🔸András Baka is a law professor who was briefly an MP (1990-1) for the Hungarian Democratic Forum (MDF). For 8 years, served as director-general of the College of Public Administration (1990-8), and also worked as a judge of the European Court of Human Rights (ECHR) in Strasbourg. He became president of the Supreme Court in June 2009 with cross-party support, but was removed from office by Fidesz at the end of 2011 because he opposed the autocratisation tendencies. In 2016 the European Court of Human Rights ruled in Baka’s favour, but he was not reinstated to his previous office. Aged 73, Baka is the oldest President to enter office since 1990.

🔸The position of the head of state has been in the focus of Hungary’s recent political dynamics. The emergence of Péter Magyar as a potential political leader coinsided with the resignation of Katalin Novák (head of state 2022-4) due to a clemency scandal. In February 2024, Orbán solved the crisis by shifting the head of the Constitutional Court, Tamás Sulyok to Sándor Palace (office of the President). Because he was seen as an Orbán loyalist (or even puppet), Magyar called for his resignation (and of many other high level officials) right after the election results were announced on April 12 this year.

🔸Tisza worked hard to get rid of Sulyok who refused to leave voluntarily. Eventually, the termination of his mandate was embedded in an amendment of the Basic Law. Following some agony, Sulyok signed the amendment together with his own dismissal. Magyar announced that the vacancy would be filled after broad national consultation, but very quickly a proposal signed by luminaries emerged to make chess champion Judit Polgár President. After instant and vicious attacks on her personality, Polgár declined the offer, and a few weeks with a public headhunting followed. The debacle of the first and rushed attempt became the first major embarrassement of Péter Magyar since the start of his premiership (09/05).

🔸Hungary has had an indirect election of the president since 1990, given the original intention of the founders of post-Communist democracy to follow the German model. However, the need for directly electing the head of state has been proposed by many since 1989, especially by the Hungarian Socialist Party (MSZP). There was a (failed) referendum about this question in July 1990. When Novák resigned, there were again calls for changing the system, and also since Tisza reopened the question last Spring. Budapest Mayor Gergely Karácsony declared that the full solution to this crisis of confidence can only be if people can directly elect, and lately Péter Magyar also hinted that a new constitutional process can also lead to direct election.

🔸For 25 years, Viktor Orbán had an oversized influence on the selection of the head of state. With the exception of Árpád Göncz (1990-2000) all hitherto Presidents of the post-Communist democracy (Ferenc Mádl, László Sólyom, Pál Schmitt, János Áder, Katalin Novák, Tamás Sulyok) were chosen by Orbán. Mádl, Sólyom, Áder, Sulyok as well as Baka are lawyers, which gives the impression that somehow the safe solution of the presidential question is to find a suitable lawyer (ideally a law professor). However, if the country moves to direct election of the head of state, it is doubtful that law professors would be most competitive candidates.

🔸The new President enters office (on 19/08) ahead of St. Stephen’s Day, which is the main state holiday in Hungary (20/08), commemorating the foundation of the Hungarian Kingdom (year 1000). From 1949 onwards, this also was the day of the Constitution. Beforehand, Hungary did not have a written Constitution. In Communist times, they also referred to it as the „holiday of the new bread”, given the coincidence with harvest time. The continuity element between Communist and post-Communist St. Stephen’s Days has been the annual fireworks, which became extremely pompous and expensive under Orbán. Cost became an issue and now, after the draught and resulting energy emergency, there is an opportunity to move back to modesty without any fuss.

🔸One possible design, and arguably the most interesting one among several options, presents intellectual celebrities, of whom their nations but also many other Europeans can be proud. Some of them are better known than others, but their life experience is typically transnational. Nevertheless, the point is that the ECB would be open to returning to the conventional approach: money should carry faces recognised by the community. Though the EU is not a genuine state and Europeans form many nations and not one, it does not work any more that the illustration of money would be just abstractions (like bridges that exist nowhere). An EU identity must be built from real personalities and their contributions, even if they originate from specific local or national contexts.

🔸Several figures from this list have already been used for monetary or political symbolism within national context. On the other hand, the names of Marie Curie and Leonardo da Vinci have been used since the 1990s to brand EU funding programmes (Curie for doctoral education and postdoctoral training and da Vinci for supporting and developing vocational education and training). Ludwig van Beethoven’s Ode to Joy from the 9th Symphony was chosen to be an anthem of the EU in 1985 (though without the lyrics written by Friedrich Schiller). Considering this, it might be a surprise that the global superstar Beethoven has been connected with the second lowest denomination only.

🔸The highest denomination of the new design euro (200) would feature the Prague born Bertha von Suttner, who was the first woman to be awarded the Nobel Peace Prize (1905). Her book Die Waffen nieder! (Lay Down Your Arms!) was first published in 1889. Sadly, she died of cancer before World War One broke out, but she had campaigned against militarisation for decades when many others (politicians, generals, intellectuals etc.) did not notice that the continent was sleepwalking to a devastating war. Since peace is a top concern and objective of the EU (at least in its catechism), this is an excellent choice. Hopefully this will draw attention to many other historic figures who also campaigned for peace and disarmament (from Jean Jaurès to Olof Palme), and will have some impact on actual decisions making as well.

🔸The gender balance among persons portrayed on proposed banknotes in itself is something to be noted. This is not only a sign of change in symbols but also decision making positions. In the last two decades, one could witness the rise of female chief economists in financial institutions, and today the International Monetary Fund (IMF), the ECB, the EIB as well as the EBRD have female leaders. Gender equality has been promoted by the EU for long, but today it is more accentuated than before. Female voices in economics receive today much more attention than in the past.

🔸The appearance of Marie Curie, who originates from a non-eurozone country (Poland), highlights that, according to the Treaty, the euro is the currency of the EU (and not just the eurozone). Once the design proposals were unveiled, many in Poland started to complain, suggesting that hiding the maiden name of Marie Curie (Skłodowska) would be a sign of underestimation of Poland’s contribution to European history (and in this specific case science). Importantly, Marie Curie was not only the first female winner of the Nobel Prize, but the first person to win in two different fields.

🔸It can only be a coincidence, that 3 of the nominated personalities (Maria Callas, Marie Curie, Miguel de Cervantes) share the MC initials. It could have been pushed a bit further, by also including e.g. Marc Chagall and Michael Collins, to introduce even more perplexity and give Europeans but also others something to speculate about in the future. Needless to say, the real puzzle regarding the euro is not the banknote design but the sustainability of a monetary union without fiscal union.

🔸Keir Starmer, who became PM in July 2024, won a parliamentary majority Labour never hed before. He must have expected to stay not for two years but two mandates. He focused on growth and normalisation in a technocratic sense, which could have worked out without a few banana skins Starmer failed to avoid. Appointing Peter Mandelson as ambassador to the US was an unforced error, and not a small one. Another example of bad judgment is the cynical support to Israel’s genocidal campagn in Gaza. On important welfare policies like the winter fuel payment and the child benefit, the prioritisation of austerity itself invited anger even if some of these measures were subject of correction or at least reviewed. While the establishment of the Corbynite Your Party was botched, Labour voters started to desert in large numbers to both Reform and the Green Party.

🔸Andy Burnham is now taking over to turn around Labour’s fortunes. He became a rising star of the party in the Blair era, usually seen as a representative of the “soft left” platform. He was cabinet minister under Gordon Brown (for culture and health) but also shadow home secretary under Corbyn (2015-7). Today his promise is to overcome factionalism in Labour, and work with all and for all. He is very different from most previous PMs. He comes from a Catholic working class upbringing, and studied in Cambridge instead of Oxford. Burnham was branded as a King of the North, knowing that the concept of the North is linked to progress in the English political dictionary. The North was the birth place of the industrial revolution and political liberalism as well. It was the heartland of the Chartists and the cradle of the cooperative movement (Rochdale). Manchester is where The Guardian newspaper comes from and Friedrich Engels also wrote his famous book there about the conditions of the working class in England.

🔸Since Burnham has been a de facto candidate to succeed Keir Starmer, he and his supporters habitually referred to “Manchesterism”, which is a vague concept alluding to Burnham’s special experience in municipal governmentin Northern England. It is beyond doubt that Manchester has been one of the success stories in Great Britain in the last 30 years. This city resisted the decline stemming from desindustrialisation, and it is in the top league not only in football but also science and culture. However, Manchester’s success cannot be just copied by Sheffield, Newcastle or Birmingham, without the national government supporting regional development more forcefully. Various governments, including Tories, have made promises in this vein, but Burnham has raised expectations beyond anyone else to deliver „good growth in every post code”.

🔸Burnham’s policy objectives are indicated by a few frequently mentioned ideas: devolution, reindustrialisation, social housing, education reform. In his first speech as Labour leader, he explained that much of the ills of British economy and society are rooted in the Thatcher era, which is correct. Without being unequivocal on this Labour would allow the Reform party to frame the economic stagnation and social malaise of the UK as a consequence of EU integration and continuing dependency. But then Burnham must prove with his policy agenda that he wants to undo Thatcherite legacy and go beyond the neoliberal constraints. Public control of services of general interest, like water and transport, will be critical tests. Besides, social care has often been mentioned by Burnham as an area in which he seriously wants to invest in.

🔸The fact that Burhnam became the seventh PM in just over a decade makes the European questionunavoidable for him. Brexit produced political instability by widening the gap between elevated expectations and diminished opportunities. Starmer started to work close with continental partners especially on issues of security (managing the war in Ukraine) but also prepared a rapprochement in a broader policy spectrum. Burnham is on the record wishing a return of the UK into the EU, but how fast and how far he can go in the next three years is a question. It’s hard to go much beyond the 2024 Labour Manifesto without seeking a stronger mandate on European reintegration from the British citizens. In 3 years we will see whether Labour can win a second mandate, and whether the US will correct anything from the direction taken by Donald Trump.

🔸Inauguration day could have been a holiday in case England had won the FIFA World Cup, which did not happen. The England team entered the tournament with more modesty than on previous occasions, but not without aspiration and confidence. The forward march was stopped by Argentina (15/07), despite England scoring first. Subsequent tactical changes (esp. substitutions) will haunt the manager Thomas Tuchel for the rest of his life. For the bronze match against France (18/07), both sides started with half of team that would not be first choices in normal circumstances. Surprisingly, for EN this was a boost while for FR this was a big drop of composure. After making 4 substitutions in half time, FR came close to equalisation, but at the end, EN regained momentum. The England win (6:4) delivering the 2nd best result ever (after the 1966 gold) can be considered a fair outcome given that in May the French champion Paris Saint-Germain won over Arsenal in the Champions League final in Budapest.

🔸The way the reconstruction will be financed will determine the shape of post-war capitalism in Ukraine for a decade or a generation. Public finance plays a key role in mobilising private capital where that is available, or substitute for it where it is not availabe. Since the war is in its fifth year, one may expect the full reconstruction to last twice as long, even if international partners remain committed as long as it takes. Beyond doubt, Ukraine’s reconstruction is a strategic question for Europe’s future.

🔸The reconstruction is not only a matter of finance. The question of human resources is too often ignored. While collecting the adequate amount of finance will require a continued effort, rebuilding the human capital stock in Ukraine will be even harder. The country suffered a demographic disaster after the Russian invasion of 2022. Ukraine will need a strategy to counter population decline, skills gaps and labor imbalances, and to deal with physical and psychosocial consequences of war.

🔸In Gdańsk, Ukraine’s delegation was led by Prime Minister Yulia Svyrydenko. In itself, the absence of President Zelenskyy did not damage the conference, but it signals a deeper (and probably deepening) rift between Poland and Ukraine. PM Donald Tusk, who hosted the event in his home town, did his best to smoothen the relationship lately, but a genuine return to a good spirited cooperation will not be possible without Ukraine correcting their approach on World War II remembrance.

🔸By the time of the Gdańsk conference, Ukraine received the first tranche (€3.2-billion) of a €90-billion EU loan to Ukraine, which would be spent first of all on defense and security but also on energy resilience. This move was made possible by the change of government in Hungary. On the other hand, the new PM of HU Péter Magyar was keen to dampen the prospects of a fast tracked EU accession for Ukraine, when the conclusions of the European Council (19/06) were drafted.

🔸The conference took place when battlefield news tended to be more favourable for Ukraine. In recent months, Ukraine boldly continued strikes on infrastructure deep inside Russian territory, and reduced the Russian capacity to supply the Crimean peninsula. Kyiv announced a 40 day operation – with the Ukraine’s State Security Service (SBU) in charge – to pressure Russia to end its war. Zelenskyy threatened Belarus with consequences in case they do not withdraw communication equipment which supposedly is there to assist Russian drone activities.

🔸Ahead of the Gdańsk conference, FEPS published the 2nd volume of the book originally titled „Europe and the war in Ukraine” (2023). The updated volume includes chapters on Ukraine’s EU accession prospects, the war’s global ripple effects, and the EU’s evolving security and defence strategy. The original English and the 2 Ukrainian language volumes are available on FEPS’ website.

