Key EU News: Week in Review (Dec 28 – Jan 3)

Last week marked a decisive start to 2026 for the European Union, with major developments shaping its economic direction, regulatory authority, and global position. From monetary expansion and climate enforcement to digital governance and security coordination, EU institutions and member states took steps that will influence policy and markets throughout the year. These events reflect a Union focused on stability, control, and long-term strategic planning amid ongoing global uncertainty.

Bulgaria Officially Adopts the Euro

• On January 1, 2026, Bulgaria became the 21st country to join the eurozone, officially replacing its national currency with the euro. The move marks a major milestone in Bulgaria’s integration with the European Union and is expected to simplify trade, reduce currency risk, and attract foreign investment.

• However, the transition also triggered domestic debate. Concerns over inflation, cost of living adjustments, and political instability surfaced as Bulgaria’s coalition government collapsed shortly after the changeover. Despite internal challenges, EU leaders welcomed the decision as a sign of continued economic cohesion within the bloc.

EU Begins Full Enforcement of Carbon Border Tax

• The European Union formally launched the full implementation phase of its Carbon Border Adjustment Mechanism (CBAM). The policy applies carbon pricing to imports of carbon-intensive goods such as steel, cement, aluminum, fertilizers, and electricity.

• The goal is to prevent carbon leakage and protect EU industries that already comply with strict climate rules. While European manufacturers largely support the mechanism, several global trading partners criticized it, arguing it could raise costs and strain international trade relations. The EU maintains that CBAM is essential to meeting long-term climate neutrality targets.

Digital Regulation Enforcement Set to Intensify in 2026

• EU regulators confirmed that enforcement of the Digital Markets Act and Digital Services Act will significantly expand this year. Authorities are preparing penalties, compliance audits, and corrective actions against major technology companies operating within the EU.

• Focus areas include competition fairness, misuse of market dominance, algorithm transparency, online advertising practices, and platform responsibility for harmful content. This marks a new phase in the EU’s digital governance strategy and could reshape how global tech companies operate in Europe.

EU Defense and Security Coordination Strengthens

• European leaders held renewed discussions on strengthening collective defense capabilities amid continued instability linked to the war in Ukraine and broader global security risks. Several member states backed deeper cooperation on joint weapons procurement, military mobility, and intelligence sharing.

• The talks also emphasized reducing dependence on external defense suppliers and increasing investment in Europe’s own defense industry. While NATO remains central to European security, the EU is clearly moving toward greater strategic autonomy.

Migration Control and Deportations Increase Across the Bloc

• The European Commission confirmed a notable rise in deportations of individuals without legal residence status across multiple member states. The increase follows tighter border controls, faster asylum processing, and expanded cooperation agreements with countries of origin.

• Migration remains one of the EU’s most sensitive political issues. While some governments argue stricter enforcement improves security and public trust, human rights organizations continue to raise concerns about due process and humanitarian protections.

Energy Security Measures Advance Further

• EU institutions continued pushing forward policies aimed at reducing dependence on external energy suppliers. Last week saw renewed commitment to accelerating renewable energy projects, expanding energy storage capacity, and reinforcing cross-border electricity grids.

• Member states also discussed contingency planning for potential energy price volatility in 2026, especially during winter months. These steps are part of the EU’s broader strategy to stabilize energy markets while advancing climate goals.

EU-China Diplomatic Engagement Expands

• Several EU member states increased diplomatic engagement with China as part of a broader effort to balance economic cooperation with strategic caution. High-level visits and trade discussions focused on supply chains, green technology, and market access.

• At the same time, EU officials reiterated concerns about economic dependency, data security, and fair competition. The approach reflects the EU’s attempt to maintain pragmatic relations while protecting long-term strategic interests.

EU Approves New Rules on Artificial Intelligence Safety

• The European Union moved closer to full implementation of its landmark Artificial Intelligence Act after regulators finalized enforcement guidelines last week. The rules introduce strict obligations for high-risk AI systems used in areas such as hiring, credit scoring, biometric identification, and public services.

• Companies operating AI tools in the EU will be required to ensure transparency, human oversight, and risk mitigation. Fines for violations could reach billions of euros. The EU aims to position itself as the global standard-setter for responsible AI development.

European Central Bank Signals Cautious Approach on Interest Rates

• Officials from the European Central Bank indicated that interest rate decisions in early 2026 will remain data-driven, as inflation pressures ease unevenly across the eurozone. While some countries are seeing slower price growth, others continue to face higher service and wage inflation.

• The ECB emphasized that premature rate cuts could risk inflation returning, while holding rates too high for too long could slow economic recovery. Markets are now closely watching upcoming inflation and employment data across the bloc.

EU Moves Forward on Joint Ammunition Production Plan

• EU defense ministers agreed to accelerate a joint ammunition production initiative aimed at strengthening Europe’s military readiness. The plan focuses on increasing manufacturing capacity within the EU to support Ukraine while also rebuilding member states’ own stockpiles.

• Funding will be directed toward expanding factories, securing raw materials, and coordinating cross-border supply chains. The move reflects growing concern over long-term security challenges and Europe’s ability to sustain defense production independently.

Agricultural Subsidy Reforms Spark Debate Across Member States

• Discussions intensified last week around reforms to the EU’s Common Agricultural Policy, particularly regarding subsidy distribution and environmental conditions. Several farming groups across Europe raised concerns that new sustainability requirements could increase costs and reduce competitiveness.

• EU officials argue the reforms are necessary to balance food security with climate commitments. Negotiations are ongoing as member states push for flexibility based on national farming conditions.

EU Advances Crackdown on Money Laundering Networks

• The European Union advanced new measures aimed at tightening controls on money laundering and terrorist financing. Authorities expanded cooperation between national financial intelligence units and accelerated plans for a centralized EU anti-money laundering authority.

• The new framework targets shell companies, crypto-asset misuse, and cross-border financial crime. Banks and financial institutions will face stricter reporting requirements, marking a significant shift in financial oversight across the EU.

The final week of the year and the opening days of 2026 showed the European Union moving with purpose. Economic integration continued with eurozone expansion, climate policy entered a stricter enforcement phase, and digital oversight advanced toward global leadership. At the same time, security, migration, and financial regulation remained top priorities. Together, these developments highlight a Union intent on reinforcing its internal resilience while shaping international standards in an increasingly complex world.

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