Week Ahead (25 August)

Monday, 25 August – Prime Minister Bayrou holds press conference on 2026 budget plan 

This afternoon (4 pm CET), French Prime Minister Francois Bayrou will hold a surprise press conference to defend his €43.8 billion savings package for the 2026 budget and call for “efficiency, responsibility and collective action.” The move comes amid mounting political and social pushback against the plan, which was unveiled in mid-July and includes a freeze on most public spending, a €5 billion reduction in health expenditures, and the elimination of two public holidays. Notably, the latter is opposed by 84% of voters, according to a recent Odoxa poll. 

Bayrou has been under pressure since the budget announcement, with opposition parties threatening to file a new motion of no confidence when Parliament reconvenes in September. Marine Le Pen’s National Rally (RN) has already warned it will back censure unless the government revises the plan, while the Socialists have signalled they may withdraw their earlier cautious support in other bills. Trade unions are preparing a nationwide blockade on 10 September, and further mobilisation is expected once the legislative debate opens. 

By going public again, Bayrou is seeking to pre-empt these challenges and force opponents, particularly the Socialists, to negotiate rather than risk toppling the government. His message is expected to be sharpened throughout the week, with appearances before the CFDT union on Tuesday, the employers’ association MEDEF on Thursday, and the Chalons-en-Champagne fair on Friday. 

President Emmanuel Macron has strongly endorsed Bayrou’s approach, calling the package “lucid and courageous.” Still, with only 212 seats in the National Assembly and a track record of relying on Article 49.3 to pass budgets, Bayrou will struggle to push the plan through. Today’s public intervention intends to pave the way for a high-stakes autumn campaign to secure support before the budget is formally tabled in October. 

W/C Monday, 25 August – Spanish Defence Minister visits Berlin for FCAS talks 

This week, Spanish Defence Minister Margarita Robles travels to Berlin to meet her German counterpart, Boris Pistorius, with discussions set to focus on the Future Combat Air System (FCAS). The visit comes after Madrid earlier this month suspended preliminary plans to purchase Lockheed Martin’s F-35 fighter jets, signalling a stronger commitment to European alternatives such as the Eurofighter and the planned FCAS programme.  

Robles has insisted that the F-35 is “not a priority” for Spain, with defence spending instead directed towards projects like the S-80 submarines, F-110 frigates, and supply ships. The decision to drop the American option, despite the navy’s Harrier AV-8B fleet approaching retirement by 2030, could strain relations with Washington at a time when Madrid is already resisting NATO’s new 5% GDP defence spending target championed by President Trump. 

Notably, the shift comes as FCAS itself faces renewed uncertainty. Longstanding friction between Dassault Aviation and Airbus over project leadership resurfaced in July. Madrid’s position is to maintain the current structure and avoid a major redistribution of project oversight, although industry player Indra, which leads a core FCAS workstream, may tolerate a more French-dominated arrangement if Germany withdraws, potentially gaining influence in the process.  

Spain, which has already committed around €2 billion to FCAS, prefers to maintain the current governance structure. Madrid opposes a radical redistribution of oversight but would likely remain in the project even if Germany were to withdraw, with Indra, a lead contractor in key workstreams, potentially gaining greater influence in a more French-driven structure. 

Therefore, this week’s high-level meeting could provide a sign of convergence between Berlin and Madrid on how to keep FCAS on track amid the ongoing Franco-German discord. For Spain, deepening ties with Germany offers both political cover for abandoning the F-35 and a chance to secure a stronger role in shaping Europe’s most ambitious defence programme to date. 

Monday, 25 August – France faces deadline on nicotine pouch ban 

Today, France will reach the EU-mandated standstill deadline for its proposed ban on nicotine pouches, a measure originally due to take effect in May but delayed after formal objections from seven member states – namely Czechia, Greece, Hungary, Italy, Romania, Slovakia and Sweden. The draft law would go far beyond restrictions elsewhere in Europe by outlawing not only the manufacture and sale of nicotine pouches but also their possession, use, and transport. More specifically, individuals caught with a pouch could face up to one year in prison or a €15,000 fine, while retailers and manufacturers risk penalties of up to five years in prison and fines of up to €375,000. 

