Welcome to the Brussels Edition. I’m Suzanne Lynch, Bloomberg’s Brussels bureau chief, bringing you the latest from the EU each weekday. Make sure you’re signed up.

Greetings from Copenhagen, where EU leaders are meeting for a summit amidst deepening alarm about the security situation in eastern Europe.

After a series of drone incursions last week, Danish authorities have called in back-up as they welcome EU leaders, with Ukrainian President Volodymyr Zelenskiy due to join tomorrow. (Slovakia’s Robert Fico is not attending due to health issues, his office said.)

Sweden, Germany and France have provided anti-drone capabilities, while a German frigate is also keeping an eye on things.

Speaking on her way into the summit this lunchtime, Danish Prime Minister Mette Frederiksen struck a somber note.

Danish Prime Minister Mette Frederiksen at the informal EU Council meeting in Copenhagen today. Photographer: Nichlas Pollier/Bloomberg

“When I look at Europe today, I think we are in the most difficult and dangerous situation since the end of the Second World War,” she told reporters.

“I hope that everybody recognizes now that there is a hybrid war, and one day it’s Poland, the other day it’s Denmark, next week it will probably be somewhere else,” she said, adding that Denmark is prepared to take down drones in its airspace.

Leaders will today discuss a slew of flagship defense projects, including a European “drone wall” promised by Commission President Ursula von der Leyen.

But the reality of how to pay for this is tricky. The EU’s €150 billion SAFE fund offers a source of financing, though potential projects need to be presented by the end of November.

The EU already announced that €6 billion from a G-7 loan to Ukraine financed by profits from frozen Russian central bank assets would be front-loaded for a “drone alliance” with the government in Kyiv – but that is mostly focused on beefing up Ukraine’s capabilities, not Europe’s.

Also gaining momentum is a proposal to use Russia’s immobilized assets themselves, rather than just the interest they generate, to help Ukraine. Finland and Sweden are the latest countries to back the concept, following Germany’s about-face.

But Belgium, home to Euroclear which holds the bulk of the assets, is still not on board.

G-7 finance ministers are expected to discuss ways of exploiting the Russian frozen assets in a call today.

The Latest

• The EU plans to reduce the bloc’s quotas for foreign steel by almost half and ramp up tariffs to mirror the policy of other jurisdictions such as the US, which currently imposes 50% tariffs on steel imports, Bloomberg’s Jorge Valero reported.
• Euro-area inflation accelerated in September, cementing the European Central Bank’s plans to keep interest rates steady for now.
• The US is pushing to repeal a recent rule change that eased capital requirements for some of the euro-region’s largest lenders, setting the stage for a clash with Europe’s most senior bank supervisors.
• European banks are building a competitive edge in chasing opportunities tied to the green transition, according to Frank Elderson, an ECB executive board member.
• Europe is making the biggest change to how power is traded in years, in a move that brings the market closer to the needs of a system increasingly reliant on renewable energy.
• Sanofi revealed it was the target of a raid by EU antitrust regulators over suspected “anticompetitive disparagement,” in the latest crackdown on firms allegedly bad-mouthing their rivals.
• Pandora, a Copenhagen-based company which sells more pieces of jewelry than any other company in the world, picked its first woman as leader, an adjustment to its male-dominated C-suite, which for long has been out-of-whack with the customer base.

Seen and Heard on Bloomberg

WATCH: Google’s EMEA President Debbie Weinstein speaks to Bloomberg TV’s Francine Lacqua.

Google’s top executive in Europe said the continent should simplify complex and conflicting rules on artificial intelligence and technology as Silicon Valley’s biggest companies gripe about their impact on their ability to do business. Debbie Weinstein told Bloomberg’s Women, Money & Power conference today that the EU has issued about 100 internet laws since 2019. “They conflict with each other. They are not clear on what the outcome is,” she said. “There is a real need for simplification and harmonization.”

Chart of the Day

Poland’s public debt is set to breach a threshold in 2028 that would trigger austerity measures, complicating government efforts to ramp up defense spending without unpopular cuts in welfare. The cabinet’s medium-term fiscal strategy, published  yesterday, showed that public debt will exceed the key level of 55% of economic output in 2028, up from 52.6% projected next year.

Coming up

• Press Conference at informal meeting of EU leaders in Copenhagen later today
• G-7 finance ministers expected to issue a statement on Russian sanctions today
• Meeting of the European Political Community in Copenhagen tomorrow

Final Thought

Friedrich Merz speaks to reporters during a cabinet retreat in Berlin. Photographer: Sean Gallup/Getty Images Europe

German Chancellor Friedrich Merz’s ruling coalition agreed on reforms designed to streamline and digitalize administration that it said will save €16 billion in costs and reduce the burden on citizens and businesses. The package was approved on the final day of a two-day cabinet retreat in Berlin, where Merz’s conservatives and his Social Democrat partners were attempting to present a united front after a rocky start to their tenure,  with disagreements on issues including taxes and social welfare overshadowing efforts to revive the economy.

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