The week when Brussels will deploy its new weapon against Big Tech

Good morning. Brussels engineered a legal loophole to circumvent Hungary's veto on arms financing for Ukraine with cash from stranded Russian assets, the EU's top diplomat told me, with foreign ministers facing discuss the workaround today.

This maneuver will be essential to the G7 plan to lend Ukraine tens of billions this year. Today our financial correspondent reveals the European Commission's plan to execute this plan. But first, our tech correspondent previews a huge week in the escalating battle between Brussels and Big Tech.

Brussels strikes back

This week, the European Commission will finally use its new powers granted under historic rules to rein in Big Tech. Brussels should pursue proceedings against Apple for alleged anti-competitive behavior, and Microsoft for suspected profiting from its dominant market position, writing Javier Espinoza.

Background: The EU has been preparing for years to fully implement the Digital Markets Act, landmark rules designed to force powerful “online gatekeepers” to open their businesses to competition within the EU.

The expected charges against Apple, first reported by the Financial Times, would be the first under these powers and demonstrate the extent to which regulators can force companies to change their practices.

The EU is set to open a new investigation into whether fees introduced by Apple, including charging app developers 50 cents per download if their app has more than a million users, comply with rules. Analysts say this goes to the heart of Apple's business model, and targeting fees could hurt how the company makes billions in the future.

Brussels believes the tech giant is breaking the law and is expected to charge the iPhone maker this week, according to three people with knowledge of the matter. If found guilty, Apple faces fines of up to 10% of its global annual revenue.

Apple has denied any wrongdoing. On Friday, it announced it was pausing new AI-based features for iPhones in Europe due to uncertainty over the rules' implementation.

Then there is Microsoft. Under separate antitrust powers, Brussels suspects the tech company is using its ability to bundle video streaming app Teams with its other software to the detriment of competitors. Concessions offered by Microsoft to allay these concerns were not enough, and formal charges against the group are also expected this week.

Microsoft said it continued to “engage with the commission, listen to market concerns, and remain open to exploring pragmatic solutions that would benefit both customers and developers in Europe.”

Although the case is far from settled, some people familiar with the matter believe the two sides could reach a deal that would allow the company to avoid a hefty fine.

The exact timing of the announcements may still change, but it is clear that the EU thinks now is the time to hit Big Tech hard.

Chart of the day: Mathematics

French voters most trust the far-right National Rally to manage the economy and reduce the public deficit and debt, despite its unfunded spending plans, according to an FT/Ipsos poll.

Thaw

The European Commission wants EU countries to quickly put into practice the G7 agreement providing for a $50 billion loan to Ukraine using profits from sanctioned Russian foreign exchange reserves, writing Paola Tamma.

Context: The European executive laid the foundations for a “cooperation mechanism for loans to Ukraine” in a document consulted by the FT. It describes how income from assets tied up in the EU, possibly including tax revenues generated by those assets, could be sent to Ukraine to repay the $50 billion G7 loans.

“Revenues would be distributed in proportion to the size of the bilateral loans granted,” writes the commission, adding that “each lender would bear the residual risk of its loan.”

EU finance ministers discussed the document on Friday, but failed to reach agreement on the EU's share of the loan. The Italian Giancarlo Giorgetti, who currently chairs the financial section of the G7, indicated that it would be “between 50 and 60 percent”.

The question of whether profits from assets held in other G7 members should be part of the system also remains open. In total, 260 billion euros are frozen by the G7 and its partners, of which 190 billion euros are held by central securities depository Euroclear in Belgium, the main target of the EU proposal. Others are tied up in countries like the United States, United Kingdom and Japan.

“Further discussions with G7 partners are necessary on the conditions of their participation,” the commission wrote.

The aim is to reach agreement on technical details by the end of the year. “We need to move in this direction and ensure that this loan can be available for Ukraine as early as this year,” Executive Vice President Valdis Dombrovskis said on Friday.

What to watch today

1. EU foreign ministers meet in Luxembourg.

2. European agriculture and fisheries ministers meet.

Now read them