Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union.

NATO was preparing to offer Donald Trump a military-spending target of 5% of GDP on a silver platter. That’s until Spanish Prime Minister Pedro Sanchez rejected the spending plan, threatening to derail a NATO summit that Secretary General Mark Rutte needs to run smoothly — with the military alliance’s survival potentially at stake. As the gathering starts in The Hague today, Rutte needs to keep Spain in line while preventing others, like Slovakia, from breaking ranks. Everybody will be bracing for Trump’s reaction, even as a pause appears to be on hand in the Middle East after the US president announced a ceasefire in the 12-day war between Iran and Israel. 

— Andrea Palasciano and Michal Kubala

What’s Happening

Transatlantic Bonds | The EU and Canada signed a security partnership that moves them closer to cooperation on military purchases, as Prime Minister Mark Carney aims to reduce his country’s dependence on the US for defense.

LNG Rush | Flows into Germany’s LNG terminals have surged in recent months amid a rush to replenish gas reserves. But much of the fuel they import is flowing abroad — leaving domestic storage levels stubbornly low, even though Germany spent billions of euros on building the terminals after the energy crisis laid bare its supply security risks. 

Cautious ECB | The ECB is well-positioned to manage heightened economic and political uncertainty, according to its president, Christine Lagarde, who said the central bank is monitoring oil price swings cause by tensions in the Middle East. With inflation stabilizing around 2% and growth risks persisting, policymakers, including Lagarde, remain cautious about further interest-rate adjustments. 

Border Help | As Russia’s war on Ukraine shows no sign of easing, leaders from Poland and the three Baltic nations have called on the EU to step up financial support for plans to reinforce their borders, the first line of defense on the bloc’s eastern flank. 

Around Europe

Novo’s Breakup | Novo Nordisk ended its partnership with telehealth platform Hims & Hers, saying the US company used deceptive marketing practices to sell unauthorized versions of its blockbuster obesity drug Wegovy. 

Fiscal Reset | Romania’s new government, sworn in yesterday, unveiled plans to scale back the budget deficit by 30 billion lei ($6.8 billion) this year as part of a broader package that may involve a one-off bank levy and pension and wage caps. 

Squeezing Exits | Wealthy Europeans are increasingly facing steep so-called exit taxes as nations like Germany, Norway, and Belgium expand levies targeting rich individuals who want to move abroad. Such controversial taxes seek to recoup lost revenue upfront or make residents reconsider their departure. 

Luxury Slump | Meanwhile, London’s luxury housing market is in a downturn and the conditions are set to get worse with further price cuts and financial distress. Prime property values already tumbled over 20% from their peak and waning foreign interest and unfavorable tax changes make buyers increasingly scarce.

Chart of the Day

Germany plans to significantly boost defense spending to 3.5% of GDP over the next five years, aligning with NATO’s heightened defense targets amid rising threats from Russia. Chancellor Friedrich Merz’s coalition aims to reverse decades of military underinvestment by the EU’s biggest economy, although he acknowledged challenges in recruiting sufficient qualified personnel. Read here on what Germany’s budget plans include.

Today’s Agenda

All times CET

• 10 a.m. NATO Secretary General Mark Rutte delivers address at NATO Leaders' Summit in The Hague
• 5:45 p.m. Bill Gates speaks at European Parliament development committee
• EU industry chief Sejourne participates in roundtable with Eurocommerce CEOs
• EU Parliament transport committee adopts position on two draft bills on passenger rights
• EU trade commissioner Maros Sefcovic, Swiss Foreign Minister Ignazio Cassis sign joint declaration on level of partnership between EU & Switzerland
• EU European affairs ministers meet in Luxembourg

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