Major Events and Trends Shaping Europe and the World in 2026

As Europe enters a new year, EU leaders have set out an ambitious agenda: strengthening security, boosting economic competitiveness and growth, keeping deficits in check, defending democratic systems against destabilising forces, and maintaining the support of key allies, just to name a few.

Last year, our experts’ outlook for 2025 anticipated mounting pressure on Europe, including a disruptive shift in US leadership, a pivotal German election that could either consolidate or weaken Germany’s influence within the EU, growing strain in Europe’s neighbourhood, and rising tensions between economic competitiveness, security and climate ambition.

As 2026 begins, we offer here our insights into some of the important events and trends that will shape Europe’s efforts to reinforce its security, revitalise its economy and deepen ties with neighbours and allies.

New year, same struggles: The EU‘s geoeconomic vulnerabilities – Etienne Höra

US tariffs and Chinese supply squeezes laid bare the EU‘s geoeconomic weaknesses in 2025. These include critical dependencies, a lack of leverage and member states‘ unwillingness to use the limited leverage Europe has for fear of retaliation. At best, all these situations are paused.

Last summer’s EU-US tariff agreement is unlikely to be the final word, as demands to weaken EU protection of consumers, human rights and the environment keep coming in. In the Chinese case, the EU benefits from a fragile US-China trade truce that eased the country’s export controls on rare earths and permanent magnets. But this deal was made without the EU, comes with a one-year expiry date – and could implode even sooner.

The case of Nexperia, a Chinese-owned, EU-based semiconductor producer, has shown that even dependencies in non-critical areas, such as legacy chips for the car industry, can become massive liabilities.

As the EU‘s geoconomic weaknesses are structural, quick and dramatic improvements are out of reach. The EU will have to play the hand it has been dealt. However, decisive action in the coming months can improve the EU‘s medium-term prospects, from market surveillance to better managing shortages and targeted investments in the critical supply chains that others will keep weaponising.

Ukraine at the centre of Europe’s strategic choices in 2026 – Miriam Kosmehl

Russia’s war will continue to shape global dynamics, unless Europeans assert a more active role in the emerging great power order. Three states entrusted with guarding the world order may instead accelerate its erosion.

Russia and China will deepen their alignment, but not out of ideological affinity. Instead, this will emerge through a shared interest in weakening global institutions and normalising coercive statecraft.

The US under the Trump administration operates within its own strategic orbit. Venezuela represents the latest precedent for disregarding international rules, potentially encouraging further such cases. As it prioritises competition with China and sustaining a great power oligopoly, the US seeks stable relations with Russia that allow for commercial engagement – unless a shift in the midterm elections redirects American policy or credible multilateral coalitions, such as the E3 or E5, step in.

Ukraine’s resilience, supported by the EU’s December 2025 €90bn financial injection, will keep it politically sovereign and militarily capable. Yet personnel shortages and pressure on air defences and critical infrastructure will persist. Russia will sustain a war economy and rely on domestic repression, hoping time erodes the unity of Ukraine’s allies. Meaningful peace negotiations are unlikely, unless economic and battlefield dynamics undermine Russia’s ability to continue its war.

Europe faces a decisive choice: develop genuine agency or risk marginalisation. Supporting Ukraine – militarily, economically and politically – is central to this transformation. Ukraine’s fate depends on its partners’ cohesion and resolve – and Europe’s future is interdependent with Ukraine’s. The EU and national governments possess the means to counteract Russia and China, moving away from US dependence, provided they can muster the political will to use them.

From partnership stress tests to an EU alliance strategy – Jake Benford

By 2026, the EU-UK relationship will be a revealing test of the EU’s capacity to move beyond ad hoc partnerships towards a coherent alliance strategy.

The UK is a significant security power, yet Brexit has entrenched red lines that push deep institutional integration into the medium term, if at all. As a result, this relationship functions less as a template, and more as a stress test of how far the EU is willing to trade regulatory purity for strategic effect, assuming the UK’s red lines remain unchanged.

This bilateral case reflects a systemic challenge. As uncertainty of the US’s role as a systemic anchor grows, Brussels can no longer assume that partner alignment will organise itself. The EU has built a growing network of security and defence partnerships with Japan, South Korea, Canada and others, but these ties risk remaining symbolic unless translated into joint capability development and co-production of strategic technologies.

In parallel, the EU’s geoeconomic toolkit is more advanced. Targeted mini-deals on resilience, supply chains and critical technologies have created leverage without binding commitments. The 2026 choice is whether to keep security and economic instruments decoupled, or to pursue deeper alignment by tying access to selected tools to cooperation. This decision will shape the EU’s credibility as a security actor.

Much more of the same: China’s fifteenth Five-Year Plan is alarming for European industry – Cora Jungbluth

China’s proposal for its fifteenth Five-Year Plan (2026–2030) signals continuity with a notable shift in speed and ambition. Released last October and due for adoption in March, Beijing’s plan again prioritises technological self-reliance in strategic sectors – from semiconductors to AI – with the clear objective of reducing external dependencies and securing global leadership in future industries. The novelty lies not in the direction, but in the accelerated pace and expanded scope of this agenda.

