Week Ahead (23 June)

Monday, 23 June – Negotiations on pension reform in France to conclude 

Originally scheduled to end on 17 June, unions and employer organisations convene for one final day to find a solution to pensions impasse. As a reminder, in order to persuade the Socialists to abstain on confidence motions associated with the passage of the 2025 budget last February, French Prime Minister Francois Bayrou committed to reopening negotiations on the pension reforms introduced in 2023 which, inter alia, increased the retirement age from 62 to 64. 

There may be cause for optimism after unions indicated they could accept more targeted measures instead of a return to the retirement age of 62 – previously a red line. Last Monday, Bayrou floated an additional proposal: offering senior workers who postpone retirement a partial pension while they continue working, framed as a “bonus” scheme – this was greeted with some scepticism by unions.  

In any case, even without a breakthrough on pensions, our assessment is that Bayrou will survive the summer. This is because:  

• The Socialist Party remains internally divided. Although some MPs insist on bringing down the government over the age issue, others have shown a more pragmatic willingness to legislate on the basis of a partial agreement given Bayrou's latest set of concessions. 

• More importantly, the National Rally has clearly signalled that it will not support a motion of no confidence solely on pensions. Early last week, its leader Jordan Bardella said on RTL that the ‘’moment of truth’’ for Bayrou’s government would come during budget negotiations in the autumn, not now.  

As a reminder, every motion of no confidence would need the backing of both RN and the Socialists in order to be successful and reach the threshold of 289 votes, given that the backing from the rest of left-wing parties (LFI, Communists, Greens) is already priced in. This is still an unlikely combination at present but one that could materialise in autumn.  

Monday, 23 June – European Commission to hold workshop on Amazon’s compliance with the DMA 

Today, the European Commission is hosting a workshop on Amazon's compliance with the EU's Digital Markets Act (DMA). The aim of the workshop is to gather industry feedback on the company’s proposed changes while reviewing the platform’s compliance with the DMA. Similar workshops on Alphabet, ByteDance (TikTok), Meta, and Microsoft took place in March 2024, shortly after the rules entered into force.  Another workshop, dedicated to Alphabet with a focus on Google’s search functions is earmarked for 8 July. 

The DMA’s purpose is to regulate the digital market by preventing big tech companies, referred to as ‘’gatekeepers’’ from abusing their dominant market positions, and opening competition to smaller competitors. To that end, it introduces new responsibilities for tech companies, including sharing data, linking to competitors, and ensuring interoperability with rival apps. Companies with an annual turnover exceeding €7.5 billion, a market capitalisation of over €75 billion, and active monthly users in the EU totalling 45 million fall under these rules.   The Commission can impose fines of up to 10% of a company’s global revenue for non-compliance. 

The inaugural investigations under the DMA were concluded in April. The Commission issued its first fines under the DMA, imposing penalties of €500 million against Apple and €200 million against Meta for non-compliance. The decisions represented a pivotal moment in the bloc’s effort to assert regulatory control over Big Tech amid growing trade and diplomatic tensions with the US. Yet, the Commission opted not to impose immediate financial penalties. Instead, both companies have been granted 60 days to adjust their practices or otherwise risk periodic penalty payment. This grace period expires this Thursday, 26 June. 

Tuesday 24 June – Wednesday 25 June – NATO to hold annual summit in The Hague; expected to agree on new 5% spending goal 

This week, ΝΑΤΟ will hold its annual summit in The Hague. The main item on the agenda will be the adoption of a new 5% of GDP defence spending target, replacing the current 2% goal first agreed in 2014. This new target, strongly backed by the US and shaped by NATO’s Secretary-General Mark Rutte, will be a byproduct of intensifying pressure on European allies to shoulder a larger share of the transatlantic defence burden. 

The proposed framework splits the 5% target into 3.5% for core defence spending and 1.5% for related categories such as cyber resilience, dual-use infrastructure, and military mobility. This more “flexible” definition is designed both to enable politically constrained governments to meet the target and to accommodate the evolving nature of security threats. 

The push comes at a moment of relative momentum: 23 NATO members met the existing 2% threshold in 2024, a steep increase from just six in 2018. Germany’s recent debt brake reform, which could unlock €500 billion in defence spending, and the EU’s activation of the National Escape Clause (NEC), which allows member states to raise defence spending without breaching fiscal rules, have created greater financial leeway for this shift. The NEC alone could deliver a boost of up to €650 billion across member states over four years. 

