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EU unveils ‘clean industry’ package to drive green transition

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The EU executive body has revealed plans to help Europe’s most polluting industries achieve a green transition, while simultaneously reducing environmental reporting demands on companies. It insists that it will maintain its course on climate goals.

On Wednesday, the European Commission released the “clean industry deal,” outlining a plan to assist polluting industries, such as steel and cement, in transitioning to a net-zero emissions future. The plan also aims to support “clean technology” companies, like those producing electric vehicle charging points.

The Commission highlights four primary goals: stimulating industrial innovation through investment, reducing regulatory burdens, lowering high energy prices, and striving to enhance global competitiveness through new trade agreements.

The Commission also released a plan aimed at lowering energy bills for businesses and consumers, along with controversial proposals to ease environmental reporting requirements for small and medium-sized enterprises.

The clean industry deal reaffirms the EU’s goal to reduce emissions by 90% by 2040 and outlines 40 distinct measures to accelerate the “green transition.” These include faster permits for wind farms and other infrastructure, as well as changes to public procurement rules to support clean technology manufactured in Europe.

Teresa Ribera, the European Commission’s vice president responsible for the green transition, stated, “We believe that the clean industry deal is a business plan for Europe to tackle the climate crisis.”

Ribera dismissed criticisms that the EU is reversing course on the green transition, asserting, “We are not deregulating. On the contrary, we are moving into the implementation phase.”

The Commission announced it would create a new industrial decarbonization bank with €100 billion in new and repurposed public funds, which could indirectly leverage €400 billion from the private sector.

Ursula von der Leyen stated that this simplification is key to restoring competitiveness, promising European firms approximately €6 billion in annual savings.

A more significant role was also outlined for the European Investment Bank (EIB), including providing guarantees to grid component manufacturers, enabling them to increase production. Experts say that hundreds of billions in global investment are needed to build extensive electricity grid networks to meet climate goals.

Ribera, who also leads on competition policy, pledged to amend the EU’s state aid rules by June to accelerate renewable energy and industrial decarbonization.

The new European Commission, which began its term in December with a focus on reducing bureaucracy, simultaneously released details on easing environmental reporting and due diligence rules for small companies and broadly reviewing laws adopted in just 2023 and 2024.

Commission members presenting the proposals argued that they were not weakening Europe’s green transition. Instead, they claimed to be encouraging businesses to participate in the transformation and adapt to a new geopolitical reality.

Stéphane Séjourné, the commissioner responsible for industrial strategy, said, “Europe knows how to reform itself.” Referring to an electric tool that Argentinian President Javier Milei recently gave to Elon Musk as a symbol of reducing bureaucracy, the commissioner added, “We don’t have an electric saw. But we have competent people who are leading this effort.”

The Commission proposed freezing the corporate sustainability reporting directive, set to take effect in 2023, for two years and continuing detailed consultations on exempting small businesses.

Similarly, authorities indicated that the corporate sustainability due diligence directive, which requires companies with over 1,000 employees to assess the impact of their products on the environment and human rights, would also be delayed by a year as the commission seeks to alleviate the burden on small companies.

Although SMEs are already exempt from the directive’s requirements, many say they will be caught up in burdensome rules because they supply to larger companies.

Christian Ehler, the energy and industry spokesperson for the center-right European People’s Party (EPP), the largest group in the European Parliament (EP), said that further simplification of environmental legislation “should not be a taboo” and that “we need to think about whether some [other] environmental legislation from the past legislative term is adequate.”

The bureaucracy reduction agenda has also been extended to the EU’s carbon border adjustment mechanism. This mechanism requires companies importing steel, iron, aluminum, and other “polluting” products into the bloc to pay a carbon tariff, offsetting price differences with EU manufacturers.

The Commission stated it would exempt the smallest importers from the tax, a measure that would affect 90% of importers, or approximately 190,000 companies, while still covering 99% of emissions.

The clean industry deal was released alongside an “affordable energy action plan” aimed at delivering €260 billion in savings annually by 2040.

While environmental advocates welcomed initiatives to reduce bills and accelerate electrification, they expressed concern over the proposal to fund the construction of liquefied natural gas export facilities abroad.

