This analysis provides an overview of the current state of the EU–Mercosur Agreement and explains the transition from negotiation to ratification, marking the beginning of a new and politically sensitive phase.

Against this background, attention is first devoted to the institutional dimension, where the recent formal authorisation by the EU Council to proceed with the signature of the agreement signals a renewed momentum at EU level, while at the same time leaving unresolved a series of significant political and legal challenges that are likely to shape the forthcoming ratification process.

The analysis then turns to the legal architecture of the agreement, providing a concise analysis of the two legal instruments that together constitute the agreement: the “Interim Trade Agreement” and the “EU–Mercosur Partnership Agreement”. This section delineates briefly the respective scope and objectives of each instrument and underscores their fundamental distinction, the fact that they are subject to two different ratification procedures.

The following section turns to the issue currently at the centre of the political and institutional debate, namely the potential recourse to provisional application. It focuses on the legal basis enabling the early implementation of trade-related provisions, while also examining the reasons why this option continues to give rise to significant controversy. In this context, particular emphasis is placed on concerns expressed by the European Parliament regarding democratic oversight and institutional balance, as well as on the asymmetric nature of the enforcement mechanisms governing trade obligations as compared with those applicable to sustainability- and climate-related commitments.

The discussion continues considering the positions of Member States and economic stakeholders. It outlines the strong support expressed by export-oriented industries, which anticipate rapid and tangible economic gains, alongside persistent resistance from agricultural producers and a few Member States concerned about potential market disruption, regulatory divergence, and adverse environmental effects.

The final section provides a forward-looking evaluation of where political and institutional attention is expected to concentrate in the coming days and months. It points to the role of the European Parliament, including possible legal initiatives and forthcoming approval decisions, as well as to the choices that may be exercised by the Council regarding provisional application.

Going forward, close attention will be required as developments unfold, given that the forthcoming steps are likely to shape the timing, trajectory and long-term political sustainability of the EU–Mercosur Agreement.

INDEX

The Latest Institutional Development The Interim Trade Agreement The EU-Mercosur Partnership Agreement The Provisional Application and the position of the EU Parliament The position of the Member States and Industries What to expect

The Latest Institutional Development

After years of intermittent progress, in early 2026 the EU–Mercosur agreement decisively returned at the top of the European agenda.

The last few days have clarified two things at once: institutional momentum is real, as the European Union has formally paved the way for signature, but the most difficult political challenges now lie in the ratification phase, which could still slow or, for some experts, reshape the path to entry into force.

On 9 January 2026, the EU Council approved the signature of the EU–Mercosur comprehensive partnership and trade agreement package which includes:

the Interim Trade Agreement (“iTA”). and the EU-Mercosur Partnership Agreement (“EMPA”),

Although both are integral components of the same agreement, these two components will follow different institutional procedures. The trade provisions will advance under EU exclusive competence, while the broader Partnership Agreement has been qualified as a mixed agreement.

In practical terms, under Article 218(6) TFEU, both acts must first be approved by the European Parliament but only the EMPA will also be subject to ratification by all Member States.

This “split approach”, as designed by the Commission and endorsed by the Council, was intended to advance the trade agreement, limiting legal and political friction, but it has also fuelled controversy over provisional application, i.e. the possibility of applying trade provisions before full parliamentary approval.

As a result, the process is still far from concluded.

The Interim Trade Agreement

The Interim Trade Agreement is focused on trade and investment liberalisation. It will operate as a separate agreement until the full EMPA comes into force.

Its main goal is to deliver economic benefits as quickly as possible. Indeed, the agreement provides tariff reductions and new market access for a wide range of goods and services. It also includes measures to facilitate investment and to reduce barriers to cross-border trade in services. Furthermore, it includes rules on government procurement which will allow EU companies to take part in public tenders in Mercosur countries.

Under EU law, the Interim Trade Agreement is considered to fall under the European Union’s exclusive competence. Pursuant to Article 218(8) TFEU, this allowed the Council to decide by qualified majority and removed the need for national ratification at this stage. On this legal basis, the Council decision of 9 January formally authorises the signing of the agreement on behalf of the European Union.

Commission President Ursula von der Leyen and European Council President António Costa are already preparing to travel to Paraguay, which currently holds Mercosur’s rotating presidency, to sign the agreement probably within the end of the week.

Then, while the European Parliament cannot amend the text, it must decide whether to approve or reject it. The vote is expected to be finely balanced, with Members of the European Parliament likely to vote more along national lines than according to political affiliation.

However, ahead of the vote, MEPs are expected to decide whether to request a legal opinion from the Court of Justice of the EU on the legality of the split approach and the classification of the Interim Trade Agreement as falling under EU exclusive competence. The proposal, first tabled in November 2025 by 145 MEPs, was temporarily blocked pending clarification of the Council’s position. Now, the vote could take place during the next plenary session, starting on 19 January. If approved, the request would likely delay ratification, but it would not necessarily prevent the provisional application of the trade provisions, should the Council decide to proceed.

