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German borrowing costs hit 28-year high after historic investment deal

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Germany’s borrowing costs surged to their highest level in 28 years on Wednesday. Investors are confident that the country’s struggling economy will receive a significant boost following a historic agreement between the CDU and SPD to fund investments in the military and infrastructure.

The yield on the 10-year German government bond, the Bund, rose by 0.25 percentage points to 2.73%, marking its largest single-day increase since 1997.

On Tuesday, prospective Chancellor Friedrich Merz reached an agreement with the Social Democrats (SPD) to exempt defense spending exceeding 1% of GDP from Germany’s strict constitutional debt brake, establish a €500 billion off-balance sheet fund for debt-financed infrastructure investments, and relax debt rules for the federal states.

Deutsche Bank economists described the agreement as “one of the most historic paradigm shifts in Germany’s post-war history,” claiming, “Both the speed at which this is happening and the magnitude of the potential fiscal expansion are reminiscent of German reunification.”

Goldman Sachs analysts stated that if the package is approved and implemented swiftly, it could boost Germany’s economic growth by up to 2% next year. The bank’s current forecast is 0.8%.

The German economy, grappling with high energy costs, weak investment, and sluggish consumer demand, has contracted for two consecutive years.

The euro rose by 1.2% against the dollar, reaching $1.075, its highest level since November, and German stocks also rallied.

Merz plans to push the changes through parliament this month, before newly elected members of the Federal Parliament take their seats. This urgency is driven by the critical role that the AfD and Die Linke are expected to play in the new parliament, where they could block any constitutional amendments in the upcoming legislative period.

However, the agreement between Merz’s CDU/CSU bloc and the SPD still requires the support of the Greens to achieve the two-thirds majority needed to amend the constitution.

The Greens have long called for reforms to the so-called “debt brake,” but senior party officials have indicated that they first need to digest the details of the plan. Commentators expect the party to eventually approve the plan.

The movement in German bonds also sharply increased yields in other Eurozone countries.

Germany’s Dax index, which had fallen on Tuesday following the US imposition of tariffs on some trading partners, rose by 3%.

German infrastructure companies were among the biggest gainers, with Heidelberg Materials rising by 15% and Siemens Energy gaining almost 9%. Thyssenkrupp, Germany’s largest steel producer, gained approximately 13%.

Europe’s defense sector continued its rapid ascent. Shares in Rheinmetall, the country’s largest defense company, rose by approximately 5%, while Thales, listed in Paris, also rose by 6%.

The gains spread to other European markets, with the continent-wide Stoxx Europe 600 rising by 1%.

US stocks remained stable at the opening on Wednesday. The dollar fell by 0.9% against a basket of six currencies, including the euro and the British pound.

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EU governments push to narrow “Made in Europe” preference rules in industrial draft bill

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EU governments are moving to overhaul the “Made in Europe” concept—one of the most politically sensitive provisions of the proposed Industrial Accelerator Act (IAA)—in favor of a legally precise framework grounded in trade agreements and product-specific market access.

Under the plan, member states aim to replace the broad “Made in Europe” definition originally drafted by the European Commission. According to the latest EU Council compromise document, prepared by the Irish presidency last week and obtained by Politico, national governments are introducing a new “partner origin” category. This classification will govern when goods from non-EU nations are deemed equivalent to European products in public procurement and state-support programs.

Rather than assuming all free-trade partners share identical status, the proposal distinguishes between products covered by the World Trade Organization’s Agreement on Government Procurement and those governed by the EU’s standalone free-trade or customs union agreements. Whether a specific product qualifies will depend not merely on the existence of a trade deal, but on the bloc’s actual procurement commitments regarding that specific good.

The Council’s compromise seeks to reshape the Commission’s initial two-tier approach, which granted the EU executive broad discretion to determine whether countries with public procurement and free-trade agreements qualified. That permissive interpretation raised prospects that nearly 80 countries could gain eligibility, sparking deep concern in member states such as France over the breadth of access. By contrast, Industrial Commissioner Stéphane Séjourné had previously suggested that the “Made in Europe” club might be restricted to as few as 20 nations.

To assert control, the Council’s text proposes utilizing implementing acts rather than delegated acts. This procedural shift ensures EU member states retain a formal vote on adding or excluding third countries, allowing them to evaluate whether those nations grant reciprocal treatment to European products or pose risks regarding strategic dependencies and security of supply.

