Teresa Graham, © EFPIA European governments navigate an ever more competitive global landscape, stagnating productivity and competing demands on budgets. We have successfully faced and solved many challenges in the past, but this situation is different: the choices we make today will shape our health care systems and patient care, and these choices will dictate Europe’s economic performance and global relevance for decades to come. For those of us in the life sciences, these aren’t just macroeconomic trends — they are the pulse of a system that determines how quickly a breakthrough reaches a patient. It is a high-stakes environment where policies on health care and innovation carry urgent human and economic consequences. When a medicine has the power to treat or potentially cure, neither innovators nor policymakers want to drag their heels, because no person requiring health care can afford the luxury of delay. > The true economic burden of health care isn’t financing health innovation, but > the cost of failing to do so. Europe’s challenge is clear: we must better align our industrial strength in life science with public health goals, ensuring innovation reaches both patients and economies faster. The question is no longer what Europe wants to be — it is where Europe chooses to invest to remain a global player. Health as e conomic i nfrastructure Under the weight of mounting budget pressures, it is understandable that governments often view health primarily as a cost to be contained. However, this perspective is disconnected from modern economic reality. And let me be clear: the true economic burden of health care isn’t financing health innovation, but the cost of failing to do so. For years, Europe has already been paying the price of lost productivity: citizens forced out of the workforce too early and chronic diseases managed too late. For instance, cardiovascular diseases alone cost the E uropean U nion economy up to €282 billion annually. This creates a massive yet avoidable strain on national budgets, especially as pharmaceutical innovation is estimated to be responsible for up to two-thirds of life expectancy gains in high-income countries . 1 > Every medical breakthrough that enables a citizen to return to work or care > for their family is a direct investment in Europe’s economic strength. We must shift our mindset . H ealth is not merely a social good; it is economic infrastructure. Healthier societies are inherently more productive and resilient, and every medical breakthrough that enables a citizen to return to work or care for their family is a direct investment in Europe’s economic strength. Investing in innovation today is the only way to secure a competitive workforce and reduce long-term systemic costs. The c ompetitiveness t est: a s trategic a sset, n ot a l ine i tem Europe’s life sciences sector is one of the few remaining areas that retains genuine global competitiveness and strength, contributing more than €300 billion to annual output and supporting 2 million high-skilled jobs across m ember s tates . 2 It anchors Europe’s trade resilience, generating a trade surplus 66 percent higher than all other EU sectors combined . 3 But the warning signs are clear: while Europe still accounts for 20 percent of global pharmaceutical research and development , its share of global investment is shrinking as capital and talent migrate elsewhere . 4 Europe’s world-class science is being held back by fragmentation and regulatory inertia. > We must treat this sector as a pillar of our sovereignty and a strategic > asset, not merely a cost to be managed. If we want to lead the next wave of medical breakthroughs, we must move at the speed of global change. This requires a fundamental shift: simplifying clinical trial regulations, deploying AI-driven digital tools, incentivizing research through strong intellectual property frameworks and establishing a public-private dialogue on innovative pharmaceuticals. We need a clear action plan, not just more legislation, to translate our scientific leadership into tangible health outcomes.   We must treat this sector as a pillar of our sovereignty and a strategic asset, not merely a cost to be managed.  A  c onsequential  c hoice  Europe has to choose. Either we can continue to approach life science innovation as a budgetary threat, only to reali z e too late that we have weakened our competitiveness and delayed new treatments for patients. Or we can recogni z e innovation for what it is  —  an economic multiplier that strengthens our productivity, resilience  and global influence  —  and ensure that Europe remains a place where the next generation of medical breakthroughs is discovered, developed  and delivered to patients.  There is no middle ground. Europe must stop focus ing solely on the cost of innovation and start asking how much innovation it can afford to lose. In the global race for talent and capital, hesitation is a decision. The rest of the world is not waiting. -------------------------------------------------------------------------------- References 1. The value of health: Investing in Europe’s future [EPC 2026] 2. Economic and Societal Footprint of the Pharmaceutical Industry in Europe [VE / PwC 2024] 3. International trade of EU and non-EU countries since 2002 by SITC [Eurostat 2026] 4. The 2025 EU Industrial R&D Investment Scoreboard [EC 2025] -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is European Federation of Pharmaceutical Industries and Associations (EFPIA) * The entity ultimately controlling the sponsor is European Federation of Pharmaceutical Industries and Associations (EFPIA) * The political advertisement is linked to  EU pharmaceutical regulation and innovation policy. More information here.

