BUENOS DÍAS and welcome to Brussels Playbook. During a meeting on Tuesday with Brussels journalists (at which he admitted he’s a regular reader of a certain daily morning newsletter), Spanish PM Pedro Sánchez expressed strong support for a second term for European Commission President Ursula Von Der Leyen.

Sánchez argued von der Leyen has been “outstanding” in her job and expressed admiration for both her style of politics and track record of making things happen. If a candidate from the center-right EPP gets to helm the Commission, it should clearly be her, said Sánchez (who is from the center-left Socialist party).

Where to next for Sánchez? Asked about speculation he might run for the NATO secretary-general job — given Jens Stoltenberg just agreed to prolong his stint for a year — the Spaniard dismissed those rumors and praised Stoltenberg for his commitment to the military alliance. In times of war, Sánchez argued, it’s crucial not to change the leadership.

VDL for NATO sec-gen? Another rumor that’s being spread by some (non-EU) NATO members is that Ursula Von Der Leyen herself is the hot favorite to become the Alliance’s next leader. The rumors are being fed by the fact the NATO role will become vacant (assuming Stoltenberg doesn’t get another extension) at the height of the jostling for the EU’s top jobs in the wake of next year’s European Parliament election (more on that from my colleague Lili Bayer, who wrote about this last month). The U.K.’s Daily Telegraph reports von der Leyen, who is a former German defense minister, is now U.S. President Joe Biden’s top pick.

More Spain in your ears: Get your Spotify playlist for the Spanish presidency here.

**A message from Amazon: Across the European Union, we offer starting salaries at least 6% above minimum wage to help make the cost of living manageable. It’s just one of the benefits at Amazon. Discover more.**

DRIVING THE DAY: RULE OF LAW       

LEAK — RULE OF LAW REPORT: Brussels will today unveil its annual review of the state of the rule of law across the Union — noting some judiciary improvements in Hungary and Poland, but also backtracking on corruption and media independence. The latest draft was agreed on Tuesday by the 27 commissioners’ heads of Cabinet, and obtained by Playbook here.

Always optimistic: “In Hungary, the risk of arbitrary decisions on the career of judges is expected to be limited by a new law,” the report says — the key word here being “expected.”

In grimmer news: The report also notes that “in Hungary, the Government has continued to use its emergency powers extensively since 2020, undermining legal certainty and affecting the activities and the stability of businesses in the single market.”

Judicial independence not brilliant: Similarly, for Poland, the report notes “some progress” to make the prosecution more independent from the government — only to add that “the functions of the Minister of Justice and the Prosecutor General have still not been separated.”

Caveat: Justice ministers can give direct orders to prosecutors in several countries across the EU, including Germany and Austria.

Media freedom status: “News media concentration retains its ‘high risk’ level across the EU,” the report says. In ascending order of risk, according to this years’ Media Pluralism Monitor: Croatia, Cyprus, Greece, Slovenia and Malta, which are considered “high risk” … and Bulgaria, Poland, Romania and Hungary, which are “very high risk.” The report also cites the use of spyware against journalists in Greece, Hungary and Poland — where a new case was detected.

On corruption, the report notes that all across the Union, “there are still major obstacles to reporting corruption cases in practice with less than half of Europeans (45%) knowing” where to do so.

MEANWHILE, IN HUNGARY: The Hungarian parliament on Tuesday passed a law which strips teachers of their status as public employees, increases permitted working hours and allows teachers to be transferred between schools. Teachers and students have been protesting the measures for months, arguing they will lead to an exodus of educators. Critics say the law is revenge for teachers staging more than a year of strikes calling for better pay and working conditions. Hungarian teachers are among the worst-paid in the EU. More from the Associated Press here.

SPEAKING OF HUNGARY: As PM Viktor Orbán threatens to block the revision of the EU budget and has opposed further financial assistance for Ukraine, the Spanish Council presidency will now have to look for a way to get Budapest to compromise. Senior officials said Tuesday that the EU may include some “incentives” for Hungary in the budget, but ruled out the option of unblocking Next Generation EU funds as long as its rule of law problems remained unaddressed. Instead, one official cited the Erasmus program as one example of where the EU could provide funds for Hungary without compromising on the rule of law.

Some quid for your quo: Note that while the EU has blocked some funds from the Erasmus and Horizon programs for Hungary over conflicts of interests on the boards of major universities, Budapest has reportedly expressed openness to remove politicians from those boards to get those university funds. A deadline to plan such funds for the next university term is looming at the end of this month.

