philippe and 15% for Jean-Luc Mélenchon, representing the far left. Most polls have Le Pen winning in a run-off round if no candidate wins a majority in the first round.

Leaders of the far-right party staged a two-day conference in Orléans over the weekend under high security, with heightened police checks and body searches. On Saturday thousands of left-wing demonstrators gathered to oppose the rise of the far right in the center of Paris, while across the country protests attracted hundreds of thousands of people, a week after looting and riots marred rallies across France.

“France is plunging into real violence, which will become out of control if the state doesn’t take control,” said National Rally President Jordan Bardella, addressing the crowd before Le Pen’s speech.

“The National Rally appears to be the only solution to allow the return of order and return of authority.”

France was already reeling after a man randomly opened fire on passers-by in the Paris suburb of Trappes on Friday, killing one person and injuring five, including a girl of 12. French President Emmanuel Macron deplored the incident as “a racist terrorist attack.”

Socialist Party leader Olivier Faure said on Sunday that the National Rally carried “a heavy responsibility” for the Trappes attack because it had created “a mood … suggesting that we are being invaded, that there’s a sort of great replacement.”

The National Rally pushed back on the charges, and instead accused the far left of encouraging the violence.

Sarah Paillou contributed reporting.

MADRID — The Spanish government has won a significant victory in a long-running legal dispute with international investors over its decision more than a decade ago to scrap renewable energy subsidies.

This week, a Belgian court overturned a ruling that ordered the Spanish government to pay investors nearly €76 million.

It was a major win for Spain, which has been fighting attempts to freeze its assets around the world from clean energy investors who claim they are owed at least €2 billion in subsidies.

The dispute dates back to 2013, in the middle of the European debt crisis, when cash-strapped Spain, then under a new conservative government, decided to remove subsidies for renewable energy. Investors who had poured money into Spanish renewables said this was a breach, as they had invested on the understanding they would receive the subsidies.

The International Centre for Settlement of Investment Disputes ruled that Spain must pay the money, but the European Commission has told Spain doing so would constitute unlawful state aid.

The standoff has played out all over the world, with investors attempting to freeze Spanish assets in multiple jurisdictions. In June, U.S. investment fund Blasket Renewable Investments LLC issued subpoenas demanding documents from Adidas, Hilton Hotels, and other entities involved in Spain’s Football World Cup participation to help with its bid to freeze Spanish assets.

In the end, the team went back home with its assets intact, along with the World Cup.

Spain also has cases going on in courts in Australia, Germany and the U.S.

In 2023, a British court ordered an embargo on an international school in London owned by the Spanish state. The Belgian court’s original decision was one of the few examples where investors were successful, and the decision this week to overturn it will set a precedent for other challenges.

The case

Spain’s defense persuaded a Belgian court to lift an embargo imposed in 2025 on state-owned air-navigation company Enaire for €75.76 million, according to documents seen by POLITICO.

The case was also brought by Blasket, which bought the dispute from an investment fund called RREEF. The European Commission intervened in support of Spain.

RREEF, which was originally linked to Deutsche Bank, invested in Spanish wind and solar power under a 2007 regulatory framework that guaranteed subsidies for renewable energy. In 2013, amid the economic crisis, the government of then-Prime Minister Mariano Rajoy, of the conservative People’s Party, cut those subsidies to reduce electricity costs.

International investors turned to arbitration, arguing that the Energy Charter Treaty, an international agreement signed in the 1990s, guaranteed them fair and predictable treatment. The funds sought more than €10 billion in compensation, according to sources at Spain’s Environment Ministry.

The International Centre for Settlement of Investment Disputes, part of the World Bank, which handled most of the arbitration cases, ruled against Spain, though it reduced the amount sought in many cases. The total awards came to about €2 billion. In its 2019 ruling, the tribunal ordered Spain to pay RREEF €59.6 million, plus interest and costs.

Most of the claims, including RREEF’s, were sold to Blasket, which began seeking to enforce the awards. The funds have searched for Spanish assets that could be seized to satisfy the claims.

Spain says it cannot pay because the European Commission has determined that doing so would constitute unlawful state aid. The funds invested through companies based in Luxembourg, and the EU’s top court ruled that the Energy Charter Treaty did not apply to disputes between EU investors and EU member states; EU law governed instead.

In August 2026, the Commission opened infringement proceedings against Spain over a €23 million payment on an award involving a Japanese company, which was not based in the EU.

On June 17, 2025, Blasket secured a Belgian court order freezing €75.76 million belonging to Enaire, the state-owned company that manages air navigation in Spain. Enaire receives payments from Eurocontrol, the Brussels-based European organization that collects air-navigation charges from airlines and distributes the proceeds.

That arrangement made it possible to freeze Spanish public funds in Belgium. After a legal dispute, Spain deposited €75,759,538 on May 4, 2026.

The freeze was a high-profile win for investors pursuing Spain. They have secured other attachments in the United Kingdom and are engaged in ongoing U.S. court disputes over enforcement of the awards.

