Week Ahead (10 March)

W/C Monday, 10 March – German Bundestag to debate proposed debt brake reform 

This week, the German Bundestag is set for a critical week of debates as lawmakers rush to pass sweeping changes to the country’s borrowing rules. Last week, the chancellor-in-waiting Friedrich Merz, along with the current chancellor and leader of the SPD proposed reform of the country’s debt brake rules. The proposed measures, jointly introduced by the CDU and SPD, aim to exempt defence spending above 1% of GDP from the country’s strict debt brake and to establish a €500 billion infrastructure fund. If passed, these reforms will mark a historic departure from Germany’s traditionally cautious fiscal policy, allowing for a significant expansion in military and public investment. 

The urgency stems from both political and economic pressures. Politically, CDU leader Friedrich Merz is set to become Germany’s next chancellor in a coalition with the SPD after their 23 February election victory. However, the far-right AfD (20.7%) and left-wing Die Linke (8.8%) will hold a one-third blocking minority in the new Bundestag, making future constitutional amendments nearly impossible. To avoid deadlock, CDU and SPD leaders are pushing the reform through the outgoing parliament before the new Bundestag convenes on 24 March. 

Beyond political maneuvering, economic and geopolitical pressures have accelerated the need for reform. Germany has been grappling with years of economic stagnation, with near-zero growth and an increasingly outdated infrastructure. The €500 billion fund is designed to address these issues by modernising roads, rail, energy grids, and digital infrastructure. However, the biggest driver of the debt brake exemption is defence spending. Germany has struggled to meet NATO’s 2% GDP target, relying on a €100 billion special fund created in 2022, which is set to run out in 2027. Amid a growing uncertainty over US security commitments under the Trump administration, European governments are under pressure to increase their own defence spending. The CDU and SPD argue that lifting the debt brake for military spending is essential for national security, particularly as NATO is expected to raise its defence spending targets at its June summit in the Hague. 

The key challenge is securing a two-thirds majority. CDU and SPD hold 403 seats but need 86 more. The FDP has rejected the plan outright, with parliamentary leader Christian Durr calling it “irresponsible borrowing.” That leaves the Greens as the deciding factor. While they share some investment goals, they insist climate spending must also be exempted from the debt brake. Green leader Katharina Droge has warned they will not “rubber-stamp” the deal without stronger commitments to green energy, housing, and public transport. 

The Bundestag vote is likely to take place by 18 March, with Bundesrat approval expected on 21 March. 

W/C Monday, 10 March – US and Ukraine to hold talks on peace plan in Saudi Arabia 

Also this week, the US and Ukraine will hold talks in Saudi Arabia to discuss a potential framework for ending the Russia-Ukraine war. The planned meeting comes just days after Washington suspended military aid and intelligence sharing with Kyiv. 

Trump’s special envoy, Steve Witkoff, confirmed on Thursday that discussions were underway to coordinate the meeting, which will take place in either Riyadh or Jeddah. Witkoff underlined that the focus of the talks would be to establish a framework for a peace agreement and an initial ceasefire. In a national address yesterday, Zelensky, also confirmed his planned visit to Saudi Arabia, where he is expected to meet with Crown Prince Mohammed bin Salman before Ukrainian officials engage in talks with their US counterparts. 

The meeting marks the first high-level engagement between US and Ukrainian officials since the 28 February confrontation between Trump and Zelenskyy, which resulted in the Ukrainian president being asked to leave the White House. Originally, Zelenskyy had travelled to Washington to sign a critical minerals deal with the US, which would have granted American companies priority access to Ukraine’s vast reserves of rare earth minerals after the war. Trump has framed the potential deal as an economic-based security guarantee for Ukraine, arguing that stronger US investment in Ukraine’s economy would deter future Russian aggression. However, the agreement was not signed due to the fallout in the Oval Office meeting. 

Trump has since claimed that Zelenskyy has been apologetic in private conversations and has signalled a readiness to negotiate, revealing last Tuesday that he had received a letter from the Ukrainian President in which the Ukrainian leader expressed his willingness to “come to the negotiating table as soon as possible’’. The upcoming talks in Saudi Arabia are expected to once again touch on the minerals deal that was left unsigned. The proposed agreement would grant US companies priority access to Ukraine’s reserves of rare earth minerals, a move that Trump has framed as an economic-based security guarantee for Kyiv. By deepening US economic ties with Ukraine, the administration argues that the deal would serve as a deterrent against future Russian aggression. 

The Saudi-hosted discussions will likely serve as a critical test of how far both sides are willing to compromise and whether Washington will push for a swift resolution to the war on terms that align with its shifting geopolitical priorities under Trump’s second administration. 

W/C Monday, 10 March – European Commission’s FSR and merger control rulings on AMD’s $4.8 billion acquisition of ZT Systems. 

The European Commission is set to issue two different rulings this week on AMD’s $4.9 billion acquisition of ZT Systems, a deal with the potential to reshape the AI and cloud computing hardware landscape. The Foreign Subsidies Regulation (FSR) assessment is due on 10 March, while the EU’s antitrust review must be concluded by 12 March. 

Announced in August 2024, the acquisition is part of AMD’s broader strategy to challenge Nvidia’s dominance in AI chips by expanding its AI infrastructure capabilities. ZT Systems is a key supplier to major cloud computing companies, including Microsoft and Meta, making the deal particularly significant for the hyperscale computing sector. 

