This article is part of the Cypriot presidency of the EU special report.

Cyprus, one of the bloc’s smallest countries, takes over the rotating presidency of the Council of the European Union from Denmark at a tricky time for Europe.

The EU’s next seven-year budget looms large on the presidency’s horizon and is sure to provoke some bitter disagreements as governments begin discussing how much money to allocate to different areas.

Closely linked to it is the post-2027 Common Agricultural Policy, worth hundreds of billions of euros. The next six months will help set the tone for a reform that will define income support, environmental requirements and rural funding for the next decade.

From chemicals to electricity grids via customs and access to medicines, here’s a rundown of some of the files the Cypriots will be shepherding through.

The EU’s long-term budget

Why it matters: The Cypriot presidency of the Council of the EU will have to steer a crucial phase in the negotiations over the EU’s next seven-year budget. In the coming six months, EU capitals will start discussing how much money to allocate to different areas — which is likely to prompt bitter infighting between countries. Tensions are likely to come to a head during a summit of EU leaders in June 2026. 

State of play: The current Danish Council presidency is hoping to broker an agreement among EU countries on the structure of the new budget, without discussing the amounts allocated to each program. Cyprus faces an even more difficult task: It will have to finalize a counterproposal (or negotiating box, as it’s officially known) that includes figures by the end of its presidency in June. 

Fault lines: The EU’s traditional divide between frugals and big spenders is still there — although the fault lines in Brussels have become more nuanced than they were in the past. Nordic countries such as Denmark that traditionally supported a smaller budget, are now in favor of greater spending on defense and competitiveness. Other countries such as Poland and Hungary want to maintain the focus of the budget on traditional priorities such as agriculture and payouts to poorer regions. The Cypriot presidency will have to broker a compromise between these different groups. 

Likely progress:

Author: Gregorio Sorgi

Creating an EU finance watchdog

Why it matters: The European Commission thinks creating a single top cop for the biggest finance industry players, like stock exchanges and clearinghouses, is key to unlocking the EU’s single market for investment — a must if the bloc stands any chance of keeping up with the U.S. and China economically. The trouble is, that watchdog would be in Paris, and the idea has been politically blocked for years as a glut of EU countries hate it.  

State of play: The Commission pitched the idea in early December in the same legislative package as a major shake-up of rules for financial markets. Negotiations are in the very early stages, and are bound to be both long and messy. Multiple countries came out against the watchdog idea before the text was even published. Talks are likely to devolve into trench warfare, with France leading the pro-watchdog camp and small countries against. But Germany has been mysterious about whether it will support the watchdog or not — and it could swing the numbers in France’s favor if it decides to back the idea.

EU fault lines: Small countries are skeptical of their finance industries — particularly significant ones like in Luxembourg or Ireland — relocating to Paris to be closer to the watchdog. Others just don’t want to hand over national powers to the EU level. Germany, with its federal system and coalition government, has views on both sides and can’t seem to make up its mind. Such a heated political issue will likely become a bargaining chip in other EU talks, so whether the watchdog plan is successful or not might depend on other political trade-offs between big countries.   

Likely progress:

The Commission is desperate to make quick progress in negotiations, but the legislative package is massive and there are plenty of countries in no hurry to move talks along. The Cypriots will have done well if they make some initial progress on the file, but no one’s expecting a full deal any time soon.

Author: Kathryn Carlson

Financial data sharing

Why it matters: Financial Services Commissioner Maria Luís Albuquerque considers the Framework for Financial Data Access, or FiDA, a key piece of the EU strategy to boost innovation in the financial sector. The proposal wants financial institutions, such as insurance firms or investment funds, to share their customers’ data with other businesses (with customers’ consent). The goal is to provide citizens with greater transparency on their financial choices and enable the creation of new financial products.

State of play: FiDA’s legislative story is a weird one. On paper, negotiations between the European Parliament and Council of the EU kicked off last April. However, they immediately turned into an exercise in reducing the rules’ scope under massive pressure from the industry, especially the French and German insurance sector, and because of its complex design. The Danish presidency had included a deal on FiDA in its program, but due to a series of unfortunate events, including a bike accident involving the lawmaker leading work on the file, it disappeared from policymakers’ radars. For Cyprus’ presidency, even making negotiations happen would be a step forward. 