Equally striking, China aims to retain leadership not only in high tech, but in traditional industries, such as textiles, chemicals and machine tools. Unlike previous emerging economies that gradually outsourced certain industries and segments of the value chain, China seeks to preserve value creation across the full industrial spectrum.

For European companies already facing renewed competitive pressure from China – the so-called China Shock 2.0 – this means rising overcapacity, stronger price pressures and growing import volumes. It presents a stress test for the EU’s competitiveness and economic security.

The EU should use its trade and industrial policy tools confidently – from anti-dumping and anti-subsidy measures to the International Procurement Instrument – while accelerating investment in competitiveness and innovation at home. This is not protectionism, but self-protection in an international environment where power increasingly outweighs rules.

In 2026, the Single Market agenda returns to centre stage – Claudia-Dominique Geiser

In this geoeconomic environment of tariffs and weakening export demand, Europe will need to focus inward and rely on one of its biggest strengths – the single market.

Growing external pressures have renewed calls for a second single market moment – a concerted push to close persistent gaps and barriers by integrating capital markets, reducing regulatory fragmentation, and enforcing single market rules where member states have created obstacles. Historically, this has proven difficult, as political commitments by national capitals to the single market often fail to translate into concrete action.

In 2026, advancing on these issues will require member states to move beyond familiar rhetoric towards steps that may challenge entrenched national practices and domestic stakeholders. In return, a more integrated single market would leverage internal demand, mobilise capital and allow innovative firms to scale across Europe.

One 2026 initiative stands out as a test of whether more integration is politically possible – the upcoming proposal for a 28th regime for corporate law – an EU-wide opt-in rulebook for innovative companies existing alongside national law and easing scaling across Europe. Its success depends on a lean design covering the full company life cycle, from incorporation to exit.

It’s a difficult task because member states must be willing to support an alternative framework that could be more attractive than their own laws. If done right, a 28th regime could show that ambitious integration is still feasible – and signal whether a second single market moment is within reach.

Germany’s National Security Council: A possible spark for comprehensive defence – Helena Quis

As the EU’s largest economy, a key military power and a crucial deployment hub, Germany faces growing pressure to deliver on its pivotal role in Europe’s defence and deterrence. Yet on comprehensive defence – linking military readiness with resilient civilian structures and societal preparedness – it keeps falling short. Responsibilities remain scattered across ministries and governance levels, and no one feels accountable for a concept without an institutional home that requires preparing society for a new era of risk.

The newly created National Security Council could shift this in 2026. With only 13 staff, it is no powerhouse, but it is the first body mandated to bridge civil and military defence – an intersection Berlin has long struggled to govern. Merely strengthening it beyond its embryonic form, however, will not be enough to bring overdue strategic coherence or push comprehensive defence from concept to practice.

The real test is political mindset. Officials often claim society is not ready, but the question is whether leaders themselves grasp what today’s threat landscape demands, moving past outdated binaries and involving citizens directly in national resilience.

If Berlin gets this right, it can give Europe’s resilience agendas the strategic weight needed to close dangerous civil-preparedness gaps. If not, Europe risks another year of dismissing the issue as a Nordic-Baltic niche, rather than recognised as a core requirement for defence and deterrence.

Space launch competition: New rockets do the heavy lifting – Torben Schütz

2026 will finally see competition returning to the space launch market. While SpaceX nearly monopolized the tendered commercial heavy launch market in the past years, the long-awaited entry of new launch vehicles has the potential to change the economics of this subsector and move it towards lower launch costs.

Launchers such as Blue Origin’s New Glenn, Arianespace’s Ariane 6 or Mitsubishi’s H-III – as well as SpaceX’s own Starship – enable more competition, particularly in the medium term when customers booking slots years in advance can now choose between suppliers.

Similarly, more small and medium launch vehicles are expected to enter the market by leaving their development phase and reaching orbit, which proves technical maturity. Here, contenders range from European start-ups, such as Isar Aerospace, to US innovators like Stoke Space, and finally entries from other space-faring nations, especially China’s LandSpace and India’s SkyRoot.

In effect, this could further increase the number and mass of objects in orbit, while hopefully increasing competition and lowering launch costs. This, in turn, enables more commercial activity, as well as cheaper prices for state-led demand that thrives on increased defense spending worldwide.

As a result, Europe could fulfil its space ambitions more easily. Currently, these ambitions are mostly constrained by limited launch capacity and manifested in greater European Space Agency spending and various plans for more satellites for security and military applications in a tense security environment.

Probation: Mediterranean pact enters implementation phase – Christian Hanelt

In the shadow of attention focused on Ukraine, the US and China, the EU launched a new framework for cooperation with its southern neighbours at the end of November 2025.

Endorsed in Barcelona, the Pact for the Mediterranean enhances cooperation with the 10 southern neighbours across the Mediterranean, from Morocco to Syria, including Israel and Palestine. Its aims include educating and connecting people, shaping innovative and sustainable economies, and strengthening internal and external security. The driving forces in the north are the European Commission, led by Dubravka Šuica, and the European External Action Service, led by Kaja Kallas.

