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

Whatever the outcome of Germany’s election on Sunday, there’s no easy solution for the country’s deep structural problems. Aging infrastructure, a surplus of red tape and an energy crisis triggered by reliance on Russian gas have contributed to two straight years of economic contraction. Once-steadfast union power is buckling under capital flight, while manufacturing competitiveness has weakened. In a country founded on the idea of shared prosperity, widening wealth inequality and a welfare system stretched to its limits risk breaking the social contract. Germany’s embattled political class needs to show it can stand up to Russia’s Vladimir Putin, or it risks leaving a void that the nationalist Alternative for Germany party will be more than happy to fill. 

— John Ainger

What’s Happening

Dangerous Turn | Donald Trump’s turn against Volodymyr Zelenskiy leaves Ukraine no good alternatives. After the US president denounce the Ukrainian leader as a “dictator,” Zelenskiy can try to fight on against Kremlin forces without the backing of the country that had been its chief ally and arms supplier, relying instead on what assistance Europe can offer. Or he can accept whatever deal Trump may reach in his fast-moving embrace of Vladimir Putin.

Tactical Blunder | Kaja Kallas, the EU’s top diplomat, told us in an interview that she isn’t impressed with the Trump administration’s tactics for negotiating an end to Russia’s war in Ukraine. She also called for issuing joint bonds to fund European defense. 

Trade War | The EU is ready to discuss cutting tariffs on autos and other goods as it seeks to head off a trade war with the US, the bloc’s top trade official said in Washington. Trade Commissioner Maros Sefcovic said the bloc will do its “utmost” to avoid an escalatory tariff clash. If the US acts in line with Trump’s threats, “we will have no choice but to respond firmly and swiftly,” he said. 

Sanctions Progress | As the bloc tries to increase pressure on Moscow over its invasion of Ukraine, EU ambassadors a have greed to move forward with new sanctions targeting Russian aluminum imports and the country’s fleet of shadow oil tankers. The US will keep sanctions in place until a deal is reached to end the conflict.

Fighting Saboteurs | In recent months, there have been multiple instances in European waters in which underwater cables have been mysteriously damaged or severed. The commission is seeking to address that vulnerability by boosting surveillance of the infrastructure, which is often no thicker than a garden hose. We have the draft of the plan. 

Around Europe

German Miracle | Conservative frontrunner Friedrich Merz suggested he’s a shoo-in to win Germany’s election on Sunday, telling Social Democrat Chancellor Olaf Scholz to his face that he’ll need a “genuine miracle” to pull off a comeback victory.

Defense Boost | Denmark will boost its defense spending to more than 3% of economic output as the nation seeks to counter an escalation in security threats from Russia. That’s the equivalent of roughly €16 billion in additional money through 2033.

Trump Test | Romanian authorities are facing intense pressure from the Trump administration to ensure that a far-right candidate will appear on the ballot in its election in May. Here’s what we’ve learned about the US efforts to make sure that the Trump candidate can keep campaigning.

Swiss Deal | With a possible plebiscite looming, Switzerland is aiming to sign a deal with the EU early next year to secure access to the bloc’s single market. It’s part of an effort by both sides to renew economic ties that were previously regulated by a complicated patchwork of more than 100 bilateral treaties.

European Exodus | European and Asian firms may soon flood the US market with $130 billion in new listings as the allure of loftier valuations and deeper liquidity fuels an exodus from home markets. Check out some of the companies based outside the US that are working toward New York listings.

Chart of the Day

As concern grows over Germany’s anemic growth and weak defenses, investors have a clear message ahead of the country’s election: There’s room to borrow more. Berlin’s decades of discipline have left the country with a limited debt burden, giving it plenty of borrowing power at a time when the economy desperately needs stimulus. And far from punishing the government for borrowing more, investors would welcome increased issuance given the dearth of top-quality bonds in Europe for fund managers to buy. It’s just the politicians that need convincing.

Today’s Agenda

All times CET

• 2:20 p.m. Press conference with NATO Secretary General Mark Rutte and Slovak President Peter Pellegrini
• 3 p.m. European Commissioner Valdis Dombrovskis appears at the Masters of Digital 2025 event
• 4:30 p.m. Press conference with EU digital chief Henna Virkkunen, defense commissioner Andrius Kubilius, migration commissioner Magnus Brunner, research commissioner Ekaterina Zaharieva, and justice commissioner Michael McGrath in Helsinki, following a meeting with Finnish Prime Minister Petteri Orpo
• 5:45 p.m. Press conference with EU agriculture commissioner Christophe Hansen and Spain’s Agriculture Minister Luis Planas Puchades
• European Commission President Ursula von der Leyen in Barbados for the 48th Regular Session of the Conference of CARICOM
• EU foreign policy chief Kaja Kallas in South Africa for the G20 foreign ministers’ meeting