The overarching objective of the IAA is to deploy public resources and single-market leverage to shield energy-intensive industries, net-zero technology providers, and the automotive sector from “unfair foreign competition.” This strategy includes using public procurement to privilege products that satisfy domestic-content rules or qualify for “Made in Europe” preference.

For the framework to function operationally, the Commission will need to maintain product-specific lists of eligible countries through its Access2Markets portal. The Council proposes that contracting authorities relying on this database to determine procurement scope will not be found in violation of EU law solely because of errors present in the public portal.

In a critical adjustment to Chapter III of the IAA—which establishes the definition of EU origin—the Council has introduced the concept of “melted and poured” to determine the origin of steel products. This modification aligns the legislation with existing rules, including the tightened EU steel import quotas that took effect last month.

In Annex II of the draft text, the Council retains mandatory European-content thresholds for steel, cement, and aluminum. However, it introduces a contingency allowing the 2029 enforcement date for these thresholds to be postponed if the relevant delegated acts and technical specifications are not finalized at least six months in advance.

This conditional delay signals potential slippage in the implementation timeline for the IAA. Combined with provisions in the draft regulation that have been shifted from mandatory to optional status, the changes demonstrate how far the Council has diverged from the Commission’s original proposal ahead of upcoming negotiations with the European Parliament.

European Commission President Ursula von der Leyen has called for the regulation to be adopted by the end of the year. However, with the Commission’s initial proposal delayed and rewritten before its eventual publication in March, the Council still making substantial amendments, and the Parliament not expected to finalize its position until September, the legislative timeline remains extremely tight.

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Denmark to deploy conscripts to Greenland for first time amid Arctic security risks

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Denmark has accelerated steps to bolster its military capacity, citing security risks in the Arctic region stemming from the US and Russia, alongside the environment created by the war in Ukraine.

According to Reuters, the country has conscripted approximately 1,600 new recruits for an 11-month term of service under its updated conscription regulations.

The new service term coincides with preparations to deploy conscripted soldiers to Greenland for the first time in Danish history.

Under the plan, more than 100 conscripts will assume operational duties from professional military personnel stationed in Greenland.

The newly conscripted soldiers will undergo five months of basic training, followed by six months of operational service.

Conscription in Denmark is conducted through a lottery system involving all 18-year-old men who meet medical fitness criteria.

However, the Danish armed forces rely primarily on volunteers for their military personnel.

Under a policy decision adopted in 2024, the Danish government extended the military service period from four months to 11 months and expanded mandatory conscription to include women for the first time.

According to Reuters, Copenhagen aims to increase its annual intake of recruits from 5,000 to 7,500 by 2033.

In addition to Denmark, mandatory military service is enforced in regional neighbors Sweden, Finland, and Norway, as well as the Baltic states of Estonia, Latvia, and Lithuania.

Military planning regarding Greenland took shape following statements by US President Donald Trump concerning the island. Trump’s remarks advocating the annexation of the island were rejected by the governments in Copenhagen and Nuuk.

Speaking at the NATO summit in Ankara, Danish Prime Minister Mette Frederiksen declared that her country was prepared to defend every inch of the alliance, “including its own territory.”

Trump’s rhetoric regarding Greenland intensified once again during the winter months of this year.

Arguing that Denmark was unable to secure Greenland—an autonomous territory within the Kingdom of Denmark—Trump asserted that the island was essential to US national defense.

Trump further claimed that the island was surrounded by Russian and Chinese vessels.

In statements made in May, US Ambassador to Copenhagen Kenneth Howery reported that the US president had abandoned the concept of seizing the island through military force.

However, Trump reiterated his demand for the island in July, stating that Washington required Greenland.

Trump later claimed that Greenland could come under US control by January 2029, marking the end of his second presidential term.

Meanwhile, Commander of Denmark’s Joint Arctic Command in Greenland Søren Andersen stated in January that the Danish military presence on the island was focused not on a potential military threat from the US, but on possible Russian activities.

Andersen added that the long-term objective of the mission carried out by European NATO allies in Greenland was to “keep Russia at bay.”

The NATO mission referenced by Andersen, named “Arctic Sentinel,” aims to reinforce the alliance’s military presence in the Arctic region, expand maritime patrols, and counter Russian and Chinese activities in the area. The permanent operation was officially announced on February 11, 2026, when it was initiated.

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Spain faces intense EU backlash over Ceuta migrant crisis as ministers gather for emergency talks

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Spanish Minister of the Interior Fernando Grande-Marlaska is preparing to face criticism from all sides today during an emergency EU meeting convened over the Ceuta crisis.

