Chapter 2: Will the EU become a global power?

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The rise in the cost of living among Europeans will feed populist attitudes, and some EU states may put pressure on Zelensky to accept a compromise.

Inflation will almost certainly result in negative growth in 2023, causing social anger and increasing political polarization.

The conflict in Ukraine, as well as the rivalry between the United States and China, are pressuring Europe to strengthen its foreign policy skills. By dealing with diverse sections of the globe individually, the EU commission will attempt to buffer Europe from the energy crisis, drive Europe into global tech rivalry, and safeguard its raw resources.

We anticipate that Brussels would relax its stance toward members with significant sovereign debt-related risk, enabling them to continue high levels of expenditure during uncertain times. However, reaching a political consensus will be difficult for Europe. Northern EU nations would almost certainly try to safeguard their economic stability against the more debt-vulnerable South by backing harsher penalties for members who fail to limit their deficits. On the other side, the South may attempt to exclude energy and military expenditure from the calculation.

The EU lacks strategic autonomy due to the low likelihood of all states and institutions aligning their agendas. In 2023, we anticipate the European Commission and leaders like Macron to make additional efforts to unify everyone behind a long-term commitment. We foresee increasing enthusiasm for research, raw materials, and businesses that foster innovation. As well as Chinese restrictions and potentially additional levies for American tech firms.

Political Instability in France

No elections are expected in France in 2023; however, the fragile government could collapse or we could see the dissolution of the National Assembly.

Even without a successful vote of no-confidence, the current government will be under constant threat of collapsing, paralyzing Macron’s administration. For instance, in October, the French government had to use special constitutional authority to adopt a 2023 budget without support from the National Assembly. Some of the unpopular measures that triggered the crisis were removing the corporate VAT, indexing income tax to inflation, imposing windfall taxes on energy companies, and building an energy aid for households struggling with rising energy costs.

The government’s decision to bypass the lawmakers is showing us an unstable French political landscape due to the fragmentation of the National Assembly. These conditions will complicate the implementation of Macron’s agenda domestically and abroad.

Right-wing Coalition in Italy in 2023

In Italy, the new right-wing coalition is facing an internal dispute that makes it impossible for them to implement the significant reforms expected by their voters.

The second political risk facing Italy is its sovereign debt; however, we can expect the European Union to cover any major financial risks.For Brussels, Italy is “too big to fall.” For Rome’s political elites, the EU works as a cushion against financial distress.

Giorgia Meloni’s government will continue to seek to preserve international credibility and relevance while balancing toward more protectionist policies.

We can expect a more protectionist approach from Italy this year, but even if we’re dealing with a right-wing government, preserving EU funds will remain one of their primary goals in 2023.

Hungary is moving away from Russia

Hungary is an EU member and traditionally friendly with Vladimir Putin. Since the war in Ukraine is working to absolve Putin, Hungarian PM Viktor Orban is slowly shifting his support away from Russia. In 2023, we can expect to see a limited shift in Budapest’s foreign policy away from Moscow.

As long as Russia’s war in Ukraine goes worse for them, I expect Putin’s friends to shift their support and find new ways to pursue their goals. In Hungary’s case, the country risks becoming totally isolated within the EU if they don’t try a rapprochement with the EU despite Viktor Orban’s personal preferences.

Poland election in 2023

In Poland, parliamentary elections are expected in November. A victory for the ruling party would prolong the dispute between Warsaw and Brussels. A large victory for the Polish ruling party against its pro-EU opposition would raise the tensions between Brussels and Warsaw to the point where the EU could suspend funding for the country. However, we do not expect Poland’s ruling party to extend its Euroscepticism to the West in general. On the contrary, Poland has been moving closer to its western partners since February 2022.