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Germany Pushes ‘Two-Speed’ Europe With Core Group of Six Economies

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Germany is advocating a “two-speed” European Union to overcome decision-making gridlock and strengthen the bloc’s economic and strategic autonomy. German Finance Minister Lars Klingbeil said a core group of countries should move faster on key policies, arguing that the EU needs new momentum to respond to growing geopolitical and economic challenges.

Klingbeil has invited finance ministers from France, Poland, Spain, Italy and the Netherlands to form a leading group of six economies, with an initial video meeting planned as a starting point. The proposal aims to boost Europe’s sovereignty, resilience and competitiveness, as EU economies seek to reduce reliance on imported critical raw materials and shield themselves from global trade fragmentation and tariff risks.

According to a letter seen by Reuters, the initiative includes a four-point agenda focusing on advancing the capital markets union, strengthening the international role of the euro, improving coordination on defence investment, and securing supplies of strategic raw materials. Klingbeil said faster progress in these areas is essential to make Europe stronger, more independent and better prepared for an increasingly unpredictable global environment.

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G7 leaders to discuss €30bn loan for Ukraine using Russian assets

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The G7 finance ministers are set to discuss whether Ukraine can receive an additional €30 billion loan from seized Russian assets totaling €270 billion. This proposal has sparked division within the G7, particularly between the US and Germany. While some advocate for full asset seizure, others, including Christine Lagarde, ECB president, raise legal and economic concerns.

The US and UK propose mobilizing the frozen assets to provide a substantial loan to Ukraine, with interest paid from the profits of the seized Russian assets. They argue this approach avoids the need for asset confiscation, which could disrupt the international legal order and financial stability.

Belgium, holding the largest share of Russia’s frozen assets within the G7, has already generated significant investment income from these assets. It has agreed to allocate a portion of this profit to a joint G7 fund for Ukraine.

Critics argue that using the assets as collateral for a loan effectively amounts to confiscation. However, some legal scholars suggest that under the doctrine of state countermeasures, seizure may be justified.

Overall, there is contention over whether to provide Ukraine with a substantial loan using the seized assets, with concerns about legal implications and potential repercussions for financial stability and international relations.

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Croatia begins new euro and Schengen zone era

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Croatia is beginning on a momentous year, joining the border-free Schengen zone and abandoning its own currency, the kuna, in favour of the euro. When it became the EU’s newest member in 2013, the country pledged to entering the eurozone.

Nationalist parties wanted to maintain the kuna, but the constitutional court overturned them. It is the 27th country to join the Schengen area, which permits 400 million people to freely travel between countries.

Ursula von der Leyen, President of the European Commission, praised the moves as “two enormous milestones” for the EU’s youngest member state.

She claimed 1 January – when the reforms formally happened – will be a day “for the history books”.

Above all, this would be a time of “pleasure and pride for the Croatian people,” she declared. “It is proof of your incredible journey, hard work, and determination.”

Croatia’s Prime Minister, Andrej Plenkovic, said on Sunday that the two historic amendments had “achieved its strategic, state, and political aims” for the country, a former Yugoslav republic that waged an independence war in the 1990s.

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