The EU-Mercosur Partnership Agreement

The EMPA establishes a single framework for political dialogue, cooperation, and sectoral engagement between the parties, including a trade and investment pillar that will apply once the agreement enters into force. It aims to strengthen cooperation in key areas such as sustainable development, climate action, digital transformation, human rights. Lastly, the agreement promotes closer coordination on global challenges and supports the exchange of best practices, while reinforcing coordination in multilateral fora.

As said, the Partnership Agreement qualifies as a mixed agreement under Article 217 TFEU. It means that, after the EU Parliament vote, the broader partnership elements would require also national ratifications in EU member states.

The Provisional Application and the position of the EU Parliament

The most debated topic in recent days surrounding the EU-Mercosur Agreement concerns the possibility of its provisional application.

After the signature in Paraguay, under Art. 218(5) TFUE, the Council may decide to provisionally apply the Interim Trade Agreement even before the European Parliament has expressed its vote on it.

Provisional application would be a turning point because it allows key market-access commitments, such as tariff reductions, to apply before the whole Agreement is formally concluded and fully ratified.

The EU Parliament still retains the right to approve or reject the deal later but many MEPs fear that putting the agreement into practice first and asking for political approval afterward, would weaken democratic scrutiny.

Moreover, it has been argued that provisional application creates an inherent asymmetry. Economic benefits can take effect quickly, for example through the immediate reduction or elimination of tariffs, and these commitments are supported by strong enforcement mechanisms, including binding dispute settlement and the possibility of trade retaliation. By contrast, sustainability and climate-related commitments, such as labour and environmental standards, are subject to weaker enforcement, as they rely on dialogue and expert-based procedures rather than trade sanctions.

For these reasons, in response to the European Commission’s proposal, the European Parliament adopted, on 16 December, a position focused on strengthening the rules governing the implementation of the trade agreement:

It adopted a position on bilateral safeguard measures aimed at preventing imports from Mercosur countries from causing serious injury to the EU agricultural sector. The approved text allows the EU to temporarily suspend tariff preferences for sensitive agricultural products, notably poultry and beef, originating from Argentina, Brazil, Paraguay and Uruguay. The Parliament also tightened safeguard activation conditions by lowering import increase thresholds and significantly shortening investigation timelines, enabling faster intervention in cases of market disruption. In addition, it introduced a reciprocity mechanism requiring the Commission to act where credible evidence shows that imports benefiting from tariff preferences do not comply with equivalent EU standards in areas such as environmental protection, animal welfare, food safety or labour conditions. This broadens the legal basis for safeguards beyond purely quantitative market effects.

Finally, on 18 December, Parliament and Council negotiators reached an informal agreement on the main parameters of the safeguard legislation. The provisional compromise clarifies the definition of serious injury, strengthens import- and price-based monitoring thresholds, improves data exchange between Member States and the Commission, and reinforces continuous market surveillance. Although still subject to formal adoption, this agreement aims to significantly increase legal certainty regarding the operation of safeguards once tariff concessions take effect.

However, at the beginning of 2026, the latest Council’s decision, which kept the option of provisional application open, once again fuelled scepticism, as it could be used if Parliament delays ratification by requesting a legal opinion from the Court of Justice of the European Union.

In this context, also Commission officials intervened and tried to reassure the lawmakers that there is no intention to circumvent Parliament and that provisional application would not automatically follow the signature in Paraguay, especially given that the Mercosur countries would also require time to ratify the agreement.

In this particularly tense political and interinstitutional climate, attention is currently focused on the European Parliament, to see whether it will decide to refer the matter to the Court, and, if so, on the Council, to assess whether it will actually make use of the option of provisional application.

The position of the Member States and Industries

Positions among EU member states and economic actors remain sharply divided, largely along sectoral and national lines.

Export-oriented industries across manufacturing, chemicals, automotive components, and agri-food processing broadly support the agreement. For these sectors, the EU–Mercosur deal delivers tangible commercial gains by eliminating high tariffs on EU exports (duties that currently reach up to 35% on products such as car parts and alcoholic beverages) and by reducing non-tariff barriers in a fast-growing South American market. From this perspective, the agreement strengthens EU competitiveness and reinforces supply-chain diversification at a time of global economic fragmentation.

On the other hand, opposition remains strong among agricultural producers and several member states with politically influential farming sectors. France has emerged as the most vocal critic, joined by Italy, Ireland, Poland, Austria and Hungary, all of which have raised concerns about the impact of duty-free quotas granted to Argentina and Brazil for beef, poultry and other sensitive products, like rice and sugar. While Mercosur governments argue that these quotas are limited and commercially modest, many European farmers fear being undercut by imports produced with different rules on animal-welfare and environmental standards. These concerns are heightened by the perception that EU farmers face rising compliance costs linked to pesticide restrictions, animal welfare rules and climate policies.