ALSO TODAY 1: SUPER-PLANTS. The Commission will unveil its major plan to legalize and cut red tape for modern genetically engineered plants, as Playbook previewed Monday. Full analysis here by Bartosz Brzeziński.

ALSO TODAY 2: FAREWELL TO DIRTY ENERGY CLUB. The Commission is today expected to propose that EU member nations jointly quit the Energy Charter Treaty — a pact that protects investors but opens governments to lawsuits over policy decisions that affect those investments like limiting fossil fuels. My colleagues have the full details in this morning’s Pro Energy and Climate newsletter.

FOOD FOR THOUGHT: July 3 was the hottest day ever recorded globally, according to the U.S. National Centers for Environmental Prediction, with the average global temperature reaching 17.01°C. The previous record was set in August 2016, at 16.92°C. Reuters has a write-up.

EU-CHINA       

CHINA HITS BACK: Beijing is giving Europe a yellow card in a future-defining trade war. Just as the Netherlands announced new restrictions on exports of advanced microchip machines to China on Friday, Chinese trade officials on Monday hit back with an export-control regime tantamount to threatening a ban on exports of two types of critical raw materials to unfriendly countries on national security grounds, as Playbook reported.

Hitting ’em where it hurts: The two minerals on Beijing’s hit list — gallium and germanium — are well-targeted, given their role in making goods like semiconductors, 5G base stations and solar panels — items that are symbolic of the EU’s highly prioritized digital and green transitions, as my colleagues Stuart Lau, Federica Di Sario and Pieter Haeck report. Both metals are considered “critical” and “strategic” by EU standards, meaning they rely on a single source and they are important to EU industries, as well as European defense needs.

CHINA ALSO ABRUPTLY CANCELS BORRELL’S TRIP: But Beijing didn’t stop there. China on Tuesday canceled a planned visit to Beijing by the EU’s foreign policy chief Josep Borrell — with less than a week’s notice — sending diplomatic shockwaves in Brussels and across European capitals. “We were informed by the Chinese counterparts that the envisaged dates next week are no longer possible and we must now look for alternatives,” European Commission spokesperson Nabila Massrali said.

Revenge: Without offering an explanation, Beijing made the decision days after the EU’s 27 leaders jointly agreed last week to de-risk from the Union’s dependency on China. The Netherlands, working with the U.S., soon rolled out its new restriction on exports of sensitive microchip machines to China.

Doubly delayed: Borrell, who had to postpone a visit to China in April due to a COVID infection, was scheduled to visit Beijing on July 10 for a strategic dialogue with Foreign Minister Qin Gang.

SCHOLZ POURS COLD WATER ON ECONOMIC SECURITY STRATEGY: Remember the German talk of the Nord Stream 2 gas pipeline being a “private economy project” that the state had no influence on? That same type of thinking has now reappeared in the debate over the EU’s plans to de-risk from China by preventing companies from making sensitive tech in the country. German Chancellor Olaf Scholz has already argued that de-risking should be “in essence a private sector activity.”

No state intervention: Asked on Tuesday by POLITICO about the apparent contradiction between his remarks and the EU plans, and whether some state intervention may be needed, Scholz doubled down on his call for leaving those decisions to companies. They “have to make sure that they build a second or third supply chain that includes other countries,” the chancellor said, adding that trade decisions are made by companies and “the state will never do that.”

Wait a second: So the state will subsidize companies and help them develop new technologies, but won’t interfere when the companies then share that tech with a geopolitical rival (often under significant pressure from said rival, which has less respect for free enterprise)? More by Hans von der Burchard for POLITICO Pro Trade, Tech, and Competition and Industrial Policy subscribers.

RUSSIA’S WAR       

ZAPORIZHZHIA WATCH: Ukraine’s President Volodymyr Zelenskyy said on Tuesday that Russia has placed “objects resembling explosives” on the roof of the Zaporizhzhia nuclear power plant. Russia and Ukraine have accused each other of plotting to attack the plant. As my colleague Veronika Melkozerova reported earlier in the week, according to Ukrainian intelligence, Russian workers were told to leave the power station by July 5 — meaning, today.

BEIJING CLAIMS IT TALKED PUTIN OUT OF USING NUKES IN UKRAINE: Chinese President Xi Jinping personally warned his Russian counterpart Vladimir Putin against using nuclear weapons in Ukraine when he was on his state visit to Moscow in March, the FT reports, citing Western and Chinese officials.