The implementation of the pact is scheduled for 2026 through concrete projects in cooperation with science, civil society, business, cities and regions. In addition, the potential for cooperation between Brussels and the Gulf Cooperation Council (GCC) states will be leveraged. This should mean more trade, more digitalisation, more maritime security – and more joint projects for conflict resolution in Syria, Yemen and Gaza/West Bank. A high-level EU-GCC summit is planned for autumn 2026 in Riyadh, Saudi Arabia.

The internal challenge for the EU is to achieve unity not only on paper, but in practical action. The actions of the EU and its Member States in the Israel-Palestine conflict are and remain of great symbolic importance. Brussels could contribute more to a propagated two-state solution through contributions to border security, training Palestinian police officers, financing the Palestinian Authority, and strongly supporting the Israeli-Palestinian civil society community that works together

Democracy on the line: The global significance of the 2026 US midterm elections – Brandon Bohrn and Peter Walkenhorst

The Trump administration’s actions were arguably the most important factor influencing global affairs last year. This trend appears likely to continue following the US’s unilateral U.S. military intervention in Venezuela and apprehension of President Nicolás Maduro, alongside renewed threats to annex Greenland.

These developments have intensified European debates about the future of the transatlantic relationship and the reliability of US leadership within it. Therefore, the US midterm elections on November 3^rd carry extraordinary global significance, with direct consequences for Europe.

Domestically, the elections will determine whether President Trump continues to govern with limited institutional constraint. With Trump’s approval ratings at historic lows and Republicans suffering heavy defeats in recent special elections, the party now faces the real possibility of losing control of at least the House of Representatives. A Democratic-controlled House would curb the Trump administration’s agenda by increasing oversight, constraining funding, and serving as a vital check for the remainder of this presidency.

Amid these political headwinds, Trump has pressed Republican-led states to redraw electoral districts in ways that favour his party. Such attempts to influence the electoral landscape have intensified concerns about the integrity and fairness of the upcoming elections. In this tense environment, one critical question is whether the elections will proceed as planned and, if they do, whether they will be free and fair.

For Europe, the 2026 midterms’ credibility is not a purely domestic matter for the US. It will be an important test of the resilience of American democracy, the reliability of the US as a democratic partner, and the future stability of the transatlantic relationship at a time of heightened geopolitical competition.

Show me your budget and I’ll tell you what you value: The EU’s MFF negotiators start to talk numbers – Anna Heckhausen

2026 will be decisive for negotiations on the EU’s Multiannual Financial Framework (MFF) for 2028-2034 – and for shaping the Union’s policies well into the 2030s.

So far, the Commission can claim partial success. Despite strong initial backlash, the core of its proposal remains intact and was widely approved by the European Council in December. This includes a fundamentally modernised structure that simplifies programming, increases flexibility, and shifts the budget’s focus from agriculture and cohesion towards competitiveness and research. These changes are essential to addressing priorities more efficiently, such as economic growth, decarbonisation and resilience with the EU’s limited financial resources.

As member states start talking numbers under the Cypriot Council Presidency, the MFF’s modernised structure remains at risk. Frugal governments, such as Germany, dismiss the Commission’s proposed budget ceiling of 1.26% of GNI (including 0.11% for NGEU repayments) as excessive and advocate across-the-board cuts.

Meanwhile, the so-called friends of cohesion, including Poland and Portugal, focus on defending sizeable pre-allocated cohesion and agricultural envelopes. Once they perceive that regional funds are at risk, they may withdraw their willingness to accept a shift in priorities and revamped programme structures.

Germany – one of the strongest proponents of the MFF’s new architecture – should prioritise defending this reform, even if that requires making concessions on budget size. This is crucial to safeguarding a framework that allocates funds more efficiently and puts real money behind the Union’s priorities.

Industrial Accelerator Act: Lead markets or lost momentum? – Lucas Resende Carvalho

The European Commission will propose its Industrial Accelerator Act (IAA) in late January. This will be 2026’s decisive test for the EU’s Clean Industrial Deal.

First pitched as the Industrial Decarbonisation Accelerator Act, the IDAA has since dropped its D. This reflects a shift in emphasis from a primarily decarbonisation tool toward an instrument designed to shield key industries from Chinese pressure through „Made in Europe” requirements and more assertive demand-side policies.

At its core, the IAA aims to create lead markets for low-carbon and strategically important technologies. It is expected to combine three levers: clear prioritisation of sectors such as steel, cement and batteries; non-price criteria in public procurement to reward low-carbon performance, resilience and European value creation; and local content approaches that anchor more strategic value chains in Europe.

Postponing the proposal from December 2025 to January 2026 underscored just how politically charged it is. Several core provisions remain undecided, leaving real uncertainty about the act’s final shape.

The key question to watch is one of ambition. A focused, well-designed lead-market framework could form the backbone of Europe’s clean-industry strategy. A diluted version, by contrast, would deprive the Clean Industrial Deal of its demand engine – and leave Europe exposed in an increasingly competitive global industrial landscape.

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