Franco-German Plan Urges Tougher EU Stance on China

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.As jitters continue in bond markets, spooked by France’s fiscal situation, the European Union is making plans to confront another perceived threat to its economic health – China.

EU Trade Commissioner Maros Sefcovic departs later this week for Beijing, armed with a more hawkish mandate from EU countries on how to handle the economic behemoth.

On Monday, France and Germany called for a more confrontational approach towards Beijing. In a letter to European Commission President Ursula von der Leyen, the bloc’s two biggest economies urged the EU to adopt new powers that could curb other countries’ access to the single market in the event of a trade war. Though not mentioned specifically, China is the target.

“We need a credible instrument in the hands of the commission to allow for decisive and systemic reaction,” the letter reads, suggesting “powerful measures up to an immediate cut-off from the internal market if needed.”

The shift in tone from Germany, traditionally wary of alienating China given its importance as an export market, is particularly significant.

The EU is grappling with a €1 billion-a-day deficit with China, according to the commission. Chinese imports into the EU have jumped by 45% over the past five years, while European exports to China have fallen.

Among Brussels’ main demands is that China curbs its exports – a big ask for Beijing. In the medium term, speculation is mounting about what specific measures might be considered if negotiations don’t work, everything from new trade tools or targeting chemicals, to extending tariffs to China-made plug-in hybrid cars. Though the EU imposed tariffs on electric cars in 2024, sales of plug-in hybrids, which are not covered by the tariffs, have soared.Sefcovic will brief EU ambassadors about the visit on his return next weekend, with EU leaders set to discuss China next week at a summit. The political uncertainty in Spain, following Prime Minister Pedro Sanchez’s decision to call a snap election, may also inject a new dynamic into the discussion. Sanchez has been one of the most dovish voices around the EU table on China, and the possible election of the center-right People’s Party could signal a change in direction.

The Latest

Germany’s former foreign intelligence chief, August Hanning, was taken into custody as part of an investigation into treason and espionage allegations.CVC Capital Partners raised its take-private offer for Italian pharmaceutical firm Recordati to €10.5 billion ($11.8 billion), after coming under pressure from minority shareholders to raise the bid.President Donald Trump said the US will consider establishing a permanent military base in Lithuania, prompting an offer from the Baltic state’s government to cover the costs.The EU will look to appoint a market operator to help the bloc procure energy, European Commission President Ursula von der Leyen said today.Far-right French presidential candidate Marine Le Pen set out proposals to close the deficit to 3.7% of GDP next year, compared to the government’s aim of 5%, in a long-awaited budgetary announcement today.The EU will push for a so-called “mitigation package” at the COP31 climate summit next month after a recent United Nations report said the world would breach the key 1.5C temperature goal laid out by the Paris Agreement, John Ainger reports.

Market SnapshotBanco de Sabadell SA€3.65+2.6%Market data as of 08:59 AM ET. Data is subject to provider delays.

BPCE acquired a stake of about 7% in Spain’s Banco Sabadell SA as Chief Executive Officer Nicolas Namias seeks to expand business outside the French home market.

Chart of the Day

German factory orders fell the most since January, a stumble for the manufacturing sector as it tries to mount a sustained turnaround. Demand dropped 10.6% in August, following a 3.2% gain in July. Economists had predicted a decline of just 1%, according to the median forecast in a Bloomberg survey.

Coming up

EU Commissioner Marta Kos unveils the commission’s annual enlargement report this afternoon in StrasbourgMed9 Leaders’ Summit continues tomorrow in CroatiaIreland’s Finance Minister Simon Harris gives press conference on Budget 2027

Final Thought

The world’s tech billionaires gained a combined $845 billion through Sept. 30, the most ever for the first nine months of a year, according to the Bloomberg Billionaires Index. In contrast, billionaires who made their fortunes outside technology lost a combined $62 billion over the period. The gains have also been heavily concentrated at the very top. Elon Musk, the world’s richest person, added $310 billion to his fortune this year through the end of September, or roughly 40% of the index’s total increase.