Since the 2021 Porto Summit, the war in Ukraine and the transatlantic rupture shifted the attention of decision makers to geopolitics. For some it is an excuse to sideline social and environmental policies, to be allowed just to focuse on hard power. In our policy study written together with Robin Huguenot-Noël, we argue for the opposite: for building a strong link between the quest for European sovereignty and the defence of the European social model.

”Three core arguments support better linking European sovereignty to the EU social dimension.

1./ European sovereignty is fundamentally about defining and defending Europe’s own model, that is: its values, rules, and distinct sources of political legitimacy and social cohesion.

2./ To be strong outside, Europe must first be solid inside, by building up EU’s capacity to weather crises – e.g. wars or economic shocks – without sacrificing its core values.

3./ True sovereignty demands that democratic politics prevail over market power. The EU must reaffirm its regulatory tradition of supporting and preserving high quality social services in face of predatory firms.”

Migration control is an area where in recent years policy makers responded with securitisation to growing concerns. For some it actually became an obsession. But to the extent it is legitimate to see the migration of people through the lense of sovereignty, the same should apply to the migration of companies. The EU must have the competence to decide which companies and under what condition can operate and make profits in our internal market.

🔸 Geosociology

The transatlantic crisis has triggered a new debate about the American and European social models. Not only economic but also welfare performance is now assessed in the context of geopolitics. Key issues: inequality, social rights, and crisis response, among others. On most statistics, Europe comes out well in the transatlantic comparison, and references to the “European Social Model” or the EU as a ‘lifestyle superpower’ remain relevant. And, importantly, this is not only a matter of internal cohesion of the EU but also an essential component of European soft power in the world.

Health care is an area where European social outcomes are much better than Americans (largely because the enormous profit burden of US health industry). Better health care, significantly lower child poverty and much less workplace fatalities are key factors keeping life expectancy in the EU is higher than in the US. It is of great importance that Europe performs much better in terms of gender equality in general and that also applies to the labour market. The female employment rate in the EU is close to 71 %, while in the US just 57%. A major difference is that the US has never enacted the right to paid maternity leave.

While in general we can say that the US welfare state is less developed and less sophisticated than most European models, it must be noted that federal fiscal policy plays a strong economic and social stabilising role in the US. Effective transfers between member states are taken for granted, and everybody knows that the system could not function in any other way. Federal unemployment insurance has existed since FDR’s Social Security Act (1935). What the EU can – and should – learn from the US is the ability to back up the welfare state by a genuine, federal, economic firepower.

🔸 Employment & poverty targets

Are we supposed to sit on our laurels, just because overall we are doing better than the US? NO!

The Lisbon Strategy of 2000 and the Europe 2020 Strategy (2010) have been proof that the EU is determined to attain measurable improvement in diverse economic and social policy fields. The 2017 adoption of the European Pillar of Social Rights (EPSR) created new momentum, and it remains for the stakeholders of EU social policy a key reference document and a source of inspiration.

”Since 2010, targets have been used to determine whether the fight against poverty is just symbolic or it also delivers results. In 2021 the Porto Action Plan aimed at a reduction of at least 15 million in the number of people at risk of poverty or social exclusion. Progress has been made in employment but not so much in poverty reduction.”

This highlights the importance of the recently adopted Anti-Poverty Strategy, which is built on an integrated, multi-generational approach to address both immediate needs and structural drivers.

🔸 Wage setting

We need not only new targets but also new tools. New tools can be created if what is available would not help us reaching our shared objectives. A recent and emblematic example of this is the well-known “minimum wage directive”.

An important question is whether EU citizens support common responsibility and action in this area? Yes, the overwhelming majority does (75%). Only about a quarter of citizens inside the euro area believe that wage setting should remain entirely a national competence.

The EU minimum wage directive was a consistent response to challenges linked to the Eastward EU enlargement and the financial crisis. The period which gave rise to the EU minimum wage directive was a Golden Age of Social Europe. The response to the Covid-19 recession was built on lessons from the previous crises, and included a rapid deployment of SURE. The Commission also reinforced the Youth Guarantee and presented similar proposals in support of children. The European Social Fund became ESF+ and the Commission also encouraged member states to scale up support for the social economy sector.

🔸 Social Union – a possible new stage of integration
If higher ambition is regularly expressed through setting new targets, and new tools can be added to the available ones, EU social policy can develop to a higher stage. This phrase has been often hear from thought leaders like Frank Vandenbroucke, Colin Crouch, or Maurizio Ferrera. This is a vision for further development of the EU social dimension, and not just a matter for a distant future.

Since in the recent past, it has been common to speak about a Banking Union, Capital Market Union (more recently Savings and Investment Union), Energy Union, as well as Security Union, it should not be an anathema to explore the concept of Social Union.

Social policy integration has been lagging behind economic integration in the EU. But, it has developed from the stage of full national responsibility for social policy, to the stage of coordination and minimum standards. What needs to be done to enter the stage of a Social Union is to provide more concrete guarantees (similarly to the Youth Guarantee, the Child Guarantee, and the recently proposed Skills Guarantee), and material safety nets.

🔸 Five priorities

Delivering on the long-term objectives outlined in Porto five years ago can only succeed if the economic policy path is corrected. So far, however, what concerns economic policy, the incumbent EU leadership has failed to articulate the vision of a desirable future and opted instead for a ‘Draghi light’ agenda based on deregulation rather than fiscal capacity building.

What Europe needs – instead – is a new socio-economic steering agenda that promotes its social-democratic as a core element of its sovereignty ambitions. A strategically autonomous Europe requires not only reindustrialisation but also resocialisation. In our ‘Road Map for Porto 2.0’ we focus on a limited set of genuine priorities:

· Promoting the social model as a key part of Europe’s fight for strategic autonomy;

· building the EU borrowing capacity;

· connecting economic steering and social rights via a strategic use of public procurement rooted in high social and environmental standards;

· restoring the support to public services at local and regional levels;

· and repositioning social targets at the heart of the European integration agenda and its governance.

”The EU should not treat social policy as a distinct field, but rather drive the economy with a ‘social compass’. An EU safety net for national safety nets would need to be established (including unemployment reinsurance), and the EU would also need to help member states to use diverse instruments against price shocks, especially in times of world economic turbulence.”

🔸Conclusions

It is not entirely new to connect the management of external uncertainty with internal social stabilisation. Once the risks of neoliberal globalisation were understood, the EU established the European Globalisation Adjustment Fund (EGF), which has been a small but effective instrument to help workers facing the consequences of the new international division of labour. In the world of rupture and economic warfare, we need more and not less efforts to take care of internal cohesion (economic, social, and territorial) in Europe.

Reducing Europe’s dependencies on the US (defence, currency, technology and energy) is as important as overcoming the inferiority complex with the US model of capitalism. Europe possesses many of the assets needed to combat the innovation deficit together with the deep scars on political cohesion resulting from unfettered capital concentration and social exclusion. If better integrated, the EU can remain a major industrial and regulatory power, anchored in highly educated and skilled populations, and rooted in social market economies that provide a foundation for long-term investment.

All this will need EU policy to also include stronger collective fiscal capacity and uphold regulatory autonomy. By developing the social pillar of the sovereignty agenda, the Union would show European citizens that it cares as much about insulating itself from external shocks as about its own capacity to address their everyday concerns.

Thank you!

🔸Montenegro as a host had an opportunity to demonstrate that this country is the front runner of the accession process. They are most advanced with discussing and closing the negotiating chapters, while they have been part of the eurozone as well as NATO for ages. The risk is that Montenegro’s acession could tick the box of enlargement delivery for a decade or longer. While Western EU members would believe that by this they restore the credibility of the enlargement process, those in the South-East and East could say that the West goes for a few low-hanging fruits and many thorny issues (e.g. the constitutional consolidation of Bosnia and Herzegovina) remain unattended.

🔸Not so long ago, Albania was mentioned every time when the top of the enlargement league table had to be defined. However, as previously North-Macedonia was decoupled from Albania, this time it became clear that Albania is not considered any more as a potential participant of the next enlargement round. In particular, the controversy about the Jared Kushner related seaside investment, surrounded by vocal demonstrations, is a matter for concern. It is not simply about the protection of environment, but also about governance standards, at a time when much more attention is paid to problems of foreign (non-EU) influence, the protection of European sovereignty, and the oligarchic deformations of economy and politics.

🔸Hungary’s recent elections and the entry of the government led by Péter Magyar bring new dynamics into the EU enlargement process, but not so much as the Russian aggression against Ukraine brought 4 years before. The change of government in Hungary has no direct effect on the front runner status of Montenegro, however, pushing back and potentially eliminating the cross-national oligarchic networks partly organised and financed by the former PM Orbán can bring change also into Western Balkans politics. On the other hand, Magyar’s diplomacy may bring an improvement in HU-UA relations, depending on the state of ethnic minority rights in Ukraine.

🔸What concerns Ukraine, German Chancellor Merz wanted to bring good news but found out how hard it is in this area. First of all, associate membership does not exist yet. If he means it, a Treaty change is necessary. Second, since Ukraine was provided with the vision of full (and somewhat accelerated) membership, only one leading politician, Arsen Yatsenyuk, came forward with a positive opinion on the Merz proposal. In the background, the deepening of bilateral conflict with Poland regarding WWII remembrance does not help either. In terms of the gravity of the contentious issue, this is arguably much more serious than the recent (and still ongoing) spat between Bulgaria and North-Macedonia.

🔸While the speed of EU enlargement in South-East Europe has been underwhelming (especially in view of the 2003 Thessaloniki Declaration), the nature of EU enlargement has changed as well in the meantime. Most EU officials prioritise geopolitical objectives: enlargement is a way to keep Russia and China out of the region, and the Western Balkans countries are already security providers. Secondly, the language of consolidating democracies is also around. What is almost absent is: economic and social convergence, which is most important for the peoples living in this area. The need for a progressive approach was in the focus of the Skopje initiative spearheaded by the Social Democratic Union of North-Macedonia (SDSM).

🔸Simultaneously with the summit in Tivat, a FEPS event under the title „Friends of the Western Balkans” took place in Montenegro, in cooperation with the Willy Brandt Programme of the S&D Group in the European Parliament. A key message of participants (transmitted through a conference declaration) was that developing intra-regional cooperation is as important as competition between EU candidate countries in the accession Marathon. Over 30 regional initiatives between diverse groups of Western Balkan countries prove that there is a genuine need for such cooperations. The lack of an adequate social dimension of the enlargement process has also been pointed out, given that issues like brain drain represent a daunting concern in the region.

🔸Regional breakdown: 4 persons (20%) come from countries which are not and never have been members of the European Union. And since Pietro Parolin represents the Holy See, nobody out of 20 laureates represents Italy, for example. As citizens from non-EU countries were also included, one could have thought about the UK which, for 45 years was a member of the EC/EU, massively contributing to European culture and science. However, it is not only the regional and the political bias that can be criticised, but some of the individual choices as well. There are some laureates who are not particularly well known. And a few who are notorious rather than famous.

🔸Jean-Claude Trichet is a conservative French central banker who was one of the architects of the flawed Economic and Monetary Union (EMU) and the great eurozone disaster which unfolded 15 years ago. In his acceptance speech he listed countries that joined the eurozone under his watch, as if it was sign of success of his monetary policy. Since 2012, Europe has celebrated Mario Draghi for saving the single currency, but this was only necessary because Trichet and company drove the eurozone to the brink. Those who award Trichet can be compared to the Bourbons „they learned nothing and forgot nothing” (Talleyrand).

🔸Wolfgang Schüssel is the Christian Democratic (ÖVP) politician who once pioneered the elimination of the wall between the centre-right and the far-right (year 2000). As a result of Schüssel forming a coalition with the far-rigth Freedom Party (led by Jörg Haider at the time), Austria was subject of political sanctions and sidelined in international diplomacy for years. Such quarantine is rarely used inside Europe. Since then, the EPP practice has changed, and the centre-right governs with the far right in about half a dozen EU countries. Thus one can say Schüssel set a trend which today is occasionally condemned even by Manfred Weber and Friedrich Merz.

🔸Poland is represented by two politicians: Lech Walesa, who is known to have been an informer of the Communist secret policy under the name Bolek, and Jerzy Buzek, perhaps the least remarkable PM Poles have had since 1989. As Poland also takes out 10 % of the EU budget, this overrepresentation here may not be out of tune. However, Ireland (of 5,3 million inhabitants) is represented by a former head of state and a whole pop band, as if no other pop bands existed just Irish. Just hypothetically, choosing ABBA, could have offered a seat for Sweden, by rewarding musicians which just entertained millions of people (including at Eurovision), without supporting politicians addicted to foreign military interventions, like Bono did.

🔸The strongest character on the list linked to the Socialist movement is Javier Solana Until 1982 he opposed Spain’s membership in NATO. After being government minister in Spain on various portfolios, he took office as NATO’s ninth Secretary General in December 1995. One of his main achievements is the establishment of the Euro-Atlantic Partnership Council (1997) with 16 members and 28 partners. In 1999 he spearheaded the illegal bombing of Yugoslavia by NATO (calling it „a moral duty”). Then he became high representative for the EU’s Common Foreign and Security Policy, before the holder of this position could also have become VP of the European Commission.