Nonetheless, some experts pointed out that while European farmers failed to block the EU–Mercosur trade agreement, they ultimately emerged politically stronger. The deal moved forward only after Brussels introduced extensive safeguards and tighter import controls. For example, the EU can suspend tariff-free imports if market disruption occurs. The Commission has also pledged enhanced border controls and new rules to prevent the import of products treated with pesticides banned in the EU. It is also important to consider the large budgetary concessions made to the agriculture industry. In the EU's upcoming long-term budget, the Commission announced a €45 billion budget manoeuvre that would enable Member States to allocate greater funds to farmers. Yet, these assurances have not fully softened opposition from farming unions or from green and left-wing political groups, which continue to warn that the agreement risks accelerating deforestation, both in EU and South America, undermining indigenous rights, and weakening environmental protections.

What to expect

In the immediate term, attention will focus on three closely connected institutional milestones.

First, the signature of the agreement in Paraguay. Second, the spotlight will shift to the European Parliament, whose consent is required to move forward the final approval. It also remains to be seen whether the European Parliament will seek a legal opinion from the Court of Justice, a move that could delay the agreement’s ratification by several months. Third, debate will intensify around the sequencing of implementation, particularly the possibility of provisional application of the trade provisions while waiting for full ratification of the broader Partnership Agreement. 

Taken together, these steps suggest that while EU–Mercosur has decisively moved beyond diplomatic stagnation, its future now lays less on negotiation and more on domestic politics and legal strategies.

 

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Banking and Finance

The Venezuelan Central Bank (VCB) established the interest rates applicable to obligations derived from employment relationships (59.22% and 47.61% - May 2025) and to transactions with credit cards (60.00% annual maximum lending rate and 17.00% annual minimum lending rate - June 2025). (Official Gazette of 06/30/2025. Official Notice. Entry into force: Upon publication in the Official Gazette). TAX As per Ruling of the National Integrated Service of Customs and Tax Administration (Servicio Nacional Integrado de Administración Aduanera y Tributaria SENIAT), the natural persons categorized and notified as special taxpayers and who are organized or to be organized as sole proprietorship were designated to act as value added tax withholding agents. Administrative Ruling No. SNAT/2015/0049 of 07/14/2015, published in Official Gazette of 08/10/2015, was repealed. (Official Gazette of 07/16/2025. Administrative Ruling SNAT/2025/000054. Entry into force: 08/01/2025).

Telecommunications

The National Telecommunications Commission issued an Administrative Ruling that determines the portions of the radio spectrum that will be subject to the public bid offer according Telecommunications to the Organic Law and other applicable rules. Administrative Ruling No. 113 of 09/20/2024, published in Official Gazette of 12/03/2024, was repealed. (Official Gazette of 07/25/2025. Administrative Ruling No. 145. Entry into force: Upon publication in the Official Gazette).

Miscellaneous

The Comptroller General’s Office of the Republic resolved to extend from 08/01/2025 to 08/15/2025 the period of time for filing the updated sworn declaration of property owned (declaración jurada de patrimonio) by the highest authorities and officers holding top and trusted positions at the entities indicated in the Organic Law of the Comptroller General’s Office of the Republic and of the Fiscal Control National System. The extension is valid solely for the current fiscal period. (Official Gazette of 07/30/2025. Resolution No. 01-00-000210. Entry into force: Upon publication in the Official Gazette).The Ministry of the Popular Power for National Trade declared the following standards as Venezuelan COVENIN Standards of national character; the content of said standards will be published in the institutional site of the Deconcentrated Service of Standardization, Quality, Metrology, and Technical Regulations (Servicio Desconcentrado de Normalización, Calidad, Metrología y Reglamentos Técnicos - SENCAMER) (www.sencamer.gob.ve). (Official Gazette of 06/30/2025. Entry into force: Upon publication in the Official Gazette).

Tax

The SENIAT readjusted the value of the Tax Unit from nine bolivars (Bs. 9.00) to forty-three bolivars (Bs. 43.00). (Official Gazette of 06/02/2025. Administrative Ruling No. SNAT/2025/000048. Entry into force: Upon publication in the Official Gazette).

The National Assembly issued the Capital District Tax System Law. The purpose of said Law is to regulate the creation, organization, collection, control, auditing, inspection, verification, protection, and administration of the one per thousand (1x1000) tax, the rates, the electronic fiscal stamp and the penalties over which the Capital District has competence. The provisions of the Law are applicable to all of the activities that generate payment of the taxes established in this legal framework for the jurisdiction of the Capital District. The Special Law of Fiscal Stamps for the Capital District, published in Official Gazette of 05/02/2012, is repealed, as well as any other legal instrument that conflicts with said Capital District Tax System Law. (Official Gazette No. 6.909 Extraordinary of 06/02/2025. Entry into force: Upon publication in the Official Gazette).