PARIS — Spanish Prime Minister Pedro Sánchez is no longer the only EU leader confronting U.S. President Donald Trump over the war in Iran. French President Emmanuel Macron is rallying to his side. Both European leaders are being battered in the domestic political arena, but are increasingly outspoken on the international stage in casting the U.S.-Israeli war against Tehran as illegal — something that plays well in two countries where Trump is widely disliked. Macron is also throwing his weight behind Sánchez by insisting that Europe must close ranks to defend Spain from Trump’s threats of a trade embargo. The U.S. president on Tuesday threatened to cut trade with Spain over Madrid’s decision to bar the U.S. from using jointly operated military bases for operations against Iran. Macron rang Sánchez on Wednesday to convey his support and to insist that the 27 member countries of the EU should unite in hitting back against Washington if Trump delivers on his trade threat. “The president held a call with President Sánchez to express France’s European solidarity in response to the recent threats of economic coercion that targeted Spain yesterday,” an aide to the French president said after the call.   On Sunday night after the attack on Iran, Macron signed on to a joint statement with Germany and the U.K. — the so-called E3 countries — in which he pledged to “work together with the U.S. and allies” to “take steps to defend our interests and those of our allies in the region, potentially by enabling necessary and proportionate defensive action to destroy Iran’s capability to fire missiles and drones at their source.” The trio’s reluctance to condemn Washington’s attack on Tehran contrasted sharply with the critical tone from Sánchez, who denounced the U.S. attack as a “violation of international law” and an “unjustified and dangerous military intervention.”  But on Tuesday evening, Macron shifted more toward Sánchez’s position and delivered a televised address in which he came close to disapproving of U.S. strikes on Iran. “These were conducted outside international law, which we cannot approve of,” he said.   That hardening position on the legality of the war was underscored with Wednesday’s Paris-Madrid call, which a person close to the French president said reflected Macron’s belief that “Europe must be united, that Europe must respond with a single voice when one of its members is attacked, including on trade.”  France is no stranger to Trump’s economic threats. Macron declined to join the Board of Peace scheme to rebuild Gaza, and the U.S. president vowed to impose a 200 percent tariff on French wine and Champagne.   “We’ve been in the same boat,” the same person close to the French president said.  Macron has a complex relationship with Trump, alternating shows of friendship with tough-love and public contradictions of the U.S. president. But in recent months, Macron has adopted a more aggressive stance. Macron has a complex relationship with Trump, alternating shows of friendship with tough-love and public contradictions of the U.S. president. | Evan Vucci – Pool / Getty Images In January, France called on the EU to use the anti-coercion instrument — the so-called trade bazooka — against Washington at the height of trade tensions. And at the World Economic Forum in Davos, he brazenly told an audience that he did not like “bullies,” in a not-so-veiled reference to Trump’s trade threats.   DOMESTIC CONCERNS  The escalating conflict in the Middle East is a welcome distraction for both Sánchez and Macron, as they face bleak political outlooks at home, but can score political points for standing up to a U.S. president.   The Spanish prime minister leads a weak minority government that has not been able to pass a national budget since 2023 and his Socialist Party has recently been weakened by corruption scandals and defeats in regional elections. But the head-on collision with Trump is earning him widespread praise in Spain.  