Europe Intelligence Brief for Tuesday February 10 2026

What matters today

1. Starmer’s Epstein Crisis: Surviving But WoundedUK POLITICS

What happened: Chief of staff Morgan McSweeney resigned Sunday taking “full responsibility” for recommending Peter Mandelson as US ambassador despite Epstein links. Comms director Tim Allan quit Monday. Scottish Labour leader Anas Sarwar became the first senior Labour figure to publicly call for Starmer to resign. Starmer addressed 400+ MPs Monday night: “I’ve won every fight I’ve ever been in.” Cabinet rallied behind him — Lammy, Reeves, Rayner all issued statements of support. Police investigating Mandelson for misconduct in public office (max: life sentence). Cabinet Secretary Wormald also reportedly negotiating exit.

So what: Starmer’s authority is shattered even if his position holds. Labour polling is catastrophic — Reform UK has led for over a year. Scottish Labour elections in May are now existential. The “Mandelson appointment documentation” release could take weeks (vetting for national security and police investigation). Every day without resolution bleeds support. The question is no longer whether Starmer is damaged but whether the party moves before May. Rayner and Streeting are the leading succession candidates.

2. European Parliament: Triple Vote DayEU LEGISLATION

What happened: MEPs voted on three landmark measures in Strasbourg today. (1) The 2040 climate target passed 413-226, enshrining a 90% greenhouse gas reduction vs 1990 levels with carbon credit flexibility. (2) The first-ever EU list of safe countries of origin for asylum seekers was adopted, enabling accelerated processing and returns. The rules also removed the requirement for a “link” between applicants and transfer countries — paving the way for Rwanda-style deals. (3) A safeguard mechanism for EU-Mercosur to protect European agriculture was approved. Separately, Annalena Baerbock (UN General Assembly President) addressed Parliament, and MEPs debated Spain’s migrant regularisation and the Ukrainian energy crisis.

So what: The 2040 target codifies the EU’s position as the world’s most ambitious climate legislator — but flexibility on external credits was essential to get the votes. The asylum rules are transformative: removing the “connection” requirement opens the door for offshore processing deals that would have been unthinkable two years ago. The Mercosur safeguard addresses the strongest objection from French, Polish and Irish farmers. All three measures apply from June 2026 when the Migration Pact takes effect.

3. BP Halts Buybacks: End of an Era for Big Oil ReturnsCORPORATE / ENERGY

What happened: BP suspended its $750M quarterly share buyback programme and withdrew 30-40% cash return guidance, directing all excess cash to balance sheet repair. 2025 underlying profits fell 16% to $7.5B. Q4 included a $3.4B loss with $4.3B in impairments (gas and low-carbon businesses). BP is now the only top-five oil major without a buyback. Cost-savings target raised to $5.5-6.5B by end-2027. Net debt at $22.2B. Shares fell 5.7% in early London trading. Incoming CEO Meg O’Neill (from Woodside Energy) starts April 1.

So what: BP is now firmly the weakest of the supermajors. Shell maintained its $3.5B quarterly buyback last week despite its own 22% profit decline. Exxon and Chevron are signalling continued returns. The contrast is stark: American majors are buying back; BP is desperately deleveraging. Elliott Investment Management’s activist pressure accelerated the CEO change but the underlying problem — too much debt, underperforming renewables, and lower crude prices — predates any boardroom drama. TotalEnergies reports Wednesday and is expected to cut its own payout. The FTSE 100 underperformance today is almost entirely a BP story.

4. Vance in the Caucasus: Nuclear Deal, Genocide Memorial, TRIPPGEOPOLITICS

What happened: VP Vance became the first sitting US president or vice president to visit Armenia. On Monday he signed a civil nuclear energy cooperation agreement with PM Pashinyan, offered $11M in US-made drone sales, and announced chip exports. On Tuesday he visited the Tsitsernakaberd Genocide Memorial, writing “Memory eternal” in the guest book. Vance heads to Baku today. The centrepiece: the TRIPP corridor — a 43km road-and-rail route through southern Armenia connecting Azerbaijan to its Nakhchivan exclave, bypassing Russia and Iran to link Central Asia to Europe.