A Decree of the Government of the Capital District issued the Regulations to the Capital District Tax System Law, with the purpose of developing the rules, application of and compliance with the tax obligations established in the Capital District Tax System Law. (Official Gazette of the Capital District of 06/26/2025. Decree No. 241. Entry into force: Upon publication in the Official Gazette of the Capital District).

A Presidential Decree suspended the application of the exemptions for the importation of the goods established in number 1 of article 17 of the Decree with the Status, Value, and Force of Law that establishes the Tax on Value Added Tax. The suspension of the exemption for said importation includes different food and products for human consumption, fertilizers, medicines and agrochemicals and active principles used exclusively for the manufacturing of the same, motor vehicles with special adaptations for disabled people, pacemakers, newspapers, books, among others. Likewise, said Decree exempted from Value Added Tax the final importation of corporeal personal property, made by the agencies and entities of the National Public Administration, as well as the importation made by natural or legal persons with their own resources, classified into the customs codes indicated in Appendix I to said Decree. The benefit of exemption prescribed in the Decree will be applied as of the date of filing of the relevant Customs Declaration for importation. The exemption benefits will apply for a period of one (1) year as from the entry into force of the Decree. (Official Gazette No. 6.918 Extraordinary of 06/30/2025. Decree No. 5.145. Entry into force: Five (5) days following its publication in the Official Gazette). Note: This Gazette has not been published in the web page of the National Printing and Official Gazette Autonomous Service yet. You may access it through the official web page of the National Integrated Service of Customs and Tax Administration (SENIAT).

Presidential Decree No. 5.146 (Decree on Customs Exemptions) established as follows:(i) an exemption of ninety percent (90%) from import duties and ninety percent (90%) from value added tax is established for the final importation of new or used corporeal personal property, made by agencies of the National Public Administration and by natural or legal persons with their own resources, classified into the customs codes indicated in Appendix 1 to Decree 5.146. This tax benefit operates by reason of law only;(ii) an exemption from import duties and value added tax is established for the final importation of corporeal personal property, made exclusively by the Ministry of the Popular Power for Electric Energy or its assigned agencies and entities, classified into the customs codes indicated in Appendix II to Decree No. 5.146.;(iii) an exemption from import duties and value added tax is established for the final importation of corporeal personal property, made exclusively by the Ministry of the Popular Power for Attention to Waters or the agencies or entities assigned to it, classified into the customs codes indicated in Appendix III to Decree No. 5.146;(iv) an exemption from import duties and value added tax is established for the final importation of corporeal personal property, made exclusively by the Ministry of the Popular Power for Mining Ecological Development or its assigned agencies and entities and the Corporación Venezolana de Guayana (CVG) or the companies assigned to it, classified into the customs codes indicated in Appendix IV to Decree No. 5.146.(v) an exemption from import duties and value added tax is established for the final importation of corporeal personal property made exclusively by the Corporación Socialista del Cemento (CSC) and the companies assigned to it, classified into customs codes 2520.10.11.00, 4010.19.00.00, 4010.39.00.00, 6902.10.90.00, and 7325.91.00.00. The exemption benefit prescribed in the Decree will apply as of the date of filing of the relevant Customs Declaration for importation. The exemption benefits established in the Decree will apply for one (1) year as from publication of the same in the Official Gazette. (Official Gazette No. 6.918 Extraordinary of 06/30/2025. Decree No. 5.146. Entry into force: Upon publication in the Official Gazette). Note: This Gazette has not been published in the web page of the National Printing and Official Gazette Autonomous Service yet. You may access it through official web page of the National Integrated Service of Customs and Tax Administration (SENIAT).

A Presidential Decree issued a Partial Amendment to Decree No. 4.944, dated 04/24/2024, published in Official Gazette No. 6.804 Extraordinary, dated 04/25/2024, through which the Schedule of Customs Duties was issued. (Official Gazette No. 6.918 Extraordinary of 06/30/2025. Entry into force: Upon the elapsing of five (5) days after publication in the Official Gazette). Note: This Gazette has not been published in the web page of the National Printing and Official Gazette Autonomous Service yet. You may access it through official web page of the National Integrated Service of Customs and Tax Administration (SENIAT).