🔸Finally, Angela Merkel. Formerly known as Queen of Europe. She governed in 3 cycles with the Social Democrats on her side (and once with the liberal FDP). She could have been olympic champion in muddling through (if such title had existed), but on the other hand lacked vision to move either Germany or the European Union to the next stage of success. For many Europeans, her name has been forever connected with austerity, even if for much of that her finance minister Wolfgang Schäuble was responsible. Merkel has apparently enjoyed being an ex-chancellor, also by writing. The award ceremony was an opportunity for her to demonstrate that there is more foreign policy experience in her little finger than in Ursula von der Leyen and Kaja Kallas combined.

🔸Contemporary relations between the US and China are often framed in the so-called Thucydides Trap, which is the ancient Greek model of an inevitable clash between a rising power and a declining one. How to avoid falling into the TT was openly discussed during this US—China summit as well, including by President Xi Jinping. Theoretically, the US is the declining and China is the rising great power today. For nearly 2 decades, it has been understood that US foreign policy would pivot to Asia and handle the Chinese challenge with priority. If anything was signalled by this visit, it is the strategic stalemate between the two.

🔸The top issue of the US—China security conflict is the question of Taiwan, which has been feared to become once a flashpoint for an open conflict. Though in different ways, both sides preferred to sideline the issue, with the exception of Marco Rubio who made some general statements from the side. Deflecting the Taiwan question by both Xi and Trump signals that, for the time being, this seems to be the safest way to ensure that the conflict remains frozen. If Beijing’s actions remain in the domain of diplomacy and deepening economic cooperation, while Washington refrains from provocatively sending more arms, the risk of an escalation can be kept at a low level.

🔸As opposed to Taiwan, Iran is currently a hot war in which the US is directly and China is indirectly involved. Rhetorically, both leaders expressed their wish to see the Strait of Hormuz to be reopened, and Iran not to develop a nuclear bomb. But their respective roles in creating the current crisis are completely different, and China would not help Trump to sell the US public (and the rest of the world) any kind of success, let alone victory, after the mindless destruction that has been carried out since the end of February. Nevertheless, they share an economic interest to find the exit fast.

🔸Trump was accompanied in China by a delegation of the most powerful businessmen of the USA (representing Tesla, Apple, Boeing, Meta, Mastercard, Visa, Goldman Sachs and Micron among others). In the last decade, Chinese spending on American products has halved, which is a trend Washington seeks to reverse. Chinese purchases of beef and Boeings were announced as part of the summit, and technology was subject of further discussions (from microchips to artificial intelligence). The two presidents agreed to establish a Board of Trade as well as a Board of Investment, which would open a pathway to more trade in the months and years to come.

🔸Since the second Trump administration entered office 20 months ago, trade deficits in bilateral relations have been in the focus of their actions, especially that of the Trumpian trade wars. While Trump’s aggressive tariffs were meant to tame Chinese exports to the US, the last one year saw Chinese purchases of American exports dropping by 25 percent. The US trade deficit vis a vis China has shrunk, while it has increased vis a vis ASEAN countries. Meanwhile both the US and China have their underlying macroeconomic imbalances. The US is well known for its astronomic public debt but Chinese debt has actually grown faster in the recent decade.

🔸While both US and China have behind them a period of debt driven growth, in Europe Mario „Whatever It Takes” Draghi’s messages prescribing joint borrowing for the EU to finance innovation and investment remain unheeded. The former ECB President delivered another speech, this time in Aachen (Germany) on the occasion of receiving the Charlemagne Prize or Karlspreis (14/05). German Chancellor Friedrich Merz wasted no time to contradict Draghi, thus presenting himself as the main roadblock in the way of economic competitiveness in Europe. Turning the G2 into G3, with the involvement of the European Union, is not on Berlin’s agenda.

🔸The annual economic policy conference of Friedrich Ebert Stiftung (FES) took place (22/04) just two days before this bad news came about the slow-down. Finance minister and vice-chancellor Lars Klingbeil expressed confidence in the capacity of the coalition government to consolidate, modernise and reinvigorate the German economy. Panelists discussed e.g. how competitiveness should be understood, what is the smart way to finance defence investments, and what kind of adaptation the welfare state needs to cope with all the contemporary challenges.

🔸Professor Adam Posen (Peterson Institute, US) was one of the keynote speakers of the FES conference in Berlin. He warned that much of the instability and disruption in the world economy would have happened even if Donald Trump had not returned to the White House. In an article for Intereconomics earlier this year, he explained that European economies have lost insurance of various types previously provided by the U.S. Nevertheless, the European Union has more agency to shape its new environment and more opportunities for gains than is commonly realized.

🔸Importantly for stabilising the international relations of the European economy, EU commissioner Maroš Šefčovič signed a memorandum of understanding with secretary of state Marco Rubio in Washington (24/04). The purpose of this pact is to deepen cooperation on critical minerals, and reduce dependency on China. Such steps towards economic security can play a more effective role in restoring the growth potential of the European economy than various deregulatory steps pushed through the Commission’s omnibus initiatives.

🔸The European Commission has been pursuing a competitiveness agenda in the last 18 months, and the informal European Council meeting in Cyprus (23-24/04) was another opportunity to commit to a comprehensive competitiveness strategy. What institutional leaders signed this time around was a list of measures to be implemented between June 2026 and March 2027. Competitiveness is the paradigm that has framed the understanding and actions of Ursula von der Leyen in the area of economic policy since her second mandate started, and this includes the establishment of a controversial Competitiveness Fund within the next Multiannual Financial Framework (MFF 2028-35).

🔸For all those chasing the old fashioned notion of competitiveness, Hungary should be a cautionary tale. The fallen prime minister Viktor Orbán wanted to use the Hungarian presidency of the EU Council in the 2nd half of 2024 to propagate his “successful” competitiveness strategy. After he took over in 2010, he reduced the corporate tax and introduced flat personal income tax. He revamped labour legislation in 2011 and introduced a “slave labour law” in 2018. For Orbán, climate change was just an ideology. In his last mandate (2022-6) Hungary became a stagflation champion of the EU, and the people, especially the young ones, revolted against this autocrat of economic competitiveness.

🔸On the eve of the FES conference, economic historian Clara Mattei (University of Tulsa) was awarded the 2026 Hans Matthöfer Prize for her renowned book Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. While this book is primarily about the economic policy experience of interwar Italy and Great Britain, readers may see in a new light the austerity policy of the eurozone crisis (2010-2) but also some of the contemporary debates.

🔸The risks of the reparation loan scheme were convincingly explained by the Prime Minister of Belgium. Using frozen Russian assets in such an unprecedented way would have turned the EU into a direct participant of the war, inviting immediate counter-measures by Russia, to start with. HRVP Kaja Kallas, one of the main promoters of the reparation loan idea, had suggested that Russia would be put outside the domain of international law, hence no risk was associated with the scheme. The reality, however, is that it is the EU that would have put itself outside international law, and the consequences could have been hugely detrimental. It would have hindered, and potentially blocked the efforts of the European Central Bank (ECB) to internationalise the euro and turn it into a more significant reserve currency.

🔸As compared to the reparation loan option, the joint debt delivers a message to the European citizens that they directly cover the costs of the war effort, and they need to know that. The loan is simply a postponement of the payment, and the true costs of the conflict need to be transparent. Most likely, this approach will invite more accountability. Leaders will have to talk more about what the actual war strategy is, and what kind of peace order is realistically attainable after the war. After the meeting of the European Council, French President Emmanuel Macron even hinted that now again it would make sense to speak with Russian President Vladimir Putin.

🔸Ukraine now has enough money to finance itself and the defensive war for another two years but this does not mean that the war would necessarily last for that long. Wise person of the year Alexander Stubb publicly opined that we might be closer to the end of the war than any time before. The President of Finland either knows something about the deteriorating condition of the Russian economy, or the great difficulties of Ukraine to mobilise more people for the front. For either or both of these reasons, the latent peace process may lead to some kind of settlement in 2026, especially if the Trump administration maintains its diplomatic campaign for forging a deal. Ukrainian President Volodymyr Zelenskyy seemed to have abandoned NATO membership as a goal, while the definitions of effective security guarantees and realistic territorial concessions remain missing deal makers.

🔸In the run-up to the European Council, Germany hosted a summit about peace in Ukraine, attended by Zelenskyy but also US peace envoy Witkoff and presidential son-in-law Kushner (14-15/12). This event demonstrated the endeavour to attain an outcome of the war which would be more favourable for Ukraine. It also helped boosting the profile of Chancellor Friedrich Merz, despite the fact that he was associated with the (failed) reparation loan idea. He might have known the reparation loan scheme (without open ended guarantees for Belgium) would not fly, but may have wanted to demonstrate that he was on the more committed wing of the European foreign policy spectrum when it comes to supporting Ukraine and its self-defence.

🔸Three countries: Czechia, Slovakia and Hungary opted out from the joint debt, signalling their dissent partly with the chosen method (CZ) but to some extent also with the objective of the financing effort (HU). HU PM Viktor Orbán for long has been seen as the most pro-Putin leader within the EU and his cooperation with the new CZ PM Andrej Babiš highlight the growing influence of the far right „Patriot” bloc. With Bulgaria appearing among the opponents of the reparation loan option, it is now clear that the Eastern flank of the EU is divided into two groups: the Baltic area (dominated by historic neurosis) and the more pragmatic nations South of the Carpathian Mountains.

🔸The postponement of the EU-Mercosur trade agreement – under pressure from France, Italy, but also Poland and Ireland – was another critical decision of the week. This is a major failure of the European Council, which leaves the whole megadeal with South-American countries in a vulnerable position. Trade is more obviously a core mandate of the EU than war, and the Mercosur negotiation has been a long chapter in EU history (25 years). Now, in the Trump era, it has an additional meaning as compared to the start. Somewhat ironically, one can conclude that the farmers of Europe unite more effectively than the workers of Europe, when it comes to imposing their will on EU decision making. The continuing stalemate also underlines that without more internal risk sharing a more robust representation of Europe in the world remains difficult.

🔸The previous housing crisis of Europe was primarily driven by financial sector malfunction and the most acute cases concentrated in a few countries (Ireland, Spain, Hungary). But now we are facing a long-lasting legacy especially what concerns the supply-side effects. The great financial crisis and the years of resulting underinvestment left behind an overall shortage, only to be aggravated by the setback suffered during the Covid-19 years, when construction activity dropped again. This is well explained by a recent study published by the European Investment Bank (EIB).

🔸The current European housing crisis is more structural and is fuelled by a number of factors, such as 1./ aftermath of the austerity period in the form of overall shortage of housing stock, 2./ imbalances within Europe due to labour mobility and concentration of tourism, 3./ over-tourism and related transfer of housing stock into short-term letting sector, 4./ impact of property speculation on pricing and investment, and 5./ war effects generating new refugee flows and pushing higher the price of household energy. The rent-to-salary ratio is used to compare the intensity of housing crisis from the point of view of affordability, and in this ranking Lisbon, Barcelona, Madrid and Milan stand out among major cities.

🔸Giles Merritt (Friends of Europe) warns about the political consequences in a recent oped. He argues that housing, or rather the lack of it, is foremost among the factors fuelling populism in Europe. Addressing acute housing shortages is crucial to stemming support for right-wing extremists. Merritt blames „poor planning” for much of the current problems, and suggests that establishing „youth task forces” could help finding solutions including through a kind of intergenerational rebalancing. Once we recognise that the political stakes so high, the EU level task in the area of housing policy becomes much greater than the „New European Bauhaus” project launched by Ursula von der Leyen in 2020.

🔸 There are some „low hanging fruits” here like building dormitories for students. In 2024, the European Investment Fund, backed by InvestEU (the replacement of the European Fund for Strategic Investment, which originated from the 2014 Juncker Plan), decided to support housing for up to 3,500 students in Central and Eastern Europe. This should remain an investment priority, potentially upscaled and applied in other regions as well. There are other interesting ideas around to address the supply side problems of housing. For example, given that, thanks to digitalisation and artificial intelligence, white collar work in the future will probably require less office space, converting office buildings to housing increasingly becomes an opportunity, potentially with support of EU funding.

🔸FEPS already in 2021 published a policy study on affordable housing in the EU. In the study, Sergio Nasarre-Aznar, Núria Lambea-Llop, Milan Ftáčnik and Līga Rasnača identified the main challenges relative to social and affordable housing, and proposed practical and policy-oriented solutions to deliver tangible results for the citizens in Europe. FEPS also has been working with the Brussels liaison office of the city of Vienna – the home of best practice in social housing, rooted in a century of social democratic governance.

🔸The S&D Group of the European Parliament recently unveiled a position paper on housing to deliver affordable and decent housing for all. The group has already secured the establishment of a special committee on the housing crisis in the EU (chaired by MEP Irene Tinagli). The paper, among other proposals, insists on allocating €300 billion of EU funding for affordable and decent homes, regulating short-term rentals, and reforming state aid rules to facilitate housing access for low- and middle-income earners.

