The €865 billion brainstorming session

0:00Today's episode is presented by Reju. Europe discards about 9 million tons of polyester textiles every year. Is there a way to turn textile waste into a valuable resource for the EU? Look in your feed for a special podcast episode produced by Politico Studio. Good morning, it's Thursday, October 1, and this is the Brussels Playbook podcast. The vibe in Brussels today is grim as Ukraine heads toward another winter short of money, short of air defences, and under relentless Russian attack. Also on the pod, the European Commission and EU governments are starting a two-day brainstorming session on how to use a huge chunk of the block's next budget and who gets to control it. And the Commission is using its own version of Microsoft Teams, but it's not exactly a hit. I'm Zoya Shaftelevich and with me today is one of our policy editors to Sarah Witten.

1:01Hey, Sarah. Hey, Zoya. I mean, I know you say that the vibe in Brussels is grim, but I don't think that you're capable of sounding grim. Which is probably for the best first thing in the morning. First thing in the morning, you need a little cheer, even if it's bad news base today, which we are. Let's be bad news base, Sarah. Ukraine is heading toward a pretty terrible winter. I mean, it's under a huge amount of pressure. There have been warnings about budget shortfalls. It's short on Patriot missiles. It's short on planes. And Mima Russia is absolutely pounding its energy system, bombing Kiev and other cities. And there's been loads of deaths already. So it's pretty difficult. And our colleague Yankeeyev Veronica Zerava has a story this morning that really captures just how difficult Ukraine's position is. I mean, look, Ukraine is way beyond the point of just surviving individual attacks now. And Russia is going after the systems that keep the country functioning. So the targets are energy railways, ports, fuel supplies, factories. The whole

2:04networks that Ukraine depends on and businesses are estimated to be losing between four and ten billion dollars a year because of the war and damage compound less economic activity means less tax revenue. And that brings us to this question of what Ukraine can do to fill that gap. And Veronica was among a group of journalists who were speaking with Prime Minister Sihid Karyetsky this week about that very thing. And he told her that there's about a 20 billion US dollar shortfall in terms of what Ukraine needs to defend itself this year. And the government is actually looking at what it can cut and what it can postpone spending on in order to be able to survive until more money arrives next year because the EU, of course, as well as other partners have promised money for 2027. But the problem as the Prime Minister told Veronica is that Kiev needs the money now because it's placing orders for ammunition for weapons and so forth for next year. And particularly when it comes to things like long-range drones and big missiles and things that can take these

3:07attacks down, it needs the money now so it can put down a deposit. Yeah. And so a little glimmer of good news Europe has just managed to unlock one big pot of military support. It's about 6.6 billion euros to the European peace facility. And that's been blocked since around 23 by Hungary. Exactly. And there's some money in there for, you know, joint weapons procurement. But much of it goes back to EU governments for weapons already supplied. So it doesn't actually add new cash that Kiev needs. Yeah. And there has been, you know, this idea of Russia's frozen assets. This is the 200 billion euros that are sitting in Euroclear in this Belgian company that are just frozen by EU countries. But that, oh, chestnut is not, I don't think, going anywhere because this is a thing that the EU tried to do end of last year to try to use these assets, give them to Ukraine for its defenses, basically saying, well, Russia, you are going to have to pay reparations. So we're going to take these now. But they couldn't get Belgium on board. And actually what we found out over

4:10the course of that whole debate is that it wasn't just Belgium. There were other countries as well that were against it, including some heavy hitters like Italy, like France. So I think even though this comes up every so often and it's come up again now, I think that's probably a non-goer for now. So they're looking at other options. So Zoya, what are you hearing about the current thinking in the commission, in the council? Is there anything? Yeah. So I think everyone is very firm on saying, we absolutely are going to back Ukraine for as long as it needs, as much as it needs. And there is this perception of like, okay, if Ukraine loses, then you've got a huge problem because you've got an army of a million highly trained Ukrainians who suddenly, what, fall under Russia's auspices? I mean, that would be a nightmare scenario for the EU. So I think there is an acknowledgement that money will come. But once again, we're asked the question of when and how and how long. And you know, you've got some reporting from your team, you're the Agri editor, which shows that Ukraine's money worries actually come up in the agriculture sector as well, despite the fact that Ukraine is Europe's bread basket traditionally known as. Yeah. And I mean, this, this actually really is a microcosm of

