The EU and UK are inching toward a trade deal for Northern Ireland. The two made a major breakthrough after the EU began testing the UK’s live database tracking goods between mainland Britain and Northern Ireland, we’re told. If the EU is happy, there could be an agreement over custom checks in the Irish Sea, one of the many sticking points over post-Brexit trading rules that at times risked becoming a full-blown trade war. Despite the progress, a full deal is not likely anytime soon. The UK and EU still disagree over a number of issues including the governance of Northern Ireland. But resolving checks on goods is seen as prerequisite to move onto other thorny topics.

— Ellen Milligan and Jillian Deutsch

What's Happening

Gas Cap | The EU is even more divided on how to contain an energy crisis. While countries like Germany and the Netherlands continue to oppose a price cap, a larger group of countries, including Italy, Poland, Belgium and Greece accused the commission of being too slow to develop a proposal to limit the costs of the fuel.

Renewable Rules | The EU could cut back lengthy planning rules for building renewables projects — in particular for solar farms — with a new plan meant to lower electricity prices and reduce gas use in energy, based on a draft we’ve seen: “The proposed regulation reflects the need to take urgent action in response to the energy crisis.” 

Iran Sanctions | The EU is preparing to impose further sanctions against Iran over a deadly crackdown on protests triggered by the death of a young Iranian woman, we’ve heard. Envoys to the EU meeting in Brussels are set to back proposals as soon as today targeting several Iranian individuals and entities.

Microsoft Fights | Microsoft is in for a rough week in the EU. The company’s $69 billion takeover of games developer Activision Blizzard faces an in-depth probe over concerns the tech giant could thwart access to blockbuster franchises like “Call of Duty.” European cloud group Cispe also filed a complaint against Microsoft for allegedly abusing its dominance in software to increase its share of the cloud market. 

In Case You Missed It

NATO Ascent | Sweden’s new Prime Minister, Ulf Kristersson, pledged to live up to promises made to Turkish President Recep Tayyip Erdogan to facilitate the Nordic country’s effort to join NATO. Erdogan, who was originally critical of Sweden and Finland joining the pact,  signaled his contentment with the new government in Stockholm, but reiterated a call to take his concerns seriously and deport “terrorists.”

Unfriendly US | French President Emmanuel Macron said the US Inflation Reduction Act likely does not comply with WTO rules and is “not friendly.”  “The US produces cheap gas and in addition rolls out massive state aid schemes,” Macron said yesterday at a meeting with about 50 business leaders, referring to provisions that offer subsidies for electric cars made in North America. 

Tax Overturned | Fiat won its challenge at the EU’s top court to topple a €30 million tax bill. The carmaker contested a 2015 commission order to pay back tax breaks granted by Luxembourg — part of EU Competition Chief Margrethe Vestager’s attempted crackdown on allegedly unfair tax deals. The EU Court of Justice wrote that the commission’s analysis was “erroneous.” 

Stopping Inflation | The ECB needs to continue increasing interest rates even if it hurts growth, Bundesbank President Joachim Nagel said yesterday: “We must ensure that high inflation ends soon.” He added that “in a situation where monetary policy gets behind the curve, the overall economic costs would be significantly higher.”

Beijing Trade | Spyware such as Pegasus is being deployed by state-run organizations across the EU to snoop on politicians and journalists with virtually no EU-level oversight, according to a parliament draft report. Lawmaker Sophie in ‘t Veld said citizens can “safely assume that all EU member states have purchased one or more commercial spyware products.”

Chart of the Day

Hungary, which has seen the biggest increases in food costs in the EU, is turning into a new inflation hotspot. The 10 EU nations with the highest headline inflation rates are now all in the east, led by the three Baltic states, followed by Hungary. The latter is on course to overtake them with its weak currency and an annual advance of 38% in food costs, more than double the EU average. The price of bread, butter and cheese have almost doubled in the past year.

Today's Agenda

All times CET

• College of Commissioners meeting
• Commission President Ursula von der Leyen and Council President Charles Michel participate in European Parliament debate 
• Vestager holds virtual meeting with US Secretary of Commerce Gina Raimondo
• 4:15 p.m. NATO Secretary General Jens Stoltenberg and UK Prime Minister Rishi Sunak give statement to the press