Likely progress:

EU fault lines: Lawmakers want tech giants to be excluded from the scope of the bill. The Council is divided between those who want a full or a partial exclusion. But the really hot issue is about data sharing: what categories should be shared and how. In the background, financial sector incumbents fiercely oppose the bill, considering it a threat to their business model, while consumer groups aren’t supporting it, fearing mismanagement of citizens’ data.

Author: Giovanna Faggionato

Rewriting Europe’s farm rulebook

Why it matters: Few files will loom larger over the Cypriot presidency of the Council of the EU than the post-2027 Common Agricultural Policy — a political and budgetary monster worth hundreds of billions of euros that shapes how farmers make a living across Europe. The next six months will help set the tone for a reform that will define income support, environmental requirements and rural funding for the next decade.

State of play: Brussels’ reform blueprint landed last summer, proposing to move from today’s two-pillar CAP structure to a single fund delivered through national and regional plans — a shift that leaves the core €300 billion for farmers intact but changes how any additional rural or agricultural money is allocated. Capitals are only now beginning to digest what the European Commission is asking of them. Cyprus will need all the cover it can get from bigger, better-staffed administrations just to keep the file moving.

​​EU fault lines: Expect familiar divisions. Eastern countries want to close the gap with their Western neighbours on per-hectare payments. Several states with influential large-farm sectors, including France, Germany, Czechia and Slovakia, are likely to push back against any payment caps that would hit their producers. And while the core funding for farmers is protected, agriculture ministers across the bloc worry that any additional money that today goes to farming or rural development could face tougher competition from other national priorities like defense or industrial support.

Likely progress:

Cyprus can prepare the ground, but the real political horse-trading will fall to the Irish presidency later in the year. For now, success means avoiding gridlock and convincing bigger players to lend a hand — all while broader EU budget talks turn every euro into a fight.

Author: Bartosz Brzeziński

Improving animal welfare during transport

Why it matters: The European Commission promised to beef up animal welfare standards after a “fitness check” back in 2022 found room for improvement in rules that, in some cases, date back over two decades. As part of this modernizing effort, the EU executive came up with a plan to update rules on the treatment of animals during transport in 2023 — think journey times, safe temperatures and how much space animals should have.

State of play: That plan is now in the hands of the EU co-legislators — the European Parliament and Council of the EU — that each need to come up with their own suggested amendments to the text before everyone can get into a room to hash out an agreement on new standards. While the Danish Council presidency has pushed to bring countries closer to an agreement, there’s still a lot of work to do. Meanwhile, the file is stuck in political limbo in the Parliament.

EU fault lines: In Parliament, a chasm separates the positions of the lead negotiators — with Green MEP Tilly Metz pushing for higher standards in the transport committee, and agriculture committee European People’s Party MEP Daniel Buda arguing for stricter enforcement of the status quo — while the file drowns under thousands of amendments. Meanwhile, member countries with different national contexts and climates struggle to agree on specific elements of the proposal like safe temperatures and journey times. 

Likely progress:

Cyprus, a small island nation with its own extreme temperatures, will have to try to tackle those tricky topics, while also managing work on huge agriculture files like the Common Agricultural Policy. Even if the Council is able to continue chipping away at sticking points, the file’s future in Parliament remains uncertain. 

Author: Lucia Mackenzie

Ensuring access to medicines

Why it matters: The European Commission wants to ensure Europe never runs out of essential medicines again, but to do so it has to strengthen and diversify its supply chains and tackle manufacturing dependencies on countries such as India and China. This is the idea behind the proposed Critical Medicines Act, that sets out plans to overhaul medicines procurement rules and incentivize local drug production.

