Dear Readers,
Europe’s strategic environment is changing rapidly and becoming ever more adversarial. A fragmented global order, intensifying systemic competition among major powers, and domestic political pressures are forcing the EU to rethink how it protects and projects its interests. Europe’s security and prosperity depend on its ability to navigate the intersection between economics and geopolitics.
Our Geoeconomic Interconnectivity Index (GEOII), launched in early October, provides a timely lens for understanding this challenge. The Index tracks how the EU, the United States, China, and Russia are economically connected with Europe’s neighbourhood across trade, finance, and policy. The message for the EU is clear: Europe must use its economic strength as a strategic instrument – leveraging the Single Market, regulatory standards, and financial resources more purposefully in support of foreign policy goals.
To bring these insights to life, we have launched an interactive website, which allows you to explore the data by region and sector – take a look! Building on the GEOII findings, I argue in my recent Handelsblatt column that Europe must make much more strategic use of its economic weight. Investment in the neighbourhood, integration of regional capital markets, and the alignment of trade and security policy are key to turning connectivity into strategic power.
From the economic to the technological domain, Europe’s quest for sovereignty continues. The Eurostack initiative, which our team led by Martin Hullin has helped to shape, has gained significant traction in recent months. Digital Commissioner Hanna Virkkunen’s recent endorsement marks a milestone in efforts to build European digital infrastructure. In a new podcast, Martin discusses the risks of global fragmentation around technology standards and the opportunities for cross-border collaboration.
Another crucial dimension of sovereignty lies in Europe’s economic competitiveness, which the Commission seeks to strengthen through its Omnibus simplification agenda. Last week’s EP breakthrough, after months of EPP-S&D-deadlock, offers a clear lesson: Successful simplification requires early political consensus on goals and scope, something the Commission failed to build with both Parliament and the Council. The process only advanced when the EPP pressured the S&D to compromise by threatening to seek support from the far right. Claudia Geiser’s policy brief on the Omnibus agenda is a very interesting read on what is at stake and how things can move forward.
Meanwhile, France has once again plunged into a government crisis. What may appear as a domestic impasse has, in fact, consequences that reach well beyond Paris. As I outline in my recent Carnegie Europe commentary, it poses a triple challenge to Europe’s international role: It weakens the coalition supporting Ukraine and European defence, threatens fiscal stability with possible spillovers for the euro area, and emboldens extremist forces by eroding the credibility of the democratic system. At this time, it remains uncertain whether a new government will be able to pass a budget. We will be watching developments in Paris closely in the coming weeks.
Beyond Europe’s borders, Christian Hanelt, our Middle East expert, discusses the Gaza peace summit in Sharm el-Sheikh and outlines how the EU can contribute to lasting peace in a new podcast. He calls for the engagement of Gulf states, limits on radical forces, and stronger support for local civil society.
Looking ahead, we will be watching the European Council meeting on 23 October – another test of Europe’s capacity to align interests in a demanding geopolitical environment. And of course, we are keeping a close eye on the United States. My colleague Brandon Bohrn is finalising a highly insightful policy brief on what recent shifts in U.S. foreign policy mean for Europe – in particular the implications of the closing of USAID.
Best wishes,
Daniela Schwarzer
Member of the Executive Board