According to a recent poll carried out by the state-run Center for Sociological Research, three-quarters of all Spaniards admitted to having a “very bad” opinion of Trump, and 8 out of 10 considered him as posing a threat to world peace.   Sánchez may be hoping to seize on a popularity “Trump-bump” similar to the one benefiting another center-left EU leader, Denmark’s Mette Frederiksen. Her Social Democrats suffered a crushing defeat in municipal elections last year, but since January the prime minister’s party has soared in the polls as a result of her vehement opposition to Trump’s threats to annex Greenland. In France, the global tensions are also giving the French president a new lease on political life as he faces the end of his mandate as a lame-duck president. He has nothing to lose from crossing swords with Trump and polls show his approval ratings have gone up amid some of this year’s international showdowns on trade and security. Resisting the U.S. superpower is an easy move for Macron, who can lean into the Gaullist tradition of seeking independence from Washington. France’s opposition to the Iran strikes will also rekindle memories of Paris’ opposition to the U.S. invasion of Iraq.   Former Prime Minister Dominique de Villepin, who (as foreign minister) delivered France’s landmark address rejecting Washington’s march to war in Iraq, now warns, in a post on X, that the war in Iran could end the same way, with years of civil war following the death of a dictator. For Macron, who has warned that the war in Iran has no clear end, the instability gives him yet another opportunity to push for greater European self-reliance and independence from the U.S. On Tuesday, he pitched a coalition to secure the Strait of Hormuz — the waterway and vital energy nexus leading into the Persian Gulf — with European partners, but not with the U.S.  During a speech Wednesday, Sánchez said Madrid’s stance against the war in Iran reflected “the founding principles of the European Union.”   Giorgio Leali contributed to this report.

BRUSSELS — Rome is again aligning with Berlin by saying that it’s not the time to discuss European joint debt as proposed by French President Emmanuel Macron — even though it’s an idea Italy has pushed for years. Italian Foreign Minister Antonio Tajani on Wednesday said while the government broadly agrees on the need for shared borrowing to fund investments in strategic sectors it isn’t worth contemplating while France and Germany were at odds over the matter. “I prefer to find solutions on issues that various countries already agree on, rather than opening debates on issues where there is no agreement,” Tajani told Sky TV on Wednesday. “If there is no agreement, there is no point in getting bogged down in a debate, even on issues that we consider positive.” Ahead of Thursday’s meeting of EU leaders, Macron on Tuesday called for a joint borrowing scheme to fund investments in strategic sectors. Germany was quick to shoot down the idea, stressing that it is more pressing to discuss the bloc’s productivity problems. Even under current Prime Minister Giorgia Meloni, Italy continued to support EU joint debt. But over the past weeks, she has increasingly got closer to German Chancellor Friedrich Merz, including distancing herself from some of Macron’s “Made in Europe” proposals to favor European companies in tenders and local content rules. Rome is making no secret that its caution over discussing joint debt at Thursday’s meeting of EU leaders is a way to avoid tension with Germany. “I have always been in favor of eurobonds, but at the moment there is no agreement between Germany and France,” Tajani said. “It is pointless to start a debate and divide ourselves. We must find the things that unite us and move forward.”