Introduction

Milan Ftáčnik was an outstanding social democratic politician and thinker. Beyond his better known roles in politics, he contributed to the development of EU housing policy when he joined a cross-country research project with FEPS. This lecture is dedicated to his memory.

For Slovakia, but also for the surrounding countries, it is a crucial question how the relations between the Visegrad group and the European Union develop in various fields. Sadly, most external observers only pay attendion to the Visegrad cooperation when something goes wrong. It is therefore improtant to recall that the Visegrad group was formed in 1991, for a focused and forceful representation of the shared interest of three countries: Poland, Czechoslovakia and Hungary.

The common endeavour of the three and then four countries focused on EU and NATO accession in the 1990s. After EU accession, however, members of the group, and especially Hungary and Poland were linked to various forms of deviation, especially when it comes to questions of “rule of law”. More recently, the political attitudes towards Ukraine and the war in Ukraine became subject of scrutiny.

Students of the region are advised to build any assessment of these deviations on the understanding of

o -the EU integration experience (20 years),

o -the transformation of Central European politics in the recent period, and

o -the policy choices on key EU policies.

An overview of these chapters will also allow for developing an outlook for the near future, what concerns some of the key items of the policy agenda.

1. Economic performance since enlargement

After the transformational recession of the early 1990s, the region demonstrated strong growth potential that has been consolidated by EU membership. However, the EU accession of East-Central European countries resulted in an imbalanced Single Market in which the positions and strategies of Eastern members always have to be scrutinised from the perspective of economic as well as social sustainability.

What people expected from EU membership after the shock of the ‘great transformation’ of the early 1990s: stable and sustainable growth. If we look at the period since 2004, the region seems to have been catching up with Western Europe in terms of employment and economic performance. And the economic experience after EU accession influenced what people think about the EU. Polish people became much more pro-EU than before accession, while the Euro-enthusiasm of Hungarians started to decline. However, the financial and economic crisis, which started in 2008, disrupted the previous trend of convergence. And convergence would need to be a centrla, and not a marginal issue within the EU.

The European Community (which in 1957 originally comprised six Member States) had already taken in nine additional countries prior to this enlargement. But the 2004 enlargement was different because the income disparity between new and old Member States was much more significant than in any previous round. As a result, great imbalances have developed: capital flowed largely from West to East, while workers went mainly from East to West.

The persistent wage gap between East and West has functioned as a key incentive for labour mobility. East-Central European wage dynamics deserve attention for economic and social reasons. This is also an important political question in the EU, since in 2022 the EU introduced a directive on minimum wage coordination, and the Eastern member states are supposed to be the greatest beneficiaries of this innovative EU legislation.

After the initial and turbulent phase of the transformation process, wages in all East-Central European economies started to grow dynamically from the mid-1990s up until the 2009 recession. In the wake of the crisis, however, wage convergence either experienced a sudden halt or slowed down substantially.

Wage trends are not simply by-products of the macroeconomic processes. Maintaining wage cost competitiveness has been part of a reindustrialisation and broader economic development strategy in many cases. In Poland, for example, the early 2000s saw an aggressive reduction of wage share in the manufacturing industry. And even in the post-crisis years of strong GDP growth, wage convergence has been sluggish, which is a trend increasingly frustrated by sectoral or more general labour shortages.

2. Imbalanced Single Market: large labour outflows

Eastern enlargements doubled the volumes of intra-EU labour mobility. According to estimates, around five percent of the Polish labour force now resides in other EU Member States, while this number has exceeded 10% for Romania and Lithuania. Given the fact that young people are over-represented among Eastern EU-migrants, these labour outflows tend to generate and sustain population decline, especially in regions with lower than average fertility and higher than average mortality.

Although the destination countries in Western Europe benefit a great deal from mobile East-Central European workers in economic terms, these countries are also witnessing a kind of ‘welfare chauvinism’, turning public opinion against EU migrants. In certain periods (e.g. 2011-2013) certain segments of Western media and politics were obsessed with poor migrants from the East and their access to social benefits in receiving countries. The purpose of that discourse was not so much to develop a common strategy to improve the well-being of those citizens, but to exclude them somehow from the richer countries and their welfare systems.

However, if labour mobility is a threat to social security systems, it is mainly in the sending countries. Workers’ outflow from East-Central Europe by increasing the dependency ratio between the employed and non-employed population in these countries.

The real risks of labour mobility from East to West are not in the recipient countries but in the sending countries. A large percentage of workers who migrate from East-Central Europe to the West are overqualified for the jobs in which they find themselves. In 2012 this was the case for about half of East-Central European migrants who had completed higher education. This rate of over-qualification is more than twice as high as for the nationals of the receiving countries. In certain sectors of employment, particularly health care, we can speak of a ‘brain drain’ which leads to serious problems in the sending countries.

Fortunately, mobile workers also occasionally return. They bring valuable new skills and experience that benefit the economies of their countries. Nevertheless, most of the newer Member States, irrespective of the varying speeds of convergence (in terms of GDP), have developed as an ‘inner periphery’ within the EU. The region’s capital cities are booming, but internal regional imbalances tend to grow, which only reinforce the challenge in terms of economic, social and territorial cohesion.

Other features also distinguish East-Central Europe from older EU Member States, for example, working conditions. There are major differences between East and West with regard to the degree of organisation of employers and employees. According to the OECD, less than one-fifth of wage and salary earners in Poland or the Czech Republic are actually members of trade unions – compared with a share of almost 70% in the Scandinavian Member States. This means that in terms of economic policy there is a constant temptation to improve competitiveness at the workers’ expense.

3. East-West imbalance and the social question

From a West European point of view, the debate on social dumping framed the problem of East-West economic and social imbalances. Such controversies reflected the general fear that the enlargement of the EU to the East puts the feasibility of a ‘Social Europe’ into question.

Rounds of enlargements created a geographical divide in Europe in terms of productivity and wage levels and made the EU much more imbalanced and heterogeneous as compared to its predecessor, the European Economic Community, which in itself can be seen as an obstacle to a deep social dimension whether it requires more common legislation or common funds.

It is of course good news that there is economic convergence between East and West. However, those who believe that all problems in the East will be slowly resolved by experiencing higher than average GDP growth need to look beyond the GDP growth figures and see the gaps in health conditions, life expectancy and, in particular, the extraordinary population decline in Eastern Member States.

Economic convergence seems to be happening simultaneously with divergence regarding political values and social models. Therefore, the EU has to make efforts to ensure that economic growth in the East is sustained and is coupled with convergence in terms of political and social policy standards. If, following the advice from the Draghi Report, the EU can move towards a more serious tasks of this would need to be to help the East-Central European region to a new growth model.

Regarding the EU social dimension, the decade behind us was a kind of golden age. New legislation was introduced to address the problems of social dumping, as well as work-life balance. The 2017 adoption of the European Pillar of Social Rights was another milestone, and the 2020 creation of the SURE instrument against the coronavirus crisis was a remarkable innovation too. In 2021 in Porto the EU recommitted to long-term targets to increase the employment rate and reduce poverty.

However, for the Eastern EU countries the question is not so much about legislation or targets, but resources. Today a key question is how the peripheral regions can rebuild human capital, which is being lost through constant migration towards the West and disinvestment in health and education sectors.

In several new Member States the issue of finding a way out of poverty is linked to the situation of the Roma population. Not all Roma are poor, but in Romania, Bulgaria, Hungary, the Czech Republic and Slovakia, the Roma minority and the rest of the population are worlds apart in terms of education, employment, health and housing. The lack of progress here is a collective failure of the EU and the national governments, but also the local communities.

4. Social democratic decline

A progressive policy package would need to be represented and promoted by centre-left parties, but here we arrive to a major question.

At the time of the 2004 EU enlargement, CZ, PL, HU, LT were governed by centre-left parties. Overall, especially from a macroeconomic point of view, EU accession turned out to be a success, but what the centre-left parties went through is decline, splits and sometimes even collapse.

Progressive and technocratic politics at the time of EU accession were strongly influenced by cultural liberalism and economic neoliberalism. The social democratic component was mainly represented by better relations with trade union organisations and a commitment to tripartism. But with prime ministers like Marek Belka in Poland or Péter Medgyessy in Hungary, the centre-left wanted to prove that it can govern well and deliver prosperity as well as recognition, in the context of a globalised world economy and EU integration.

Arguably, the Central and Eastern European region confirms that the neoliberal period of social democracy has reached its end, and the neoliberal experiment—even if it helped achieving the desired EU accession—contributed to the decline of the centre-left in general. Reflection on long-term trends is timely in the broader EU context. Accepting this heavy erosion and occasional marginalisation would mean abandoning the historic mission of social democracy.

From an Eastern perspective, a credibility deficit arises for social democrats to the exent the EU integration has remained a primarily neoliberal programme, despite occasional calls to integrate into the Social Europe as well. The above examples of EU social policy were either too little, or too late for this region.

In addition, the EU had few tools to enforce its social agenda in a region which wanted to base economic competitiveness on a low wage, low tax approach. GDP growth rates have consistently remained higher than the EU average, but coupled with high and often growing inequality this did not create a feeling of improving social conditions.

Strong social safety nets and guaranteed employee rights have not been part of the East-Central Europen experience so far. East-West imbalances remain significant: in the East the density of trade union organisation is weaker, and the outflow of health workers undermines the capacities of social services, the teachers are underpaid, and Roma integration also remains a challenge.

In view of all this, one can conlcude that beyond leadership failure and character flaws of some leaders, it is this more general credibility gap that resulted in the downgrading of centre-left parties which now function as second order political players, and in some cases fight for their survival.

5. Orbánism and economic nationalism

When external observers look at our region, the politics of Viktor Orbán appears perplexing for many. Orbán has his own chapter within populism studies in the academia. But, regarding practice, Orbán’s effect was proven by the Polish PiS party which tried to import his model after winning the elections in 2015 and governing for two consecutive mandates. More recently, US President Donald Trump also referred to Orbán as an inspiration.

Hungary has been the laboratory, and it is often seen as a populist—nationalist paradise where not only the ruling party (that has achieved 4 consecutive constitutional majorities) belongs to this category but also one of the main opposition parties of the past decade, the far-right Jobbik. The Hungarian case, however, is often misdiagnosed, especially when the recent political deformation is taken out of the context of the economic and social transformation of the 1990s.

In the late 1990s, Viktor Orbán united the Hungarian right on his political economy agenda – to correct the imbalances of the economic transition to a market system, which apparently created excessive foreign ownership in Hungary. This is a long-term programme, unfinished and unfinishable, which has helped forge a commitment to the leader on the right. Originally, this was a far-right agenda, which Orbán appropriated for the centre right. Economic nationalism is a core issue for Fidesz, which in recent years has pushed back foreign ownership in various sectors. The beneficiaries of this agenda consider it more important than upholding democratic standards.

Orbán was lucky to have the general elections in 2010 when people felt the fallout from the global financial crisis of 2008-09. This was bad for incumbents everywhere but it allowed Orbán to achieve a two-thirds majority in parliament, which he used to change the constitution (not discussed or promised before the election and therefore it was not something that people expected). He started to change the rules of the game in order to eliminate the tools he had used to get into power, e.g. it became virtually impossible to run a referendum on issues upon which the government would not agree.

The European People’s Party has provided cover for Orbán. Despite dismantling the rule of law in an EU member state, the EPP has protected him in order to avoid losing a member and in exchange for economic and political favours (e.g. for German businesses in Hungary like Audi, Deutsche Telekom, BLB etc.). Orbán has also pleased his German allies by championing fiscal austerity, in contrast with the previous period when Hungary struggled with excessive deficits. Pundits who thought Fidesz would mess up the populism-driven economy were proved wrong as Orbán’s government turned out to be fiscally conservative (more so than during Orbán’s first premiership from 1998 to 2002).

6. Orbán s MEGA vision

Make Europe Great Again was the slogan of the Hungarian presidency of the Council of the European Union in the second half of 2024. It was partly about trolling EU leaders who at the time, with the exception of Viktor Orbán himself, publicly rooted for Joe Biden and later for Kamala Harris to save the White House from Donald Trump and the MAGA movement. But it was also about the propagation of an ultra-conservative agenda, which suggests restoring the strength of Europe by relying on old rather than new solutions.

Shortly after he returned to power in 2010, Orbán asusmed the role of the black sheep, and a kind of universal trouble maker of the EU, who hinders collective action more often than not. However, he never presents himself as anti-EU, knowing that Hungarian citizens are overwhelmingly pro-EU, and his own voters are also in favour of continued membership. He knows very well that EU membership is vital for the Hungarian economy, so his aim is not quitting but reshaping EU governance according to his preferences. “Europe of nations” is a well-rehearsed Fidesz slogan, and occasionally they put forward ideas like abolishing the European Parliament.

