4 things to watch at the European Council

BRUSSELS — The laundry list for EU leaders when they head to Brussels for talks on Thursday and Friday is long and daunting: Ukraine, the Middle East, the bloc’s massive multi-year budget, how to take on the economic might of China, plus the challenges posed by migration, defense and narcotics.

It’s no wonder that António Costa, the president of the European Council, has broken his rule that summits should last only one day (that and the fact that some of the leaders are coming straight from the G7 in France).

So, where to start?

EU leaders will kick things off at 6 p.m. Thursday when they hear from European Parliament President Roberta Metsola and Ukrainian President Volodymyr Zelenskyy. Then, over dinner, leaders will discuss “global macroeconomic imbalances” — that’s a euphemism for the world’s overreliance on an increasingly hostile China.

They’ll reconvene on Friday to negotiate the thorny matter of the EU’s €2 trillion long-term budget, amid a revolt from the countries that contribute the most cash.

POLITICO will be covering events as they unfold on our live blog. As a primer, here’s what to keep an eye on …

Beef with Beijing

European Commission President Ursula von der Leyen and her chief of staff, Björn Seibert, are leading a push to get tougher on what they say are unfair Chinese trade practices amid fears that Europe’s industries will continue to lose ground to Beijing.

Von der Leyen wants political backing to investigate the alleged dumping of cheap products on the European market, making it difficult — if not impossible — for local producers to compete. In addition, Brussels is considering a so-called overcapacity instrument to counter state-subsidized firms producing vast quantities of goods in strategic sectors.

But, three EU diplomats and officials — granted anonymity to speak openly about the plans —  said that nobody wants a trade war: The EU is China’s largest export market, worth $560 billion in 2025, and Europe still needs Chinese raw materials and components. Instead, it’s hoped that by showing the EU has tools it could use to target imports, Beijing will change the approach of its own accord.

Let’s get competitive

This summit is not just about reining in trade rivals — the EU is also under pressure to improve what it produces.

Leaders will discuss a plan to revive the EU’s single market — dubbed “One Europe, One Market” — that aims to revamp everything from rules on founding companies, to public procurement, to posting workers.

The EU’s single market was created in the 1990s to enable the free movement of goods, services, capital and people. But in recent years it has become tangled in a web of rules that drive up costs for businesses and stymie cross-border trade within the bloc. 

The Thursday dinner discussion on competitiveness will also be a chance for countries to air their grievances about EU rules they say create unnecessary red tape for companies, likely including the Emissions Trading System. Industry says factors such as high energy prices and competition from China are making the scheme unworkable.

“We are not able to compete with these global markets like the U.S. and China if our business has worse conditions — these conditions come partially from here, from Brussels,” said Maciej Berek, Poland’s minister in charge of deregulation, who helped lead a push against burdensome bureaucracy.

The EU institutions, Berek said, need to ensure they don’t “over-regulate again [only] to have to deregulate in the next step.”

Money matters

EU leaders on Friday are set to weigh in on the size of the bloc’s next seven-year budget after the Cypriot presidency of the Council of the EU put forward a modest 2 percent cut to the European Commission’s proposal for a €2 trillion cash pot.

Germany and the Netherlands are expected to lead the resistance against Nicosia’s plan, arguing for bigger cuts across the board, four diplomats told POLITICO.

On the other hand, recipients of EU payouts — including Poland, Portugal and Bulgaria — are likely to praise Cyprus for having spared agriculture and regional spending from cuts.

The EU is eager to wrap up the negotiations before next year’s French presidential election, but Jordan Bardella, the French presidential front-runner, told POLITICO that he would challenge the bloc’s long-term budget, cut France’s contribution to Brussels and build alliances with nationalist governments to force a rethink of how the bloc works. 

World at war

Leaders will have to grapple with the terms of a preliminary peace agreement reached between the U.S. and Iran, as well as tackle the continuing fallout from Russia’s war in Ukraine. Calls from some capitals for sanctions on Israeli ministers and trade with West Bank settlements are expected to fall short, with Czechia vowing to use its veto.

Ukraine, meanwhile, is pushing for the opening of as many negotiating “clusters” — formal steps on the path to membership — as possible as part of its application to join the EU — as well as keeping other capitals onside as U.S. President Donald Trump turns his attention back to trying to impose a deal to freeze the war.

Calls for Europe to step up and prepare to meet the threats itself are also rising.

“We must increase our military support for Ukraine in order to end the war on our continent,” said Andrzej Halicki, a Polish MEP from the European People’s Party. “We must invest massively in our defense industry, including by expanding the new EU defence financing mechanism, SAFE, and by creating a European nuclear umbrella to guarantee full protection for our citizens.”

The latest version of the draft joint statement to be issued following the talks, dated June 16 and seen by POLITICO, says the European Council “strongly condemns the grave incident of 29 May 2026 in which a Russian drone carrying explosives crashed into a residential building in Romania, and recognises the immediate threats on the EU’s Eastern flank.”

Benjamin Makuch, Zoya Sheftalovich and Douglas Busvine contributed reporting.