PARIS — French President Emmanuel Macron’s celebrations over the imminent passage of the 2026 budget will be short-lived. Once it’s approved, he’s going to be a lame duck until the presidential election of spring next year. Current and former ministers, lawmakers and political aides — including three Macron allies — told POLITICO that now that the budget fight is over and the concerns of angry citizens and jittery markets are assuaged, the whole cycle of French politics will shift to campaign mode at the expense of the dirty work of lawmaking.  First will come next month’s municipal elections, where voters in all of France’s 35,000-plus communes will elect mayors and city councils. Then all attention will flip to the race for the all-powerful presidency, Macron cannot run again due to term limits, and polls show he could be replaced by a candidate from the far-right National Rally. “It’s the end of [Macron’s] term,” a former adviser close to Prime Minister Sébastien Lecornu said of the budget’s passage.   Gabriel Attal, Macron’s former prime minister who now leads the French president’s party, confirmed in an interview with French media last month that he told his troops the budget marked “the end” of Macron’s second term.  “I stand by what I said,” Attal told FranceInfo.  As president, Macron continues to exert a strong influence over foreign affairs and defense, two realms that will keep him on the world stage given the geopolitical upheaval brought on by U.S. President Donald Trump’s second term. Domestically, however, he’s been hampered by the snap election in 2024 that delivered a hung parliament.  Lecornu was only able to avoid being toppled over the passage of the budget, as his two immediate predecessors were, thanks to his political savvy, some compromises and a few bold decisions. These included pausing Macron’s flagship pension reform that raised the retirement age and going back on his promise not to use a constitutional backdoor to ram it through without a vote. “Lecornu was smart enough to make the budget phase pass and end on a high note. That’s commendable, given that [former Prime Ministers Michel] Barnier and [François] Bayrou didn’t manage to do so, and he did it with considerable skill,” said a ministerial adviser who, like others quoted in this piece, was granted anonymity to speak candidly.  But Lecornu’s decision to prioritize uncontroversial measures in the coming weeks speak to the difficulties that lie ahead.   These priorities include defining the division of power between the central government and local authorities, and streamlining and centralizing welfare payments that are currently doled out in an ad hoc fashion. Lecornu is also planning to get to work early on France’s 2027 fiscal plans to try to prevent the third budget crisis in a row.  French Prime Minister Sebastien Lecornu leaves the Elysee Palace in Paris after a Cabinet meeting on Jan. 28. His decision to prioritize uncontroversial measures in the coming weeks speak to the difficulties ahead. | Mohammed Badra/EPA “There will be a presidential election in 2027. Before then, we need to agree on a bottom line which allows the country to move forward,” government spokesperson Maud Bregeon said Thursday on Sud Radio.  Lecornu has repeatedly stressed that his government should be disconnected from the race for president, blaming “partisan appetites” for both the budget crisis and the collapse of his 14-hour government, which was eventually replaced with a suite of less ambitious ministers.   But it’s ironic that some French government officials and MPs are now saying the self-described warrior-monk prime minister may have vaulted himself into the realm of presidential contender with his budget win. Mathieu Gallard, a pollster at Ipsos, said Lecornu had clearly become a more viable presidential candidate but noted that the jump from prime minister to president “is always a hard task.”  One parliamentary leader was much less sanguine. They said the same “partisan appetites” Lecornu has long warned about will likely cost him his job before voters head to the polls to choose Macron’s successor.   “[Lecornu] has few friends … And now that the budget has passed, every political group can have fun throwing him out of office to plant their flag before the next presidential election,” the leader said.  Anthony Lattier, Sarah Paillou and Elisa Bertholomey contributed to this report. 