According to a report by Euractiv, he will address the online gathering first, after which the floor will yield to other member states that issued harsh rebukes to his government last week over its handling of the illegal entry of 60,000 individuals into Spanish territory.

Spanish Prime Minister Pedro Sánchez issued a sharp response to the backlash, declaring that the reactions of other EU governments were shaped by “political self-interest, ignorance, and prejudice.”

Twenty-two of these governments united against him over the weekend in an open letter, holding the Spanish prime minister accountable for his pro-migration policies.

Leading the criticism, Italian Prime Minister Giorgia Meloni took steps toward introducing temporary internal border controls targeting travelers arriving from Spain.

According to multiple diplomats, ambassadors made a joint effort during a preparatory meeting yesterday (August 3) to defuse tensions and shift the focus toward future resolution.

Madrid accuses member states of a “lack of solidarity”

However, several officials noted that they still expect a political confrontation during the ministerial meeting.

Two diplomats said the Spanish ambassador delivered a lengthy presentation, accusing other member states of failing to show solidarity with Madrid.

One diplomat characterized the statement as a “30-minute tirade.”

Two other diplomats indicated that the direction of today’s meeting will depend largely on the stance taken by Grande-Marlaska, a longtime ally of Sánchez.

Speaking to the press on Monday, Spanish Minister of Foreign Affairs José Manuel Albares stated that Madrid would demand greater solidarity from its European partners during the meeting, directing specific criticism at Italy.

In an interview, the minister argued that Rome had “acted inappropriately” by calling for the suspension of Spain’s membership in the Schengen free-movement zone.

Albares maintained that Ceuta and Melilla have never threatened the integrity of the free-travel area, pointing instead to migratory pressures in other regions of Europe.

Von der Leyen attempts to defuse tensions

European Commission President Ursula von der Leyen walked a careful line in a letter to Sánchez, attempting to ease friction while praising his efforts to resolve the crisis.

She also mollified the vast majority of European governments by asserting that the paramount lesson to draw from the crisis is that Europe must toughen its stance on migration.

EU Commissioner for Migration Magnus Brunner shared the following assessment in comments provided to Euractiv’s newsletter, Rapporteur:

“What matters now is that the EU acts in a unified manner and draws the correct conclusions from these events. For now, Europe has passed this test; people were unable to enter the Schengen area.”

However, Sánchez’s initiative to regularize the status of approximately 500,000 migrants in Spain is meeting severe pushback in the European Parliament.

The European People’s Party (EPP), the largest group in the European Parliament to which von der Leyen belongs, is intent on extracting a political cost from the government over the policy.

Dolors Montserrat, secretary general of the EPP and a Spanish center-right member of the European Parliament, said: “Rather than demanding respect, cooperation, and a reciprocal response from the Moroccan government, the Sánchez government has been more concerned with manufacturing conspiracy theories and igniting diplomatic disputes with its European partners.”

Sánchez faces mounting domestic pressure

At home, the right-wing Vox party is demanding that Albares and the head of the CNI appear before the Senate to provide a full accounting of the migration crisis in Ceuta.

The party submitted a comprehensive package of legislative initiatives aimed at forcing the government to produce all documents and intelligence in its possession prior to the mass arrival of migrants in Ceuta.

Concurrently, Vox requested that Foreign Minister José Manuel Albares and Director of the National Intelligence Center (CNI) Esperanza Casteleiro Llamazares appear before the Senate to explain the management process carried out during the crisis.

Vox Senator Ángel Pelayo Gordillo is specifically demanding copies of all correspondence exchanged between relevant ministries under Prime Minister Pedro Sánchez, the CNI, the European Border and Coast Guard Agency (Frontex), and Moroccan authorities.

He is also seeking the release of all prior communications, including warnings, forecasts, or intelligence assessments, that may have been transmitted to anticipate and prevent the events.

Vox leader Santiago Abascal visited Ceuta on Sunday, accusing the government of being subservient to Morocco.

Speaking to reporters, Abascal assigned full responsibility for the events to the government in Rabat and, above all, to Pedro Sánchez himself.

Abascal argued that Morocco acted under the assumption that it would face no reaction or retaliation, because the Spanish prime minister had, in his words, “subjugated himself to this African nation.”

Beyond Vox, right-wing groups Núcleo Nacional and SALF have also seized on the migration crisis to sharpen their rhetoric against the government.

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