Addressing the business community in Antwerp, European Commission President Ursula von der Leyen said, “I know that there are too many obstacles in front of you. High energy prices and overregulation have increased production costs. We need to reverse this situation; that is the core objective of the Clean Industry Deal.”

On the other hand, Chinese and US industry groups condemned the European Commission’s proposal in the new clean industry plan to favor EU companies bidding for public contracts, arguing that it would be discriminatory and hinder the bloc’s efforts to decarbonize its economy.

The Clean Industry Deal states that “European preference criteria” in strategic sectors will be included in the revision of the bloc’s Public Procurement Framework next year.

A spokesperson from the China Chamber of Commerce to the EU (CCCEU) told Euractiv that Brussels’ proposal risks violating World Trade Organization (WTO) rules, which prohibit discrimination against foreign firms.

They also warned that it could further strain already tense trade relations between Brussels and Beijing.

The spokesperson said, “As China is a key player in many strategic sectors, these preferences may disadvantage Chinese firms, escalate trade tensions, and potentially contravene WTO principles.”

The American Chamber of Commerce to the EU (AmCham EU) similarly stated it was “concerned” by the Commission’s proposal.

“Restricting access for reliable partners will slow down industrial decarbonization, increase costs, and reduce the efficiency of the clean transition,” said AmCham EU, while adding that the Deal was nonetheless a “significant contribution” to the EU’s decarbonization efforts.

The revision of the Public Procurement Framework is not the only legislative change proposed by the Commission that will favor EU firms in the coming years.

Although not included in the Deal itself, a Commission press release issued on Wednesday stated that “made in Europe criteria” will be included in the upcoming Industrial Decarbonization Accelerator Act for both private and public procurement.

The law, which aims to boost domestic demand for EU green technologies, is expected to be formally proposed in the last three months of this year.

Referring to the law, an EU official told Euractiv, “Where the product is made will matter.”

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Fico accuses Merz of blackmail over threat to veto EU budget

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Slovak Prime Minister Robert Fico has hit back after German Chancellor Friedrich Merz threatened to veto the EU budget unless funding for Ukraine is secured.

Merz said he would block the EU’s seven-year budget if no agreement is reached on financial assistance for Ukraine.

The chancellor’s intervention has angered Central European leaders who are net beneficiaries of EU funds but do not want to take part in the next round of funding to support Ukraine’s war effort.

“What the chancellor is doing is typical blackmail, and I will not bow to it,” Fico told reporters in Bratislava.

Fico spoke alongside his Czech counterpart, Andrej Babiš, whose government has refused to participate in a future loan to Ukraine.

“I do not know why he said this,” Babiš said, referring to Merz’s stance.

Merz wants EU leaders to discuss Ukraine’s financing needs at a summit in Dublin on Friday.

In a letter to European Council President António Costa, who will chair the meeting, obtained by The Guardian, Merz wrote:

“We must maintain our support for Ukraine in its struggle to defend itself. This is our shared vital interest. Yet bilateral aid provided to Ukraine is distributed unevenly, with the burden shouldered mostly by only a few member states.”

The EU agreed last year to provide a €90 billion loan to Ukraine, intended to cover two-thirds of its military and civilian spending for 2026 and 2027.

Since then, however, Russia’s relentless bombardment has placed a heavier financial burden on Kyiv, prompting President Volodymyr Zelenskyy to ask for €70 billion to plug the budget deficit.

The EU has endorsed Zelenskyy’s figures and pledged to find €45 billion. Ukraine’s other allies, such as Britain and Canada, are expected to cover the rest.

Last year, Merz launched an initiative to tap €210 billion in frozen Russian state assets held in the EU, but the plan fell through due to opposition led by Belgium, which holds most of the funds in Brussels.

The €90 billion loan was the backup plan. Having opted out of that loan, Hungary, Slovakia, and Czechia indicated that they would not take part in the next round either.

Bulgaria joined these three member states following the election of Prime Minister Rumen Radev last April.

The question of funding for Ukraine is now spilling over into the fraught negotiations on the 2028-34 EU budget.

Germany, the largest net contributor, wants substantial cuts to the proposed budget and opposes the EU providing generous funding to member states that refuse to contribute to Ukraine’s financial needs.

