Finance Desk

The European Union and Canada last week unveiled plans for an ambitious new partnership that could eventually give Canada a form of associate EU membership. Yet their existing landmark agreement remains unfinished business.

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The Comprehensive Economic and Trade Agreement (CETA) was signed in 2016 and has applied provisionally since 2017, removing almost all tariffs and helping drive a sharp increase in transatlantic trade. But ten EU countries – Belgium, Bulgaria, Cyprus, France, Greece, Hungary, Ireland, Italy, Poland and Slovenia – have still not ratified it.

The contrast was underlined last week when European Commission President Ursula von der Leyen invited Canada to deepen its economic and security ties with the bloc.

“We will move from CETA to an Alliance for the Future to create a common prosperity and economic security space,” von der Leyen told MEPs and Canadian Prime Minister Mark Carney in Strasbourg.

Despite not being fully ratified, the deal provisionally entered into force in 2017.

But what is CETA and why is its ratification blocked?

What is in the EU-Canada trade agreement?

CETA was concluded in 2016 after seven years of negotiations and often heated debate across EU member states.

The agreement removed tariffs on 98% of goods traded between the EU and Canada, covering products ranging from wine and cars to chemicals. It also opened up more of the Canadian market to European companies in sectors including financial services, telecommunications and transport.

The Commission says the agreement boosted EU-Canada bilateral trade in goods and services by 80% in 2025 compared to 2016, when CETA was signed, reaching €130 billion, up from €72.1 billion recorded nine years before. The EU has a trade surplus of €16 billion in goods and €9,7 billion in services.

For agricultural products, it allows 143 European products with the status of geographical indications (GIs) to be sold in Canada, protecting them from imitation. The deal also includes quotas for EU cheese exported to Canada (32,000 tonnes per year), Canadian beef (50,000 tonnes) and pork (80,000 tonnes) to the EU. It also bans imports of Canadian products containing prohibited substances, such as growth hormones.

Only 3% of the beef quotas were filled between 2021 and 2023, due to the EU’s Sanitary and Phytosanitary (SPS) rules, which make it costly for Canadian beef producers to export, according to a Commission assessment.

Why is the ratification blocked?

Concerns over food safety and environmental standards are among the reasons CETA has faced resistance in EU countries. European farmers have also raised concerns about unfair competition from Canadian products, arguing that some of Canada’s production rules are less stringent than those in the EU.

CETA opponents also criticised the deal’s Investor-State Dispute Settlement provisions. Those let companies bring a claim against the state before an arbitration tribunal if its government adopts a law that discriminates against a company and harms its profits. The tribunals were ad hoc, composed of private arbitrators.

However, controversies around a system that might favour business lobbies led the Commission to include safeguards and replace the Investor-State Dispute Settlement mechanism with an Investment Court System with permanent judges and an appeal mechanism. The EU and Canada have also introduced provisions to safeguard their right to regulate policies aiming to protect public health and safety, the environment or social protection. But opponents say that the safeguards won’t be enough to protect such policies. It is planned that the courts will only come into force once the deal is ratified by all 27 member states.

When will the EU fully ratify the deal?

There is no clear timetable, not least because the ratification process is effectively blocked in several member states.

For instance, in France, the Senate rejected the deal in 2024, and the government then blocked its submission to the National Assembly, fearing a full rejection.

In Poland, the ratification process is also frozen, as well as in Italy, where it has been blocked since the government rejected it in 2018, considering Italian GIs were not given enough protection. Italian MEP Carlo Fidanza, from the Brothers of Italy party, recently said that there were few chances the deal would be submitted to parliament before the December 2027 elections.

Europe’s central banks now have a working bridge into tokenised markets.

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Launched on Monday, Pontes lets wholesale transactions in tokenised assets, meaning stocks, bonds and other instruments recorded as digital tokens on distributed ledgers, to settle in the safest form of money available — reserves held at the central bank itself.

It matters because the absence of a risk-free settlement asset has been one of the main barriers holding blockchain technology back. Without it, tokenised trades have typically settled in commercial bank money or stablecoins, carrying credit risk that large institutions are reluctant to accept.

“The Eurosystem is working to enable a more integrated, innovative and resilient European financial market in the digital age,” said ECB President Christine Lagarde.

