Kaja under pressure at EEAS | Commission flags €140bn Ukraine loan risks | Digital sovereignty summit in Berlin
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Welcome to Rapporteur. This is Eddy Wax with Nicoletta Ionta in Brussels.

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Need-to-knows:

  • Brussels: Kaja Kallas clashes with von der Leyen as budget squeeze exposes EEAS limits

  • Ukraine: Commission acknowledges €140 billion ‘reparation loan’ may spark financial 'knock-on effects'

  • Tech: Friedrich Merz to host Macron and Starmer in Berlin after the European digital sovereignty summit

Kaja Kallas (Photo by Viktor Kovalchuk via Getty Images)

The problems facing Kaja Kallas, head of the External Action Service, increasingly come from within.

Approaching a year in the post, the former Estonian prime minister has struggled to make her mark in Brussels, forced to shift from executive decision-maker in a tiny country to a tiny decision-maker in the EU machine.

Her difficulty navigating the system has raised eyebrows.
With her father Siim’s legacy as a former commissioner, Kaja sits near the closest thing Brussels has to political royalty, or an American-style dynasty.

But gone are the collegial, back-channel days her father inhabited. Instead, the younger Kallas finds herself hemmed in by a Commission president determined to dominate the world stage.

On Monday night,
Kallas pushed back against Ursula von der Leyen’s plan to create an intelligence “cell” in the Berlaymont, warning it would duplicate existing work, confuse intelligence agencies seeking a Brussels point of contact, and strain already scant resources. The point is, though, few expect she can stop it.

The latest spat between the pair, whose relationship is widely considered strained, comes just after von der Leyen’s decision to kill Kallas’ attempt – first reported in this newsletter – to bring top official Martin Selmayr back into frontline politics in the EEAS.

Selmayr would have given her the political clout she sorely lacks – but von der Leyen's loyalist Magnus Brunner was dispatched to make Italy-based Selmayr an offer he could only refuse.

Kallas inherited an EEAS grappling with deep structural problems: divisions over Gaza, the hiving-off of the Middle East and North Africa file into a new Commission department, and an immediate budget squeeze. She said on Monday that despite “financial constraints" none of the 145 delegations will close but some will be “streamlined” into bare-bones operations.

Written answers from the EEAS to MEPs, seen by Nicoletta, show the service has paused or cancelled some overseas security spending, potentially putting EU staff at risk. Kallas is now looking to pinch money elsewhere, including by casting an eye over the sizeable comms budget of the development arm, DG INTPA, but is already facing resistance.

She has also got to explain why she appears rudderless in Brussels. Kallas allowed Simon Mordue to leave, only to see him join von der Leyen’s Cabinet as a diplomat adviser, depriving her of another seasoned aide.

Kallas has her own analysis for these frustrations. She told MEPs last night that the EEAS often sets out a geopolitical strategy only for funding to be splashed in the opposite direction by better-endowed parts of the Commission. “We don’t have the tools when it comes to funding,” she said. But appealing to lawmakers – whose role in foreign policy is limited – offers little leverage.

At root, the constraints are structural. The EEAS higher-ups see themselves as grand strategists, while national capitals tend to view the service as a technical secretariat – more pawn than player on a geopolitical chessboard they dominate.

“We cannot be expected to uphold Europe’s role in the world with decreasing real resources,” Kallas said. That may well be precisely the point.

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Ukraine support options hit capital's mailboxes

The EU would need to mount a “concerted effort” to reassure financial markets if it proceeds with a proposed €140 billion loan for Ukraine backed by immobilised Russian sovereign assets, the European Commission warned in a letter to capitals on Monday, seen by
Euractiv.

The message marks the first time the Commission has acknowledged that the plan could trigger “potential knock-on effects” for Europe’s financial sector if it is viewed internationally as a form of “confiscation,” my colleague Thomas Møller-Nielsen reports in
The Brief, our weekday evening newsletter on EU affairs.

Both the European Central Bank and the Belgian government have repeatedly warned that the so-called “reparation loan” could unsettle foreign investors and prompt capital flight from the euro area.

Von der Leyen has put forward three options to cover Kyiv’s financing needs for 2026–2027, including the reparation loan – the Commission chief’s preferred model for supporting Ukraine’s war effort.

Brussels said that the Russian assets would be used to extend a zero-interest loan to Ukraine, with repayment tied to future reparations paid by Moscow. EU countries would provide guarantees to cover potential legal or financial risks.

Engaging with Libya: Not 'fun' but unavoidable

EU Migration Commissioner Magnus Brunner faced scrutiny during a discharge hearing over recent incidents in which the Libyan coastguard fired on NGO vessels.

German MEP Daniel Freund pressed him on whether EU-funded equipment was used in the attacks. “There was no EU funding involved,” Brunner insisted, prompting Freund to shoot back: “Was it the boat? Was it the gun?” The Commissioner denied any link.

On the broader Libya file, Brunner argued that continued engagement remains necessary despite mounting risks. An EU delegation visit in July was abruptly blocked on landing in Benghazi. “It’s not fun, it’s not easy,” he said, “but not engaging is not an option.”


Merz hosts Macron and Starmer in Berlin

Berlin will host a trilateral on Tuesday evening, with Friedrich Merz welcoming France's Emmanuel Macron and Britain’s Keir Starmer for a private dinner following a summit on European digital sovereignty.

At the summit, Austria is expected to unveil its declaration on tech sovereignty and disclose how many governments have signed on. Co-hosts France and Germany, meanwhile, will issue a joint declaration of their own, Euractiv has learned. The two capitals have been pushing hard to streamline the bloc’s tech rulebook ahead of the gathering.