Merz states in his letter that a “collective commitment without exceptions” is a “fundamental prerequisite” for closing Ukraine’s financing gap and for “discussing other matters, particularly those with financial implications.”

He also notes that, in the context of the EU’s next seven-year budget, known as the Multiannual Financial Framework, all member states must contribute to a “robust” financial perspective for Ukraine from 2028 onwards.

A German government official said:

“For the Multiannual Financial Framework (MFF) to be successfully concluded, it is vital that all EU member states provide financial support to Ukraine.”

Berlin is also aiming to shift decision-making on funding for Ukraine from unanimity to qualified majority voting, in an effort to prevent a single government from blocking EU decisions.

The letter reflects mounting frustration among the EU’s northern member states, Ukraine’s most generous backers, over lower contributions from other EU countries in Central and Southern Europe.

The task of brokering an agreement on the budget falls to Costa, the former Portuguese prime minister.

Costa wants a deal by the end of the year, ahead of elections in France, Poland, and Italy in 2027 that could complicate the process.

A spokesperson for Costa confirmed receipt of the letter without elaborating on details. “President Costa will dedicate time to the Ukraine issue at the informal European Council meeting in Dublin this week,” the spokesperson said, adding that funding for Ukraine would be addressed at a dedicated summit on the EU budget scheduled for 26-27 November.

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EU expects next Israeli government to adopt less aggressive posture

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The EU expects the next Israeli government to mend its “difficult relationship” with Brussels and adopt a more constructive approach toward Gaza and illegal settlements.

Israeli President Isaac Herzog tasked Gadi Eisenkot, the leader of the anti-Netanyahu bloc, on Sunday with forming a government.

Eisenkot stated that the country faces a “catastrophic diplomatic crisis” as traditional allies begin to reassess their relations with Israel.

Speaking to Rapporteur, several European diplomats stationed in Tel Aviv said they expect ties to get back on track.

“Whatever government comes in, we can try to revitalize relations because Israel is clearly a very important partner,” one European diplomat said, adding that Brussels expects the next administration to be “less aggressive”.

The diplomat noted that relations with Europe are currently “not very good”.

Israel cut off communication with Kaja Kallas, the EU high representative for foreign affairs and security policy, after Rapporteur revealed in June that she had compared Israel to apartheid-era South Africa during a visit to Mexico.

The diplomat stated that this decision, taken ahead of elections, was political in nature. A second European diplomat based in Brussels explained that the announcement came only a few days before an official visit by Dubravka Šuica, the European commissioner for the Mediterranean.

“This could have been interpreted as a tactic to divide Europe, but Israel had asked Kallas to deny the report; she did not do so,” the second diplomat said.

Brussels has repeatedly voiced its frustration with Israel over the humanitarian crisis in Gaza and the expansion of West Bank settlements.

However, EU governments blocked almost all sanctions proposed by the European Commission.

A third diplomat said opposition parties would “almost certainly take the issue more seriously” when it comes to tackling violence by West Bank settlers:

“We see Palestinians being expelled from their homes and new illegal settlements being built in the West Bank. There is a reluctance on the part of the current government to address this issue, which causes problems in our relations.”

The new government is expected to ease pressure on Palestinians and halt construction of the E1 settlement project, a controversial plan to build settler housing in the West Bank east of Jerusalem.

“They will probably try to deal with the problem of extremist settlers in the West Bank,” the diplomat added.

On Gaza, the diplomat described the situation as “a complete nightmare”, with two million Palestinians crowded into an area that accounts for roughly 35% of the territory.

“There are not enough tents for the winter, and not enough vaccines are reaching the area despite an increase in diseases,” the diplomat said.

The European official argued that Donald Trump’s peace plan met all the conditions for Europe. Although the EU had much to offer, neither the US nor Israel appeared interested in EU involvement in the process.

“We are currently training Palestinian police in the West Bank, and if permitted, we could do the same in Gaza,” the diplomat said.

The diplomat disclosed that Israel had agreed with Šuica that Europe would finance two projects aimed at improving sewage and water infrastructure in Gaza, continuing:

“However, none of these projects has started yet because there is a serious problem with dual-use goods. Getting materials into Gaza is very difficult because the Israelis say they could be misused if they fall into the wrong hands of Hamas.”