TELECOMMUNICATIONS

The National Telecommunications Commission (Comisión Nacional de Telecomunicaciones – CONATEL) issued an amendment to the Administrative Ruling containing the Conditions for Qualification of Free Use Equipment, published in Official Gazette of 06/10/2013, in order to include new equipment and frequency bands for Radio Local Area Network Devices (RLAN), Medical Implant Communication Service (MICS), Proximity Sensors for Automotive Use, and Short-Range Devices. (Official Gazette of 06/16/2025. Administrative Ruling No. 064. Entry into force: Upon publication in the Official Gazette).

CONATEL established the parameters and indicators to which the subscription broadcast service will be subject, as well as the goals to be met by the operators of said service, in order to bring about access to and provision of the same in appropriate quality conditions. Administrative Ruling No. 841, published in Official Gazette of 09/12/2006, was repealed. (Official Gazette of 06/16/2025. Administrative Ruling No. 071. Entry into force: Upon publication in the Official Gazette).

CONATEL established the measures for implementation of Protocol IPv6, as well as the goals to be met by the operators that render telecommunications services and use the Protocol IP. (Official Gazette of 06/16/2025. Administrative Ruling No. 096. Entry into force: Upon publication in the Official Gazette).

MISCELLANEOUS

The Ministry of the Popular Power for Mining Ecological Development determined the geographical areas in the State of Bolívar in which the Corporación Venezolana de Minería S.A. (CVM) and the Compañía General de Minería de Venezuela C.A. (MINERVEN) will perform the activities prescribed in article 1⁰ of the Decree with the Status, Value and Force of Organic Law that Reserves to the State the Activities of Exploration and Exploitation of Gold and other Strategic Minerals. Likewise, it determined the areas in the State of Falcón in which Carbones del Zulia S.A. (CARBOZULIA) will perform the activities prescribed in article 1⁰ of the Decree with the Status, Value and Force of Organic Law that Reserves to the State the Activities of Exploration and Exploitation of Coal and other Strategic Minerals. (Official Gazette of 06/18/2025. Resolutions Nos. 018-2025, 019-2025 y 020-2025. Entry into force: Upon publication in the Official Gazette).

A Resolution of the Ministry of the Popular Power for Productive Agriculture and Lands fixed at six (6) months the period of effectiveness of the phytosanitary and zoosanitary permits required for the importation of animals, vegetables, products and derivatives of both origins, granted by the National Institute of Integral Agricultural Health (Instituto Nacional de Salud Agrícola Integral - INSAI). Said period of effectiveness will begin on the date of issue of the relevant phytosanitary or zoosanitary permit. The permits in force by the date of publication of the aforesaid Resolution will be valid up to the expiration date established in the same. Resolution DM/No. 022/2023, published in Official Gazette of 11/22/2023, is repealed. (Official Gazette of 06/11/2025. Resolution DM/No. 043/2025. Entry into force: Upon publication in the Official Gazette).

The European Union has adopted its 18th package of restrictive measures in response to Russia’s ongoing war of aggression against Ukraine. This latest package, among the most comprehensive to date, targets key sectors of the Russian economy and introduces new measures to prevent circumvention and ensure accountability.

Key Elements of the 18th Sanctions Package:

Energy Sector: The EU has lowered the price cap on Russian crude oil from $60 to $47.6 per barrel, aligning it with global market prices. A dynamic mechanism has been introduced to adjust the cap automatically. An additional 105 vessels linked to Russia’s shadow fleet are now banned from EU ports, bringing the total to 444. Sanctions now target companies and individuals involved in circumventing the oil price cap, including a major Indian refinery and a vessel captain. Banking and Trade: New restrictions have been imposed on Russian financial institutions and trade entities. The EU has introduced an import ban on refined petroleum products made from Russian crude oil, even if processed in third countries—excluding Canada, Norway, Switzerland, the UK, and the US. Military-Industrial Complex: Sanctions target entities supplying or supporting Russia’s military operations, including those involved in the production and transport of military equipment. Accountability Measures: The EU has listed 55 new individuals and entities (14 individuals and 41 entities), bringing the total number of individual listings to over 2,500. These include actors responsible for crimes against Ukrainian children and cultural heritage. Belarus: Complementary measures have also been adopted against Belarus in light of its continued support for Russia’s war efforts.

This package underscores the EU’s unwavering commitment to supporting Ukraine and increasing pressure on the Kremlin until a just and lasting peace is achieved.

Tax Reduction in Madrid: Inheritances and Donations

Since 2019, the Community of Madrid has continued with tax reductions in all kinds of areas such as personal income tax (IRPF), rentals, and, once again, the Inheritance and Gift Tax (ISD). A total of 32 reductions, which places the Spanish capital as a leader in the Autonomous Fiscal Competitiveness Index in Spain (an independent index prepared by the Foundation for the Advancement of Liberty and the US Tax Foundation).

As part of the taxes ceded by the State, the Autonomous Community of Madrid has approved that, starting from July 1, 2025, when the law comes into force, gifts and inheritances between nephews/nieces and uncles/aunts (Group III) will see their ISD bonus increase from 25% to 50%. This regulation, in addition to increasing the tax bonus, also simplifies the requirements for accessing these benefits.

