Week Ahead (5 October)

Monday, 5 October & Wednesday, 7 October – Member states tackle remaining ETS reform issues ahead of ministerial debate

Member state officials will hold two further Working Party negotiations on the EU ETS review on Monday and Wednesday, completing their examination of the remaining elements of the Commission's proposal ahead of the 12 October Environment Council. The meetings come after the Irish Presidency divided the wider review into eight negotiating blocks during September, including separate discussions on the overall emissions cap and Linear Reduction Factor (LRF), free allocation and mechanisms for addressing excessive allowance prices.

The two meetings will help prepare what is becoming the first important political test of the wider ETS reform at ministerial level. The Presidency has identified three issues where member state positions remain particularly divided and on which it is seeking guidance from environment ministers on 12 October: the post-2030 LRF trajectory, the use of international carbon credits and conditionality requirements attached to continued free allocation. Officials have also been examining whether the existing Article 29a mechanism for responding to excessive EUA prices should be strengthened or supplemented, although no concrete Council position has yet emerged.

The negotiations are taking place against growing pressure from governments seeking a more competitiveness-oriented ETS. Poland and Italy remain among the more interventionist member states, while Czechia has recently stepped up its political campaign for changes to the system. Last month, Prime Minister Andrej Babis made ETS reform a prominent government priority and called for a wider coalition of member states seeking changes on competitiveness grounds. Concerns over carbon costs have also moved beyond the environment track, with Austria, Czechia, Hungary, Poland and Slovakia bringing the issue into last month's Competitiveness Council. 

France remains an important swing member state. Paris has so far avoided firmly aligning with either the more interventionist group or governments such as the Netherlands and Nordic countries that favour preserving a tighter ETS architecture. This partly reflects divisions within the French government itself, with the energy and ecological transition ministries favouring greater continuity while the industry and economy ministries have pushed a more competitiveness-oriented approach. Germany, meanwhile, continues to occupy a position somewhere between the two camps.

The 5 and 7 October discussions are therefore important primarily as the final technical preparation before ministers confront these political trade offs on 12 October. The Irish Presidency intends to use the ministerial guidance to begin assembling its first compromise text, initially covering the less contentious parts of the review, while continuing to target a Council General Approach in December. The key question over the coming days will be whether mounting pressure from Italy, Czechia and other industry focused governments begins to translate into broader support for a softer post-2030 supply trajectory. Much will hinge on Germany's and France's ultimate positions. 

Wednesday, 7 October – General Court to rule on Zalando challenge over access to DSA supervisory fee documents

The EU General Court will rule on Wednesday on the Zalando v Commission (T-203/24), a case concerning the Commission's refusal to provide the online retailer with documents relating to the calculation of its annual supervisory fee under the Digital Services Act (DSA). Zalando is seeking annulment of the Commission's implicit rejection of its request for access to the documents, arguing among other things that Brussels wrongly relied on exceptions protecting commercial interests and ongoing decision making.

The case forms part of the wider legal dispute surrounding the DSA's system for financing Commission supervision of Very Large Online Platforms (VLOPs). Under the DSA, designated platforms contribute towards the Commission's enforcement costs through an annual supervisory fee. Zalando's challenge is narrower than directly contesting the fee itself, focusing instead on whether the Commission was entitled to withhold information underpinning how its contribution was determined.

Last year, the General Court upheld challenges by Meta (T-55/24) and TikTok (T-58/24) against their own supervisory fee decisions, finding that the methodology used to calculate average monthly active recipients, an essential component of the fee calculation, should have been established through a delegated act rather than through individual implementing decisions. The Court annulled those decisions but preserved their effects for 12 months, while the Commission has appealed the rulings and moved to formalise its methodology.

Zalando is also pursuing a separate legal challenge to its underlying designation as a VLOP. The General Court rejected that challenge in September 2025, endorsing the Commission's approach to calculating whether Zalando exceeded the DSA's 45 million user threshold, with the company subsequently appealing to the Court of Justice.

Wednesday's judgement therefore concerns a relatively specific transparency and access-to-documents question, rather than the legality of DSA supervisory fees as such. However, a ruling requiring greater disclosure could make it easier for regulated platforms to scrutinise the information and methodology underpinning their individual fee calculations, adding another element of judicial oversight to a DSA enforcement architecture already facing several challenges.

Thursday, 8 October & Friday 9 October – Sefcovic heads to Beijing as EU-China trade talks reach October deadline

EU Trade Commissioner Maros Sefcovic will travel to Beijing on 8–9 October for highly anticipated talks with Chinese Commerce Minister Wang Wentao, marking the political deadline Brussels set in June for demonstrating tangible progress towards rebalancing EU-China trade. The visit follows several months of increasingly intensive negotiations, including DG TRADE Director-General Ditte Juul Jorgensen's discussions at technical level in Beijing last week.  Sefcovic said last week that talks had been “constructive, but tough” and that the two sides were “definitely not there yet”, while stressing that he expects concrete results from the visit.

