Week Ahead (1 December)

W/C Monday, 1 December – European Commission to table legal proposal on Russian-asset-backed Ukraine loan as pressure intensifies on Belgium 

The European Commission is expected to present a formal legal proposal this week for the EU’s €140 billion Ukraine loan backed by immobilised Russian state assets, as efforts continue to overcome Belgium’s opposition ahead of the 18 December European Council, where leaders aim to reach a political agreement. The text will seek to provide the legally enforceable guarantees requested by Belgian Prime Minister Bart De Wever, whose government remains the key holdout. Without Belgian consent, the asset-backed structure cannot proceed, as the vast majority of Russian central-bank reserves in the EU are held at Euroclear in Brussels. 

Belgium’s concerns remain unchanged: exposure to disproportionate legal and financial risk if Russia challenges the scheme in court or if a peace settlement requires restitution of the assets. De Wever reiterated these fears in a strongly worded letter to Commission President Ursula von der Leyen last Thursday, calling the current approach “fundamentally wrong” and warning that Belgium cannot assume liability for potential losses. He has also argued that using the assets now could complicate future peace negotiations by removing leverage over Moscow. 

President von der Leyen had previously floated two fallback options if Belgium does not shift—joint borrowing, which is opposed by fiscally conservative northern states, and direct national contributions, which are rejected by high-debt members. This leaves the Commission with limited alternatives, increasing the importance of delivering convincing guarantees in the legal text expected this week. 

At the same time, diplomatic pressure on Belgium has intensified. Several EU countries have raised concerns about tax revenue generated from the immobilised assets. Euroclear’s windfall profits are subject to Belgian corporate tax, which totalled roughly €1.7 billion in 2024. Sources within member state EU delegations point to the fact that Belgium has not fully demonstrated that this revenue is being channelled to Ukraine as committed last year, and instead appears to have folded at least part of it into the national budget. Belgium denies any misuse, stating the tax proceeds are “entirely earmarked” for Ukrainian support, but it has not clarified whether all funds have already been transferred. The lack of transparency was supposed to be resolved in 2024 with the establishment of an EU/G7 instrument for these revenues, which has not yet materialised. 

Meanwhile the clock is ticking: Kyiv is expected to face a tightening fiscal situation from April 2026 if new external financing does not materialise, including the need for additional domestic borrowing. With the political window narrowing, von der Leyen has stressed that “European taxpayers alone cannot pay the bill” if assets must eventually be returned, signalling that the forthcoming proposal will include more robust burden-sharing provisions. 

Against this backdrop, negotiations are expected to intensify over the next two weeks ahead of the last European Summit of the year. 

W/C Monday, 1 December – French senate to vote on the revenue section of the 2026 Budget; Assembly begins second reading of the Social Security Bill 

This week will be particularly important for the 2026 budget process in France, with the Senate preparing to vote on the revenue section of the State Budget (PLF) on 4 December, followed by examination of the expenditure section on 5 December. The budget has already encountered severe turbulence in the National Assembly, where the government’s draft PLF was rejected overwhelmingly last Friday, with only one MP voting in favour, with 404 against and 84 abstentions. After more than 125 hours of debate, the bill was transmitted to the Senate unamended, which speaks volumes for the depth of the stalemate. 

The Social Security Bill (PLFSS) is progressing more smoothly, albeit it still faces hurdles. Last week, the Senate rejected the government’s compromise on suspending parts of the pension reform, and the text will return to the National Assembly this week for a second reading with a vote earmarked for 9 December. While the PLFSS is expected to pass eventually, the State Budget remains far more contentious. 

There was, however, a modest easing of external pressure at the end of last week. Standard & Poor’s opted not to issue a fresh rating decision on France and instead maintained its A+/A-1 with a stable outlook, following a downgrade on 17 October. Even though the confirmation does not alter the overall fiscal picture, it reduces the immediate risk of another negative market signal as parliamentary negotiations continue. Finance Minister Roland Lescure said the government “takes note” of the decision. Against this backdrop, Prime Minister Lecornu is holding further discussions today with the Socialist delegation at Matignon seeking to stabilise internal dynamics before the Senate enters its final voting stages next week. 

Under the current timetable, the Senate will vote on the full PLF on 15 December, after which a joint conciliation committee of MPs and senators will try to agree on a final version by 23 December, which is the constitutional deadline under Article 47, which provides Parliament 70 days from tabling to adopt the budget. The government tabled the draft on 14 October, meaning that the time window is narrowing quickly. 

If no agreement appears feasible, the government has two alternatives: 

• a “special law” rolling over the 2025 budget, which must be submitted by 19 December; this would prevent any increase in defence spending until a new PLF is adopted; or 

• use of Article 47(3) to adopt the budget by ordinance, which has never been used before but remains an option. 

  
  

Prime Minister Lecornu is seeking to influence the process by scheduling a stand-alone vote on increasing defence spending for 10 December, using Article 50.1. The intention is to put pressure on centre-right MPs (Les Republicains and Horizons) who support higher defence spending but oppose several elements of the broader PLF. Whether this will translate into greater support for the overall budget remains uncertain; parts of Les Republicains have indicated they would prefer extending the 2025 budget to accepting a package they view as overly aligned with Socialist priorities. 