MAIN NOVELTIES

1. Extension of Bonuses.

The new regulation raises the bonus on the ISD tax liability to 50% for taxpayers in kinship group III, which includes:

Second and third-degree collateral relatives by blood (brothers/sisters, uncles/aunts, and nephews/nieces) Second and third-degree collateral relatives by affinity (brothers-in-law/sisters-in-law, uncles/aunts by marriage, and nephews/nieces by marriage) Ascendants and descendants by affinity (parents-in-law, sons-in-law, and daughters-in-law)

Both mortis causa acquisitions (inheritances) and inter vivos acquisitions (gifts) receive this bonus, which was previously 25%. Although it is still far from the 99% bonus maintained by groups I and II (parents, children, and spouses).

2. 100% Bonuses for Small Gifts.

The tax liability on gifts of up to 1,000 euros, regardless of the degree of kinship, receives a total bonus on the tax liability. However, this bonus can only be applied once every 3 years between the same donor and donee.

Furthermore, the submission of self-assessment will not be mandatory when the donated asset does not require registration.

3. Formal Simplification.

From July 1, the requirements regarding public documents are made more flexible:

It will only be mandatory when the taxable base of the gift exceeds 10,000 euros (provided by the law does not require it for its validity). Gifts made in a private document can be elevated to a public document within a voluntary self-assessment period without losing the tax benefit.

DISCLAIMER: This document has been prepared for internal professional development purposes only. It is also exceptionally addressed, as a courtesy, to a circle of selected contacts for information purposes. Reproduction and distribution to third parties is prohibited. It cannot under any circumstances be considered as legal, fiscal, accounting or any other kind of professional opinion. GA-Alliance is at disposal for any further information and/or request and/or clarification.

This document aims to provide a thorough examination of the European Union’s approach to Foreign Direct Investment (FDI) screening, with a particular focus on presenting the diverse perspectives of EU institutions on the key topics involved. It highlights how the European Commission, the European Parliament, and the Council differ and converge on the objectives, scope, procedures, and powers related to FDI screening, thereby illustrating the ongoing political dialogue shaping the final regulatory framework.

The first section explains the driving forces behind the EU’s increasing emphasis on coordinated FDI screening. It identifies growing concerns over the potential risks that foreign investments may pose considering both the external geopolitical context and the internal difficulties. Following this, the document presents a detailed timeline outlining the development of the FDI screening initiative and the stances of the EU institutions.

The core of the document examines the main issues related to FDI screening and the differing views between the institutions that will be discussed during the trilogue, reflecting broader debates between national sovereignty and EU-level coordination within this framework. It begins by defining the scope of national screening mechanisms, clarifying which types of investments and sectors are subject to review. It then explores the procedural aspects of these mechanisms. The attention is then to the criteria used for risk assessment.

The document also discusses the rules for multi-jurisdictional transactions, where investments span multiple Member States. Then, central to the EU’s approach is the cooperation mechanism established to facilitate information sharing and joint assessments among Member States. Finally, the willingness of the Parliament to expand the role and powers of the European Commission is examined.

In conclusion, the document summarises the balance that must be struck between protecting security and public order and preserving the EU’s attractiveness to foreign investors, highlighting ongoing debates among institutions.

At the end, a table summarises the positions of various EU institutions on the FDI screening proposal, providing insight into the political dynamics shaping the final regulatory framework.

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BRUSSELS AIMS FOR THE STARS: THE EU SPACE ACT UNVEILED

On 25 June 2025, the European Commission presented the proposal for a regulation known as the EU Space Act, taking the first concrete step toward creating a unified internal market for space activities.

The initiative seeks to replace the current patchwork of national laws—comprising thirteen different regulatory systems—with a single European legal framework. The goal is to boost the EU’s global competitiveness, particularly in comparison with the United States and China.

The proposed Regulation is built on three core pillars: security, resilience, and sustainability.

Security: The Act introduces mandatory satellite tracking and disposal plans, addressing the growing issue of orbital pollution. Equally important are the new obligations concerning the use of collision avoidance services. For businesses, this means greater operational predictability, fewer in-orbit incidents, and significantly lower costs from corrective manoeuvres. Resilience: The Act requires risk assessments across the full lifecycle of space missions, with strong emphasis on cybersecurity and electronic interference. This marks a regulatory breakthrough aimed at preventing blackouts and malfunctions while tackling a rising threat—space-related cyberattacks, which cost the industry around €1 billion annually. Additional measures are introduced to ensure the continuity of critical data services in sectors such as telecommunications, defence, and transport. Sustainability: The third pillar establishes a set of rules to promote low-impact technologies and extend satellite lifespans. The regulation mandates lifecycle assessments for all missions and foresees the creation of shared databases to track and reduce environmental impact. Emerging technologies—such as in-orbit servicing and debris removal—are also incentivised. The objective is twofold: lowering costs while making missions more efficient and sustainable.