Israel insists that Hamas must be disarmed before subsequent phases of Trump’s plan can proceed.

With disarmament unlikely to happen in the near term, the EU argues that certain measures can be carried out in parallel.

“We can begin rebuilding sanitation systems in Gaza. We can start building desalination plants. We can begin providing energy and water to Gaza,” one diplomat said.

While Brussels hopes for progress on Gaza and the West Bank, it maintains that expectations regarding the establishment of a Palestinian state need to be “managed”.

The EU continues to advocate a two-state solution, yet most leading Jewish parties oppose the creation of a Palestinian state.

The diplomat noted that the next Israeli government will likely have “a very slim majority and not much room for manoeuvre”.

There is also a “major misunderstanding” between the EU and Israel that must be addressed. According to the diplomat, Europeans fail to recognize the “psychological impact” of 7 October on Israelis.

“This event changed the country and made the two-state solution even more distant than before,” the diplomat said.

In return, some Israeli politicians believe Europe has betrayed Israel despite what they view as a fight against “Islamist terrorism”.

“Their argument is that European politicians are somewhat afraid of the Muslim population in Europe,” the European diplomat said.

Europe strongly opposes Iran and the possibility of Tehran acquiring nuclear weapons, imposing sanctions in response.

However, the diplomat argued that the EU would not participate in a war because it lacks a common army:

“We are a diplomatic and economic power, which is why we resort to sanctions and diplomacy. The expectation that we would take part in a military operation is unrealistic.”

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Germany threatens EU budget veto over long-term Ukraine aid

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Germany has threatened to veto the European Union’s joint budget for the 2028-2034 period, which is currently under negotiation, unless every member state commits to providing financial support to Ukraine in 2027 and subsequent years, German Chancellor Friedrich Merz warned.

According to a report by the Financial Times (FT), Chancellor Merz set out Berlin’s condition for the budget talks in a letter addressed to European Council President António Costa.

In his letter, Merz wrote: “A collective commitment that every single one of us, without exception, will make a fair contribution to closing Ukraine’s budget deficit is an indispensable prerequisite for resolving this budget issue and, in particular, for addressing subsequent matters that carry financial implications.”

The German Chancellor stressed that a formula backed by all member states must be established to provide Ukraine with a reliable, multi-year financial perspective starting from 2028.

Merz also insisted that any agreed solution must cover the interest payments on debts incurred to finance the assistance provided to Kyiv.

Conversely, several countries within the bloc have cut financial aid to Ukraine, and the number of capitals adopting this stance is projected to rise next year.

In December 2025, Hungary, Slovakia, and the Czech Republic approved the EU’s 90 billion euro loan package for Kyiv only on the condition that they would not contribute to its costs themselves.

Alongside these three countries, Bulgaria has also stated that it does not plan to participate in subsequent financial assistance packages for Ukraine.

In France, far-right leader Marine Le Pen, who could potentially win the presidential election scheduled for spring 2027, recently told the FT that Paris has run out of funds.

Le Pen assessed: “The honest approach is to tell Mr Zelensky clearly, and even warn him: ‘Look, we cannot do more. We have already allocated the 90 billion euro EU loan, in which France’s share amounts to 18 billion euros. 18 billion euros is genuinely a huge amount of money.'”

The EU’s 90 billion euro loan, covering the 2026-2027 period, aims to meet two-thirds of Ukraine’s financing requirements.

Brussels expects the remaining 45 billion euros to be covered by other partners, including Canada, the UK, Norway, Japan, South Korea, and Australia.

Germany remains the largest net contributor to the EU budget.

In contrast, the four Eastern European countries seeking to avoid financing Ukraine rank among the largest net beneficiaries of the bloc’s budget.

Leveraging this balance, Chancellor Merz aims to use his influence in the EU budget negotiations to secure uninterrupted support for Kyiv in 2027 and the years beyond.

According to the FT, Berlin is also demanding that future aid packages be decided by qualified majority voting rather than unanimity, which is required under the current system.

A German government spokesperson told the newspaper:

“The issue of Ukraine’s financial needs must be resolved within the framework of the next EU budget. Financial support for Ukraine from all EU members is decisive for the successful conclusion of the budget talks.”

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