Spain appealed, and the European Commission intervened on its behalf. The Belgian state also argued that the attachment breached EU law. The Belgian court has now ruled in Spain’s favor, lifting the freeze and ordering Blasket to pay the legal costs.

That leaves Spain in a stronger position against international investors seeking to enforce the awards — at least within the EU.

Romania ended five months of political paralysis Tuesday with its parliament voting in Luca Niculescu as prime minister after three failed attempts to form a government — but the deal comes with a six-month deadline for the parties to strike a more lasting agreement.

The threat of snap elections, which would likely see the populist right-wing Alliance for the Union of Romanians (AUR) party surge, helped push the center-right National Liberal Party (PNL) and the center-left Social Democrats (PSD) to agree on a government led by independent Niculescu, a former journalist and diplomat who was nominated as prime minister by moderate President Nicușor Dan earlier this month. The socialists will join the cabinet, but the liberals will stay out.

Romania has the sixth-largest population in the EU and plays a critical role in NATO’s defense of southeastern Europe as home to a major military base and a U.S. missile shield site. The country has been plagued by political instability and a mushrooming budget deficit in recent years, fueling a surge in support for hard-right nationalist politics. 

The new deal keeping the government afloat expires in six months, and parties will need to renegotiate the pact with no agreement yet on what comes next.

During this period, the Social Democrats will try to pass an investment-focused 2027 budget by the end of November, steering Bucharest away from austerity, party leader Sorin Grindeanu told POLITICO Playbook Capitals in an interview.

“Romania needs an economic recovery plan, not austerity,” he said. “Our priorities are protecting purchasing power and supporting business, restarting public investment, and improving essential public services.” Grindeanu added that he aims to revise the 2026 budget by the end of October and to fast-track implementation of EU projects to unblock funds.

The Social Democrats in May teamed up with AUR to topple the coalition government led by centrists and centre-right liberals, as unpopular debt-cutting reforms drove Social Democrat voters toward the populist right. PNL and USR have refused to govern with the Social Democrats again.

The formation of the new government makes snap elections harder to trigger once the six-month deal expires, as Romania’s constitution requires two failed attempts to install a government before Parliament can be dissolved.

Grindeanu hopes to persuade his former coalition partners to reunite in six months, but with a different economic program. Fearing an uptick in support for the far right, he wants to avoid further cuts.

But the pivot away from austerity puts him at odds with the PNL, which has defended fiscal restraint. The PNL refused to sign a detailed coalition program, Grindeanu said, forcing the administration to cobble together support vote by vote over the next six months.

Grindeanu distinguished between parliamentary votes and lasting alliances, and said he won’t seek a pact with AUR, citing deep disagreements over Europe and national security. He said he rejected an offer from AUR to back a €300 million social spending package during negotiations over the 2026 budget, after the far-right party demanded PSD’s support on another, unspecified issue in return. Instead, he waited to find a compromise with PNL.

“Until I will stay in this position, PSD will not have any agreement with AUR,” he vowed.

LONDON — Kemi Badenoch warned Labour Prime Minister Andy Burnham on Tuesday not to repeat the economic mistakes of her former boss Liz Truss in his first budget next Wednesday.

The Tory leader said higher national debt, increased gilt yields and extra government spending are creating a gloomy economic picture — and demanded sharp spending cuts from the ruling Labour government next week.

“The lessons of the mini-budget are: if you don’t balance your budget, if you give away £150 billion in subsidizing people’s energy bills, but you don’t cut spending, then the markets will react,” Badenoch said, citing former Tory leader Truss’ ill-fated mini-budget in 2022, which triggered a sharp sell-off in U.K. government bonds and saw the value of the British pound fall.

Truss — Britain’s shortest-serving prime minister, who spent just 49 days in Downing Street — announced Tuesday she is publishing a new book setting out “what really happened” during the mini-budget in 2022, according to a press notice issued by her spokesperson.

“Bank Job: A short book on how the Bank of England broke the bond market and brought down the government” will be published later this month.

The ex-PM has blamed the mini-budget’s consequences on the Treasury, the Bank of England and the Office for Budget Responsibility watchdog.

Badenoch told a press conference in London she does not believe Labour is paying attention to the consequences of that Conservative budget by failing to reduce spending: “They are the ones who want to repeat the mistakes of four years ago, we are not going to be making that mistake again.”

“We need to live within our means,” she said. “We have to stop borrowing so much, but instead, Labour are taking out more loans to pay the interest on our existing loans.”

Questioned on why the public should trust her judgement on economic competence, Badenoch, who served as Truss’ international trade secretary, told POLITICO: “I am not Liz Truss and I think that the public can tell the difference.”

Badenoch said she only saw the mini-budget when it was presented and collective responsibility “doesn’t mean that you agree with all of the decisions that are made.”

“She needs to take responsibility for it, one way or another,” Badenoch said. “That is her issue.”