In case of violations, companies may face fines of up to 2% of their global annual turnover or an amount equal to twice the profits gained or losses avoided through the breach. There are, however, exceptions. The regulation does not apply to satellites already in orbit, nor to those used exclusively for military or national security purposes.

The Act also addresses operations beyond EU borders. Non-European companies operating in the EU market must appoint a legal representative within the Union and comply with equivalent requirements—unless their country of origin is recognised as offering comparable oversight (as is the case with the United States).

CONTEXT

The strategic importance of the space sector for the EU has been long recognised, as highlighted in both the Letta and Draghi reports. This direction has since been reaffirmed in the Competitiveness Compass and the Commission’s 2025 Work Programme.

The need for such a measure also emerged in two joint communications: the EU Approach for Space Traffic Management and the EU Space Strategy for Security and Defence. These communications responded to Member States’ calls for a coherent, stable, and harmonised regulatory framework capable of fostering a true internal market for space—one that can drive innovation and investment.

Pressure for EU-level action has come not only from Member States, but also from real-world developments in orbit. In recent years, there has been an exponential rise in so-called "constellations" of low-orbit satellites, led by Elon Musk’s Starlink. These systems offer faster, more reliable connections—but at the cost of increasing space congestion. With over 10,000 satellites already in orbit and 50,000 more expected by 2030, the volume of debris is also growing rapidly. This has prompted the EU’s clear objective: curb the surge in space debris and tighten oversight of sector operators before the situation becomes unmanageable.

Yet the issue is not just technical. Space is now both congested and contested—prompting the EU to adopt a firmer regulatory stance. For years, the United States and China have competed to shape global space governance, rallying blocs of aligned countries. The US spearheaded the Artemis Accords—a set of non-binding principles for peaceful cooperation in space exploration, endorsed by most EU Member States. Meanwhile, China has proposed its own framework for peaceful space use, aiming to build a parallel alliance of partner countries.

Adding to the geopolitical complexity are Europe’s own vulnerabilities, exposed during the war in Ukraine. Elon Musk’s satellite network played a crucial role in maintaining communications during the conflict, highlighting the risks of relying on non-European private infrastructure. This dependence triggered alarm bells in Brussels, reinforcing the need for the EU to strengthen its strategic autonomy in space.

In short, the confluence of rapid sectoral developments, intensifying global competition, and fragmented national regulations has made the EU’s initiative both timely and necessary. By establishing its own comprehensive framework, the Union is seeking not only to regulate its internal market, but also to shape the rules of the game on the global stage.

Backing this ambition are strong political signals. French President Emmanuel Macron, among others, has called for significantly increased investment in the space sector, urging the next EU budget to allocate at least €60 billion to space policy. Underscoring France’s determination, the government has also increased its stake in Eutelsat—seen as the most credible European alternative to Starlink.

ITALY TAKES OFF

On the same day the EU Space Act was presented, Italy enacted Law No. 89 of 13 June 2025, introducing—for the first time—a comprehensive national framework governing outer space and both public and private space activities.

Entitled "Provisions on the Space Economy," the law places Italy among the few countries worldwide with a dedicated space law. It addresses geopolitical, technological, and environmental challenges with a bold vision and advanced legal instruments.

The text clearly defines space activities and requires prior authorisation for all operators, including Italian entities active abroad. It sets firm requirements on national security, cybersecurity, environmental sustainability, debris management, and insurance coverage. Implementation and coordination are entrusted to a structured institutional setup involving the Italian Space Agency (ASI), COMINT, and the Prime Minister’s Office.

The law also governs the registration of space objects, sets liability rules for operators and the state, and establishes procedures for revoking or suspending authorisations on security grounds. Notably, it includes dedicated rules for public procurement in the space sector, aligning with the Public Contracts Code and opening access to innovative start-ups and SMEs.

Through this dual legislative push, both Italy and the EU are positioning themselves as key players in the new space era. The result: tangible new opportunities for Italian and European businesses, now able to operate within a clearer, more stable, and harmonised legal environment.

SPAIN’S PLAN TO INCENTIVISE SAVINGS AND INVESTMENT

The CNMV (National Securities Market Commission) has highlighted the need to make European savings accounts more attractive both fiscally and operationally. They encourage offering tax advantages to incentivise long-term investment and direct savers’ money towards key sectors like digitalization and sustainability.

Spain, along with other European countries, is promoting a Competitiveness Laboratory to establish a label for investment products that provide tax benefits. However, since taxation is a national competence, the European Commission can only make suggestions or recommendations.

