The EU has introduced a comprehensive plan aimed at revitalizing its internal market, focusing on enhancing competitiveness and addressing challenges posed by global economic shifts.

The EU is considering renewing a tariff-free agreement on American lobster imports to facilitate trade negotiations with U.S. President Donald Trump, who recently reinitiated a trade war. The original 2020 deal, expiring on July 31, was implemented to support Trump’s re-election by aiding Maine’s lobster industry and to ease tensions with the EU. The EU had eliminated its 8% lobster tariff, while the U.S. halved tariffs on $160 million worth of EU exports. Discussions have recently resumed, targeting Trump’s imposed 20% tariffs on almost all EU imports, which he temporarily reduced to allow negotiation. Trump has retained steep tariffs on steel, aluminum, and cars, and threatens additional duties on various sectors. The EU is open to purchasing more U.S. goods including gas, weapons, and agriculture to reduce its trade surplus, though it holds retaliatory tariffs in reserve. EU officials emphasize maintaining food safety and environmental standards, while analyst Bernd Lange supports extending the lobster deal for diplomatic benefits despite its limited economic impact. By 2024, U.S. lobster exports to the EU had risen to €69.2 million.

The European Union’s investment vehicle is investing €40 million ($45 million) in a dedicated European defense fund, marking a first as the bloc seeks to bolster its defense capabilities amid growing geopolitical tensions. The fund aims to support joint defense projects and enhance the EU’s strategic autonomy.

The European Union is considering easing its proposed 2040 climate target, originally intended to reduce emissions by 90% from 1990 levels, due to growing political and economic pressures. Suggestions from the European Commission include allowing carbon credits, accounting for carbon capture and storage, and adjusting the emissions trajectory to require deeper cuts later. These measures aim to address concerns from industries and member states struggling with current decarbonization demands, amid broader efforts to reduce regulatory burdens and economic disruption.

In April 2025, UK government borrowing rose to £20.2bn, exceeding economists’ forecasts and increasing from £19.1bn in April 2024. The Office for National Statistics (ONS) attributed the rise to higher public service and benefit spending, which outpaced increased revenues, including gains from national insurance contributions introduced in the latest Budget. This overshoot heightens pressure on Chancellor Rachel Reeves ahead of the June 11 spending review, where she must reconcile ambitious public service improvements with her fiscal target of balancing day-to-day spending by 2029-30. The borrowing rise, compounded by potential economic effects from US tariffs and internal political pressures, could necessitate further tax increases in the autumn Budget. A partial policy reversal on winter fuel payments underscored these political constraints. Revised ONS data showed borrowing for 2024-25 at £148.3bn—still above the Office for Budget Responsibility’s (OBR) £137.3bn forecast—while the current budget deficit rose to £70.3bn. Private sector activity in May showed signs of mild recovery after a sharp downturn in April, though broader economic growth is expected to slow. Analysts remain skeptical that borrowing can be significantly reduced this fiscal year, casting doubt on the OBR’s projection of a fall to £117.7bn.

In May 2025, the decline in UK business activity showed signs of easing, though manufacturing continues to struggle significantly. The S&P Global UK Composite PMI rose to 49.4 from 48.5 in April, indicating only a slight contraction. The services sector showed marginal recovery, registering a PMI of 50.2, but new orders dropped sharply, suggesting future weakness. Manufacturing remained a major concern; the sector’s PMI fell to 45.1, and job cuts intensified—the worst since May 2020 and among the steepest since the 2008-09 crisis. The decline was linked to falling export orders and broader economic pressures. Overall, official data showed strong Q1 growth, but the Bank of England remains cautious, warning of a potential Q2 contraction. Business sentiment improved slightly due to easing U.S. tariff tensions, following a UK-U.S. trade accord and the suspension of steep tariff hikes by the U.S. However, price pressures weakened, potentially calming inflation concerns. Despite the slight improvement in sentiment and services performance, economic growth is expected to be volatile, facing ongoing challenges from tariffs, uncertainty, and increased taxation.

Sweden’s budget watchdog revised the 2025 deficit forecast to 51 billion crowns (0.8% of GDP), down from 94 billion, despite increased defense spending.

Turkey’s central bank maintained its year-end inflation forecast at 24%, signaling readiness to tighten monetary policy if needed.

Hungary’s central bank emphasized the need for patience in combating inflation, citing risks from global economic uncertainties and US tariffs.

President-elect Nicușor Dan pledged to increase NATO defense spending to 3.5% of GDP, despite a record public deficit of 9.3%.

Romania’s Constitutional Court dismissed a challenge to annul the May 18 presidential election, confirming Nicușor Dan’s victory.