When speaking about the EU, Orbán tends to push a narrative which suggests that in reality he defends the EU’s original construct and the threat to the integration comes from those who insist on adding further, unnecessary or harfmul elements, like gender ideology or climate policy. While he is now the longest serving EU prime minister, he never includes himself in the EU elites, but pretends to represent the people, who are by (his) definition culturally conservative. Talking heads of Fidesz never miss an opportunity to stress the need for returning to Europe’s Christian roots. In 2019, Orbán and Fidesz did vote for Ursula von der Leyen to become Commission President, but now they consider her a failure, for giving in to green, gender, rule of law and war ideologies in her first mandate, and for supporting Ukraine against Russia all along.

Orbán’s dream is a Europe led by Meloni and Le Pen type politicians. And as the recent presidential elections in Poland and Romania proved, he has many allies and followers in the Eastern member states of the EU. The combined strength of parties belonging to the ECR (European Conservatives and Reformists Group ) and Patriots for Europe Group is astonishing (especially if we also include Austria in this categorisation).

Populism and growing far right influence has been a problem across Europe: from Germany to Italy, and from Sweden to Portugal. But it is the Polish—Czech—Hungarian trio of Central European countries which inherited the British mantle of Euroskepticism. At the time of the Brexit negotiations, Poland even wanted to take over the stake of the United Kingdom in the European Investment Bank (EIB). These three countries have remained outside the eurozone (to be discussed in a separate chapter).

7. Ukraine and the war

From the very start of the Russia—Ukraine war, Hungary has been seen as an outlier in the EU, due to the ostensibly pro-Moscow pivot of Viktor Orbán. He took decisions against Hungarian arms deliveries to Ukraine, or even just to allow such transports through our country. He did not visit Kyiv for very long (2,5 years after 24/2), contrary to many other leading European politicians. He has waged a propaganda campaign against anti-Russian sanctions, and visited Moscow as only EU head of government for the funeral of Mikhail Gorbachev (3 September 2022). Not even his foreign minister met his Ukrainian opposite number since the invasion for almost two years, and Orbán’s ferocious media empire peddles pro-Kremlin language in shifts.

West European commentators often conclude that Orbán is going against the broader East European position, it is only partly true. People commenting like this often apply the term “Eastern” countries to the Polish—Baltic group only. This way of thinking is obviously flawed. While Orbán and his government can rightly be considered as an outlier in the EU as a whole (because of their attitude to specific EU actions), but if we only focus on the South-East European region, Orbán appears as a bolder and more influential version of a more general pattern.

Overall, South of the Carpathians peoples are less Russophobic than in the Baltic region. This is due to a few historic reasons. Most importantly, while the Baltic three and partly also Poland were once incorporated in the Russian Empire, this was not the case South of the Carpathian Mountains. South-East Europe does not share the same historic neurosis which is a feature in the Baltic region, and such reminiscences cannot be exploited for militaristic purposes today. Consequently, people in this region are more skeptical about propagandistic statements which suggests that “Russia would invade the whole of Europe” or that “the Ukrainians are fighting for us all”.

Russia has been a factor in the history of the South-Eastern European region but neither in an outstanding way nor particularly negatively. A lengthy period of history to the South of the Carpathians was characterised by a triple hegemonic rivalry with the Habsburg, the Ottoman and the Russian empires as competitors. For some, and especially for Orthodox Slavs (Serbs and Bulgarians, Russia was not an oppressor but a liberator who helped keeping Catholic or Ottoman invaders or occupiers out. Greeks, in the shadow of the Ottoman Empire (and then Turkey), also looked at Russia with sympathy.

Orbán and Fico are often mentioned together, while their approaches are not identical. One may argue – though with some simpolification – that Orbán is more pro-Putin than pro-Russia, while Fico is likely to be the opposite. And of course this is not just about the leaders but also wider segments of the population in Slovakia, Serbia and Bulgaria. Leaders like Slovak prime minister Robert Fico and Croatian president Zoran Milanovic won elections (and reelection) while it was widely known what views they held about Russia and the war in Ukraine.

8. The question of EU enlargement

Since 2022 Ukraine has been candidate for EU membership. While this was originally seen as a gesture and an encouragement to fight the war against Russia, the European Commission kept the ball rolling, and political actors including governments had to form a position. Ukraine’s EU membership has also become a major theme in Hungary’s domestic politics. So much that Orbán organised a „national consultation” about the topic. This was to further raise, if possible, anti-Ukarainian sentiment in the country, which would help uniting his camp and dividing the opposition.

The reported outcome of Orbán’s consultation was 95% rejection of Ukraine’s EU membership, which Orbán announced on the eve of the European Council meeting in June 2025. This was not a surprise, since in the “information campaign” that accompanied the consultation only the costs and risks of a possible accession were emphasised, and not a word was spoken about the potential benefits for the EU. Orbán’s camp consistently refers to the conflict of two Slavic nations turned into a proxy war.

The rejection of Ukraine’s EU membership became a main theme of Orbán’s subsequent public speeches on foreign policy. It should be noticed that while Fidesz continued to use Ukraine’s future membership in the EU for scaremongering, the whole opposition prefered to sideline the issue hoping that the significance of the issue in domestic political debates would diminish. In his 2025 speeches, Orbán often referred to an EU of concentric circles, practically a modified version of the model 12 French and German experts developed 2 years earlier with the definition of 4 categories.

Meanwhile inside Ukraine the share of those hoping for NATO and EU membership declined sharply, and the broader EU debate on further Eastern enlargement has also changed. Historically, West European countries developed enlargement fatigue after the 2004 “big bang”, while Easterners remained enthusiastic in order to bring in their aspiring neighbours. In 2022, there was consensus in the EU about turning Ukraine and Moldova into candidates. Since then, the earlier asymmetry seemed to turne around completely.

The West became more pro-enlargement for geopolitical reasons, while neighbours of Ukraine developed some scepticism, basically for 3 reasons. One is the dispute on grain import from Ukraine with potential consequences in case of an accession. The second is the expected effect of Ukraine on the EU budget (especially cohesion and agricultural policy). And the third one is the specific historic grivances (the case of the Volhynia massacres standing out and putting a shadow over Polish-Ukrainian relations). For these reasons, Orbán appears less and less as an outlyer what concerns opinions on Ukraine’s future EU membership.

9. Eurozone enlargement: East-West cleavages

When the currency union was designed, the Eastern member states were not yet part of the EU. When the countries between the Baltic, Adriatic and Black Seas got a chance to join the EU, it was made clear to them that the single currency was not optional, but rather an obligatory part of the EU accession package. Slovenia, Slovakia, Estonia, Latvia and Lithuania introduced the euro relatively early, Croatia more recently, and Bulgaria from next January.

The Visegrad group, minus Slovakia. PL, CZ and HU are all mid-sized EU countries, and as such, monetary policy autonomy is meaningful in their case. The Czechs have always been rather reserved with regard to their interest in eurozone accession, while Poland’s initial political commitment was derailed first by the global financial crisis and more recently by the rise of PiS. Hungary had two target dates for accession when the government was held by Socialist-Liberal coalitions (first 2008, then 2010), but the endeavour to join the euro was washed away by the global economic crisis, despite the relative popularity of the euro in Hungary.

In September 2017, European Commission President Jean-Claude Juncker outlined his vision to reunite the eurozone and the EU. In order to ease the further eastward enlargement of the eurozone, he proposed a budget line to smooth the accession of those who want to join in the coming period. This initiative of Juncker by now has been largely forgotten. It is not so well known either that the Central Bank of Hungary (CBH) came out with a new set of criteria in 2017 which would be monitored before the country decided whether to join the euro. A key factor in the new set of criteria by the CBH is the real economic convergence as measured in GDP per capita.

It would also be necessary to clarify how the Maastricht rules of accession would be interpreted in the case of the Visegrad and South-East groups of countries. For example, in order to allow high-debt member states (e.g. Belgium, Italy, Greece) to join the euro, the rules had to be interpreted accordingly. Similarly, suitable interpretation was necessary for the Baltic States, using currency board arrangements to skip the ERM-II exchange rate mechanism.

When we look for the reasons why the Visegrad group (besides Slovakia) wants to keep its distance from the single currency, it is mainly due to their insistence on holding on to the possibility of making autonomous decisions. The dilemma of joining the eurozone is thus essentially the choice between more or less autonomy in their decision-making processes. In the current political framework, the ruling powers clearly favour more national discretion and autonomy, even if this position entials the risk of becoming part of a political periphery in a supposedly inevitable two-tier EU.

An acceleration of EMU reform leading to better functioning could increase the appetite of the larger Visegrad countries to join. Such a reform could bring currency reform to the centre of economic policy debates in the East, and it might also diminish the power of nationalism. This aspect is all the more important because, many Eastern advocates of eurozone accession put an emphasis on the political arguments in favour of joining (out of fear of a two-speed EU).

10. Policy outlook

The Visegrad countries continue to have a shared interest in an EU which offers balanced economig growth but also convergence. This needs to be economic and social convergence at the same time.

-overall, the key question is whether East-Central Europe finds a new growth model. A way out of the low-wage, low-tax development path (the so-called “middle-income trap”).

-maintain a strong EU budget incl cohesion and CAP – EU must play a role in financing but also incentivising this change

--maintain legislation supporting social standards, especially the minimum wage. Social investment orientation is crucial, also to slow-down the demographic decline.

-the need to maintain some control will probably prolong the maintainance of national currencies in PL, CZ and HU, at least in the medium term, but possibly much longer

-support EU enlargement but starting with the WB where economies have been consolidated and reformed

-support a strong reconstruction program towards UA and ensure that Eastern EU regions sharing a border with UA or Black Sea are included

-an EU reform, potentially in the form of a new Treaty may come. Visegrad will hardly agree with a deepening (abolishing unanimity requirements on foreign policy matters) without significantly higher levels of solidarity in the forms of common funding for public goods and fiscal risk-sharing on a permanent basis.

It is not helpful when West Europeans only notice regional differences when it comes to issues like rule of law, or particular items of the foreign policy agenda. In fact, the divergence of the economic and social questions is a more fundamental problem. The fight against autocracy and populism must be part of a broader agenda for convergence.

Sources

Where Now After Ten Years Of Eastern Enlargement? In. Social Europe

https://www.socialeurope.eu/now-ten-years-eastern-enlargement

“Fifteen Years of Convergence: East-West Imbalance and What the EU Should Do About it,” Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 54(1), pages 18-23, January.

Against a General Theory of Populism: The Case of East-Central Europe, in. Intereconomics: Review of European Economic Policy, Volume 55, 2020 · Number 1 · pp. 21–26

https://www.intereconomics.eu/contents/year/2020/number/1/article/against-a-general-theory-of-populism-the-case-of-east-central-europe.html

Die EU-Osterweiterung nach 20 Jahren: Kann die Konvergenz sozial und wirtschaftlich nachhaltig gestaltet werden? Wirtschaftsdienst, Sciendo, vol. 104(6), pages 377-382. (With Andrew Watt)

https://ideas.repec.org/a/vrs/wirtsc/v104y2024i6p377-382n1008.html

Revamping Europe, in. Progressive Yearbook 2024

https://www.researchgate.net/publication/378858564_Revamping_Europe

Hungarian heresy in the mirror of history, in. Views from Central Europe and the Balkans, ULB

https://views-from-central-and-balkan-countries.eu/hungarian-heresy-in-the-mirror-of-history/

From the point of view of country size, Europe’s largest country invaded the second largest one. European solidarity with Ukraine – in a military, as well as a humanitarian, sense – has been remarkable. However, this has also been a time for European leaders and the general public to learn a lot, including the lessons of warfare.

At the time of the Russian invasion of Ukraine, national and EU leaders felt being mugged by reality, and embarked on building a new European order, primarily from the point of view of security but with grave consequences on our economy and societies. In the light of the war experience, the soundness of this great European reconstruction needs to be assessed thoroughly.

Reshaping the institutional framework

The Russia-Ukraine war invigorated thinking about European institutional and especially security architecture. In 2022 it was not only Ukraine that applied for NATO membership but also Sweden and Finland. Both of them found the fast track, though without adequate time for public debate, let alone a referendum.

At the same time, it was not only NATO but also EU enlargement which came to the agenda in the first year of the war. While there had already been a queue waiting for accession, two new candidates were added in 2022: Ukraine and Moldova. What’s more: in December 2023 even Georgia was given candidate status by the European Council. These moves energised enlargement policy not only in favour of Ukraine and Moldova but also the countries of the Western Balkans. Today Montenegro and Albania are the most talked about countries when it comes to guesses about the next round of accession.

However, understanding that EU enlargement is not a sprint but a marathon, the EU had to do something else first. Leaders in 2022 reached back to an idea which was first developed more than 30 years before. When the Eastern (Soviet) block was disintegrating at the end of the 1980s, the socialist President of France Francois Mitterrand came forward with the idea of a Confederation. This was an expression of interest in an integration process that covers a wide geography, while signalling to the newly democratising East that a rapid expansion of the European Union should not be expected. At the end, the Confederation was not formed, and 8 countries from the former Eastern bloc became EU members 15 years after the fall of the Berlin wall.