State of play: With negotiations on the pharmaceutical legislation — the first major overhaul of the bloc’s medicines regulations in 20 years — nearing the finish line, the Critical Medicines Act is the next big piece of the puzzle that should help ensure Europeans have access to secure and affordable medicines. Denmark has done most of the groundwork to reach a compromise in the Council of the EU, and the European Parliament has also moved quickly, spurred by European Health Commissioner Olivér Várhelyi’s urgency. But now it will be up to Cyprus to lead countries through interinstitutional negotiations and navigate what are likely to be tough talks.

EU fault lines: Joint procurement rules have dominated much of the discussions so far. Smaller countries with less market power see this as an opportunity to ensure innovative medicines for their patients, while industry has historically opposed it. The Parliament also wants more action on stockpiling — another tool countries are skeptical of. And changes to state aid rules and the impact on drug prices are also a concern for smaller countries.

Likely progress :

Várhelyi wants to wrap up the Critical Medicines Act as soon as possible, and the Parliament and Council seem to share this sentiment, particularly as the legislation is seen as complementary to the pharma package. Cyprus is likely to want to be the one getting this through to the finish line.

Author: Claudia Chiappa

Cutting tech red tape  

Why it matters: The European Commission wants to simplify the EU’s digital rulebook to make life easier for businesses, public authorities and citizens — and help the bloc compete with economic rivals like the U.S. and China. A key report published last year by former Italian Prime Minister Mario Draghi said the EU’s regulatory stance toward tech companies, with “around 100 tech-focused laws and over 270 regulators,” hampers innovation.  

State of play: The Commission presented its two-part digital omnibus package on Nov. 19, with wide-ranging proposals to simplify everything from artificial intelligence to privacy rules. Now, the plans have to go to EU lawmakers and countries to hash out their views — and prepare for a lobbying storm as tech companies and digital rights advocates try to shape the debate.  

EU fault lines: Countries are divided on whether, or how, to amend the EU’s key privacy rulebook (the General Data Protection Regulation). Germany is pushing for far-reaching changes, while others like France and Austria are firmly against reopening the law. The AI rulebook could be less contentious, with many already accepting that a key part of it will be delayed. 

Likely progress:

The plans are being pushed by the Commission through a fast-tracked process, and the Cypriots will be trying to keep up that momentum during negotiations — but some of the more controversial changes could present roadblocks.  

Authors: Ellen O’Regan and Pieter Haeck

Stopping child abuse online

Why it matters: After three years of trying, EU countries in late November finally agreed on their version of legislation to combat child sexual abuse material online, paving the way for negotiations with the European Parliament. The law has been hotly contested, with the bloc trying to protect children from predators without opening the door to government surveillance. 

State of play: The issue hanging over the negotiations is more about timing than substance: An exemption to the EU’s privacy rules allows companies to voluntarily scan for CSAM, but that expires in April. Negotiators will be well aware that they must reach an agreement before then and lawmakers will need to extend the exemption, too, to allow scanning to continue while the new law is implemented. That deadline should turbocharge negotiations.

EU fault lines: The big bust-up in the Council of the EU was about whether companies like WhatsApp should be forced to scan for CSAM, or merely allowed to choose to do so. In the end, EU countries agreed on the latter, moving their position closer to the Parliament’s privacy-friendly proposal, agreed in 2023. That should make talks relatively simple, though privacy advocates still have some gripes. 

Likely progress:

The April deadline means both Parliament and Council are laser-focused on getting the deal over the line. Though the file itself is contentious, the motivation of the deadline should make Cyprus’ job relatively easy. 

Author: Sam Clark

Bringing some order to space

Why it matters: Satellites are crowding the skies faster than ever — and so is the space junk they leave behind. To get a grip on the problem, the European Commission proposed a new law this year that would impose tighter rules on satellite operators: clean up their debris, curb their pollution, boost their cybersecurity. The Space Act also aims to bring some order to the EU’s mix-and-match national rules or, for countries without any space legislation, introduce some.

State of play: EU capitals have so far reported little progress in negotiations, hampered by legal doubts and fears of regulatory overreach. They were quick to challenge the legal basis of the bill, arguing it would wrongfully allow the Commission to venture into their national competencies. 

