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Good morning. Can the EU really claim to have a single market? Our correspondents question if Brussels has what it takes to fix the bloc’s biggest asset.
Germany will today announce it wants to spend 3.5 per cent of GDP on defence by 2029. Here, I explain why today’s Nato leaders’ summit could be derailed by other allies not showing the same ambition. And the outgoing head of the EU’s fraud buster tells Laura that a sister agency set up to help him is in fact getting in the way.
Gimme five
Nato secretary-general Mark Rutte was known as “Teflon Mark” during his time as Dutch prime minister for his ability to shrug off crises. He’ll need that magic today back in The Hague, where he is charged with shepherding the 32-member alliance through its first summit featuring Donald Trump 2.0.
Context: US President Trump, a longtime Nato sceptic, has demanded allies raise defence spending to 5 per cent of GDP to “equalise” the cost of Europe’s security between the US and the rest.
Rutte is well aware such an increase is tough, if not impossible, for many of Nato’s deeply indebted European members. He has spent the past five months carefully choreographing a scheme to both satisfy Trump and allow other leaders to sign up to a vaguely realistic pledge (possibly with fingers crossed behind their back).
But that delicate compromise — 3.5 per cent on core defence spending and 1.5 per cent on capabilities such as cyber and infrastructure — is now looking shaky.
Spanish Prime Minister Pedro Sánchez’s refusal to agree to those numbers, and Rutte’s acquiescence, has prompted some to request similar treatment and sparked the fury of others who see it as a breach of unity.
Sánchez has said he will sign up to Nato’s shared shopping list on what needs to be purchased, “regardless of the share of GDP that it entails” — in essence claiming that Spain can do it for less than 5 per cent.
Deploying some creative ambiguity, Rutte yesterday insisted that wasn’t an opt-out: “We are in an alliance where we fight together and, if necessary, where we also suffer and die together . . . Spain has also agreed with the targets.”
Inherent in all this last-minute wordplay is the risk that Trump smells a rat. That will increase if more leaders demand what Rutte described as Spanish “flexibility”.
Robert Fico, Slovakia’s prime minister, did just that last night, declaring that “similarly to Spain” Bratislava would meet the capability targets, but not 5 per cent spending.
That made diplomats arriving in The Hague last night nervous. Nato veterans still flinch at the memory of the 2018 summit, when first-term Trump threatened to leave the alliance altogether.
Trump, as one senior Nato official quipped to the FT, likes big round numbers and has little time for details. Rutte sure hopes so.
Chart du jour: Greenwashing
EU guidelines for climate-related investment have seen funds change their names and increase their fossil fuel exposure, according to think-tank Influence Map.
Beef
EU agencies set up to fight fraud and corruption have instead been busy fighting each other, writes Laura Dubois.
Context: EU watchdog Olaf has since 1999 been tasked with investigating corruption and fraud. But it only has the power to make recommendations and cannot start criminal proceedings, which is why the European Public Prosecutor’s Office (EPPO) was set up in 2021 to take suspects to court.
This was supposed to streamline anti-fraud operations, but the two agencies have not always worked well together, sometimes disagreeing on when to open an investigation.
Ville Itälä, Olaf’s outgoing chief, told the FT that his agency should be involved in more investigations handed over to the European prosecutor, saying that “huge” amounts of additional money could be recovered in this way.
He described the arrival of EPPO in 2021 as a “trip through the jungle” and said that Olaf shed dozens of staffers for EPPO. “We paid quite a huge amount of our resources to EPPO — 45 posts,” he said.
Itälä said that EPPO now took on about a third of Olaf’s cases, when criminal proceedings were probably warranted. But he criticised the lack of joint investigations, which he said would allow the EU to recover funds more quickly, and before a court had ruled.
“We can recover the money much quicker than what they ever can do,” he said, pointing to Olaf’s administrative powers. “These complementary investigations, that is what we need much, much more [of] to defend [the] EU budget and taxpayers’ money.”
Last year, Olaf recommended that €871.5mn should be returned to the EU’s coffers, of which some €300mn has been clawed back so far.
An EPPO spokesperson declined to comment.
What to watch today
Nato leaders’ summit begins with informal dinner hosted by the king and queen of the Netherlands.
German finance minister Lars Klingbeil presents Germany’s 2025 draft budget.
Now read these
Macron and Merz: Europe must arm itself in an unstable world, the French President and German Chancellor write in a joint piece for the FT.
Summer offensive: Russia’s advances have been aided by a novel type of attack drone that cannot be jammed.
Bidding wars: Brussels is examining the Italian government’s controversial sale of shares in Monte dei Paschi di Siena last year.
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