Listen on * Spotify * Apple Music * Amazon Music Die Bundesregierung legt ihren Jahreswirtschaftsbericht vor und der Ton ist ungewöhnlich ernüchternd. Erwartet wird nur ein Prozent Wachstum, getragen vor allem von staatlichen Sonderausgaben für Infrastruktur. Von Aufschwung oder Befreiungsschlag keine Spur. Rixa Fürsen spricht mit Rasmus Buchsteiner über einen Bericht, der vor allem Probleme beschreibt. Zugleich bleibt offen, welche konkreten Reformen daraus folgen sollen. Im Fokus stehen Infrastruktur, Arbeitskosten, Fachkräftemangel und Sozialreformen. Doch klar wird auch: Ohne weitere Entscheidungen im Koalitionsausschuss bleibt der wirtschaftspolitische Neustart Stückwerk. Für Kanzler Friedrich Merz wächst damit der Druck, das Versprechen vom Reformjahr 2026 einzulösen. Newsletter-Hinweis: POLITICO Pro – Energie & Klima POLITICO Pro – Industrie & Handel Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. Jetzt kostenlos abonnieren. Mehr von Host und POLITICO Executive Editor Gordon Repinski: Instagram: @gordon.repinski | X: @GordonRepinski. POLITICO Deutschland – ein Angebot der Axel Springer Deutschland GmbH Axel-Springer-Straße 65, 10888 Berlin Tel: +49 (30) 2591 0 information@axelspringer.de Sitz: Amtsgericht Berlin-Charlottenburg, HRB 196159 B USt-IdNr: DE 214 852 390 Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna

PARIS — The French government survived two no-confidence votes over its fiscal plans Friday, moving one step closer to finally adopting a proper state budget for the year. The motion of no confidence put forward by the far-left France Unbowed was backed by 269 MPs — 19 votes short of passing— while the far-right National Rally’s version netted support from a mere 142 lawmakers. The two parties attempted to bring down Prime Minister Sébastien Lecornu’s government following his decision to use a constitutional backdoor to pass France’s 2026 budget after lawmakers failed to approve one before the end of 2025. That maneuver, Article 49.3 of the constitution, allows the government to ram through legislation without a vote but in turn gives opposition lawmakers the opportunity to respond by putting forward a no-confidence vote. Lecornu triggered that measure on Tuesday to pass the part of the budget that concerns raising revenue. He is expected to use it again Friday to pass the final part of the budget concerning government expenditures. Lecornu had been expected to survive, as the political extremes do not have enough lawmakers among themselves to bring down the government. The more centrist Socialists, who have played a kingmaker role during the prime minister’s tenure, did not try to topple the government after Lecornu offered them several last-minute budgetary concessions. France is under pressure from financial markets and international institutions to cut a budget deficit that came in at 5.4 percent of GDP last year and debt that is projected to go up to 118.2 percent of GDP in 2026, according to the government’s forecast. The country’s hung parliament was, for a second year in a row, unable to craft a state budget on its own despite Lecornu’s pledge to let lawmakers search for a consensus. They did, however, agree to a deal on funding the country’s social security system. Without proper plans in place, lawmakers were forced to roll over the 2025 budget into the new year until proper fiscal plans could be finalized. Lecornu said last week he would use Article 49.3 to enact a budget despite having ruled that option out in October. The 2026 budget being enacted is projected to carry a deficit of 5 percent of GDP and remains under excessive deficit procedure from the European Commission. Paris has pledged to bring the figure below 3 percent of GDP, as required by EU rules, by 2029.

PARIS — French Prime Minister Sébastien Lecornu can breathe a sigh of relief for now as his government will likely survive future no-confidence votes over his budget plans. Socialist leader Olivier Faure said Tuesday his party will not join efforts by the far-left France Unbowed or far-right National Rally to topple the government after the PM offered several concessions last week, including €1 lunches for university students and more spending on social housing. “Our conditions for not censuring [the government] have been fulfilled,” Faure said on French radio. France’s political extremes do not have enough lawmakers to bring down the government without the assistance of more centrist members of the opposition. Lecornu announced Monday he would expose his government to the possible no-confidence votes by invoking a constitutional backdoor to finalize France’s fiscal plans after months of deadlock. France entered the new year without a proper budget after lawmakers failed to adopt one in December but avoided a U.S.-style shutdown by rolling over last year’s budget into 2026. The maneuver Lecornu is using to enact a proper budget — Article 49.3 of the French constitution — allows the government to pass legislation without a parliamentary vote but in turn gives opposition lawmakers the opportunity to respond with no-confidence votes. Lecornu will Tuesday trigger Article 49.3 to pass the part of the budget that deals with tax revenue. If Lecornu’s government survives the motions of no confidence put forward in response, which are likely to be voted on Friday, it will immediately again trigger the article for the second part of the budget, which covers spending, according to Lecornu’s office. The goal is to have the process wrapped by Jan. 30, said a parliamentary adviser. While the text of the new budget is not public yet, Budget Minister Amélie de Montchalin on Monday promised that it would bring the country’s chronically high budget deficit down to at least 5 percent of gross domestic product this year. That target will be met thanks to €2 billion of unspecified savings by state agencies and other state bodies, and by extending a 2025 tax on 300 big companies which was meant to be temporary, de Montchalin said. Anthony Lattier contributed to this report.