Under the FSR review, the Commission will determine whether AMD or ZT Systems have received foreign financial contributions that could distort competition within the EU. The FSR, which came into effect in July 2023, mandates companies to notify the Commission of acquisitions involving significant EU market presence, defined as €500 million or more in annual turnover, and financial contributions exceeding €50 million from foreign governments over the past three years. The regulation aims to level the playing field by addressing distortions caused by non-EU state subsidies, particularly in mergers, acquisitions, and public procurement processes. 

Separately, the EU merger control review, due by Wednesday, will assess whether the acquisition would harm competition within the European semiconductor and AI hardware markets. The Commission can either approve the deal unconditionally, impose remedies, or launch an in-depth four-month investigation if concerns arise. 

Tuesday, 11 March – European Parliament’s plenary to debate the future of the European defence with Presidents von der Leyen and Costa 

Tomorrow, the President of the European Commission, Ursula von der Leyen, and the President of the European Council, President Costa, will appear before the European Parliament’s plenary in Strasbourg to hold a debate on the future of the European defence, including support for Ukraine. The two EU leaders are expected to answer a series of follow-up questions following two key developments last week: the announcement of a five-point ‘’Rearm Europe’’ plan by von der Leyen on Tuesday and Thursday’s emergency Summit. Both came against the backdrop of mounting urgency following Donald Trump’s suspension of all US military aid to Ukraine last Monday. 

Von der Leyen declared that the EU is now in an “era of rearmament”, calling for unprecedented financial commitments to bolster military capabilities, support Ukraine, and reinforce Europe’s defence autonomy. Her plan envisions mobilising up to €800 billion in defence spending, a sharp increase from the €500 billion that the Commission had previously estimated as necessary over the next decade. More specifically, it includes suspending EU budgetary limits on defence spending by activating the so-called "escape clause" in the Stability and Growth Pact, allowing military investments to bypass debt and deficit restrictions. A €150 billion common defence fund would be established as an EU-backed loan instrument to finance joint procurement of critical capabilities, including air defence systems, drones, cyber security, and military mobility. The plan also proposes repurposing EU cohesion funds to encourage member states to redirect regional development resources towards defence investments, an idea initially championed by French President Emmanuel Macron. The Commission also aims to mobilise private capital by expanding the EU Savings and Investment Union to attract private-sector funding for military production, while amending European Investment Bank rules to allow direct financing of defence-related projects. 

At the emergency European Council summit last Thursday, EU leaders moved closer to adopting this new approach to defence spending, borrowing, and regulation. Costa noted that what was once just “brainstorming” had now become concrete policy proposals. Despite a broader consensus on the need to ramp up the bloc’s defence spending to €800 billion in defence investment, disagreements persist over how to finance this effort. Spanish Prime Minister Pedro Sanchez argued that the proposed €150 billion loan scheme should be converted into direct grants, while Macron insisted the sum itself was too low, suggesting that a new digital tax could help bridge the funding gap. Following the CDU-SPD proposal for a debt brake reform, Germany, which has historically been reluctant to back increased military spending, played an unexpected role in advocating for greater financial flexibility, marking a break from its traditionally cautious fiscal stance. 

Despite general agreement on the need to strengthen European defence, divisions remain. Hungary’s Prime Minister Viktor Orban once again opposed a joint EU effort to replace US military aid to Ukraine, standing alone as the only leader to reject the initiative. However, the remaining twenty-six member states backed the Commission’s proposal to create a long-term EU defence financing mechanism. Von der Leyen has pledged to introduce a legal framework for the new measures ahead of the next European Council summit on 20-21 March, where leaders will negotiate the details of the plan. 

Tuesday, 11 March – European Commission to unveil new EU directive on migrant returns 

On Tuesday, will unveil its revised EU Returns Directive on Tuesday, aiming to toughen enforcement measures for deporting rejected asylum seekers. The proposal is expected to define the rights and obligations of migrants who have exhausted their legal options to remain in the EU while making it easier for national authorities to remove them to third countries. 

The push for reform comes as Brussels faces growing pressure to address the bloc’s low deportation rates. According to Eurostat, more than 480,000 people were ordered to leave the EU last year, yet only 20% actually departed. Most returnees were sent to Georgia, Albania, and Turkey, while the highest number of deportation orders were issued to Moroccan, Algerian, and Afghan nationals. 

Earlier this month, Magnus Brunner, the EU’s Migration Commissioner, made it clear that deportation orders must be properly enforced, telling Die Welt that  “the result must be that when a return decision is made, it is actually carried out’’, warning that migrants who refuse to cooperate should face "harsh consequences." 

The directive is expected to include new measures restricting the freedom of movement for those facing deportation, with proposals to require check-ins at migrant centres to prevent people from disappearing before their removal.  

The timing of the proposal reflects a broader political shift in Europe, where right-wing and far-right parties have gained ground on an anti-migration platform. The EU’s stance on migration has hardened in response, with leaders pushing for faster deportations, stricter border controls, and increased cooperation with third countries to curb irregular arrivals. 

The directive will be a major topic of debate in the European Parliament’s plenary session in Strasbourg this week, with EU governments set to negotiate the final terms in the coming months.