Thirteen institutions have completed onboarding and are ready to use the system immediately, including Deutsche Bank, Santander, Société Générale, KfW and the European Investment Bank, alongside four ledger operators including Clearstream.

The ECB also intends to become a user itself.

In a separate announcement, it said it has begun preparatory work to invest a small portion of its own funds in tokenised securities, with purchases settled through Pontes.

The initial focus will be euro-denominated debt issued by euro area governments, regional authorities, agencies and European supranational institutions.

The own-funds portfolio sits outside monetary policy and generates income to cover the bank’s running costs. No amount was specified, and the Executive Board will decide on timing once the groundwork is done.

“Pontes brings tokenised markets another step closer to the core of the euro area’s financial infrastructure,” said Richard Baker, founder and CEO of Tokenovate, which builds technology to help financial institutions automate post-trade processing, collateral management and tokenised settlement.

Baker noted the service will initially run within existing market hours, but that “the longer-term opportunity is to support more continuous, potentially 24/7, settlement.”

That gap is where Europe is playing catch-up.

American markets have moved faster as the New York Stock Exchange is building a blockchain-based venue for trading tokenised shares and funds around the clock, and BlackRock has run a tokenised money market fund since 2024.

Pontes itself will only reach full capability, with longer operating hours and enhanced features, by 2028.

The two sides are also taking different routes.

Washington, under US President Donald Trump, abandoned plans for a Federal Reserve digital currency and backed privately issued stablecoins instead. On the other hand, Frankfurt is betting that public central bank money should sit at the centre.

Where the digital euro stands

Pontes is aimed at banks and markets, not consumers. The retail equivalent, the digital euro, would let the public make everyday payments directly in central bank money.

That project is further from reality.

The European Parliament’s economic committee approved its position in June, opening negotiations with member states, and final legislation is targeted for the end of this year.

If that holds, a pilot involving 36 payment providers will begin in September 2027, with first issuance possible in 2029.

Published on
21/09/2026 – 11:46 GMT+2

Volkswagen, Europe’s largest automaker, is no longer among the eurozone’s blue chips.

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Index provider Stoxx confirmed the change in its annual review at the start of September, and it came into force before trading began on Monday, with Finnish telecoms group Nokia returning to the index and French utility Engie joining.

Dutch information-services group Wolters Kluwer was also dropped.

The removal is mechanical rather than a judgement, as the index is weighted by free-float market value, and Volkswagen’s shrinking valuation no longer cleared the threshold.

However, the consequences are real, as funds that track the benchmark must now sell their Volkswagen holdings, adding to pressure on a stock already under strain. Stellantis suffered the same fate last year.

Volkswagen shares have fallen almost 30% since the start of the year and are down over 6% since last Monday’s open, trading at roughly €76 at the time of writing.

A profit warning to match

The timing could hardly have been worse.

On Friday, Volkswagen flagged around €10 billion in one-off charges and cut its operating margin forecast for 2026 to no more than 1%, down from a previous range of 4% to 5.5%. Analysts had expected 4.1%.

More than €6 billion of the charges stem from a writedown at Porsche, in which Volkswagen holds a 75.4% stake, after the sports car maker lowered its medium-term expectations.

Porsche has been hit hard by American tariffs and weak Chinese demand for foreign luxury brands, and managed a margin of just 1.1% last year.

A further €2 billion or more covers expanded early retirement schemes, impairments in China and the planned sale of Volkswagen Osnabrück GmbH, a wholly owned subsidiary and automotive manufacturing plant located in the northwest German city of Osnabrück.

The company warned of “further deterioration in the market environment, especially in China, as well as an accelerated shift in demand in favour of battery-electric vehicles.”

The warning came two weeks after it agreed its largest-ever restructuring, doubling planned job cuts to 100,000 and halving its model line-up.

However, not everyone reads the numbers as a collapse.

Stripping out the one-off items, Volkswagen puts its underlying margin at around 4%, and it kept its cash flow and liquidity forecasts unchanged.

Deutsche Bank, which rates the shares a buy with a €115 price target, said it believes “the headline significantly overstates the deterioration in the underlying business.”

The bank does not expect the pain to end there as it wrote that “additional restructuring charges simply confirm that the transformation process is very expensive and complex […] we expect more to follow over the coming months.”

Volkswagen’s third-quarter results are due on 29 October.

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