Still, not all European NATO members share the same level of urgency in scaling up defence spending: Last Thursday, Spain formally requested to opt out of the new 5% framework, arguing that its national defence needs are met at 2.1% of GDP and calling for a broader definition that includes climate resilience and disaster response. Prime Minister Pedro Sanchez faces severe political constraints at home, where his minority government is propped up by the hard-left Sumar alliance, a bloc that has opposed NATO spending increases and recently even backed a motion to leave the alliance altogether.  

Over the weekend, Spain agreed with NATO to skip the 5% defence spending target. This will be achieved by the adoption of a more flexible language on Wednesday’s conclusions. Wording was changed from ‘’we commit’’ to ‘’allies commit’’, allowing Spain the possibility of an opt-out, without needing to veto the resolution. Instead, Sanchez pledged to spend 2.1% of its GDP on defence “to acquire and maintain all the personnel, equipment and infrastructures requested by the alliance to confront these threats with our capabilities.” This still constitutes a significant increase from the current 1.8% that it spends on defence. 

One area where compromise has emerged is timing; while Rutte initially floated 2032 as the deadline to meet the 5% target, the summit on Wednesday will likely push the deadline to 2035, with several European NATO members arguing that this timeline is more realistic and politically palatable. The final text of the summit declaration may include staggered or intermediate targets, such as 2.5% by 2028 and 3% by 2030, to keep momentum while offering flexibility. 

Wednesday 25 June – German federal cabinet to approved revised 2025 budget 

On Wednesday, the German federal cabinet is expected to approve the revised national budgets for 2025, marking the next major step in the implementation of the country’s €500 billion “special fund” for infrastructure, defence, and climate-related investment. The proposal, first cleared by the Bundestag in March following a constitutional reform of the debt brake, creates a €500 billion ‘special fund’ outside the core federal budget, allowing targeted investment in defence, infrastructure, and climate transition without breaching regular borrowing limits. 

Approximately €100 billion has been earmarked for energy cost relief alone, with plans for subsidised electricity pricing still under discussion. Other priorities outlined in the draft include broadband and mobile network expansion, digitalisation of administrative systems, and bridge renovations. 

Despite the debt brake reform allowing greater leeway for spending, Finance Minister Lars Klingbeil has stressed that the reform effort must be paired with structural savings, warning that “leaning back is not an option.” He pledged to push every ministry to find efficiencies as part of a broader three-pronged strategy focused on investment, reform, and fiscal consolidation. Therefore, each ministry was given a tight deadline in May to submit project proposals and identify offsetting cuts within their existing budgets.  

In addition, two key risks are looming at EU level: First, the government’s attempt to classify a wide range of energy and industrial support as eligible under the special fund may raise state aid concerns at EU level. Second, even with the constitutional debt brake now partially loosened, the risk of exceeding EU fiscal rules remains. Germany will need to ensure that spending from the special fund is ringfenced appropriately to avoid breaching the updated Stability and Growth Pact thresholds, especially as the broader fiscal framework tightens in 2025. 

In terms of the budget timeline, after Wednesday’s cabinet sign-off, the Bundestag is expected to hold its first debate in July, with committee deliberations in September and final approval due before year-end. The 2026 draft budget is scheduled to follow in parallel, with cabinet sign-off by 30 July and final votes in November (Bundestag) and December (Bundesrat), in line with the usual schedule. 

Wednesday 25 June – European Commission to unveil new Clean Industrial Deal state aid framework 

Also on Wednesday, the European Commission’s Executive Vice-President Teresa Ribera will unveil the final version of its Clean Industrial State Aid Framework (CISAF), a central pillar of the EU’s evolving industrial strategy. The new framework is designed to give member states greater flexibility to support industrial decarbonisation, particularly in key clean tech sectors such as batteries, solar, and wind power. The CISAF will replace the Temporary Crisis and Transition Framework (TCTF), introduced in response to the economic fallout from Russia’s invasion of Ukraine. 

The CISAF is a core component of the Commission’s wider Clean Industrial Deal, presented in February as part of its effort to modernise EU industrial policy and reduce the burden of high energy costs, regulatory complexity, and slow investment uptake. Among the Deal’s broader proposals were revisions to merger assessment guidelines, aimed at giving more weight to factors such as innovation, resilience, affordability, and sustainability, a move that signals a shift away from the EU’s traditionally strict market concentration focus. 