Earlier this year, this sweeping approach triggered pushback from the aforementioned member states which argued that banning reduced-risk alternatives undermines harm-reduction strategies at a time when Sweden is nearing “smoke-free” status thanks in part to products like snus and nicotine pouches. On the other hand, French officials counter that flavoured pouches are increasingly popular among young people, pointing to a US study showing a sharp rise in accidental ingestion by children and the viral spread of brands such as Zyn on TikTok. 

Today’s deadline mandates the French government to either defend its draft bill or adjust the legislation to address the concerns raised at both the EU and domestic level. Overall, the bill represents a test case for an ongoing debate around harm reduction approaches to tobacco, in particular whether nicotine pouches should be restricted as a public-health hazard or preserved as a tool to cut smoking rates. 

Thursday, 28 August – ECB to release minutes of July meeting  

On Thursday, the European Central Bank (ECB) will publish the minutes of its 24 July meeting, where it opted to hold interest rates steady at 2% after a year-long easing cycle that halved borrowing costs from 4% to 2%. The decision reflected policymakers’ desire to pause amid uncertainty over EU–US trade talks and assess the impact of the past year’s rate cuts. 

Just days later, on 28 July, Brussels and Washington reached a deal capping US tariffs on EU exports at 15%, higher than the ECB’s June baseline assumption but avoiding the “severe” scenario of 30% levies. The agreement, whose joint statement was published last Thursday, also reduced car tariffs from 27.5% to 15%, easing some immediate fears but left questions over coverage in sensitive sectors such as pharmaceuticals and semiconductors. Last week, ECB President Christine Lagarde underlined that while the deal “mitigated” risks, it has “certainly not eliminated global uncertainty.” 

Markets will scrutinise the minutes for insight into how Governing Council members weighed these risks, as well as the balance of views on further easing. Inflation data for July, published after the meeting, showed headline inflation steady at 2.0%, slightly above the 1.9% consensus forecast, with core pressures sticky at 2.3%. Meanwhile, the eurozone economy has surprised on the upside: the August flash PMI rose to 51.1, marking an eighth consecutive monthly gain and reinforcing expectations that the ECB may hold rates through the autumn. 

Derivatives markets now price only a 5% chance of a rate cut at the September meeting and less than a 40% probability of any additional easing this year. Still, with ECB staff set to publish fresh projections in mid-September that fully account for the trade deal, investors will look to the July minutes for early signals of how the Governing Council intends to calibrate policy in the face of resilient activity and sticky services inflation. 

Thursday, 28 August – Friday, 29 August – Informal meeting of EU foreign and defence ministers in Denmark to discuss Ukraine security guarantees and SAFE 

Late this week, EU foreign and defence ministers will gather in Denmark for their annual informal meeting, the first in-person opportunity since early summer for capitals to take stock of Europe’s evolving security landscape. The discussions will come just days after President Trump hosted Ukrainian President Volodymyr Zelenskyy and a group of European leaders in Washington, where he signalled US readiness to provide “NATO-like” security guarantees to Ukraine as part of a future settlement. 

The Washington talks exposed familiar transatlantic and intra-EU divides. Italy’s Giorgia Meloni pressed for an “Article-5-style” clause to deter Russia, while France’s Emmanuel Macron urged caution against automatic commitments. Germany has previously drawn red lines on troop deployments, though Chancellor Merz hinted Berlin might follow if the US were to lead. Trump himself downplayed the need for a ceasefire, instead promoting a trilateral Trump–Zelenskyy–Putin summit. Kyiv, meanwhile, has sought to anchor security guarantees in US industry, tabling a $100 billion weapons procurement package and a $50 billion drone co-production deal with US firms. 

These issues pertaining to Ukraine will be at the epicentre of ministerial exchanges in Denmark, where the EU will also take stock of its own defence financing efforts. The latest “soft deadline” for the Security Action for Europe (SAFE) loan programme passed on 15 August without new submissions, leaving participation at 18 member states. Italy’s recent entry on 30 July brought total requests above €130 billion, with Poland seeking the largest share at up to €45 billion. Denmark is currently the only country openly weighing whether to join, thereby the gathering will provide a clearer idea of Copenhagen’s intentions.