The EU is expected in the coming days to finalize details of a 9 billion-euro financial package for Ukraine to bolster the war-torn nation. We’re told the new macro-financial assistance program would consist of 25-year loans, with a 10-year grace period to reimburse the principal, and that the EU budget would cover interest payments. President Volodymyr Zelenskiy underlined the devastation wreaked on the country’s economy by the Russian invasion. Speaking virtually to a Milan conference yesterday, he said “normal economic life” in Ukraine isn’t possible. “Almost half of our economy and our economic system is not operational,” he added. In another show of support, EU leaders are set to formally grant Ukraine candidate status later this week, following a meeting of ambassadors yesterday where nobody opposed the decision, according to officials. Here’s the latest news on the war. 

What’s Happening
Gas Grip | Russia again tightened its grip on Europe’s natural gas supply, rejecting an offer from Ukraine to book more transit capacity to compensate for reduced flows through a key pipeline to Germany. Several major German industrial consumers are ready to participate in a government auction that will help ensure security of supply this winter, Deputy Economy Minister Oliver Krischer said in an interview.

Ukraine Workforce | Refugees fleeing the war in Ukraine could end up boosting the euro area’s active labor force by up to 1.3 million people, the ECB predicts. Rough calculations point to a jump of 0.2% to 0.8% over the medium term, the institution said in an economic bulletin. That equates to between 300,000 and 1.3 million workers.

Lagarde Digs In | ECB President Christine Lagarde reaffirmed officials’ intention to raise interest rates in July and September, signaling that concerns over financial-market tensions aren’t derailing the fight against inflation. The comments to EU lawmakers follow an emergency meeting last week where officials accelerated work on a tool to defend the integrity of the euro region.

China Tensions | The EU and China are planning high-level meetings on the economy and climate in coming weeks, the bloc’s ambassador in Beijing told us, demanding tangible benefits after “a dialog of the deaf” in April. Nearly one in four European companies — the most in a decade — are considering shifting investments out of China as Covid outbreaks dim the outlook, a survey showed. 

In Case You Missed It
Macron Loses | In Sunday’s elections, Emmanuel Macron became the first French president in decades to fail to garner an absolute majority in parliament. His alliance will remain the largest bloc, but he will have a hard time passing legislation. That puts much of his agenda in peril — including plans to increase the retirement age and deliver tax reforms.

Trade Push | A group of 15 member states sent a letter to the European Commission yesterday calling for renewed vigor on trade talks. As we first reported last month, member states warn that the progress made by the Asian bloc should be a “wake-up call” for Europe, according to Swedish Trade Minister Anna Hallberg, who led the initiative.

ESG Standoff | There’s a standoff brewing between European lawmakers and the Big Four accounting firms as they try to lay claim to an ESG market that may generate fees of as much as $8 billion a year. Roughly 50,000 European companies will need to hire qualified firms to evaluate their ESG reports once new EU disclosure requirements are finalized. The dispute centers on who gets to do that work.

Intel Owed | Intel is seeking 593 million euros in interest from the Commission following a historic court victory that overturned a 1.06 billion-euro antitrust fine earlier this year. In a challenge at the EU’s General Court, the chipmaker asked the Luxembourg-based tribunal to order the EU to pay the sum, saying the amount consists of default interest on the main fine, minus the interest the Commission had already paid back.

Tank Tour | Ukraine is planning to send an exhibition of destroyed Russian military vehicles across Europe, as it strives to maintain public attention on the conflict. “We’ll help to ensure that Russian tanks are in Europe, but as scrap,” said Defense Minister Oleksii Reznikov. Ukraine plans to start the tour in Warsaw before moving on to Berlin, Paris, Madrid and Lisbon.

Chart of the Day

European banks may be an unlikely bet when recession risks are stacking up, but BlackRock says it’s the right time to add exposure to the beleaguered sector. “It’s contentious, but I see an extreme valuation opportunity in European banks,” Nigel Bolton, co-chief investment officer of BlackRock Fundamental Equities, told us. “Rising interest rates are boosting net interest margins. Banks are still very cheap and backed up by strong earnings, with retail-focused banks to benefit in particular.” Lenders have become a proxy for recession fears as central banks turn hawkish to rein in inflation.

Today’s Agenda
All times CET.

• 9:30 a.m. EU European affairs ministers meet in Luxembourg

• 11:10 a.m. Budget Commissioner Johannes Hahn delivers a keynote speech at the Global Borrowers & Bond Investors Forum 2022 conference in London

• 11:45 a.m. EU climate chief Frans Timmermans in Berlin for speech at Zeitenwende conference

• Commission President Ursula von der Leyen delivers the opening speech of the European Development Days

• Health Commissioner Stella Kyriakides delivers a speech at the ONE — Health, Environment, Society — Conference 2022