The turn of the millennium was characterised by the doctrine of unique, convergent and homogenous integration. This assumed that all EU countries (save those with an opt-out) would also have the euro, and the EU could include all those who want to join: Turkey, with whom accession talks started in 2005, Iceland, which was preparing a bid for 2009, and the Western Balkans, to whom the Thessaloniki summit in 2023 made a clear promise. (It is noteworthy that for Turkey, Germany and Austria originally proposed a privileged partnership instead of full membership, but this idea was sidelined then.)

The great financial crisis (which threatened a disintegration of the euro) and the subsequent Brexit referendum (June 2016) incentivised fresh thinking, and a group of experts put forward a proposal for a ‘continental partnership’. Under this concept, the UK could have taken back some control over labour mobility and could have distanced itself from the EU’s perceived supranational decision-making. The proposed partnership would have consisted of participating in goods, services, capital mobility and some temporary labour mobility as well as continued participation in inter-governmental decision-making. It would also have entailed regulatory integration (i.e. enforcement of common rules to protect the homogeneity of the integrated market).

In such a partnership framework, the UK could have retained a good amount of influence on EU policies but without formal authority. This approach would have turned the EU into an inner circle (deep and political integration), while an outer circle with less integration would have been created. Over the long run the latter could also have served as a vision for structuring relations with Turkey, Ukraine and other countries.

The post-cold war Mitterrand idea with the original vocabulary was revived after the outbreak of the Russo-Ukrainian war in Spring 2022 by the former Italian Prime Minister Enrico Letta. He put forward and started to popularise the idea of a European Confederation. This was part of a plan to speed up simultaneous deepening and widening of the integration. According to Letta, the existing EU would need to deepen in altogether seven fields, including defence, energy and social, while we would create a Confederation which would include the EU but also countries of the Western Balkans plus Ukraine, Moldova and Georgia in the East. The Confederation would not need to be something entirely separate from the European Union.

In a slightly modified, form, this idea became the most important institutional innovation of this new chapter. In 2022, the European Political Community^[2] (EPC) was established, and since then two meetings per year held by leaders (one inside and one outside the EU). Further creating thinking followed in expert circles. At the request of their respective ministers, a group of French and German EU integration experts developed a scheme of four concentric circles (organising all countries in Europe in a structured system of integration and cooperation, with the exception of Russia and Belarus).

Shifting focus of EU to security and defence

Arguably, what has been more important than the new continental design of Europe the functional reprofiling of the European Union. The war has shaken up the EU, which first of all turned itself into an economic division in support of the defensive effort of a neighbour with whom four EU member states share a border. Even if most EU member states are also members of NATO, defence became a new priority for the EU itself, perhaps even at the expense of more conventional or foundational policy fields.

Although the EU for long has been described as a peace project, more and more people identified with a new mission, which is to actively support Ukraine’s defensive struggle, and potentially to prepare for future conflicts. By and large, it has been accepted that the EU should subordinate its economic policy to the interest of the war, and roll out more and more sanctions on Russia, even if those have substantial costs for the EU countries themselves.

Institutional conclusions were drawn when the new European Commission was formed after the 2024 European Parliament elections. First time, an EU commissioner for defence was introduced. Security as well as preparedness became themes appearing in titles of several commissioners. In addition, Ursula von der Leyen commissioned former Finnish president Sauli Niinistö to deliver a report to help framing the agenda driving towards a higher level of militarisation of EU policy.

The return of Donald Trump into the White House delivered further boost to the EU defence dimension, because it created a fear regarding the US commitment to NATO potentially fading away, demanding the EU to resurrect the plans for a defence and security union. A White Paper on defence was presented in March 2025. These new plans outlined in the WP will lead the EU into a different dimension in terms of defence capacity and security profile. It is important that decisions with long-term implications are based on a sound assessment of the situation instead of shocks and hysteria.

Decisions about defence must be embedded in a broader security policy, which in the case of the EU needs to factor in all member states, including those committed to military neutrality. It is not so easy but probably also not desireable to turn the EU into a war project from a peace projects.

Spending more on defence Europeans prepare the ground for cuts in public services and the welfare state, as well as development aid. A greater problem is that behind the need to boost military capacity in Europe, there seems to be no clear methodology. Arbitrary numbers are thrown out to impress the audience, without seriously discussing what type of military capacity is lacking and what is the best way to attain it.

Nevertheless, it has become common to talk about „military keynesianism”^[3]. When arguing for more spending on defence, officials emphasize how much employment it would create, but also that investments in military technology would have beneficial effects on civilian R&D, which may become a focus point in common EU strategy. Though such points might be valid, the defence sector also requires scrutiny from the point of view of waste and corruption.

When judging the new militaristic endeavour, one needs to appreciate that European countries outspend Russia by far on defence. Counting at current prices in 2024, Germany and France together spent as much as Russia on the military. If we also add the UK, Italy and Poland, the sum is already twice as much as Russian military expenditure.

Assuming that EU countries do not need to fear internal military conflict, and the main question is matching the Russian capacity, the key is finding different arrangements rather than spending much more. The EU role should be primarily in the field of better coordination of this spending to boost collective defence. In this spirit, in a new policy brief for FEPS, Roberto Castaldi^[4] outlines the need for “a strategic shift towards a defence model that combines shared European military capabilities with the ability to mobilise national forces when needed, also positioning the EU as a strong pillar within NATO.”

Beyond increased spending, the question of establishing a European army also comes back today more frequently than before. Dialogue and diplomacy have started to play a diminished role, and conflict prevention is almost vanished from the EU policy map. Diversity, nevertheless, appears as a barrier to integration as in any other policy field, especially what concerns the rather uneven threat perceptions among EU countries.

Finally, the war has started to reshape European finance too. Perhaps the most important development here is that in 2025, following the snap elections for the Bundestag in Germany, a great parliamentary majority decided to do away with the infamous debt break, and they did so primarily to launch large-scale rearmament programme (5/03).

But not only the new German government but also the European Council started to position itself towards common EU borrowing for a rearmament programme (6/03). And it is not less important that the European Investment Bank is now newly allowed to finance defence related investments.

This has also been the time when the European Commission started to work on a new long-term budget (MFF), with the needs of defence, security and preparedness appearing everywhere. This drive in the current forms represents a threat to conventional EU policies that require strong budgetary allocations: the Common Agricultural Policy (CAP) and Cohesion Policy. If new priorities are pursued without awareness of their impact on regional disparities, we may end up with the poorer EU regions paying for the conflicts in our neighbourhood.

European dependence on US

Even before the boost for the defence dimension came openly to the EU agenda, Commission president Ursula von der Leyen since 2019 has been talking about leading a „geopolitical commission”. Such expressions carry the promise of greater influence on the international stage. However, in the last year, we have seen the manifestation of the opposite: European weakness.

The reason for this is that from the very start, Ursula built her geopolitical strategy on the assumption of US leadership. But the US was not building this European dependency^[5] without a reason. The masterplan is about using the European Union as a buyer of US products which otherwise Europeans would not need. This is necessary for the US because America has been struggling with a chronic trade deficit, which eventually threatens US solvency as well as the hegemonic role of the US dollar.

Last Summer, European leaders – with the notable dissent of Pedro Sánchez – accepted the US demand to drive up military expenditure to 5% of the annual GDP, in the hope that the general tariff level can be 10% instead of higher. But Trump who wants to maximise the gains from this asymmetric relationship, imposed tarriffs at 15% level. Then the EU accepted the 15% tariff in the hope that perhaps Trump does not walk away from the war in Ukraine.

But then in August, Europeans had to witness Trump not only hosting Vladimir Putin in Alaska, but also blaming Biden and not Putin for the war, and dropping the demand for ceasefire and whole sanctions agenda. The reality is that no genuine trade negotiation took place between the EU and the US. The US did not make any concessions. Even more dramatic is that the EU leadership failed to stand up for multilateralism in the field of international trade and echoed Trump’s false narrative about „rebalancing” instead. Besides, promises were made that European companies would turbo charge investment in the United States, which contradicts the genuine needs of the EU (as outlined by the Draghi Report among others).

The culmination of events in Summer 2025 serves with a cautionary tale about politicians who wanted to play geopolitics without understanding geoeconomics, but only demonstrated in timidity and cognitive dissonance. EU leaders – especially after joining forces with the UK – should have exerted greater persuasive power in Washington in all respects: both in trade negotiations and regarding the future of the war in Ukraine. However, it seems that the EU’s economic power cannot be easily converted into global political influence.

For years, we heard about the Brussels effect, the power of the EU single market in the world, which is preparing the EU to play a role in international affairs which is commensurate with the size of its market. What we learned recently is that it is not the size of the EU’s market, income level or population that matters here, but that the EU is dependent, and even subordinated, to the US in several areas. The four cardinal dependencies that make the EU more of a strategic periphery are: military-security issues, digital services, energy supply, and the hierarchy of the financial system.

The most visible and current is that Europe is dependent on the US in the field of security policy. NATO, founded in 1949, is still a legacy of the Cold War, but it has survived its original mission and has continued to expand. This also means that more and more European countries are subordinating their military-security issues to US policy, and now even former neutral countries (Sweden and Finland) have classified themselves as such. Theoretically, there would be a way for Europe to become independent and emancipated – this was also part of the thinking about “strategic autonomy” for years. But this direction is hampered by many reasons, for example the importance of nuclear weapons, technological dependence, and the need for coordination, which all lead directly to the acceptance of hegemony.

Dependence on digital services means that most purchases in Europe now also go through US service providers (through market research, product search, payment, etc.), which also means that in most of these digital operations, an American company either receives revenue or useful information. This is no longer a product of the Cold War, but of the period since then, when Europeans thought they could keep up with the rapid pace of global economic change without a meaningful industrial and technological policy. Now the US wants to extend its dominance in this area even further and demands that the EU dismantle its regulation of digital services.

Energy dependence on the US would have been unthinkable a few decades ago, but even 5-6 years ago we could not have imagined that we would end up here. The US can export liquefied natural gas (LNG), which Europe did not particularly need before the war. If what Ursula von der Leyen promised Donald Trump in Scotland really comes true, then all that will happen is that the EU will replace its unilateral dependence on the East with a Western one in the area of ​​gas imports.

Finally, the EU – like every other region – is also dependent on the monetary hegemony of the United States. European monetary cooperation dates back to the 1970s, and from the beginning it was intended to filter out the instability caused by the volatility of American politics. The then 12 EU member states decided at the end of the Cold War to create a currency union to reduce American dependence. But the euro has so far only really functioned internally, with minimal external functions. In the quarter century since its creation, the euro has failed to significantly increase its share of international trade and reserves. And this now contributes to the EU’s structural weakness.

European miscalculation

When the history of this war will be written, a special chapter will have to be dedicated to miscalculations. The history of wars is also a history of miscalculations. And this applies not only to sides that lose wars, but very often also to sides that eventually win. The key question before engaging in military conflict is whether the war aims can be reached with the means available. The consequences of miscalculation are: the war lasting much longer than expected, the costs becoming much higher than expected, and the gains at the end appearing much less than expected, especially if someone loses the war instead of winning it at the end.

A most famous case of military miscalculation comes from 1914^[6], and this is particularly important for us, Central Europeans. Franz Josef I (“Kaiser und König”: “emperor and king”) was almost 84 years old when he sent the Austro-Hungarian troops into war against the Western Balkan rival Serbia in July 1914, because the latter allagedly sponsored youthful terrorists who killed the heir to the throne, archduke Franz Ferdinand, in Sarajevo. The Serbian government ignored the security concerns of Austria-Hungary for too long, and Franz Josef thought that by the end of the Autumn (when the leaves fall), the soldiers would be back home. Instead, the war lasted for four years, and it was the multinational monarchy which disintegrated due to the defeat. Franz Josef did not live to see the sorry outcome because he passed away in 1916.

But the elderly Franz Josef was not the only one misjudging the state of the world in 2014. Karl Kautsky, the great Social Democratic thinker, published an article in Die Neue Zeit on 11 September 1914, in which he famously explained that in the era of ultraimperialism, major wars were not possible any longer. He drafted the piece several months before and thought that the minor mid-summer developments would not weaken the power of his arguments. To use the expression of the Australian historian Christopher Clark^[7] that “Europe sleepwalked into the Great War”, and as the case of Kautsky demonstrated, even among the most brilliant theoreticians of the time, the dynamics of conflict were not well understood. What Kautsky called “ultraimperialism” was supposed to be a relatively peaceful stage when major powers behave in international politics like cartels in the sphere of economics. Kautsky was not alone with such expectations; previously, the British John Hobson but also the German Karl Liebknecht had similar speculations.

Regarding the current war, the main miscalculation took place on the side of Russia, which started the war in February 2022. It was a folly to think that Ukraine can be subdued through a SMO in a few days, but also to expect that Russian soldiers would be welcome in Ukraine beyond Crimea, and to assume that the EU would not stand up in support of Ukraine united. Russians also miscalculated by believing that the EU public would be moved by the neo-Nazi influence in Ukraine, by thinking that military superiority is sufficient for acheiving all main political goals, by assuming that battlefield success would sideline West-European geopolitical concerns, and by believing that challenging NATO enlargement could not further strengthen NATO and turn out to be counterproductive, at least for a while.