EU fault lines: Governments find the text too complicated and prescriptive. They’ve expressed concerns it would add unnecessary red tape on space companies and national authorities alike, as well as clash with existing cybersecurity rules. (The U.S. administration came out swinging against the “unacceptable” law — which will add a layer of rules for SpaceX and Amazon Leo constellations — calling for its removal.)

Likely progress:

The Cypriot presidency of the Council of the EU will nudge the negotiations along, but with this file hitting sensitive national nerves, a wrap-up is unlikely.

Author: Mathieu Pollet

Turbocharging telecom network rollout 

Why it matters: A plan to overhaul the EU’s telecom rulebook — and a pledged lifeline to the largest telcos, who warn they are facing a slow death by a thousand cuts due to fragmentation, red tape and lack of scale — has gone decidedly sour. The Digital Networks Act, which is set to land in January, will aim to boost investment in Europe’s digital infrastructure and make life easier for network operators, so they can keep rolling out 5G and fiber at pace.

State of play: Despite its pending status, the future law has been widely debated over the past two years and faces headwinds from many corners of Europe — from smaller players and tech firms to regulators and, most importantly, national governments. Even the European Commission’s own scrutiny board had some negative feedback.

EU fault lines: The bloc’s capitals have repeatedly expressed skepticism, if not full-fledged disapproval, of the EU executive’s ambitions for the law. There have been grumblings over the infamous “fair share” proposal, the push to dial down regulatory pressure on legacy operators and the plan to reform spectrum governance, despite heavyweight backing from former Italian Prime Ministers and authors of flagship reports for the Commission Enrico Letta and Mario Draghi.

Likely progress:

With the proposal trampling on multiple red lines, expect strong, blanket pushback at first — followed only later by slow progress as governments decide which battles to fight and which they can live without.

Author: Mathieu Pollet

Boosting European competitiveness

Why it matters: The Industrial Accelerator Act is one of the first concrete actions for the entire industry that the EU executive presented since it took office in December 2024. While it was first aimed at speeding up permitting for the decarbonization process, the European Commission decided to broaden it up to include a “Made in Europe” preference in public procurement and conditionalities for foreign investments in the EU. 

State of play: The Commission is slated to present its proposal on Jan. 28. Cyprus will be in charge of negotiating the Council of the EU’s position before it goes into interinstitutional negotiations.

EU fault lines: Made in Europe and conditionalities for foreign investments in the EU could be tricky topics for governments. France has been a fierce advocate of local content requirements, while other countries are wary. How can the local content requirements be designed without turning them into national favoritism? How should they go about sectors that are stronger outside the EU? Questions on whether this is in line with international trade rules will also come up. On conditionalities, the questions will be how far is the EU ready to go? Will it include mandatory technology transfers or will it be limited to make sure investments lead to job creation and creating value within the EU borders? 

Likely progress:

Everyone talks about the urgency to act and support European industry, but success will depend on how far the EU goes on local content requirements and conditionalities for foreign investments.

Author: Aude van den Hove

A road map for the single market

Why it matters: Announced by European Commission President Ursula von der Leyen during her State of the Union speech in September, the single market road map will lay out clear targets for 2028 to complete the European internal market in topics ranging from capital, services, energy, telecoms, the 28th regime and the fifth freedom for knowledge and innovation. 

State of play: Governments have been calling for the Commission to act on the single market, while the EU executive has been playing the ball back into the countries’ court arguing that they are the ones keeping up barriers. In May, the Commission identified 10 of the most urgent barriers to tackle — dubbing them the Terrible Ten — and has been focussing its work on addressing them. Denmark has picked three — from labeling to company law — for EU countries to prioritize. 

EU fault lines: Completion of the single market will depend on the political will of EU countries to let go of their particularities, while the Commission should step up enforcement of the rules. The EU executive has been slowly distancing itself from infringement procedures, saying these take up a lot of time and are often met with raised shields from EU governments. Industrial Strategy Commissioner Stéphane Séjourné says the EU executive is trying a more consensus-driven approach, but it can only do so much without the willingness of EU countries. 