So what: Washington is muscling into Russia’s traditional sphere. The TRIPP corridor competes directly with Russia’s existing influence over Caucasus transit and connects to the Middle Corridor (6,500km China-to-Europe route). Armenia signalling it may choose a US company for its new nuclear reactor (replacing the Russian-built Metsamor plant) is a seismic geopolitical shift. Pashinyan accepting an invitation to Trump’s Board of Peace (Feb 19) further deepens the realignment. Georgia — notably skipped by Vance — is being sidelined as its government pivots toward Russia.

5. Spain’s 500K Migrant Regularisation Divides BrusselsMIGRATION

What happened: The European Commission has “strong reservations” about Spain’s plan to grant legal status to ~500K undocumented migrants via royal decree. Applicants must prove 5 months’ continuous residence before Dec 31, 2025. Applications open April–June 2026. The European Parliament debated the policy today; Commissioner Brunner addressed MEPs. PP (opposition) and Vox (far-right) requested the debate, arguing the measure threatens Schengen. Sánchez framed it as “a moral imperative and an economic necessity.” Podemos leader Montero drew fire for linking regularisation to expanding the left’s voter base.

So what: This is the most ambitious migration regularisation in Europe in 20 years. The precedent matters: if Spain shows economic benefits (higher tax revenue, reduced informal economy), other ageing EU states with labour shortages may follow. But the timing — coinciding with the EU adopting its toughest-ever asylum rules — creates a jarring contradiction. Spain’s working-age population is projected to shrink by 800K in the next decade; employers in agriculture, hospitality and elder-care support the move. The Commission is walking a tightrope: it has said regularisation is “national competence” but is clearly uncomfortable with the Schengen implications.

6. Ukraine Peace Talks: Prisoner Swap, No BreakthroughWAR & PEACE

What happened: The second round of US-brokered trilateral talks concluded in Abu Dhabi Feb 4–5. Each side exchanged 157 prisoners — the first large-scale swap in five months. Ukraine proposed an unconditional ceasefire; Russia rejected it. US-Russia military-to-military dialogue formally restored for the first time since 2021. Zelenskyy said next talks likely in the US. US envoy Witkoff’s team discussed a March 2026 target for a peace deal — but five sources told Reuters the timeline is unrealistic. Territory remains the core impasse: Russia demands Ukraine cede the Donetsk region; Kyiv refuses.

So what: European capitals are watching two tracks simultaneously. The Paris “coalition of the willing” (Jan 6) produced concrete security guarantees — UK/France pledging military hubs on Ukrainian soil — but the US-Russia bilateral track (Abu Dhabi, Florida meetings) is where the deal will be shaped. Zelenskyy’s claim that “90% of a deal is agreed” refers to the architecture, not the territory. Germany’s Merz has said troops would be stationed in a neighbouring country, not Ukraine itself. The European Parliament votes today on fast-tracking the MFF amendment to guarantee Ukraine support loans for 2026–27.

7. EU Carbon Flash Crash: Phase 5 JittersCLIMATE / MARKETS

What happened: EU carbon prices plunged €3.30 in under 10 minutes today — one of the most volatile sessions in months — triggered by headlines about EU discussions on ETS market reform for Phase 5 (2031–2040). Prices clawed back the entire decline as traders processed the news. The ETS review is due in 2026. CBAM (Carbon Border Adjustment Mechanism) enters its full operational phase this year, replacing 2.5% of free allowances. EUA supply in 2026 is 8% lower than 2025. Consensus forecast: €126/t by 2030.

So what: The flash crash revealed how sensitive the carbon market is to any hint of loosening post-2030 rules. Heavy industries are lobbying hard to weaken Phase 5 caps; today’s price action shows markets are already positioning for that battle. The recovery suggests the structural bullish case (tighter supply, CBAM enforcement) remains intact, but the ETS review will be the most consequential EU climate debate of 2026. Brussels’ Bruegel Institute warned last month: weakening the system would “undermine investment signals and penalise early movers.”

