Estimated time of reading: ~ 4 minutes

The two main countries in the EU, Germany and France, are currently facing a deep political crisis. The German election, which will be held on the 23rd of February next year, could have a great impact on European politics and shape the next political decisions taken in Brussels and other member states. At the same time, an enduring political instability in France can affect the national economy and consequently bring troubles even outside the borders. If this is not enough, a new president will sit at the White House, one that is prone to sharp decision-making and is not scared of threatening partners and foes with news tariffs, as Donald Trump already proved in his first term as head of state.

Still, 2025 does not have to be a dark year for Europe as a whole, especially if we look at the economic and social side. The EU has proved remarkably resilient in recent decades, and the economy played a big role in such a dynamic, despite the odds. European countries managed to tackle the economic impact of the COVID pandemic and face the consequences of the war in Ukraine and other global shocks. All the EU needs to do is find a balance between the political turbulence inside and outside the European borders: even if China’s long-running boom winds down and trade tensions with the United States may blur the transatlantic trade picture, there is room for economic growth in certain sectors, while wise decision-making can still work out for the benefit of all the member states. Looking at the half-full glass, economic growth in the EU is projected to remain moderate in 2025, but inflation is expected to gradually slow down after a generally better performance in 2024 than in the past years. Plus, the labour market is forecasted to remain tight, with unemployment rates at historically low levels. If we see the glass half empty, the EU countries could face greater financial strains in the next months, which could trigger further political and social upheaval that would benefit extremist forces on the political spectrum, especially the far right, as the surge of Alternative für Deutschland (AfD) in the German polls testifies. Also, the Rassemblement National in France could find room for further growth in the polls with the ongoing difficulties of President Emmanuel Macron in choosing the right prime minister to have an efficient executive in Paris. Other right-wing parties in the EU, as we saw recently in Romania, can have a chance to gain power by exploiting social inequalities and economic uncertainties. Then there is a global problem, the lack of economic and industrial competitiveness, as highlighted in the report presented in the past months by the two former Italian prime ministers, Mario Draghi and Enrico Letta. Even the President of the European Central Bank, Christine Lagarde, warned that Europe’s social model would be at risk if it doesn’t change course quickly and the EU does not create its own path for rapid technological change, in particular in digital innovation. “Otherwise, we will not be able to generate the wealth we will need to meet our rising spending needs to ensure our security, combat climate change, and protect the environment,” Lagarde said.

Written by: Francesco Marino