Welcome to the Brussels Edition. I’m Suzanne Lynch, Bloomberg’s Brussels bureau chief, bringing you the latest from the EU each weekday. Make sure you’re signed up.

Francois Bayrou’s day of reckoning has arrived with the French prime minister widely expected to lose a confidence vote in the lower house today, having failed to secure support for his budget. The embattled premier is due to address the chamber this afternoon, with the outcome of the vote expected later this evening.

It’s not just France’s future at stake. Investors and the euro area as a whole are watching the machinations in Paris closely as the government teeters on the brink of collapse once again. France, the EU’s No. 2 economy, has the widest deficit in the 20-member euro area. The government has warned that debt is climbing on the order of €5,000 ($5,840) a second, with debt-service costs poised to hit €75 billion next year.

The market impact has been in evidence for the past year. Since Macron shocked France by calling a snap election in June 2024, the CAC 40 has fallen 4.1%, compared with a 4.9% gain for the Stoxx Europe 600 Index and a 24% rise in Germany’s DAX Index, excluding dividends.

France’s 10-year yields are now among the highest in the bloc, having already surpassed countries like Greece and Portugal. Markets eased somewhat late last week after Bloomberg reported that Macron would seek to avoid a snap legislative election.

Whatever the outcome today, France is heading for a season of fresh political instability. If Macron names a new prime minister, he or she will still have to pass a budget, opening the prospect of further deadlock.

France’s fiscal woes are mounting even as other countries — including Italy —  make comparative progress in taming their deficits. Both countries are under the commission’s excessive deficit procedure for breaching European fiscal rules.

Will Horobin and Alice Gledhill have more on how France got to this point, including an interview with Pierre Moscovici, a former EU Commissioner and finance minister. Our Bloomberg team will be following all the twists and turns throughout the day and into the evening on our live blog. 

The Latest

• The EU is exploring new sanctions on about half a dozen Russian banks and energy companies as part of its latest round of sanctions on Russia, Bloomberg’s Alberto Nardelli reported this morning. 
• Greek Prime Minister Kyriakos Mitsotakis announced in an annual speech over the weekend a radical €1.6 billion ($1.9 billion) reform of the country’s income tax system, aimed at boosting the nation’s middle class, which has struggled to rebound from years of crisis.
• Italy’s budget this year will not require any sacrifices of citizens, Finance Minister Giancarlo Giorgetti said, stressing that national accounts were in line with the government’s expectations.
• Bulgarian Prime Minister Rosen Zhelyazkov has ruled out a full investigation into the GPS jamming incident involving a plane carrying Ursula von der Leyen. “There’s been an information mess,” Zhelyazkov told reporters late last week.
• German industrial production rose more than expected in July, offering some hope that the country’s key sector may be stabilizing and soon overcome its years-long slump.
• Swedbank’s outstanding US investigations by the Department of Justice and the New York Department of Financial Services still pose a risk for the Swedish lender given their narrower focus on potential money-laundering violations, analysts have warned.

Seen and Heard on Bloomberg

Volkswagen CEO Oliver Blume criticized the US-EU trade deal in an interview with Bloomberg TV, warning that the 15% tariff “would be a burden” for the carmaker, though it gives the company “planning security.” “We don’t appreciate the asymmetric deal in-between the US and EU because it’s distorting the competition in Europe,” he told Bloomberg’s Stefan Nicola on the sidelines of the Munich Auto Show.

Chart of the Day

Rome is getting better at collecting taxes and shrinking its shadow economy, data suggests. The so-called tax gap – the difference between taxes owed and what is effectively collected – has declined over the past decade, falling from 23% of what should have been paid in 2011 to 15% in 2021, writes our columnist Lionel Laurent.

Coming up

• Vote of confidence in the French parliament this evening
• Polls close in Norway's election at 9 pm
• European Council President Antonio Costa visits Estonia this evening
• Debate on Ukraine and Israel-Gaza tomorrow morning at the European Parliament plenary session in Strasbourg

Final Thought

SvalSat, the only commercial ground station providing all-orbit support, on the island of Spitsberge in the Svalbard archipelago of Norway. Photographer: Lorna MacKay/Bloomberg

Svalsat in Norway’s Arctic is the world’s largest satellite ground station. Its critical role in global communications is one measure of how strategically significant the Norwegian territory of Svalbard has become at a time when Trump says he wants control of Greenland — and as Russia’s war on Ukraine demonstrates the Kremlin’s willingness to advance its territorial ambitions by force.

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