PARIS — French Prime Minister Sébastien Lecornu will risk his government’s survival by ramming a state budget through parliament without a vote to break a monthslong legislative deadlock. The PM explained Monday that he would on Tuesday invoke Article 49.3, a constitutional backdoor that allows the government to pass legislation without a parliamentary vote, to enact the part of the budget that deals with tax revenue. Opposition parties can respond to the move by calling for a no-confidence vote that, if successful, topples the government and blocks the bill in question. Far-left France Unbowed heavyweight Mathilde Panot said before Lecornu’s announcement that her party would respond by filing a motion of no confidence. Lecornu and his government entered the new year with mostly risky options to finalize France’s fiscal plans after lawmakers in the country’s hung parliament failed to pass a proper budget before the end of 2025. Lecornu had, early in his tenure, ruled out using Article 49.3 to pass a budget, betting the concession would help ensure the survival of his minority government. But on Monday he acknowledged that despite personal “regret” and “bitterness,” he would need to go back on his word, saying that while the government wanted the parliamentary procedure to continue “until the end,” the legislature’s fractured nature had made it impossible. The success of the PM’s maneuver will likely depend on getting the Socialist Party, who have played a kingmaker role throughout Lecornu’s tenure, to abstain from voting for any censure. Boris Vallaud, a high-ranking Socialist, said Monday the party could play ball thanks to concessions announced Friday, which include €1 lunches for university students and more spending on social housing. The government is currently being financed by an emergency measure passed late last year that effectively just rolls over the 2025 budget into the new year. That legislative bandage does nothing to cut France’s chronically high budget deficit, which Lecornu reiterated Friday must be brought down to 5 percent of gross domestic product this year.

Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He posts at @Mij_Europe. 2026 is here, and Europe is under siege. External pressure from Russia is mounting in Ukraine, China is undermining the EU’s industrial base, and the U.S. — now effectively threatening to annex the territory of a NATO ally — is undermining the EU’s multilateral rule book, which appears increasingly outdated in a far more transactional and less cooperative world. And none of this shows signs of slowing down. In fact, in the year ahead, the steady erosion of the norms Europe has come to rely on will only be compounded by the bloc’s weak leadership — especially in the so-called “E3” nations of Germany, France and the U.K. Looking forward, the greatest existential risks for Europe will flow from the transatlantic relationship. For the bloc’s leaders, keeping the U.S. invested in the war in Ukraine was the key goal for 2025. And the best possible outcome for 2026 will be a continuation of the ad-hoc diplomacy and transactionalism that has defined the last 12 months. However, if new threats emerge in this relationship — especially regarding Greenland — this balancing act may be impossible. The year also starts with no sign of any concessions from Russia when it comes to its ceasefire demands, or any willingness to accept the terms of the 20-point U.S.-EU-Ukraine plan. This is because Russian President Vladimir Putin is calculating that Ukraine’s military situation will further deteriorate, forcing Ukrainian President Volodymyr Zelenskyy to capitulate to territorial demands. I believe Putin is wrong — that backed by Europe, Zelenskyy will continue to resist U.S. pressure on territorial concessions, and instead, increasingly target Russian energy production and exports in addition to resisting along the frontline. Of course, this means Russian aerial attacks against Ukrainian cities and energy infrastructure will also increase in kind. Nonetheless, Europe’s growing military spending, purchase of U.S. weapons, financing for Kyiv and sanctions against Russia — which also target