Likely progress:

The desire to complete the single market has been gaining momentum, but progress will depend on the extent to which governments are able to let go of national barriers and stop going beyond EU rules. 

Author: Aude van den Hove

Improving electricity networks

Why it matters: The European Grids Package is a plan to improve and expand the EU’s electricity networks. It was announced in February as part of the broader Clean Industrial Deal. Better transcontinental interconnection is crucial to the clean energy transition because it allows more new generators to be added and electricity to be transported from where it’s generated to where it’s consumed, often over thousands of kilometers. Interconnection is especially important in a renewables-dominated grid because it provides a form of insurance against the risk that the sun will stop shining and the wind will stop blowing simultaneously in a given region. 

State of play: The package was made public on Dec. 10. The Cypriot presidency has told POLITICO that it will make it a priority. Perhaps ironically — or conveniently, depending on whom you ask — Cyprus is completely disconnected from Europe’s main grid and pays some of the highest prices for energy in the EU, according to Eurostat. It’s currently in the process of connecting its grid to those of Israel and Greece via what would be the longest subsea electricity cable in the world. But diplomats broadly trust that the Cypriots, who have taken on a seasoned Greek energy expert for the file, will make a good go of it. 

Fault lines: Hard to tell given it’s early days. but there are some reliable tensions that we can expect to resurface. France, for instance, has historically resisted interconnectivity with Spain, worrying the country would flood its grid with cheap renewables. And Norway has long balked at Germany’s bottomless consumption of its energy to feed its industry, which drives up bills back home.

Likely progress:

Author: Ben Munster

Reforming customs 

Why it matters: The behemoth 265-article EU customs reform is essentially overdue maintenance of the bloc’s endlessly fragmented approach to customs. Hoping to tackle the rising flood of cheap and illegal packages, the customs reform also aims to help national agencies deal with other laws that increase workloads, like the forced labor product ban and the Ecodesign for Sustainable Products Regulation. The reform creates a new EU-level customs authority and a data hub to centralize risk profiles and facilitate cooperation.

In the meantime, the EU is working on effectively ending the entry into the bloc of tax-free packages worth less than €150 by 2026, something the customs reform will deal with in a more in-depth manner from 2028.

State of play: Almost there. Regardless of the outcome of the negotiations planned for Dec. 10, the European Parliament and member countries will need more time to hash out specifics. Among those: To what degree will EU countries allow the European Commission to implement the day-to-day operations of the new EU Customs Authority and where will it be located?

EU fault lines: The final issues in the negotiations have focused on who has access to customs data and how broadly the law should list EU-wide penalties for companies. More deeply, the reform laid bare the ever-present tension between Commission wishes to further EU integration and capitals hoping to slow things down.

Likely progress:

Cyprus will oversee the vote on the seat for the new EU Customs Authority. This is expected in late February and should be the crowning decision in the package. 

Author: Koen Verhelst

Steel trade measures

Why it matters: With the world producing more steel than it could possibly use, the almost freely accessible EU market is absorbing a lot of the so-called overcapacity. European steel producers also face high energy prices and the need to invest in lower-emission tech to produce low-carbon steel. Lower quotas and higher tariffs are meant to tackle at least the import problem.

State of play: It’s early days. The Council of the EU needs to approve two things. Firstly, a mandate for the European Commission to renegotiate steel import quotas with major supplier nations like Turkey and Japan. Secondly, it needs to reach a compromise on the legal framework the Commission proposed to translate the trade measure into full-blown EU legislation. The European Parliament is expected to sign off on its compromise in the first quarter. Current quotas and tariffs expire by June, so there’s a clear deadline for the interinstitutional talks, which the Cypriots will need to lead on the Council side.

EU fault lines: How World Trade Organization-proof is this measure? The Parliament will likely have different ideas about that than most EU countries. At the same time, there is broad consensus that the steel industry needs assistance and that the cliff edge in June cannot be left unattended.