The CNMV also emphasizes the need to improve financial education so that citizens can access more profitable investment options beyond bank deposits. Additionally, measures are being prepared to strengthen capital markets and reduce burdens for fund managers.

In this regard, Inverco and the CNMV have joined forces to implement key European and OECD proposals for funds and pensions, welcoming additional tax incentives. This was discussed at the 2025 General Assembly of Inverco held in Madrid on June 04-06-2025, specially how to boost savings, investment in funds and pensions.

Nationwide, a key factor would be to maintain the current regulatory framework for funds while welcoming extra tax advantages to attract new investment flow. On the European side, the upcoming measures should eliminate national barriers to the cross-border commercialization of founds.

Moreover, the OECD made a report in which recommends to take action and promote measures such as boosting company and individual pension plans while considering contentious issues like removing the ten-year liquidity cutoff in pension vehicles. 

SOURCES:

Ángel Alonso, Madrid, 04-06-2025 “la CNMV insiste en que las cuentas de ahorro europeas sean ‘fiscalmente atractivas y sencillas operativamente’” Funds Society, 04-06-2025 “Inverco y la CNMV suman fuerzas para materializar las propuestas marcadas por Europa y la OCDE en fondos y pensiones, y dan la bienvenida a incentivos fiscales añadidos.”

COMMISSION UNVEILS €193 BILLION EU BUDGET FOR 2026

On 4 June, the European Commission has put forward its draft EU annual budget for 2026, amounting to €193.26 billion in commitments, complemented by €105.32 billion from NextGenerationEU. Building on the mid-term review of the EU’s 2021–2027 long-term budget, the proposal aims to address ongoing global and regional challenges, such as the energy crisis and rising geopolitical tensions.

The 2026 draft budget aligns with the new Commission priorities by allocating funds to key flagship initiatives, including the Competitiveness Compass, the Clean Industrial Deal, the Union of Skills, and the EU Startup and Scaleup Strategy. It also introduces simplification measures through new Omnibus proposals, aiming to streamline EU funding and implementation processes.

BACKGROUND

The draft EU budget for 2026 includes both the expenditure covered by the long-term budget ceilings, financed through the EU’s own resources, and additional spending under the NextGenerationEU instrument, which is financed through borrowing on the capital markets.

For the core EU budget, two figures are presented for each programme: commitments and payments. Commitments represent the amounts that can be legally agreed upon in contracts during the year, while payments refer to the actual disbursements made within the same period. All figures are expressed in current prices.

NEXT STEPS

The European Parliament and the Council must formally adopt the 2026 budget before year-end.

BUDGET BREAKDOWN

Below is an overview of the main budget priorities and the amounts allocated to each:

Agriculture and Fisheries: €54.6 billion

€53.8 billion – Common Agricultural Policy

€0.8 billion – European Maritime, Fisheries and Aquaculture Fund

Regional Development and Cohesion: €42.09 billion Social Cohesion and Employment: €14.51 billion (through the European Social Fund Plus) External Action and Global Partnerships: €15.51 billion

€10.11 billion – NDICI – Global Europe

€2.20 billion – Instrument for Pre-Accession Assistance (IPA III)

€0.50 billion – Growth Facility for the Western Balkans

€1.93 billion – Humanitarian Aid (HUMA)

Ukraine Support: €10.59 billion

€3.89 billion – Grants under the Ukraine Facility

€6.70 billion – Loans

Research and Innovation: €14.12 billion

€12.97 billion – Horizon Europe (Includes funding for the European Chips Act)

Strategic Investments: €4.59 billion

€3.02 billion – Connecting Europe Facility (cross-border infrastructure)

€1.00 billion – Digital Europe Programme

€299 million – InvestEU

European Space Programme: €2.33 billion Resilience and EU Values: €15.13 billion

€4.3 billion – Erasmus+

€396 million – Support for artists and creators

€332.6 million – To promote Justice, rights, and values

Environment and Climate Action: €2.18 billion

€802.9 million – LIFE programme (climate action)

€1.26 billion – Just Transition Fund

Border Protection: €2.69 billion

€1.2 billion – Integrated Border Management Fund (IBMF)

€1.13 billion – Frontex (European Border and Coast Guard Agency)

Migration: €2.32 billion

€2.08 billion – Support for migrants and asylum seekers

Defence: €1.99 billion

€1.0 billion – European Defence Fund (EDF)

€251.3 million – Military Mobility

Single Market Functioning: €1.02 billion

€622 million – Single Market Programme

€207 million – Anti-fraud, taxation, and custom

LINKS FOR MORE INFO

2026 annual budget to fund EU priorities addressing global challenges: link

EU budget 2026: Providing crucial funding for EU priorities in times of global volatility: link

Questions and Answers about the Draft Annual Budget 2026: link