As compared to Russia, its main strategic adversary, the United States did not miscalculate much. Perhaps what the Americans did not foresee properly was how hard it is to walk away quietly from such a war. China is also a beneficiary of this war indirectly, and one could not find too many examples of miscalculation on their side.

What concerns Ukraine, the victim of Russian aggression, there has also been examples of miscalculation on their side, to the extent their leaders also had to make decisions at certain points. The tentative list of Ukraine’s follies is this:

--to hope that through a war supported by the West they can achieve something better than the Minsk agreement of 2015 or the nearly accomplished Istanbul deal of 2022

--to assume that invasion by Russia would totally eclipse domestic conflict

--to assume that Ukraine’s self-defence will invite global solidarity

--to believe that „as long as it takes” means „until Russia is defeated”

--to assume that if things go badly US/UK/EU would enter the war

--to assume that the UK is sufficiently strong and effective to influence but also move the EU and US positions in all circumstances

--to assume that attacking Russian territories could create political crisis in Russia

--to assume that NATO and EU membership would quickly follow after the war because it was so much talked about

But the longest list of miscalculations has developed on the side of EU countries. The following should be considered:

--to believe that the US out of principle supports a war for the rules-based-int’l-order

--to suggest that Russia’s war against Ukraine is an attack on Europe from the outside and not an intra-European conflict

--to assume that economic sanctions can weigh down Russia in a few years

--to assume that the transatlantic alliance guarantees military superiority over Russia

--to expect an incremental buildup of Ukrainian military arsenal be effective against overall Russian dominance in personnel and amunition

--to assume that the nuclear threat by Russia would not be a factor if we don’t think about it

--to assume that the Global South can be talked into an isolation of Russia

--to expect that the European public remains committed to a war with maximalist objectives and fully supportive of Ukraine’s ambitions (with readiness for endless sacrifice)

--to believe after the US elections that European leaders can talk Trump back into supporting the war effort

--to suggest that it is Putin’s manipulation of Trump and not the battlefield reality which is shifting the Ukraine policy of Washington

--to assume that maximalist objectives can be upheld during negotiations between the warring parties even if the battlefield reality does not support them

--to think that war without any diplomacy should determine our future relations with our largest neighbour.

The current war in the mirrors of history

One reason for European strategic miscalculations regarding the Russo-Ukrainian war is that many leading politicians, and perhaps a certain share of the general public too, used only one previous war as a model, which is supposed to help with the understanding of this war. And that was World War II, which lasted for 6 years, and ended with the outright defeat of the main agressor Germany (and its allies).

Using World War II as a main reference leads to comparing the adversary to Hitler, to trashing appeasers with reference to Munich 1938, to assuming that the only true meaning of victory is unconditional surrender of the enemy, and to rejecting a new Yalta – all come from the history of World War II, which was beyond doubt the most devastating war in the history of humanity. Comparison with WWII helps qualifiying the Russo-Ukrainian war as a war of aggression (or war of conquest), which can be defined as a military conflict waged without the justification of self-defense, usually launched for territorial gain or subjugation.

However, for people who have heard about other wars, and perhaps even studied them, the current Russo-Ukrainian war reveals many similarities to other wars. This of course does not mean this would be a copy-paste of anything that happened in the past, but for analytical reasons the comparison makes a lot of sense. In particular, we should pay attention to the following:

1./ 1st Crimean war^[8] (1853-6). Western imperialist countries France and England fought a war against Russia in support of the Ottoman Empire. There was a certain religous packaging of the conflict, especially at the start, but the key question was how to preserve the balance of power at a time when the Ottoman Empire was progressively weakening. It was called the „Eastern question” by the British, whose preoccupation was to preserve control of trade routs going through the Middle East. In its nature it was a genuine inter-imperialist war. Sevastopol was destroyed, Russia was weakened, though in the next decade it came back again as a major power (on the Balkans).

2./ post-Yugoslav wars^[9] of secession (from the 1990s) also invite comparison. A war of dissolution can be defined as intense military activities accompanying the break-up of an empire or a federal state, typically entailing territorial disputes, inter-religious hostilities, and ethnic cleansing (e.g. post-Yugoslav wars in the 1990s or post-Soviet wars since 1991). The longer a multinational, multicultural or multiethnic entity existed the more likely it is that the dissolution turns out to be conflictual. Both Yugoslavia and the Soviet Union existed for much of the 20th century, and neither story of dissolution can be considered completely settled, in which geopolitical factors, and very importantly, external geopolitical factors play a major role.

3./ The Iraq-Iran war of the 1980s is a helpful comparator for two reasons: one is the centrality of oil and gas in both cases, but also because in both cases the term proxy war has been used with a reason. A proxy war is a war instigated by a major power which does not itself become directly involved in the open conflict; the relationship between the external actor and the belligerent can take the form of funding, military training, arms, or other forms of material assistance which assist a belligerent party in sustaining its war effort. For neoconservatives who were keen to have this war between Russia and Ukraine, Russia is probably just a larger version of Iran, and it is counterintuitive that the full support of US, UK and EU has not been sufficient to inflict military defeat, at least not in the first 43 months of this war.

4./ from a legal point of view there is a similarilty between the 2022 invasion of Ukraine and the 1982 invasion of Lebanon by Izrael. A strong state detected a secuty risk in its neighbourhood and defined the nature of this security risk autonomously, and eventually, disregarding international law. The fundamental objective of the military campaign was not territorial from the point of view of the aggressor, but to ensure that the neighbouring country cannot become a base for future actions that endanger its sovereignty or territorial integrity.

5./ The 1974 “Greek-Turkish War” is also a comparator, because it left a country divided, partly occupied, which on the other hand did not prevent Cyprus enter the European Union 30 years later. It is not an insignificant fact that the Turkish invasion of Cyprus was a direct military response to a Greek-led coup that aimed to unite Cyprus with Greece. In other words, Turkey committed aggression to prevent an unfavourable geopolitical shift in its neighbourhood. But Turkey was not only not excommunicated by the democratic countries allied under the umbrellas of NATO and EU, but became a candidate for EU membership too in 1999 (accession talks started in 2005 and came to a standstill in 2016 only).

Arguably, the current Russo-Ukrainian war has more parallels even with WWI^[10] than WWII^[11] (provoking SMO against weak neighbour of greater power which then can be turned into greater clash eventually leading to the fall of the aggressor, according to the script). Having parallels with other wars than WWII does not mean that the Russo-Ukrainian war would not be a war of aggression. Of course, it is. But it is not only a war of aggression, and a more appropriate historic contextualisation is important for both sound analysis and constructive policy responses.

For better analysis, Europeans will also have to study the relationship between kinetic warfare and economic one. Economic warfare means the use of, or the threat to use, economic means against a country, in order to weaken its economy and thereby reduce its political and military power. Means can include: trade embargoes, boycotts, sanctions, tariff discrimination, freezing of capital assets, suspension of aid, prohibition of investment and other capital flows, and expropriation.

Kinetic war can be a consequence of economic warfare, but but the escalation of economic warfare can be a tool to support a kinetic war. And in any case, the longer a war is, it also becomes a war of attrition – a prolonged period of conflict during which each side seeks to gradually wear down the other by a series of small-scale actions. Because so many people ignore the economic factors when discussing war, a useful reminder comes from British historian A.J.P. Taylor, who is often quoted with the following sentence:

„No matter what political reasons are given for war, the underlying reason is always economic.”

Conclusions

The culmination of events in recent years, and especially last summer also serves as a cautionary tale about politicians who wanted to play geopolitics without understanding geoeconomics and ended up in confusion and cognitive dissonance. Such a lack of mental preparedness at the leadership level has consequences. Internationally, the result is a deep and genuine transatlantic crisis, and, within Europe, a new divide between the verbally courageous who would be keen to militarise the EU and the quiet pragmatics who wish to maintain the integrity of the European single market and social model.

However, since it is rather hard to admit to miscalculation and strategic failure, the only preoccupation of many European leaders is just to prolong the war and postpone the moment of truth, irrespective of the price Ukrainians and EU citizens have to pay for it. It remains a question whether the EU can continue to represent its own values without undermining its strategic interests (to the extent that the latter has been defined at all).

Without improving the analysis, it is hard to assume that Europeans themselves will be the creators of the European order. A lot depends on post-war reconstruction, which has been discussed frequently almost since the start of the war, but especially since the rapprochement between Russia and the United States in 2025. For Europeans it is increasingly clear that much of the reconstruction costs (on Ukrainian territory which is not controlled by Russia) will fall on European countries. Obviously, the longer the war lasts, the higher the reconstruction costs will be. It is therefore in Europe’s interest to create the conditions of reconstruction as soon as possible.

With or without a Gramscian quote, it is a kind of commonplace today to suggest that the world is in a transition. With this transition the world system is headed towards multipolarity. Europeans also must contextualise the developments on our continent within the global system. The analysis I gave you today suggests that among the major players of the world, Europe is the least prepared for multipolarity.

^[1] See Krumm https://www.ips-journal.eu/topics/foreign-and-security-policy/an-end-to-germanys-end-of-history-6786/

^[2] See an assessment of the first period of EPC https://feps-europe.eu/publication/the-european-political-community/

^[3] See Krebs and Weber https://www.taipeitimes.com/News/editorials/archives/2025/03/28/2003834189

^[4] See https://feps-europe.eu/publication/european-defence-for-security-and-peace/

^[5] See Kahn https://theconversation.com/europe-is-allowing-itself-to-be-dominated-by-the-us-it-just-isnt-admitting-as-much-267060

^[6] See Neiberg https://journals.openedition.org/lerhistoria/656

^[7] See Clark on WWI and Russo-Ukrainian conflict https://theglobalobservatory.org/2014/03/are-we-sleepwalking-towards-war-interview-with-chris-clark/

^[8] See e.g. Myre https://www.npr.org/2022/07/13/1106123496/russia-ukraine-invasion-crimean-war-history

^[9] See comparison here https://www.institutmontaigne.org/en/expressions/sarajevo-mariupol-what-yugoslav-wars-can-teach-us-about-ukraines-fate

^[10] Lieven on WWI comparison https://foreignpolicy.com/2022/10/27/ukraines-war-is-like-world-war-i-not-world-war-ii/

^[11] About the inappropriateness of comparison with WWII https://thehill.com/opinion/international/3503191-russias-war-in-ukraine-is-nothing-like-world-war-ii/

Three important developments occurred one year ago, in 2024 September:

o -the first FEPS-FES policy conference took place

o -the Draghi Report was presented on competitiveness

o -L.A. launched weekly commentary on Substack.

Below I provide an overview of the EU’s competitiveness debate in 10 steps, using some of the earlier Substack notes.

🔸DRAGHI (1)

To frame the policy debates leading up to the establishment of the new European Commission, Ursula von der Leyen invited Mario Draghi to presented a report^[1] under the title “The Future of European Competitiveness”.

Mario Draghi was among the authors of the 2012 document known as the “Four Presidents’ Report”, and a “Five Presidents’ Report” 3 years later. He saved the euro by telling the markets: he would do “whatever it takes”. This is his second coming.

Draghi managed to outline a comprehensive plan. The discourse around the report spread the news about the EU economy being in crisis but also that the leadership has a plan for revival. But just like many other reports, this one has also highlighted the gap between talking the talk on the one hand and very intense inaction on the other hand. In 2024 competitiveness has been confirmed as part of the catechism of the EU, and in the person of Mario Draghi a pontifex has also emerged. He returned in the same role last week to mark the first anniversary of the original launch.

One year after the Draghi report it is a general view that progress has been partial and selective. But the problem actually starts from the conceptualization of competitiveness.

🔸KRUGMAN (2)

The usefulness of the concept of competitiveness in European economic policy was questioned in the early 1990s by Paul Krugman^[2] (which was recalled by Draghi himself when presenting the essence of the report in La Hulpe^[3] in April 2024). Subsequently he published a booklet under the title: “A country is not a company” (1996), in which Krugman, who later was awarded the Nobel memorial Prize, argued that business leaders need to understand the differences between economic policy on the national and international scale and business strategy on the organizational scale.

However, in EU circles the search for the recipe of competitiveness already started in the 1990s once the deflationary effects of the Maastricht Treaty (and the subsequent SGP) were detected. Eventually the Lisbon Strategy was launched in March 2000 by the EU heads of state and government. Its aim was to make Europe “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”. Though this definition has often been mocked in the past two decades, by this the EU gave a new definition to competitiveness.

But the eurozone crisis saw a relapse to the earlier, cost focused interpretation of competitiveness.

🔸VON DER LEYEN (3)

Enter Ursula von der Leyen. Competitiveness is all around in the language of the EU today and the structure of the Commission has also been aligned on this new priority. However, Draghi did not just propose a change of the elevator music.