BERLIN 🇩🇪

Lars Klingbeil, Germany’s vice-chancellor and finance minister,
said Beijing had signalled openness to easing concerns over rare earths access and shoring up supply-chain resilience during talks in the Chinese capital. At the German-Chinese Financial Dialogue, Klingbeil met Vice Premier He Lifeng, who emphasised both sides’ willingness to deepen economic cooperation. Klingbeil described Chinese firms as “serious competitors” but stressed competition must be fair, warning that Europe could take action against market distortions.

PARIS 🇫🇷

Emmanuel Macron travels to Berlin today for the European Digital Sovereignty Summit, which he will co-chair with Chancellor Friedrich Merz. The French president is expected to press for a leaner EU regulatory framework and advocate a European preference in public procurement, while placing renewed emphasis on innovation and competitiveness. Macron will also champion the development of credible European cloud and AI players. A joint Franco-German statement is anticipated, alongside the signing of key bilateral agreements.

HELSINKI 🇫🇮

President Alexander Stubb and NATO Secretary-General Mark Rutte met in Brussels on Monday, underscoring the need to sustain – and if possible increase – Western support for Ukraine. Stubb said talks centred on helping Kyiv resist Russia’s ongoing aggression and strengthening NATO’s overall defence posture. He warned that Moscow shows “no real desire to negotiate,” arguing that tougher sanctions and sustained economic and military backing for Ukraine remain essential to Europe’s security.

ROME 🇮🇹

Italy’s ambition to build a bridge linking Sicily to the mainland – a flagship project
revived by Giorgia Meloni – has suffered another setback. The Court of Auditors again rejected key documents, this time refusing the third addendum to the convention between the Transport Ministry and Stretto di Messina S.p.A. Transport Minister Matteo Salvini insisted the project “will go ahead,” while Green-Left MP Angelo Bonelli said the government was committing funds without sufficient technical or environmental guarantees.

MADRID 🇪🇸

Ukrainian President Volodymyr Zelenskyy will travel to Madrid on Tuesday to address Spanish lawmakers before holding meetings with King Felipe VI and Pedro Sánchez. The prime minister's office said the visit would allow Spain to reaffirm its support for Kyiv “in all areas.” In October, Zelenskyy thanked Sánchez for sending 70 generators to
help restore Ukraine’s energy infrastructure following Russian strikes. During last year's visit, Spain pledged €1 billion in military aid, including Leopard tanks and ammunition.

WARSAW 🇵🇱

Poland is investigating what PM
Donald Tusk called a deliberate “act of sabotage” after an explosive device damaged a key rail link between Warsaw and Lublin, a route officials say is vital for supplying Ukraine. No injuries were reported, and while some pointed to Russia, Deputy Interior Minister Maciej Duszczyk cautioned against assuming every such incident is Moscow-directed, even if its involvement “cannot be ruled out.”

PRAGUE 🇨🇿

President Petr Pavel has warned
he may refuse to appoint Andrej Babiš as prime minister unless the billionaire resolves a long-running conflict-of-interest dispute over his ownership of the Agrofert conglomerate, which receives substantial EU and state subsidies. Pavel said naming Babiš in his current position would “create an unlawful situation,” urging the election winner to offer a clear remedy or put forward an alternative candidate. Babiš’s ANO party insists he will not step aside.

BUCHAREST 🇷🇴

Romania
evacuated part of the border village of Plauru on Monday after a Russian drone strike on a Danube port in southern Ukraine ignited a ship carrying liquefied petroleum gas, prompting a precautionary RO-ALERT warning and a halt to local traffic. Authorities said no unauthorised airspace incursions were detected, though Bucharest has repeatedly summoned Moscow’s ambassador in recent weeks over drone debris falling on Romanian territory – accusations the Russian embassy has dismissed as “theatrical.”

Clarification: While Monday’s meeting was the first time ministers focused specifically on the national plans, Danish officials wanted to clarify that it was the third MFF discussion under their presidency. Copenhagen also notes that the presidency has not tentatively “excluded” the option of removing farm funding from the national plans but has simply tentatively “not included” it in the draft package.

Euractiv Pro-subscribers: Keep an eye on your inbox at midday for our new budget-focused newsletter.

Christian Ehler, a veteran German MEP and longtime power broker on Parliament’s industry committee, has tightened his grip on Europe’s industrial strategy after quietly securing the mandate to steer negotiations on €409 billion in research and competitiveness spending.

An “URGENT” email in October – co-signed by S&D and Renew coordinators – effectively handed him control of a new industrial “superfund” and €175 billion in research grants, a move rivals blasted as undemocratic. Backed by EPP leader Manfred Weber and buoyed by his group’s new dual-majority leverage, Ehler is now positioned as a key architect of the EU’s shift toward a more interventionist industrial policy.

📍 Antonio Costa meets the prime ministers of Montenegro and Moldova

📍 EU Enlargement Forum, with speeches by Ursula von der Leyen, Marta Kos, Kaja Kallas, and Costa

📍 Von der Leyen receives Moldovan PM Alexandru Munteanu

📍 Henna Virkkunen in Berlin for the summit on European digital sovereignty

author_name Newsletter Editor
Eddy Wax
author_name Politics Reporter
Nicoletta Ionta

Contributors: Jeremias Lin, Laurent Geslin, Charles Szumski, Alessia Peretti, Inés Fernández-Pontes

Editors: Christina Zhao, Sofia Mandilara

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