MAKING RUSSIA PAY: Kyiv is using every legal method at its disposal to force Moscow to pay $5 billion for the energy infrastructure it illegally expropriated from Ukraine’s state energy firm Naftogaz when it seized Crimea in 2014. To claw back the losses, Naftogaz has filed a motion with a U.S. court, looking to have the award confirmed and enforced by countries that host Russian state assets. My colleague Gabriel Gavin has the story.

ROMANIA WANTS GERMAN TROOPS: Romania’s Prime Minister Marcel Ciolacu surprised Olaf Scholz on Tuesday by urging him to send German troops to his country “soon” and “permanently.” More by Hans.

BULGARIA’S PM ON RUSSIAN MEDDLING: Bulgaria’s new Prime Minister Nikolai Denkov said it is time for the country’s law enforcement authorities and security services to stop turning a blind eye to Moscow’s malign influence. Speaking to POLITICO, he added that the Bulgarian people are “victims of very active and very aggressive pro-Kremlin, pro-Putin propaganda.” Read more here, from Nicolas Camut and Christian Oliver.

AHEAD OF VILNIUS: With NATO leaders preparing to gather for next week’s summit in Vilnius, Ivo Daalder, a former U.S. ambassador to the alliance, writes for POLITICO on how tangible and binding security guarantees, like NATO’s Article 5, could be extended to a country at war.

WAGNER FALLOUT: POLITICO’s Jamie Dettmer writes about the questions that remain following warlord Yevgeny Prigozhin’s short-lived insurrection. Moscow’s near future seems destined for more witch hunts, he argues.

**Save the date – POLITICO Live’s event “Open Finance: the battle for data” will take place on September 19 to discuss protection of consumer data, the commission’s Open Finance initiative and a new, more vibrant European market for financial services. Register now!**

IN OTHER NEWS       

GERMAN AUSTERITY: German Finance Minister Christian Lindner is set to unveil his country’s budget for next year today, which will — for the first time in 10 years — involve painful spending cuts for all ministries except defense, Hans von der Burchard writes in to report. Ahead of the announcement, Germany’s three ruling parties engaged in blame games over who is responsible for cuts on issues such as child care, with politicians posting confidential government letters on Twitter to underscore their arguments.

EU BAILOUT FUND REFORM: Italy’s parliament is due to vote today to postpone a reform of the eurozone’s bailout fund, dealing a blow to EU plans to boost its safety net for failing banks. More from Paola Tamma.

WELCOME TO IRAN — SORRY, FRANCE: In the wake of France’s violent riots, President Emmanuel Macron told mayors that one option when the situation is out of control could be to cut access to social media platforms such as Snap and TikTok, according to BFM. “We need to think about social networks, about the bans we need to put in place. And, when things get out of hand, we may need to put ourselves in a position to regulate or cut them off,” he reportedly said. On Friday, Macron blamed social media platforms for adding fuel to the fire. H/t Laura Kayali

GREECE STOPS WITCH-HUNT AGAINST EX-STATISTICIAN: Greece’s government announced on Tuesday it has withdrawn an application to the European Court of Human Rights over its long-running battle against the country’s former head of national statistics, Andreas Georgiou. The government had asked the court to review a decision which found that Georgiou’s right to a fair trial was violated in Greece, Nektaria Stamouli writes in to report.

Background: Georgiou was hit with a series of lawsuits accusing him of inflating fiscal figures during Greece’s debt crisis and thereby worsening the country’s financial woes. He has gathered strong international support with economists and statisticians arguing he’s been used as a scapegoat by Greece’s political class, which refuses to recognize that the crisis was the consequence of years of fiscal profligacy. More backstory here.

AGENDA       

— Weekly European Commission College meeting at 10:30 a.m., followed by a press conference by Věra Jourová and Justice Commissioner Didier Reynders on the rule of law report. Watch.

— Press conference by Green Deal chief Frans Timmermans and Environment Commissioner Virginijus Sinkevičius on Green Deal measures. Watch.

— EU member countries’ permanent representatives meet in Coreper II from 10 a.m. … deputy permanent representatives meet in Coreper I from 11 a.m.

— High Representative Josep Borrell travels to Niger. Meets President Mohamed Bazoum and Nigerian ministers, followed by doorstep … joins Bazoum to inaugurate the Gourou Banda solar power plant … participates at a medal parade at EUCAP Sahel Niger. Watch.

— European Commission President Ursula von der Leyen receives President of the European Committee of the Regions Vasco Cordeiro.

— Competition chief Margrethe Vestager meets via videoconference with First Deputy Prime Minister of Spain and Minister for the Economy and Digital Transformation Nadia Calviño … meets via videoconference with co-CEO of Zalando Robert Gentz.