Hence, state aid for clean technology manufacturing will likely be subject to a more permissive approach, reflecting growing concerns across the bloc about Europe’s industrial competitiveness in the face of rising global pressure, especially from the US Inflation Reduction Act and China’s expansive subsidies. Approval procedures are also expected to be streamlined to speed up the rollout of national support schemes. 

This evolution in approach echoes several of the core messages in Mario Draghi’s September 2024 report on European competitiveness, which called on the EU to adopt a more strategic and coordinated industrial policy. Draghi urged the Commission to rethink how competition policy, investment incentives, and innovation tools are deployed, especially in sectors critical to the green and digital transitions. 

The Commission received over 500 contributions during the public consultation that expired in April. Its proposal this week will likely reflect mounting pressure from industry stakeholders to act quickly but will also have to navigate deep divisions among EU member states: on one hand, countries like Germany and France have consistently backed greater fiscal flexibility to support strategic industries, a group of northern and fiscally conservative countries, notably Sweden, Finland, the Netherlands, and Belgium, have called for a return to pre-crisis state aid rules. Sweden argued there is “no added value” in introducing a new framework specific to the Clean Industrial Deal, while Finland objected to CISAF’s proposed duration through 2030. 

Wednesday, 25 June – EU deadline to rule on Mars’ $36 billion acquisition of Pringles-maker Kellanova 

This week, the European Commission is expected to issue its Phase 1 decision on Mars’ proposed $36 billion acquisition of Kellanova, the US-based maker of Pringles. Announced in August 2024, the deal would significantly expand Mars’ footprint across the European fast-moving consumer goods (FMCG) sector, particularly in the savoury snacks market. 

Despite not being direct competitors in most core segments, the multibillion deal is structured as a conglomerate merger and has prompted concerns from EU competition officials over the potential for portfolio effects, namely, whether Mars could use its broader product range to secure more favourable distribution and shelf placement terms from supermarkets and independent retailers. 

Specifically, the Commission has examined whether Mars might be able to leverage its expanded portfolio to pressure retailers into bundled purchasing agreements, potentially squeezing out rivals or distorting competition across categories. This follows concerns raised by Independent Retail Europe, which warned that the FMCG market is already highly concentrated and that any further consolidation could undermine retail diversity and worsen pricing dynamics for consumers amid rising food costs. 

Although Mars engaged in extended pre-notification talks in an attempt to address potential issues in advance, no remedies were submitted by the deadline of 18 June. This makes it highly likely that the Commission will open an in-depth Phase 2 investigation. A Phase 2 probe would allow the Commission additional time to scrutinise the competitive impact of the merger. 

Thursday, 26 June - Friday, 27 June – European Council to discuss Ukraine, Middle East, defence and security 

This week, the European Council will convene in Brussels with leaders expected to focus on key geopolitical and internal challenges facing the Union. The meeting will come only a day after the conclusion of the NATO 2025 Summit in The Hague making it a natural follow-up discussion for the EU’s NATO members as they work to align European strategic priorities. 

The first agenda item will be Ukraine, as the country enters another critical phase of the war amid Russia’s summer offensive. In recent weeks, Moscow is escalating efforts to expand control in the Donbas and along the frontline before any potential ceasefire or negotiation round. European defence and security will also take centre stage, especially in light of NATO’s expected adoption of the 5% GDP defence spending goal at the summit in The Hague.  

The situation in the Middle East will be another major topic of discussion, especially after the US on Saturday joined Israel’s military campaign by attacking three Iranian nuclear sites. Paris had previously strongly warned against military action aimed at regime change with President Emmanuel Macron last week stressing that such steps would “lead to chaos”. However, most European leaders have refrained from openly condemning Trump’s decision to step up military action, urging instead for a rapid return to the diplomatic table. The European Council this week will likely try to shape a coordinated EU position. 

Beyond geopolitics, leaders will address migration, competitiveness, and the EU’s role in the world, according to the provisional agenda. The discussion on competitiveness is expected to include reflections on capital markets union, the green transition, and reducing regulatory fragmentation, all part of efforts to close the economic gap with the US and China.