As Russian forces continue to intensify their attacks on the eastern part of Ukraine, the country told its partners yesterday that it will need as much as $65 billion this year for budget funding and repairs to critical infrastructure. The figure excludes security and defense and goes beyond the $39 billion the IMF estimates is missing from Ukraine’s budget for 2022. It also represents a more urgent request than the reconstruction plan that Kyiv presented to donors yesterday in Lugano, Switzerland. The country’s increasing needs for this year come as the EU has trouble providing about 8 billion euros in emergency financing to the Ukrainian government to pay for salaries and other expenses.

— Jorge Valero and Alberto Nardelli

What’s Happening

Limited Scope | Bundesbank President Joachim Nagel said yesterday that the new anti-fragmentation tool to address market volatility should be triggered only under “exceptional circumstances and under narrowly defined conditions.” His comments may mean that the days of ECB teamwork heralded by Christine Lagarde are ending.

Startup Plans | The EU wants to change its IPO rules and attract at least 45 billion euros in private funds to help tech startups get off the ground and stay in Europe, according to plans we’ve seen. Research Commissioner Mariya Gabriel will present the plan this afternoon, which will allow countries to use state aid for testing infrastructure and pursue options for companies to offer startup visas and stock for new workers.

Taxonomy Upended | The EU’s efforts to rid itself of Russian fossil fuels has been turbocharged by the war in Ukraine, yet the conflict is also threatening to bring down a key pillar of the bloc’s climate plans. In a vote tomorrow that’s expected to be close, Ukrainian campaigners are calling on lawmakers to reject plans to include gas and nuclear energy in the EU’s green rulebook. Here’s what’s at stake ahead of a key debate today. 

Toxic Label | A EU proposal coming this month that could classify lithium as a reproductive toxin could severely hurt Europe’s booming electric-vehicle industry. Organizations that produce lithium and batteries said that such a classification would also undermine efforts to boost domestic production, which the Commission designated as a critical raw material in 2020. 

In Case You Missed It

Green Bank | The ECB will reinvest “the sizeable redemptions expected over the coming years” in a way that would penalize companies with a big carbon footprint, the institution said yesterday. The plan will affect some 30 billion euros worth of reinvestments each year and will adjust one of the central bank’s key instruments of its toolbox amid growing evidence of global warming.

Russian Offensive | With the key city of Lysychansk under its control, Russia is switching its focus further west into Donetsk, intensifying shelling of the region, according to Ukrainian officials. Meanwhile, Kyiv is working with the UN and Turkey to make sure that countries won’t take its grain that was illegally exported by Russia. Read our Ukraine update here.

Small Reshuffle | French President Emmanuel Macron announced few changes in his new cabinet after losing his outright majority last month. Former OECD Chief Economist Laurence Boone replaces Clement Beaune as delegate minister for Europe. Beaune became junior minister for transport. Separately, Macron’s standout success in using public spending to tame rampant inflation is reaching its limits.

Fearing Defaults | German banks should be prepared to set aside extra funds to cover a potential spike in defaults if Russia cuts gas deliveries, senior representatives of the sector warned yesterday. Lenders are particularly concerned about planned maintenance work on the main pipeline connecting Germany with Russia as there’s a chance that supplies won’t resume as before once the work is completed, we’re told.

Chart of the Day

Germany reported its first monthly trade deficit in three decades, as companies faced surging costs for imports and softer demand for their products. The shortfall in May for Europe’s biggest economy was 1 billion euros. With rising living costs and high uncertainty as result of Russian invasion of Ukraine and Covid-related lockdowns in countries including China, “the outlook for trade is rather bleak,” said Oliver Rakau, an economist at Oxford Economics in Frankfurt. 

Today’s Agenda
All time CET.

• 10 a.m. Opening remarks by NATO Secretary General Jens Stoltenberg before signature of accession protocols for Finland and Sweden, followed by press conference at 11:30 a.m.
• 10:30 a.m. Greek Prime Minister Kyriakos Mitsotakis addresses European Parliament
• European Commission Vice-President Valdis Dombrovskis attends the Ukraine Recovery Conference in Lugano

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