— Commission Vice President Maroš Šefčovič receives Deputy CEO of TotalEnergies Stéphane Michel.

— Equality Commissioner Helena Dalli joins a roundtable with ministers responsible for LGBTQ+ policies … delivers a keynote speech at event on advancing LGBTIQ+ rights in Europe.

— Energy Commissioner Kadri Simson in Vienna. Participates in roundtable on energy sustainability at OPEC International Seminar … meets with CEO of Vitol Russell Hardy … meets with Azerbaijani Minister for Energy Parviz Shahbazov.

— European Parliament President Roberta Metsola meets President of the Parliament of Moldova Igor Grosu at 9 a.m. with a joint press point following the meeting. Watch.

— The European Institute for Asian Studies and the Study Circle hosts conference on EU-Bangladesh cooperation from 11 a.m.

— European Committee of the Regions 156th plenary session starts at 3 p.m. Agenda. Commission Vice President Věra Jourová gives a statement in a debate on the role of local and regional authorities in defense at 3:05 p.m. … Environment Commissioner Virginias Sinkevičius gives a statement in a debate on the revision of EU legislation about urban waste water treatment and ambient air quality at 4:20 p.m. … Budget Commissioner Johannes Hahn addresses debate on the midterm review of the Multiannual Financial Framework at 5:50 p.m. Watch.

— Swedish Prime Minister Ulf Kristersson meets U.S. President Joe Biden at the White House.

**Spain’s neutral position as Council President might be tested as they are to organize hearings for the Anti-Money Laundering Authority (AMLA). This because Madrid is aiming to host the new EU agency. Follow AMLA talks with POLITICO Pro.**

BRUSSELS CORNER       

CLEAN CITIES BRUSSELS VERDICT: Brussels achieves a C grade in a new report by Clean Cities examining the state of shared and zero-emission mobility in European cities. But the city’s plan to cap the number of shared e-scooters and bikes could push it further down the ranking.

The plan: Brussels does not wish to ban shared e-scooters like Paris, but it will significantly cut their numbers in 2024 from 21,000 to 8,000. (Fun fact: Paris currently has fewer e-scooters than Brussels — only 15,000).

So what does the report say? Brussels achieved 10 out of 10 for having more than 20 bikes, e-bikes or e-scooters per 1,000 inhabitants, ranking alongside Helsinki, Lisbon and Paris. But introducing the cap on e-scooters could result in a drop of 40 percent in Brussels’ overall score in the report. The city currently ranks 11th out of 42.

Details: The report also examined the number of electric buses and cars, as well as vehicle charging infrastructure. Copenhagen ranks first in the overall ranking, while last place goes to Greater Manchester. Other Belgian cities rank below Brussels — with Antwerp 12th, Ghent 18th and Liège 36th.

RYANAIR ON STRIKE: Ryanair pilots based in Belgium are threatening to strike on the weekend of July 16 and 17 over pay. Unions CNE/ACV Puls and the Belgian Cockpit Association have given management an ultimatum to make a serious proposal on pay by this Friday afternoon — or they will go through with the strike. Read their statement here.

CINQUANTENAIRE PARK RENOVATION: The non-profit organization in charge of the ambitious renovation of the Cinquantenaire Park has fired two of its high-ranking employees for “management problems leading to financial difficulties,” reports L’Echo.

MUNICIPAL ELECTIONS 2024: Brussels residents will be able to choose where they vote in the 2024 municipal elections, as long as their chosen polling station is located in their own municipality — all part of the newly digitized registration process. More from BRUZZ.

JAZZ JAMM & SOCIAL NIGHT: Fancy some Thursday night jazz? You can enjoy an evening of Jazz Jamm & Social in the garden at Orange Art House on July 6 at 8:30 p.m.

BIRTHDAYS: MEP Jan Huitema; Former MEP, Slovenian PM and ace harmonica player Alojz Peterle.

THANKS to Nektaria Stamouli, Stuart Lau, Hans von der Burchard, Playbook reporter Ketrin Jochecová, editor Jack Lahart and producer Dato Parulava.

**A message from Amazon: We believe that every job should have benefits that work around life. That’s why we offer competitive starting salaries and a comprehensive benefits package from day one to get the best start. Discover more at aboutamazon.eu.**

SUBSCRIBE to the POLITICO newsletter family: Brussels Playbook | London Playbook | London Playbook PM | Playbook Paris | POLITICO Confidential | Sunday Crunch | EU Influence | London Influence | Digital Bridge | China Watcher | Berlin Bulletin | D.C. Playbook | D.C. Influence | Global Insider | All our POLITICO Pro policy morning newsletters