5:16the whole war and why EU countries are maybe not giving the help that it would seem like, would align with their values. So as you were saying, Ukraine is one of the bread baskets of the world. Russia actually is also incidentally, but the fighting in the Black Sea means that neither a country can get their grain out. There's been a blockade since essentially the summer, right? So yeah. Exactly. And so normally this, this grain is going to Africa, to the Middle East, to Asia, but it's been blocked as much as, you know, 50% of Ukraine's grain and now its oil seeds are blocked. And they've been relying on some land roots sending grain down the Danube. And this week on Monday, all the agriculture ministers from around the EU were meeting. And Ukraine's agriculture minister came also and he was like, Hey, we really need your help and we need your help now. We need you to free up more shipping routes for us. And we need money to help support Ukrainian farmers who have lost all this income. They're trying to plant their next

6:19round of seeds now, but they can't afford to do it. So we're going to again just see this problem compound if you don't help us. But the EU agriculture ministers were like, sorry, we can't help you. We can't do anything more at least in the immediate term to increased shipping capacity. So this is, I mean, it's a huge problem for Ukraine. It comes to a point where it collides with the greater interest in this war when it comes to back in Ukraine. And that's very difficult. Anyway, that's where we're sitting at the moment. Sarah, let's talk the EU's next seven year budget. We've been talking about this, spanging on about this for ages, but let's do it again because there's a very interesting two-day meeting that starts today. And it's a meeting between the European Commission and national governments. It's a brainstorming session on how a large chunk of the EU's next budget is going to work. Yeah. And so, bear with us folks, it's going to get a little bit technical, but the reality is

7:22for citizens around the European Union who are not paying attention to the Burleigh Mall and the Parliament and everything that the EU does. The EU is a funder, and it funds projects. It gives farm subsidies. It gives things for regional development. We call this type of thing cohesion. And the commission wants to kind of merge huge amount of money, 865 billion euros. That's almost half of the proposed two trillion euro budget into kind of one big pot called the National and Regional Partnership plans, rather than kind of separating it into all of these different funds. Yeah. And this would be a huge change for the commission because previously this money has been earmarked in individual pots. So you would have your cohesion pot, your farming pot, your migration pot, and countries would get money from those individual pots for those particular things. Now they just want all the money for these areas together, and you draw down from the wider

8:24budget. But the problem with that as some countries see it, the countries that are against it, is that it means that if you don't ring fence money for a particular area, you may find that you're getting less money, say if you're in agriculture, then you otherwise would if it was only for agriculture. Yeah. And I mean, there would still be some ring fencing, but broadly the other issue is that the commission wants this leverage to use this money to say, okay, if you don't make reforms, then you're not going to get this cash. And that's kind of drawing on this model that they used from the COVID recovery fund. Governments would agree to reforms and targets, and then unlock the money as they deliver. And we've already had 10 countries push back against part of this approach, including Poland. And their concern is that, you know, Brussels is getting too much power over sensitive areas such as pensions or judicial reform. Yeah. And so today and Friday, this is this first chance to discuss how this new model might work in practice, this model of

9:26pooling all the money together. Our colleagues, Gregorio, Sorgi and Gerardo Fortuna have obtained this sort of agenda for this meeting. And it's going to be chaired by Declan Costello, who's the head of the commission's reform and investment task force. And that is in SG reform. This is a super interesting body. And as you say, it was running the post-COVID recovery fund system. Now it's taking more of a central role. And it's sidelineing to some extent, DG Regio, which is what traditionally oversees cohesion and regional funding and DG Agri as well. And this is something that we've spoken about on the podcast. There is a conversation about getting rid of or merging some departments. And DG Regio is one of the ones that has been mentioned as potentially being on the chopping block. And there was a view among the commission and people who you speak to that SG reform is kind of best case or best practice model for distributing money. So the idea is

10:27that it looks like, if you look at this agenda and you see who's running this meeting, indeed, it looks like SG reform is looking like it's getting more powers. And I mean, look beyond the sort of the offices or institutions running things, Costello is seen as very close to commission president Ursula Fanger-Lion. So this again also feeds into this narrative that she is taking more and more control and bringing it to the 13th floor. Sarah, last story for today. So, you know, Europe is pretty concerned about its strategic autonomy. And that includes its strategic autonomy when it comes to big tech and various apps that it uses. And the European Commission is trying to put its money where its mouth is and come up with sort of a plan B, just in case Microsoft Teams, which is the app through which a lot of us do our meetings, our calendar app with Microsoft. So they're coming up with their own version that can work just in case Microsoft Teams get switched off. Yet it's called Element Pro. It was rolled out over the summer.