sources of energy revenue — could help maintain last year’s status quo. But this is perhaps the best case scenario. Activists protest outside Downing street against the recent policies of Donald Trump. | Guy Smallman/Getty Images Meanwhile, European leaders will be forced to publicly ignore Washington’s support for far-right parties, which was clearly spelled out in the new U.S. national security strategy, while privately doing all they can to counter any antiestablishment backlash at the polls. Specifically, the upcoming election in Hungary will be a bellwether for whether the MAGA movement can tip the balance for its ideological affiliates in Europe, as populist, euroskeptic Prime Minister Viktor Orbán is currently poised to lose for the first time in 15 years. Orbán, for his part, has been frantically campaigning to boost voter support, signaling that he and his inner circle actually view defeat as a possibility. His charismatic rival Péter Magyar, who shares his conservative-nationalist political origins but lacks any taint of corruption poses a real challenge, as does the country’s stagnating economy and rising prices. While traditional electoral strategies — financial giveaways, smear campaigns and war fearmongering — have so far proven ineffective for Orbán, a military spillover from Ukraine that directly affects Hungary could reignite voter fears and shift the dynamic. To top it all off, these challenges will be compounded by the E3’s weakness. The hollowing out of Europe’s political center has already been a decade in the making. But France, Germany and the U.K. each entered 2026 with weak, unpopular governments besieged by the populist right and left, as well as a U.S. administration rooting for their collapse. While none face scheduled general elections, all three risk paralysis at best and destabilization at worst. And at least one leader — namely, Britain’s Keir Starmer — could fall because of an internal party revolt. The year’s pivotal event in the U.K. will be the midterm elections in May. As it stands, the Labour Party faces the humiliation of coming third in the Welsh parliament, failing to oust the Scottish National Party in the Scottish parliament and losing seats to both the Greens and ReformUK in English local elections. Labour MPs already expect a formal challenge to Starmer as party leader, and his chances of surviving seem slight. France, meanwhile, entered 2026 without a budget for the second consecutive year. The good news for President Emmanuel Macron is that his Prime Minister Sébastien Lecornu’s minority government will probably achieve a budget deal targeting a modest deficit reduction by late February or March. And with the presidential election only 16 months away and local elections due to be held in March, the opposition’s appetite for a snap parliamentary election has abated. However, this is the best he can hope for, as a splintered National Assembly will sustain a mood of slow-motion crisis until the 2027 race. Finally, while Germany’s economy looks like it will slightly recover this year, it still won’t overcome its structural malaise. Largely consumed by ideological divisions, Chancellor Friedrich Merz’s government will struggle to implement far-reaching reforms. And with the five upcoming state elections expected to see increased vote shares for the far-right Alternative for Germany party, pressure on the government in Berlin will only mount A historic truth — one often forgotten in the quiet times — will reassert itself in 2026: that liberty, stability, prosperity and peace in Europe are always brittle. The holiday from history, provided by Pax Americana and exceptional post-World War II cooperation and integration, has officially come to an end. Moving forward, Europe’s relevance in the new global order will be defined by its response to Russia’s increased hybrid aggression, its influence on diplomacy regarding the Ukraine war and its ability to improve competitiveness, all while managing an increasingly ascendant far right and addressing the existential threats to its economy and security posed by Russia, China and the U.S. This is what will decide whether Europe can survive.

