Between a rock and a hard place: Europe needs a mental shift in 2026

2025 has not been an easy year for the EU: the war in Ukraine is still ongoing, the EU’s eastern flank is in a very scary limbo about its future, the western flank is experiencing major social issues, and, globally, the EU seems to have no allies left at this point, with major powers viewing it only as a relatively wealthy and important consumer market - and nothing more.

Europeans’ resistance to the changes needed to ensure our competitiveness and prosperity (or at least to retain some of today’s prosperity) is, in part, a consequence of having lived in relative safety and comfort for a long time.

Some people seem to have forgotten that without a strong economy, we won’t have strong defence capabilities, and then we will be left with nothing at all. 

A strong economy doesn’t just happen through regulating, taxing, and procuring “desirable” companies. The global financial system is flexible, people and businesses are mobile, and the EU is too vulnerable to be as protectionist without major repercussions as some of the major global powers.

The world that many generations of Europeans, especially Western Europeans, have been used to is now gone, and a change in perspective is needed. Either we do it willingly, or worsening circumstances will force that change upon us.

We’re doing OK for now, but the future isn’t guaranteed

We seem to be doing reasonably well financially (for now). Inflation appears to have been brought under control (2.1% in the euro area in November 2025). The euro is also performing better than many other currencies at the moment: as of December 22, 2025, €1 equals $1.16, ¥8.26 (Chinese yuan), ₽92.47, C$1.62, and A$1.77.

The future, however, isn’t guaranteed. Over the next few years, bills will come due to cover the costs of the Recovery and Resilience Facility, and negotiations on the next EU budget (2028–2032) will reach their peak next year.  The EU’s debt-to-GDP ratio in the euro area now stands at 88.2%, and Mario Draghi has warned that (even without new spending needs such as defence) it could rise by around 10 percentage points over the next decade, reaching 93% of GDP.

Potential future trade wars, hybrid or conventional attacks on the EU Member States, local resistance to the EU’s global trade partnerships, and opposition to moderate reforms are all tangible threats to the EU’s well-being in the near future.

Better access to capital in Europe, better corporate law and business conditions, and real global support for European companies

Many smart people have tried to reverse-engineer the reasons for America’s success in internet technologies and China’s success in telecommunications. It isn’t the 9-9-6 work culture (though it may help), and it isn’t intelligence (look at how many Europeans are headhunted globally, or how many European companies are acquired by foreign entities).

The answers have been known for a while. We need better access to capital within the EU (through the Savings and Investment Union). We need stronger corporate law and a better business environment (a “28th regime,” more harmonised implementation of existing rules, and treating the business environment as a KPI for both EU and national governments). And we need a stronger European presence globally - with real impact (new trade partnerships; reforming the Global Gateway and other support mechanisms for third countries).

Does this get sufficient attention? Absolutely not. All of these topics remain niche, interesting to only a small fraction of people.

The Savings and Investment Union is probably the least discussed of all. It tends to be mentioned only in passing in speeches about European competitiveness at fancy galas.

The 28th regime is often seen as a “big Western European country problem” by more digitally advanced and business-friendly countries, overlooking the fact that scaling within Europe matters for everyone. And, more broadly, we all depend on the biggest European economies thriving, because we are all very much interdependent.

Increasing the global presence of European companies is almost a non-topic for many, aside from occasional discussions of the “Brussels effect,” focused on regulation. We also know very little about Global Gateway reform, and the next tangible steps to make Europe’s diplomatic, economic attaché, and financial-support network actually work for Europe. One notable exception: the EU is likely to restrict third countries that receive EU financial support from purchasing high-risk vendor equipment.

We’re too divided and we need to learn to pick our battles

European competitiveness has indeed been at the forefront of this year’s political debate. 

However, different political currents across Europe still seem to be focusing on short-sighted battles instead of choosing priorities carefully and investing time and resources in the reforms needed to ensure that Europeans can, at least to some extent, maintain their quality of life over the coming decades.

Even when moderate changes and reforms are proposed (such as the EU’s “Omnibus” packages), some Europeans focus on the short term rather than the long-term picture, locking themselves into petty battles and mutual accusations.

What are we focusing on instead? The luxury issues: layering new consumer-protection rules on top of existing ones (e.g. Digital Fairness Act),  trying to revive old ideas we previously dismissed (e.g. “network fees” in the upcoming Digital Networks Act), pearl-clutching about incremental reforms to fuel the EU’s data economy (e.g. the proposals for the General Data Protection Regulation), bickering with bots on X, talking more than doing (e.g. endless long-reads about how the EU “should act/react” that are later used against us). 

Too often, we focus on differences rather than shared interests, and we relentlessly attack politicians who are already caught between a rock and a hard place (e.g. the criticism aimed at Ursula von der Leyen and Henna Virkkunen for “not clapping back” on whatever nonsense someone has uttered).