When Draghi presented his Report in Brussels alongside Ursula von der Leyen in September 2024, he tried to alarm the European audience. He actually said that the EU either embarks on the road he outlined or faces slow agony of decline. The problem is that since the Draghi Report was commissioned, the EPP became even more dominant in the EU institutions than before, the approach today is to cherry pick from Draghi rather then implement the Report in full.

Which approach prevails at the end, will determine whether the EU remains an autonomous player in the global competition or not.

If the question is what von der Leyen has been focusing on in the first year of her second mandate: it is deregulation, financialisation, and militarisation.

The reductionist approach is embodied in one of the first major document of the second von der Leyen Commission.

🔸COMPASS (4)

The long awaited “Competitiveness Compass” of the European Commission presented by Ursula von der Leyen on 29th of January, focusing on 3 key areas of action: innovation, decarbonisation and security. Flagship measures outlined for the implementation of the policy aim at 1./ closing the innovation gap, 2./ decarbonisation and competiveness, and 3./ reducing excessive dependencies and increasing security.

Deliverables will be organised in 5 action areas (“horizontal enablers”): 1./ simplification, 2./ lowering barriers to the Single Market, 3./ financing competitiveness, 4./ promoting skills and quality jobs, and 5./ better coordination of policies at EU and national level.

With the Draghi Report and the Compass, von der Leyen’s message is that she is aware of the deep crisis of the European business model and that the leadership has a plan for revival. But neither the Report nor the Compass consider that different regions of Europe have different types of deficits. The growth engine of Germany broke down for different reasons in the last 5 years than the Italian one 25 years ago. And the convergent economies of the Eastern member states again would require different maintenance.

The Compass is much more ambitious on deregulation and financialisation than on reforming the EMU and creating a proper EU fiscal capacity for investment.

🔸MILEI (5)

Corporate Europe Observatory^[4] (CEO) responded to the presentation of the Competitiveness Compass by voicing some concerns, especially regarding 1./ an unjustified negative view on regulation and a strong focus on deregulation, 2./ unprecedented corporate influence, and 3./ fast-tracking of administrative procedures which are branded as “cutting red tape” but in reality will weaken crucial safeguards.

This shift in focus has been helped by the transatlantic developments towards a right wing economic policy agenda.

In the US the return of Donald Trump opened has a new direction what concerns the orientation of goverment policy, which can be characterised as an ultra-Reaganite campaign against state intervention in the economy. The Argentinian President Javier Milei is a symbol of this new trend. The self-styled „anarcho-capitalist” Milei since his entry generated industrial decline and sharply rising poverty^[5] in Argentina.

Just like in the 1970s Chile was the laboratory of Chicago neoliberals and their neoconservative practicioners in the US and UK, now it is Argentina which is the test ground for the capitalist revolution.

🔸SANDBU (6)

Martin Sandbu^[6], European economics commentator of the Financial Times has delivered a critique of this new trend. He notes that a European inferiority complex helps recycling the neoliberal policies. Few in Europe dare to challenge the dominant “overregulation” narrative which is now used as a basis to deregulate the economy in various ways and dilute social and environmental commitments.

According to Sandbu, today the EU is set to repeat some of the past mistakes. Ursula von der Leyen selectively follows Draghi’s guidancee, translating it into just deregulation and financialisation, even if that contradicts the developments of the last decade, including her own recent policies.

The tradition of benchmarking EU functioning and performance on the US is often stretched to looking at the US as an utopian model of economy, society and politics, without noticing that America is not at ease with itself.

🔸GREEN DEAL (7)

No surprise that the typical reading of Big Business is that with the Competitiveness Compass the Commission would end the Green Deal. Contrary to public perceptions, this should have been primarily an investment programme, and only in second place a regulatory one

Its implementing methods should be revised but not its objectives. It will remain a progressive responsibility to ensure that while its bathwater is thrown out, the Green Deal can live and deliver.

Draghi is an ally for those who are keen to save the EU Green Deal as a policy package for climate protection and sustainability.

It will remain a progressive responsibility to ensure that while its bathwater is thrown out, the Green Deal can live and deliver the necessary measures for environmental and climate sustainability. The climate problem will not solve itself, and EU action will remain crucial.

🔸MFF (8)

The Draghi Report has been serving as an intellectual jumping board to bring as much as possible under the umbrella of competitiveness, which now also includes nearly a quarter of the EU budget. However, the MFF cannot be the only source to fill the “investment gap”, but it should be a strategic tool driving effective solutions while safeguarding our social and environmental standards.

The newly proposed Competitiveness Fund deserves attention. It takes inspiration from the Juncker Plan and the subsequent InvestEU program.

Draghi is not particularly happy with the limited ambition in the new MFF draft. When he reappeared as the sage of Europe a few weeks ago in Rimini^[7] (22/08), he emphasized: “Only forms of common debt can support large-scale European projects that fragmented and insufficient national efforts would never be able to implement.”

His guidance is to be heeded by all those who do not only dream about European strategic autonomy but would also like to do something for it. The MFF would need to be the main tool of the EU to deliver a reduction of EU dependency on the United States in fields like defence, digitalisation and energy.

By the way, also in Rimini, Draghi referred to neoliberalism as a „dogma of the past”.

🔸 LETTA (9)

Let’s not forget, however, that Mario Draghi was not alone thinking about the future of the EU economy and we should in particular pay attention to the reports authored by Enrico Letta on the potential of the Single Market

The six chapters focus on 1./ research, innovation and education; 2./ financing strategic goals, 3./ scaling up companies, 4./ sustainability in the Single Market (for all), 5./ speedy and efficient enforcement of regulations, and last but not least 6./ the Single Market Beyond its Borders.

Unlike Draghi, whose inputs came almost exclusively from older member states, Letta built his report from a myriad of consultations both East and West.

It caught the eyes of many readers and stakeholders that Letta introduced the concept of “the freedom to stay”. This would require a genuine spread of economic opportunities to each and every corner of the EU, providing quality education to young people everywhere and implementing the youth guarantee effectively to facilitate school to work transitions. Letta’s approach would justify those who consider the Single Market and Cohesion Policy the two sides of the same European coin.

🔸EPSR (10)

Finally.

The Competitiveness Compass mentions the European Pillar of Social Rights as a source of competitiveness. How serious this commitment is and what it implies in practice remains to be seen.

Those of us who believe that the EU needs to find a path to recovery without dropping social and environmental standards must learn from 2 further reports:

--one delivered by the expert group chaired by Commissioner Elisa Ferreira and managed by the LSE professor Andrés Rodriguez-Pose,

--and even more, like the one delivered in 2023 by Anna Diamantopoulou^[8].

The combined lessons of these reports should not only lead to action which aims at improving the business model of the EU but also to a further boost to the social dimension of the European Union.

The search for a new economic growth model in Europe, under the banner of competitiveness, should revive the endeavour of long-term planning with result orientation. But most importantly, the tools of an EU level industrial policy need to be found quickly.

Under the recent shocks, the progressive potential of the European Union should be rediscovered. It can be the guide to the necessary reset of our economic governance mechanism but also a new commitment to social cohesion.

^[1] Draghi, Mario (2024) The future of European competitiveness. European Commission

^[2] See P. Krugman (1994) Competitiveness: A Dangerous Obsession, in. Foreign Affairs, Issue: March/April 1994 (volume 73, number 2)

^[3] On the La Hulpe conference and declaration see F. Vandenbroucke (2024) The declaration of La Hulpe: an ambitious social agenda for the next five years in. The Progressive Post https://feps-europe.eu/the-declaration-of-la-hulpe-an-ambitious-social-agenda-for-the-next-five-years/

^[4] See the full CEO assessment here: https://corporateeurope.org/en/2025/01/von-der-leyens-competitiveness-compass-deregulation-threatens-social-and-environmental

^[5] On the social consequences of Milei’s economic policy see AP report here https://apnews.com/article/argentina-poverty-milei-economy-crisis-f766deb9302aa4ddde1bb9ae26aaf7af

^[6] https://www.linkedin.com/posts/chlo%C3%A9-mikolajczak-026520a0_few-in-europe-dare-to-challenge-the-dominant-activity-7317456816626434048-PLr1

^[7] https://www.agenzianova.com/en/news/draghi-al-meeting-di-rimini-leuropa-si-riscopra-protagonista-sulla-scena-globale-video/

^[8] See European Commission, Directorate-General for Employment, Social Affairs and Inclusion, The future of social protection and of the welfare state in the EU, Publications Office of the European Union, 2023, https://data.europa.eu/doi/10.2767/35425

🔸Ursula von der Leyen introduced her SOTEU speech (10/09) by highlighting European independence. Europeans have been rightly concerned about the humiliation suffered during the EU-US trade negotiations. As compared to the importance of this, von der Leyen only touched upon some details of the trade debacle towards the end of her speech and did not deliver a convincing strategy about reducing dependency in the foreseeable future. The need to develop autonomous European capacities was mentioned in the context of defence and digital services, but neither the need for the diversification of the energy supply nor the development of the external functions of the euro were mentioned. Instead, von der Leyen wrapped the SOTEU speech in pro-Ukraine agitation.

🔸Solidarity with Ukraine was something von der Leyen preferred to talk about in the first half hour of the speech on the state of the European Union. This is still a unifying subject, since Europeans sacrificed so much to defend Ukraine since the beginning of the Russian aggression, while the end of the war is still not in sight. Nevertheless, it is encouraging that the Commission is already preparing for the reconstruction and worked out a viable financial plan too. Von der Leyen’s preoccupation with missing children in Ukraine – something she also voiced during the televised discussion with Donald Trump in the White House – deserves attention, not least because it will require not only hosting a Summit of the International Coalition for the Return of Ukrainian Children, but also a diplomatic engagement with Russia.

🔸In a striking contrast with Ukraine, von der Leyen for nearly two years turned her head away from the genocidal destruction committed by the Israeli army in Gaza. This speech represents a marked shift in her position. Similarly to the Ukraine theme, the fate of children played an important role to raise sympathy but also solidarity. But this is too little and too late. The silence of the EU in critical times will not be forgotten, and the actions from now onwards need to be consistent and forceful to really drive the process towards the desired two-state solution. The Commission President only managed to come forward with a partial suspension of the EU-Israel trade agreement. Imposing sanctions on extremist ministers and violent settlers is good, but von der Leyen should note that Benjamin Netanyahu himself is subject of an arrest warrant by the International Criminal Court.

🔸Similarly to Gaza, the chapter on social Europe was included in the speech to regain support among those in the wide pro-European spectrum who have been critical about von der Leyen’s inaction in the last year. Yes, the commitment to eradicate poverty by 2050 is welcome. The upcoming strategy must be comprehensive, supported by ambitious financial means, and rooted in respect and inclusion. And there are high expectations for the Quality Jobs Act too. It was particularly refreshing to hear a list of concrete ideas to tackle the housing crisis (including the revision of state aid rules and the foreseen legal initiative on short-term rentals). These are key elements to ensure that the right to affordable and sustainable housing is enforced and lived by all.

🔸Von der Leyen’s speech was permeated with right wing economic ideology, and she was aided by EP President Roberta Metsola who mentioned in her introduction that she wants to be proud of an EU that can cut red tape. This is all about implementing an EPP agenda and serving the interest of specific groups of business. However, the bogus omnibus process would need to be reconsidered to ensure that the integrity of the Single Market is protected and EU actions support growth and prosperity in real. The SOTEU speech fleshed out some elements of a genuine EU industrial policy, more guarantees would be needed that all this leads to a full implementation of the Draghi and Letta Reports. Besides, while von der Leyen promises simplification, she also comes forward with ideas for new bureaucratic procedures, like the European Defence Semester. Meanwhile cohesion policy was not mentioned or even alluded to in the entire speech, revealing indifference on the side of von der Leyen to municipalities, regions, and peripheral territories of Europe.

🔸In the SOTEU speech, von der Leyen evaded the question of EU fiscal capacity, which is understandable after the mixed reactions to the presentation of her half-baked MFF proposal in July. But this is also a question of providing sufficient investment capacity to underpin the EU’s climate and digital ambitions. On one hand, the Commission states its intention to stay the course on the European Green deal. On the other hand, it proposes to roll back on key environmental regulations through the omnibus proposals. On one hand, the Commission’s President calls for supporting fact-based media for better informed citizens. On the other, she plans for an unlimited and uncritical development of AI. Von der Leyen too often appears as a split personality.

🔸Von der Leyen knows that the EU stands for democracy and the rule of law. Yet, her appeal to a “pro-democratic majority” rings hollow, given the EPP’s cooperation with the far right in the European Parliament on a variety of issues. The Commission president claimed that she would listen to everyone. At the same time, she only highlighted her consultations with industries, while an engagement with civil society defending European citizens’ rights and health was nowhere to be found. With such contradictions, it is hard to expect enthusiasm for her SOTEU speech. No surprise, another confidence vote in the EP is looming (prepared on two separate tracks by the far-left and the far-right).

https://www.politico.eu/article/far-right-far-left-eu-parliament-von-der-leyen-no-confidence-motion-midnight/