8. European Defence Spending Hits €381B — Still Not EnoughDEFENCE

What happened: EU defence spending reached an estimated €381B in 2025 (~2.1% of GDP), up 63% from 2020. Defence investment hit €130B. R&D at €17B. EP debated strengthening European defence today with Commissioner Kubilius. EPP’s Riho Terras argued against common EU debt for defence. NATO’s 5% GDP target by 2035 would require tripling current spending. Rheinmetall rose 2.4% Monday. EU defence industry turnover hit €183.4B in 2024 (+13.8%), employing 633,000.

So what: The numbers are impressive on paper but still lag: the US spends €845B (3.1% GDP), and Russia’s purchasing-power-parity spend is estimated at €234B. Fragmentation remains the core problem — 27 separate procurement systems buying different platforms. The EDIP programme (€1.5B) and ReArm Europe plan (€800B mobilisation target) are steps, but analysts at Bruegel estimate a “go-it-alone” scenario would push the EU deficit toward 6% of GDP. The ECB as a buyer of “EU Defence Bonds” is increasingly discussed. Goldman Sachs sees German defence-driven fiscal push as the eurozone’s main 2026 growth engine.

9. Record European Equities: UniCredit, InPost, Novo LeadCORPORATE

What happened: STOXX 50 (+1.0%) and STOXX 600 (+0.6%) both closed at fresh all-time highs. UniCredit surged 6.4% after Q4 earnings beat and strong dividend announcement; Commerzbank rose 3.7% (UniCredit owns 26%). InPost soared 13% on $9.2B Advent-FedEx consortium acquisition. Novo Nordisk bounced 8% after Hims & Hers pulled its copycat GLP-1 pill (FDA intervention). SAP +2.5%, Adyen +5% recovering from last week’s Anthropic-triggered AI sell-off. Rheinmetall +2.4%. NatWest fell 4% on £2.5B Evelyn Partners takeover reports.

So what: European equities are outperforming in 2026 for good reason: banks are printing money (UniCredit is the poster child), defence stocks benefit from spending ramp, and the tech sell-off created buying opportunities in SAP and ASML. But Morningstar warns valuations are now at fair value with no margin of safety. The InPost deal signals PE firms see value in European logistics. Novo’s long-term outlook remains clouded — 2026 revenue expected to fall 5-13% on US pricing pressure. The Anthropic AI-tool sell-off last week rattled tech — watch for further AI narrative shifts.

10. EU-Mercosur: Safeguard Clause Passes, FTA Edges ForwardTRADE

What happened: MEPs adopted the agricultural safeguard mechanism for the EU-Mercosur trade agreement. The clause can be triggered if imports from Brazil, Argentina, Paraguay and Uruguay harm European farmers. The Council has given the green light to signing the partnership agreement. The French National Assembly rejected the EU-US trade agreement separately. EU exports to Mercosur projected to rise 39% under the deal, creating a free-trade zone for 700 million consumers.

So what: The safeguard was the price of French and Eastern European agricultural votes. Without it, the Mercosur deal would have died in Parliament. The mechanism is deliberately vague — it can be “triggered” but enforcement criteria are still being defined, which is exactly how Brussels builds consensus. France’s separate rejection of the EU-US deal highlights the protectionist mood in Paris. The EU is simultaneously liberalising trade with South America while fighting the US on tariffs — a strategic choice to diversify away from American economic coercion.

United Kingdom

Sterling under pressure at 1.3672 on political crisis. FTSE 100 dragged by BP (-5.7%). Starmer’s authority collapsing — Reform UK polling ahead of Labour for over a year. Scottish elections in May now the trigger point. Gilt markets stable but watching; any leadership contest would introduce fiscal policy uncertainty. UK police investigating Mandelson for misconduct in public office. AstraZeneca projected continued growth in 2026 earnings.

Eurozone

STOXX 50 and STOXX 600 at record highs. Goldman Sachs forecasts 1.3% GDP growth in 2026. German fiscal push (defence-driven) offsetting contractionary forces elsewhere. ECB cutting rates; EP voting on ECB annual report and new supervisory board vice-chair today. Budget deficit projected at 3.4% of GDP. €192.8B EU budget for 2026 adopted with defence, competitiveness, and research priorities. Bulgaria adopted euro Jan 1 2026 (21st member).

