Finland and Sweden took a major step closer to joining NATO after they clinched a deal yesterday with Turkish Prime Minister Recep Tayyip Erdogan, who had blocked their bids to join for weeks amid security concerns. NATO leaders, gathering for a two-day meeting in Madrid, are likely to warmly welcome the agreement between the Turkish leader and his Nordic counterparts during talks convened by Secretary General Jens Stoltenberg ahead of the summit. The two countries agreed to an action plan to do more to combat terrorism, a key Turkish concern particularly with regard to Kurdish groups it considers terrorist. 

— Natalia Drozdiak and Jorge Valero

What’s Happening

Anti-Fragmentation Shield | The ECB on Friday will activate its first line of defense to stabilize markets, President Christine Lagarde said yesterday. The Frankfurt institution will flexibly reinvest part of its 1.7 trillion-euro pandemic bond-buying portfolio. And Lagarde said that she’s ready to step up her response to soaring inflation, just as Governing Council member Martins Kazaks has requested.

Greener Cars | EU countries endorsed a push to eliminate carbon emissions from new cars by 2035, effectively heralding the end of the era of the internal combustion engine. Environment ministers struck a deal on the proposal after Italy, home to Ferrari and Lamborghini, gave up demands for a five-year delay.

French challenge | President Emmanuel Macron is facing his first test in France’s parliament since losing his outright majority in elections this month — offering a glimpse of how he plans to navigate the deeply divided house over the next five years. Separately, the government slashed its economic growth forecast, underscoring the constraints on Macron as he tries to repair public finances from the Covid pandemic and support households struggling with rising prices.

Tokyo Warning | Japanese Prime Minister Fumio Kishida urged his UK counterpart Boris Johnson to reach a deal with the EU on Northern Ireland that doesn’t hurt Japanese companies in Europe. Japan’s concerns came as London pushes ahead with legislation to override parts of the Brexit deal. Ford has also warned that the UK bill could put further investments in the country at risk.

Monkeypox Vaccine | An initial 5,300 doses of the Bavarian Nordic vaccine are arriving in Spain, with Portugal, Germany and Belgium set to receive doses next, the Commission said yesterday. To combat the monkeypox outbreak, the bloc is expected to receive more than 100,000 vaccines, with most of the deliveries slated for July and August.

In Case You Missed It

Hitting Russia | Group of Seven leaders concluded their three-day summit in the Bavarian Alps by mandating their ministers to urgently discuss how the prices of Russian oil and gas can be curbed to cut into President Vladimir Putin’s war chest. The final statement also called on China to use its influence with Moscow to end the war in Ukraine. Read our G-7 coverage.

Climate Club | The chiefs of the most advanced economies also agreed to set up a new platform promoting joint rules and standards in the fight against global warming with the hope that it will avoid spats over green tariffs. The new club intends to accelerate climate action, in particular in the industrial sector. 

Tone Down | Hungary is open to resolving the rule-of-law dispute with the EU, Justice Minister Judit Varga said on Facebook. Budapest responded to questions from the Commission about its judiciary system and other issues that are at the center of the dispute over EU funds and remains ready to engage in the talks. 

Going Wild | There’s a revival in the whiskey industry after the Scotch Whisky Association relaxed rules that prevented producers from experimenting with the purity of its three ingredients: barley, water and yeast. To entice consumers, Pernod Ricard and Diageo are debuting lighter, reduced-alcohol varieties, ageing their whiskies in barrels that formerly held other drinks and blending them with notes of agave, molasses and other aromas.

Chart of the Day

Energy use roared back last year as Europe emerged from pandemic restrictions, pushing natural gas demand to the highest in a decade, BP said in its annual statistical review. The rebound coincided with capped gas flows from Russia and a squeeze on liquefied natural gas. The wild price swings have continued this year with the invasion of Ukraine. The conflict “threatens to lead to shortages in food and energy,” said Spencer Dale, BP’s chief economist. Read our gas updates here.

Today’s Agenda
All times CET.

• 9 a.m. US Defense Secretary Lloyd Austin, UK Foreign Secretary Liz Truss speak on Brussels Forum panel from Madrid
• 1:45 p.m. NATO Chief Stoltenberg holds news conference during summit in Madrid (and again at 5:45 p.m.)
• 7:30 p.m. EU Vice President Maros Sefcovic delivers speech on Brexit at Bloomberg office in London

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