The pressure for progress has increased alongside the trade imbalance. The EU's goods deficit with China reached approximately €360 billion in 2025, up from €304.5 billion in 2024, equivalent to almost €1 billion per day, as European exports declined while Chinese imports continued to rise. Commission officials last week also highlighted particularly strong import growth in machinery, textiles, basic metals and chemicals, alongside increasing demands from European industry for trade defence action.

In recent days, the negotiations increasingly appear to be moving towards a possible package of targeted arrangements rather than one comprehensive agreement. Autos remain among the most important areas, with Brussels seeking action against the rapid growth of Chinese hybrid and plug-in hybrid exports, while chemicals, Chinese purchases of European goods, market access and greater predictability around rare earth and critical input export licences are also under discussion. There is still no indication that Beijing has accepted the EU's reported objective of reducing the share of China-made hybrids to around 15%, but Chinese officials appear more willing to discuss product-specific arrangements than their public opposition to conventional export restraints would suggest.

The political environment in Europe is, meanwhile, becoming more supportive of stronger action. Germany's position has shifted, with the influential German Association of the Automotive Industry (VDA) now supporting EU trade action and the Bundesrat calling for tariffs to be extended to additional sectors including plug-in hybrids (PHEVs). Chancellor Friedrich Merz is also facing growing domestic pressure as the AfD gains support in industrial regions where manufacturing job losses and factory closures are politically sensitive. France and Germany are separately developing proposals for a stronger EU trade response instrument that could allow faster action against economic pressure from third countries and make it harder for individual member states to prevent an EU response, compared to the existing Anti-Coercion Instruments.

At the same time, the Commission is preparing its forthcoming ''DiversifyEU initiative'', aimed at reducing critical supply chain dependencies by encouraging or requiring companies in sensitive sectors to diversify sourcing across several suppliers. Existing preparations for potential trade defence action covering products including hybrids, chemicals and machinery are also continuing. Brussels has so far held back some measures to give the negotiations with Beijing room to produce results, particularly in chemicals, but these could return relatively quickly if last week's talks disappoint.

The visit therefore represents an important ''carrot and stick'' moment in the relationship. A limited agreement covering individual products, purchases, market access or critical inputs could reduce the immediate risk of escalation, but would not halt the EU's wider diversification and trade defence agenda. Conversely, limited progress would increase pressure for unilateral measures ahead of the 15–16 October European Council, where leaders will have an early opportunity to assess the outcome of Sefcovic's visit and the wider direction of EU-China economic relations.

Thursday, 8 October – Bundestag committee to scutinise €140 billion defence budget as Berlin shifts procurement into regular spending

The Bundestag's Budget Committee will examine the government's 2027 defence spending plan on Thursday, the next important parliamentary stage for Berlin's rapidly expanding military budget. The draft envisages €109.7 billion for the regular Defence Ministry budget alongside €29.9 billion from the remaining Bundeswehr special fund, taking total ministry expenditure to approximately €139.6 billion. More than €60 billion is earmarked for military procurement.

As previously highlighted, the budget sits alongside an unusually large procurement pipeline. The Defence Ministry currently plans to submit 123 major procurement proposals worth at least €123.3 billion for parliamentary approval during 2027, compared with 119 proposals worth around €82.1 billion this year. These figures represent multiyear contract values rather than expenditure falling entirely within next year's budget, but illustrate the scale at which Germany is attempting to translate higher defence commitments into equipment orders.

Thursday's scrutiny will also provide another indication of the transition away from reliance on the €100 billion Bundeswehr special fund towards permanently higher spending through the regular budget. The government's draft increases the core defence budget from €82.7 billion this year to €109.7 billion in 2027, with €30.3 billion of the latter allocated directly to military procurement. The remaining special-fund resources are meanwhile expected to be largely committed during 2027.

The debate comes at a politically difficult moment for Chancellor Friedrich Merz. The latest ARD DeutschlandTrend puts the AfD at 27%, ahead of the CDU/CSU on 20%, while only around 10% of respondents say they are satisfied with Merz's performance. Defence Minister Boris Pistorius remains considerably more popular, with 50% expressing satisfaction with his work. The figures reflect the increasingly difficult domestic backdrop against which the government is pursuing both higher defence expenditure and broader fiscal reforms.

Thursday will not settle the budget. The committee can still recommend changes before its final clean up session on 12 November, with the Bundestag currently expected to hold its final budget vote on 27 November. The immediate question is therefore whether scrutiny of the Defence Ministry's plans produces material changes to the spending or procurement trajectory, as the German shift towards structurally higher defence expenditure is now considered a given.