Spain

Political firestorm over 500K migrant regularisation. Sánchez governing without parliamentary majority; passed via royal decree (no parliamentary vote needed for 30 days). PP opposition vowed to repeal. PSOE allies Cerdán and Ábalos jailed on corruption. Podemos extracted the policy as a coalition price. Economy projected to grow above EU average — immigrants contribute ~10% of GDP. Minimum-wage talks ongoing (potential rise to €1,221). Constitutional vulnerability: any Junts defection could topple government.

European Union

Triple legislative day in Strasbourg: 2040 climate, asylum safe countries, Mercosur safeguard. Commission wrestling with Spain’s migration move. Cyprus holds Council presidency (H1 2026). €800B ReArm Europe mobilisation target. CBAM entering full phase. ETS Phase 5 review looming. EU-India FTA signed. EU-Mercosur moving to ratification. The institutional machine is legislating at pace — but political fragmentation (Spain, France, Germany all domestically distracted) limits implementation.

United Kingdom

United States (European Footprint)

Vance’s Caucasus tour reshaping regional alignments. TRIPP corridor competes with Russian transit dominance. Nuclear deal pulls Armenia from Moscow’s orbit. Critical minerals initiative (55 countries) launched Feb 4. US-Russia military dialogue restored. Ukraine peace talks moving to US for next round. France rejected EU-US trade agreement. Trump’s $1.5T military budget proposal (2027) boosting European defence stocks. Bessent confirmed China visit last week.

Russia

Rejected Ukraine’s unconditional ceasefire proposal in Abu Dhabi. Continues demanding territorial concessions (remaining Donetsk). Military strikes on Ukrainian energy infrastructure ongoing — EP debating humanitarian crisis today. Defence budget at €234B (PPP). Revenue squeeze: Kremlin raising taxes and borrowing as oil revenues dwindle. Influence waning in South Caucasus as Vance visit demonstrates. Military-to-military dialogue with US restored — a small diplomatic win.

EU Asylum: Safe Countries List + Third-Country Transfer Rules

CBAM Enters Operational Phase 2026

Carbon Border Adjustment Mechanism now reducing free allowances by 2.5% for CBAM-covered sectors (steel, aluminium, cement, fertilisers, hydrogen, electricity). Full CBAM tariff applies to imports from countries without equivalent carbon pricing. Phase-out of free allowances accelerates: non-leakage sectors capped at 30% free in 2026, zero by 2030. CBAM sectors lose free allocation entirely by 2034. State aid relief expanded to 20 additional industrial sectors.

UK App Store Rules: Apple & Google Concessions

UK regulators extracted concessions from Apple and Google on app store distribution, payments, and ranking transparency without waiting for court outcomes. Implications for European startup margins and customer acquisition costs. If the UK model works, EU regulators may replicate it, creating a patchwork of compliance requirements forcing structural product changes across iOS and Android.

Europe is legislating at historic pace while its biggest member states are politically paralysed. In Strasbourg today, MEPs voted on the most consequential trio of measures in years — a binding 2040 climate target, the EU’s first asylum safe-countries list, and the Mercosur agricultural safeguard — all passing in a single session. But in London, the Prime Minister is fighting for his political life over a scandal rooted in the appointment of a man whose friendship with a convicted sex offender was already public knowledge. In Madrid, the government is bypassing Parliament to regularise half a million migrants while its own coalition crumbles. In the markets, the contradiction is even sharper: STOXX indices hit record highs while BP — once the emblem of British corporate ambition — became the only supermajor without a buyback programme. And in Yerevan, the Vice President of the United States is doing something no American leader has done before: standing at the Armenian Genocide memorial, signing nuclear deals, and drawing new trade lines through a region Russia used to own. The common thread is realignment. The EU is building new rules for a post-American security order, a post-carbon economy, and a post-national migration framework — all at once, all under pressure, and all while the political leaders who should be driving these changes are consumed by domestic crises of their own making.

Europe Intelligence Brief

Daily Edition · Tuesday, February 10, 2026

Data sourced from Bloomberg, Reuters, Euronews, Al Jazeera, European Parliament, European Commission, Carbon Pulse, Trading Economics, CNN, PBS, CNBC, AP, and national press agencies. Market data as of close of trading February 10, 2026.