Europe needs to break its reliance on just a handful of “very big” chip producers that manufacture the tiny, yet crucial, components used in everything from cars to smartphones. That’s the message EU digital policy chief Margrethe Vestager sent in an interview with us, just as semiconductor giant Intel tries to secure European support for a new plant in the region. Commission President Ursula von der Leyen made technological investment a key pillar of her state of the union speech, calling for about a fifth of the EU’s 800 billion-euro recovery package to be spent on innovations from blockchain to quantum communication. Watch out for a new European Chips Act in the coming weeks too, as part of the bloc’s efforts to become less tech-dependent on the rest of the world. - John Ainger and Aoife White

What’s Happening

Greening Continents | Increasing the supply of semiconductors is also part of the EU’s new Indo-Pacific strategy set to come today, as keen readers of the Brussels Edition learned last week. Beyond that, the bloc wants to focus on boosting so-called green alliances to help accelerate the transition to a zero-carbon economy, according to the draft seen by Bloomberg.

Energy Crunch | Natural gas prices in Europe are continuing their record-breaking run. Power prices also surged to a new high after disruption to a power link between the U.K. and France that may last until March. And the crunch forced a major fertilizer maker to shut down two U.K. plants in a sign that a record rally in gas and power prices is threatening to slow the region’s economic recovery.

Climate Spanner | Here’s our explainer of why the gas crunch is not just hitting consumer pockets, but also has bigger implications for Europe’s shift to a low-carbon future. Across the continent, governments are preparing to intervene to keep homes warm and factories running as winter approaches. 

U.K. Cabinet | Boris Johnson demoted his Foreign Secretary Dominic Raab following criticism of the U.K.’s chaotic withdrawal from Afghanistan, as part of a wider overhaul after his ruling Conservatives slipped in the polls. Trade Secretary Liz Truss replaces Raab, who takes the role of justice secretary. Read the latest here.

Far-Right Risk | In this year’s German election, the far-right AfD is set to consolidate its position in the Bundestag after its breakthrough in 2017. With Merkel’s conservative bloc facing a reckoning as its support plummets, the nationalists could play a role in reshaping the German right in the post-Merkel era.

In Case You Missed It

Climate Fight | Von der Leyen used her annual state of the union address to call on China and other nations to do more on the fight to tackle climate change, including stepping up commitments on pollution cuts and finance for poorer countries. Here’s what she said.

1.5 Degrees | EU countries themselves still need to do more to protect the environment though. Almost every government in the world isn’t doing enough to cut greenhouse-gas emissions, making it likely global temperatures will rise beyond the tipping point of 1.5 degrees Celsius in coming years, a new report said yesterday. You may be surprised at the only nation doing enough.

Pol-Exit | Poland’s de facto leader said the country has no plans to follow Britain out of the EU, toning down the rhetoric in an increasingly bitter row about membership sparked by delays in clearing billions of euros of stimulus funding. One senior party official had even compared the spat with Brussels to Germany’s occupation of Poland during World War II.

EU Bills | The EU sold short-dated bills for the first time yesterday, adding another type of debt instrument to its expanding portfolio of tools and allowing it to raise cash quickly if needed. It won’t be the last innovation either: watch out for its first green bonds coming as soon as next month.

Promote Women | ECB President Christine Lagarde said efforts to close the gap between men and women at work aren’t going far enough, with women still vastly outnumbered in senior positions across major institutions and large companies. She added that the institution itself will let its employees work remotely until early next year.

Wrapping the Arc | It couldn’t be done during their lifetimes. But about 60 years after artists Christo and Jeanne-Claude first dreamed of it, their art project of wrapping Paris’s landmark Arc de Triomphe monument in cloth will be completed this weekend. Here’s how it’ll look.

Chart of the Day

Germany’s sudden spike in pandemic-induced inflation is prompting a noticeably less hysterical response than the country is used to. Against the backdrop of the most pivotal election in a generation — bringing the chancellorship of Angela Merkel to a close — climate-change policies, infrastructure, high rents and taxes are the most significant economic issues. The fastest consumer-price jump since 2008 isn’t so prominent, even though media have highlighted the surge.

Today’s Agenda (All times CET.)

• 11 a.m. Press conference by Commission Vice President Vera Jourova on improving safety of journalists in the EU
• 1 p.m. Press conference with Commission Vice President Margaritis Schinas and Commissioners Stella Kyriakides and Thierry Breton on the European Health Emergency Preparedness and Response Authority (HERA) package
• 2 p.m. Press conference by EU foreign policy chief Josep Borrell on an EU strategy for cooperation in the Indo-Pacific
• 3 p.m. Commission Vice President Valdis Dombrovskis speaks in Geneva on EU priorities for the future of the WTO
• 7 p.m. Germany's Merkel, France’s Macron statements before talks over dinner on Afghanistan, Libya, Belarus and other issues in Paris
• Commission President Von der Leyen in Malta to discuss recovery plan
• European Council President Charles Michel meets Luxembourg’s Prime Minister Xavier Bettel
• G-20 agriculture ministers meeting in Florence
• EU’s top court rules on legality of the Commission’s 2016 order that Belgium claw back about 800 million euros in tax breaks from dozens of companies including Anheuser-Busch InBev