Likely progress:

A cliff edge of no protection for the steel industry looms in late June if the institutions don’t agree in a timely manner. With the Parliament expected to complete its work in the first quarter, it will be up to the Cypriots to ensure quick negotiations.

Author: Koen Verhelst

Migrant returns in full swing

Why it matters: Cyprus has spearheaded a hard-line returns policy for migrants. Now, the country will use its role at the helm of the Council of the EU in Brussels, to push through reforms that would roll out migrant return plans across the bloc. 

State of play: The Danish presidency, which lasts until Dec. 31, has concluded negotiations on the Common European System for Returns within the Council. Informal negotiations between the Council, European Parliament and European Commission are expected to start during the Cypriot presidency, which aims to reach an agreement during its six-month tenure. In order to do that, the European Parliament has to agree on its own position on the issue, so informal negotiations are expected to begin in March.

EU fault lines: Big disagreements among member countries remain as there are concerns the system will lead to longer detention, fewer rights and increased risks of human rights violations for migrants and asylum-seekers. A new proposal on so-called return hubs in third countries is also hugely controversial.

Likely progress:

Author: Nektaria Stamouli

Revising rules on chemicals 

Why it matters: Next year is going to be a make-or-break moment for what the EU calls “the industry of industries.” The revision of the EU’s flagship chemicals law, REACH, is expected to land in the first quarter of 2026. The chemical industry in Europe is struggling and unable to compete with China and the U.S, but the question is whether simplification of chemical regulations will come at the expense of protecting human health and the environment. The chemicals omnibus is also expected to be finalized under the Cypriot presidency of the Council of the EU, amid a heated debate over whether cancer-causing chemicals in cosmetics should be automatically banned.  

State of play: REACH has been delayed several times since the EU decided to revise it in 2020. The Commission’s internal watchdog, the Regulatory Scrutiny Board, shot down an impact assessment of the proposal in September, meaning the revision won’t land by the end of 2025, but early next year, according to the EU executive. The European Parliament and Council are preparing for a big fight over how to regulate chemicals. The chemicals omnibus is currently going through Parliament and is expected to be put to a vote in plenary in April before entering interinstitutional negotiations. 

Fault lines: The Commission is very slow to phase out harmful chemicals. It takes 14.5 months on average to decide whether to allow companies to continue using banned chemicals, almost five times the legal limit, according to the European Ombudsman. The EU has to register a chemical on the market within 3 weeks, but it can take up to 20 years to restrict it. The main chemical lobby in Brussels, CEFIC, alongside its German counterpart, VCI, have even argued that it wasn’t necessary to reopen REACH in the first place. 

Likely progress:

REACH is like opening a can of worms. It’s been delayed often and some don’t see the point in its revision, making for a tough battle in the Council to find a position. 

Author: Jakob Weizman

Updating air passenger rights 

Why it matters: The rules governing consumer protection in the context of air travel date back to 2004 and have been reshaped by several court decisions, which has led to legal uncertainty and excessive paperwork for those seeking compensation. The European Parliament has repeatedly called for a higher level of passenger protection, but airlines have warned that airfares would increase along with the regulatory burden.

State of play: The European Commission’s proposal to update the rules was presented in 2013 but has been stuck in the Council of the EU for over 10 years. In June, countries reached a common position by a slight majority, opening the unusual second reading procedure — which angered MEPs due to its tightened negotiating times. Diverging positions on key issues and a lack of willingness to compromise from the parties led to the failure of negotiations under the Danish presidency. According to the second reading procedure, Parliament can now amend the Council’s position and send the file back to the countries. If governments disagree with the amended text, the reform proposal may end up in conciliation. 

EU fault lines: The countries’ proposal to expand the delay threshold for granting compensation from three hours to four or six hours, depending on the distance, is preferred by the airlines. The Parliament’s proposal to maintain the current threshold and introduce new rights, such as a 7-kilogram carry-on bag at no extra charge, is preferred by consumer rights organizations. If the co-legislators don’t move from their respective red lines, a deal will remain out of reach during the Cypriot presidency as well.

Likely progress:

Author: Tommaso Lecca