BRUSSELS — If you ordered Christmas presents from a Chinese web shop, they are likely to be toxic, unsafe or undervalued. Or all of the above. The EU is trying to do something about the flood but is tripping over itself 27 times to get there. “It’s absolutely crazy…” sighs one EU official. The official, granted anonymity to discuss preparations to tackle the problem, said that at some airport freight hubs, an estimated 80 percent of such inbound packages don’t comply with EU safety rules. The numbers are dizzying. In 2024, 4.6 billion small packages with contents worth less than €150 entered the EU. That all-time record was broken in September of this year. Because these individual air-mail packages replace whole containers shipping the same product, the workload for customs officials has increased exponentially over recent years. Non-compliant, cheaply-made products — such as dangerous toys or kitchen items — bring health risks. And a growing pile of garbage. It’s a problem for everyone along the chain. Customs officers can’t keep up; buyers end up with useless products; children are put at risk; and EU makers of similar items are undercut by unfair and untaxed competition. With the situation on the ground becoming unmanageable, the EU agreed this month to charge a €3 fixed fee on all such packages. This will effectively remove a tax-free exemption on packages worth €150 — but only from July of next year. It’s a crude, and temporary, fix because existing customs IT systems can’t yet tax items according to their actual value. ALL I WANT … Which is why all European lawmaker Anna Cavazzini wants for next year’s holiday season is “better rules.” Cavazzini is a key player in a push to harmonize the EU’s 27 national customs regimes. A proposed reform, now being discussed by the EU institutions, would create a central data hub and an EU Customs Agency, or EUCA, with oversight powers. As is so often the case in the EU, though, the customs reform is only progressing slowly. The EUCA will be operational only from late 2026. And the data hub probably won’t be up and running until the next decade. “We need a fundamental discussion on the Europeanization of customs,” Cavazzini told POLITICO. As chair of the European Parliament’s Internal Market and Consumer Protection Committee (IMCO), the lawmaker from the German Greens has been pushing the Council, the EU’s intergovernmental branch, to allow the customs reform to make the bloc’s single market more of a unified reality. European lawmaker Anna Cavazzini. | Martin Bertrand and Hans Lucas/AFP via Getty Images EU capitals worry — as always — about handing over too much power to the eurocrats in Brussels. But the main outstanding issue where negotiators disagree is more prosaic: it’s about whether the law should include an explicit list of offences, such making false declarations to customs officers. While the last round of negotiations in early December brought some progress on other areas, the unsolved penalties question has kicked the reform into 2026. With the millions of boxes, packages and parcels inbound, regardless, individual countries are also considering handling fees, beside the €3 tax that all have agreed on. France has already proposed a solo fee with revenues flowing into its national budget, and Belgium and the Netherlands will probably follow suit. RACE TO THE BOTTOM Customs reform is what’s needed, not another round of fragmented fees and a race to the bottom, said Dirk Gotink, the European Parliament’s lead negotiator on the customs reform. “Right now, the ideas launched by France and others are not meant to stem the flow of packages. They are just meant to earn money,” the Dutch center-right lawmaker told a recent briefing. To inspect the myriad ways in which they are a risk, Gotink’s team bought a few items from dubious-looking web shops. “With this one, the eyes are coming off right away,” he warned before handing a plush toy to a reporter. The reporter almost succeeded in separating the head from the creature’s body without too much effort. And thin, plastic eyes trailed the toy as it was passed around the room. “On the box it says it’s meant for people over 15 years old…” one reporter commented. But the cute creature is clearly targeted at far younger audiences. Adding to the craze, K-pop stars excitedly unbox new characters in online promotional videos. The troubles aren’t limited to toys. A jar of cosmetics showed by Gotink had inscriptions on its label that didn’t resemble any known alphabet. Individual products aside, the deluge of cheap merchandise also creates unfair competition, said Cavazzini: “A lot of European companies of course also fulfill the environmental obligations and the imports don’t,” she said. “This is also creating a huge unlevel playing field.” After the holidays, Gotink and Cavazzini will pick up negotiations on the customs reform with Cyprus, which from Jan. 1 takes over the rotating presidency of the Council of the EU from Denmark. “This file will be a priority during our presidency,” a Cypriot official told POLITICO, adding that Denmark had completed most of the technical work. “We aim to conclude this important file, hoping to reach a deal with the Parliament during the first months of the Cyprus Presidency.” Despite the delays, an EU diplomat working on customs policy told POLITICO that the current speed of the policy process is unprecedented: “This huge ecommerce pressure has really made all the difference. A year ago, this would have been unimaginable.”