The dominant news story in the European economic press last week was the return of inflation in the eurozone to 2% in December 2025, reaching the European Central Bank’s (ECB) exact target. Euronews, echoed by several national outlets, emphasized that the fall in energy prices played a key role, while service prices continue to rise at around 3.4%, maintaining pressure on household budgets.
For the economists surveyed, this situation places the ECB in a “comfort zone”: the institution can afford to wait before considering further rate cuts, especially since medium-term inflation expectations remain slightly above 2%, as shown by its latest Survey of Consumer Expectations. However, this macroeconomic “good news” does not automatically translate into an improvement in the daily lives of employees and public service users, as real wages have been severely eroded since 2021 and public budgets remain under strain.
EU budget for 2026: A compromise under the ceiling
On the budgetary front, the broad outlines have already been set but continue to be analyzed by European media: the European Union’s 2026 budget was adopted at the end of November and approved by the Council, amounting to €192.7 billion in commitments and €190.1 billion in payments. The European Parliament is pleased to have secured an additional €372 million for key priorities, including research (Horizon Europe), youth (Erasmus+), health (EU4Health), and humanitarian aid, compared to the initial position of the Member States.
However, as several analyses in the Austrian and Brussels press point out, this budget remains strictly confined within the ceilings of the 2021-2027 Multiannual Financial Framework (MFF), without any structural revision to incorporate the needs related to the green transition, housing, or healthcare systems. At the same time, new economic governance rules reforming the Stability and Growth Pact are gradually coming into force: Member States must now negotiate multi-annual adjustment paths with the Commission, which maintains a strong incentive for fiscal discipline just as social movements are demanding more public investment.
This week in Brussels: Committees, housing, and economic sovereignty
In this context, the week of 12 to 18 January 2026 will not see any major economic decisions finalized, but it will lay the groundwork for several key issues. The European Parliament’s weekly agenda presents this period as a time for committee and political group work in Brussels, ahead of the plenary session in Strasbourg from 19 to 22 January.
On Monday 12 January, the Committee on Budgetary Control (CONT) will continue its work on the 2024 discharge, examining the proper use of European funds by the Commission and other EU bodies, at a time when transparency and the social impact of spending are once again at the forefront. On the same day, the Special Committee on the Housing Crisis is organizing a discussion with Commissioner Dan Jørgensen on the European Affordable Housing Plan, which the Cypriot Presidency of the Council has placed at the heart of its program.
According to working documents from the Cypriot Presidency and analyses published in several European media outlets, Nicosia wants to make this plan one of the main levers of its “socially strong and cohesive Union” agenda, linked to the fight against poverty and the implementation of the European Child Guarantee. The challenge now is to look beyond the rhetoric: what concrete funding is available, what are the real margins under the new budgetary rules, and how does this fit with the housing struggles emerging in several countries?
Mercosur, competitiveness, and fiscal discipline: The decisive triangle
The commercial dimension of European economic strategy remains a major point of tension. Last week, the international press widely reported that Member States had given the green light to the signing of the EU-Mercosur agreement, after more than twenty years of negotiations, based on a qualified majority vote in the Council despite opposition from several governments.
Articles analyzing this agreement point out that it could eliminate customs duties on more than 90% of European exports to Argentina, Brazil, Paraguay, and Uruguay, generating up to €4 billion in annual customs savings for EU companies and strengthening their position against American and Chinese competitors. However, they also highlight the risks for certain European agricultural sectors, criticism of environmental clauses deemed insufficient, and the contradiction between a highly aggressive trade policy and social budgets squeezed by new stability rules.
An economy “on target” but under pressure
Seen from the European Quarter, the economic picture at the beginning of January 2026 is paradoxical: on paper, inflation has returned to the ECB’s target range, European budgets are adopted on time, and major trade agreements are moving forward. At the same time, national fiscal room for maneuver is shrinking, public services lack resources, and social struggles—by doctors in France, railway workers in Belgium, and transport workers in Italy—are giving concrete form to the social “costs” of this macroeconomic architecture.
Sources:
- Euronews – Eurozone: inflation falls to 2%, ECB target: Article on December 2025 inflation (2%), core inflation and the role of energy and services.
- Eurostat – Euro indicators: Official press releases on macroeconomic indicators, including the flash estimate of inflation in the euro area for December 2025.
- ECB – Consumer Expectations Survey results – November 2025: Results of the ECB survey on household inflation expectations (medium term > 2%).
- ING Think – Eurozone inflation back at 2% target, confirming ECB’s sweet spot: Analysis of the return to 2%, the components (services, energy) and the implications for monetary policy.
- BNP Paribas AM – Stocks enjoy strong start to 2026; Eurozone inflation returns to target: Market note linking the slowdown in inflation and stock market conditions.
- OECD – Consumer Prices, OECD – Updated 12 January 2026: Comparative data on inflation in the OECD area, including the euro area.
- European Parliament – 2026 EU budget: final vote in Parliament: Summary article on the adoption of the 2026 budget, amounts, priorities and gains achieved by Parliament.
- ERA Portal Austria – EP adopts EU budget for 2026: Summary of amounts (€192.7 billion in commitments, €190.1 billion in payments) and main budget lines.
- Council of the EU – Council gives green light to the EU’s annual budget for 2026: Press release on the adoption of the budget by the Council and the overall breakdown of expenditure.
- EP Think Tank – The European Union’s 2026 budget: Detailed analysis of the 2026 budget, envelopes by heading and the political context.
- Le Monde – European Union finds budget reform deal to loosen rules: Article on the reform of budgetary rules (new economic governance) and its implications for national budgets.
- Wikipedia – Stability and Growth Pact: Reference sheet on the old and new rules of the Pact, useful for historical context.
- IEU Monitoring – EU Parliament publishes agenda for the week ahead 12–18 January 2026: Parliamentary agenda (committees, groups), including CONT and the Housing Crisis Committee.
- European Parliament – Agenda 12–18 January 2026 (PDF): Details of committee meetings and preparations for the Strasbourg plenary session (housing, technological sovereignty, passenger rights, medicines).
- Priorities of the Cyprus Presidency of the Council of the EU: Official note on the priorities of the Cyprus Presidency (social cohesion, affordable housing, combating poverty).
- Euronews – Eurozone inflation falls to ECB’s 2% target as price pressures ease: English version with quotes from analysts on the ECB’s “comfort zone”.
- Reuters / press analysis – What’s in the EU-Mercosur trade deal and why is it contentious? : Analysis of expected gains (customs duties, €4 billion/year), risks for agricultural sectors and environmental concerns.
- The Jakarta Post – Crunch time for EU’s long-stalled Mercosur trade deal: Article on the political agreement in the Council, customs duty savings and social tensions.