11:33And Teams is still the commission's main communication tool. But Element Pro, as our colleagues Sebastian Starsevich reports, Element Pro is meant to be quote an internal backup tool that helps ensure our business continuity. As you said, in case there's a disruption. Yeah, but Sebastian has been going around the commission and asking people what they think of it. And he's seen some internal messages on the various messaging systems and notis boards. And things aren't going particularly smoothly. So one EU official told him that the new tool is, and I quote, absolute shit. Yeah, another said, I don't understand the added value here. Another person was like, well, if the US does decide to switch off their tech, it shows that the US would quote instantly win the war. Yeah, now to be fair, elements here Matthew Hodgson spoke with Sebastian and told him, look, of course, things are a little rocky. This thing has only just been rolled out. It's going to take some time. And he said, you know, this is TV issues. And people that just

12:37not used to wear the buttons are, they're not used to using this thing and don't worry, it'll be fine in the end. Yeah, I mean, also, I remember a few years ago when the commission made this switch from kind of landline phones to having everything run through Teams. And they were complaining then, also. So yeah, indeed, nobody likes switching systems. Politico is about to change our content, management system like, whoa, I'm going to be a nightmare. Oh, no, I'm quaking in my boots. I'm so I finally got used to WordPress 12 years later. Now you're telling me I have to use a different one. Gird your lines. So yeah, I mean, it's not just the commission where this is happening. France told civil servants that they had to stop US video tools like Teams and Zoom by 2027. And they're going to use something else called Visio. And Austria's military replaced Microsoft office with a German thing called Libra office last year. So it's happening everywhere. Actually, I wouldn't mind hearing from our listeners about whether this is happening in their offices. If you're in Europe, are you finding that your company has switched to a non-US tech platform? That would be super

13:42interesting to know, actually. And what are you using? What are you? What's everyone using? I don't know. Tell us on American tech platform. What's that? A send us a WhatsApp through the link in the show notes, which are also probably on an American listening platform. Whoops. At least we've got Spotify. Spotify is still European, right? Yeah, we're getting nods from the production booth. All right, Sarah, what have we got on the weekend or tomorrow? Well, Zoya will be continuing maybe with the slightly grim vibes, but with a smile on our faces. As we talk about gray zone attacks, this also is called sometimes a hybrid war, although the security expert that I'll be interviewing Elizabeth Bra, who's been studying this stuff for like over a decade doesn't like that term. So we will be diving into that. Elizabeth has a new book coming out called The Undersea War. It's out in just over a week and it's about the other battlefield the most of us never even see, which is the attacks on cables and pipelines on the seabed that keeps the world connected. So we'll be talking about Nord Stream, other attacks in the Baltic Sea, and more

14:47broadly what Europe should do as these attacks become more frequent and more dangerous, but at the same time are not really classic, classically violent. Super interesting. I'm looking forward to that one. Sarah, we've had an interesting note in our WhatsApp's from John from Belgium, who's an ex-EU civil servant. He says he was hired before the existence of Epso, which is this body that administers the EU's testing. So if you want a job in the EU as an EU civil servant, you might have to do a test run by Epso. And John wrote in to say, it seems to me that Epso has been pretty dysfunctional from its beginning, and he points out that EU institutions have actually been bypassing Epso to fulfill staffing needs by hiring contract staff. So it's a known problem, long time problem, he reckons. Yeah, but you know if you want the full-time cushy commission job, you gotta just run through the Epso continent. Epso facto, baby.

15:51A message from Reju. Europe currently discards about 9 million tons of polyester textiles every year. That's the weight of about 900 Eiffel Towers. It is so much material in terms of oil, which is such a critical resource going forward. That is a missed opportunity if we just burn it or throw it into the ground. Post-consumer textiles could be a valuable resource for the EU. The technology is there. The circular economy act is peeking over the horizon. Can the EU rise to the challenge? Look in your feed for a special podcast episode produced by Politico Studio.