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This week’s news cycle has been dominated by two prospective ‘deals’: the EU’s bid to reach an agreement with the US to avoid tariffs on European exports, and Washington's push for a negotiated settlement to Russia’s war in Ukraine. The first would almost certainly be a tonic for Europe’s ailing economy. But what about the second?

Unsurprisingly, the economic impact of an end to the Ukraine war will depend on what kind of deal is eventually reached. Nevertheless, many analysts predict that an end to the fighting, however temporary or politically distasteful, would be economically beneficial.

Perhaps the most obvious impact of any such agreement would be a reduction in energy prices, triggered by the resulting surge in EU imports of cheap Russian gas.

This trend is already reflected in the data. The Dutch Title Transfer Facility (TTF), the European gas price benchmark, has fallen by around 14% since Donald Trump’s shock announcement on 12 February that negotiations to end the conflict would begin “immediately”.

Experts note that this drop in energy costs could, eventually, ease general inflationary pressures across the bloc. This, in turn, could allow the European Central Bank (ECB) to more aggressive when it comes to rate cuts and hence boost the EU’s low levels of investment.

Indeed, Goldman Sachs recently estimated that a “comprehensive and credible” peace deal could reduce euro area inflation by up to 0.5 percentage points – precisely matching the difference between the ECB’s 2% target and the current eurozone inflation rate of 2.5%.

Goldman also predicted that an end to the three-year war would have a similarly positive impact on EU growth: consumer confidence would rebound, business investment would surge, and European stock prices would rise. (Indeed, as with gas prices, the impact on equities is already being felt.)

Ukraine’s reconstruction would also provide European companies with a steady stream of business opportunities, including, potentially, expanded import and export markets. This would likely outweigh the negative impact on the European labour market caused by Ukrainian refugees’ returning home.

All in all, Goldman estimates that even a “limited truce” would boost the eurozone’s GDP by 0.2%, while a genuine, lasting peace could raise overall output by as much as 0.5%.

Thus, it seems that such a deal could, at the very least, partially mitigate the impact of Trump’s tariffs. Indeed, there is a chance that such a deal could counteract their impact entirely: in another study published last year, Goldman estimated that its “baseline scenario”, which “assumes a more limited set of tariffs on Europe”, would reduce the eurozone’s GDP by 0.5%.

Read more.

Europe seeks alliance with the United States to combat Chinese “overcapacities”. Speaking to journalists the day after a high-stakes meeting with senior US officials, EU trade chief Maroš Šefčovič said that Brussels and Washington should “work together” to tackle the “non-market practices” that are rendering the EU and US metal industries increasingly uncompetitive. “My plea here was: let’s not target each other’s steel and aluminium sectors,” Šefčovič said, referring to the 25% tariff announced by Donald Trump earlier this month. “Let's try to work together and to tackle what is the real problem – and this is the global overcapacity.” Šefčovič also said he hoped the "momentum" generated by the "good meeting" could be used to reach a negotiated solution. Read more.

The EU surplus with the US represents “a drop in the ocean” of total transatlantic trade, says EU trade chief. In a self-described “plea” to avoid Trump’s tariffs, Maroš Šefčovič said before meeting US officials in Washington that the EU’s €50 billion net surplus is “relatively small”, representing just 3% of the €1.5 trillion in total transatlantic trade of goods and services. “This is a small fraction, I would say a drop in the ocean if you will, of our overall economic exchanges,” he said. Read more.

European Commission proposes to increase the guarantee available under ‘InvestEU’ programme and combine it with other “legacy programmes”. According to a draft of the second ‘Omnibus’ simplification package, seen by Euractiv, the financial guarantee provided by InvestEU will be increased by €2.5 billion over the current seven-year budget period. The package also proposes integrating InvestEU with programmes such as the European Fund for Strategic Investments (EFSI), the Connecting Europe Facility (CEF), InnovFin, and the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME). Read more.

EU envoys agree to another round of sanctions on Russia amid mixed US signals. The new sanctions package – the EU’s 16th since Russia launched its full-scale invasion of Ukraine in 2022 – includes import bans on aluminium, export restrictions on chromium and other items used to produce factory equipment, and the removal of multiple Russian banks from the SWIFT international payments system. The move, which came the day after US and Russian officials met in Saudi Arabia to discuss an end to the three-year war in Ukraine, followed a meeting of EU finance ministers on Tuesday in Brussels, where officials reaffirmed their support for the bloc’s current sanctions policy. Read more.

Brussels is gearing up to unveil a bold six-step plan to shield heavy industry and stake its claim in clean tech. An early draft of the Clean Industrial Deal, seen by Euractiv, proposes to make a “preference” for European firms a “structural feature” of the bloc’s procurement market in “strategic sectors”.  The proposal is likely to anger the US and will also open Brussels up to accusations of hypocrisy from Beijing: last month, the EU’s executive accused China of “systematic discrimination” against European medical device manufacturers in bids for public contracts. Read more.

Ursula von der Leyen’s plan to boost European defence expenditure blindsides EU diplomats. The confusion was sparked by the Commission chief’s announcement on Friday that Brussels will activate “the escape clause” in the EU’s budgetary framework, thus allowing member states to “substantially increase” defence spending. The proposal – which came just two days after Donald Trump stunned world leaders by announcing that negotiations will begin “immediately” to end Russia’s three-year war in Ukraine – “took us all by surprise”, said one senior EU diplomat. The fact that the current rules contain two “escape clauses” – a “general” and a “national” one – suggests that von der Leyen herself doesn’t have a precise idea of what she is recommending, several EU officials noted. Read more.

German CDU plans to reshuffle ministries if it wins power. Days before Sunday's German elections, frontrunner Friedrich Merz has spelled out his plans to restructure the next government, should he lead it. Merz has clarified that he wants to break up a ‘super ministry’ created by the outgoing government, which has seen the responsibilities for the economy and climate combined within one ministry, led by Green vice-chancellor Robert Habeck. Read more.