Tuesday, 2 December – Eurostat to release November flash inflation estimates for euro area  

Eurostat will publish the flash inflation estimate for November on Tuesday, offering an important data point ahead of the ECB’s final Governing Council meeting of the year on 12 December. Last month’s reading showed a slight moderation with headline inflation easing to 2.1% in November, down from 2.2% in October, driven by softer price growth in food, alcohol and tobacco, and in non-energy industrial goods. Energy inflation remained in deflationary territory, deepening further. The main counter-trend came from services, where inflation rose to 3.4% (from 3.2% in October), reflecting firm wage dynamics. 

The ECB’s most recent policy meeting on 30 October left interest rates unchanged for a third consecutive time, with the deposit rate held at 2%. At that meeting, Governing Council members signalled broad satisfaction with the current stance, at what President Lagarde called a “good place” to be, but also noted that uncertainty around global trade, political risks and uneven domestic growth as points of caution. The Council adopted a unanimous hold in October after eurozone inflation ticked up to 2.2% in September and core inflation stabilised at 2.3%, reinforcing the view that underlying pressures are easing but not decisively anchored. 

Since then, incoming data have remained mixed. Growth indicators point to moderate resilience: Q2 GDP rose 0.4% q/q, October’s composite PMI stayed above 50, and retail and industrial output are holding up. However, wage-sensitive services inflation and geopolitical risks continue to complicate the picture. Recent comments from ECB policymakers confirm this cautious tone: last Thursday, Martins Kazaks stressed it is “too early” to discuss another rate cut and warned that inflation “may still turn out higher than expected’’.  

Against this backdrop, this week’s flash inflation data will therefore be read mainly as a risk indicator, rather than as a trigger for immediate policy action. With markets already pricing a prolonged pause stretching well into 2026, the ECB’s December meeting is unlikely to shift course unless services inflation surprises materially to the upside. For now, the Governing Council appears more concerned with external headwinds, including the delayed impact of US tariffs, a firmer euro, and fiscal uncertainty in key member states, than with marginal month-to-month changes in headline inflation. 

Wednesday, 3 December – European Commission to unveil latest Economic Security Strategy 

This week, the European Commission will present its updated economic security package on Wednesday, building on the 2023 Economic Security Strategy and the risk-assessment work carried out with member states over the past year. The new package reflects the EU’s effort to strengthen its resilience to geopolitical shocks, reduce exposure to strategic dependencies, and address risks emerging from foreign investment patterns, technology leakage and supply-chain vulnerabilities. 

As with the January 2024 package, several elements are expected to take the form of communications, recommendations and white papers, rather than immediate legislation. These initiatives reflect the bloc’s quest for greater strategic autonomy in critical sectors, after pandemic supply chain shocks and the war in Ukraine prompted its own ‘’geopolitical awakening’’. 

According to a leaked draft of the package, it will centre on five initiatives, all aimed at consolidating the EU’s economic security toolbox: 

1. Revision of the Foreign Direct Investment (FDI) Screening Regulation. The existing framework, which only entered into force in 2020, increased coordination among member states but left screening mechanisms largely optional. The Commission will now propose a more binding approach, requiring all member states to establish an FDI screening regime and strengthening information-sharing obligations with the Commission. 

2. A non-binding framework for outbound investment screening. This initiative would ask member states to evaluate certain overseas investments by EU companies when they involve sensitive technologies, in order to prevent unintentional transfers of capabilities to strategic rivals. Yet, the proposal will remain a recommendation at this stage, reflecting differing national positions, several member states remain cautious about extending screening to outbound flows. 

3. A white paper on export controls for dual-use technologies. The Commission will outline options for modernising export-control rules, with a focus on emerging dual-use technologies relevant to security and defence. Early indications suggest this will address areas such as drones, satellites, quantum-enabled applications and advanced sensors. 

4. Measures to strengthen research security. The package will encourage member states and research institutions to adopt common standards to limit risks of foreign interference and technology leakage, particularly in projects financed under Horizon Europe or involving sensitive industrial partnerships. 

5. An initiative on promoting the development of critical, dual-use technologies. This also builds on the 2023 list of “critical technologies” identified by the Commission: artificial intelligence, quantum computing, semiconductors and biotechnology. The Commission will propose options to better align EU funding, de-risk R&D investment and support scale-up in these sectors. A dedicated funding mechanism remains under discussion. 

Together, these initiatives reflect the EU’s attempt to address four categories of economic-security risks that were first outlined in the June 2023 strategy:

• supply-chain vulnerabilities, 

• physical and cyber risks to critical infrastructure, 

• technology-security and leakage risks, and 

• risks arising from weaponisation of economic dependencies. 

In terms of the geopolitical context, although China is referenced only once in the draft text, the measures are designed against the backdrop of intensifying US–China competition and growing evidence of coercive practices in global supply chains. Member states remain divided on the degree of alignment with Washington on several of these issues, including export controls and dealing with China. Some governments advocate a cautious approach to avoid escalating tensions with Beijing, while others argue for a more assertive stance to prevent strategic dependencies from deepening. 

Although the implementation of the proposed measures will hinge heavily on the approach taken by national governments, particularly on outbound investment screening and research-security practices, the package will still mark a further step in the EU’s move toward a more structured, security-driven economic policy framework.