The biggest thud we are likely to hear in Europe in the next few years is the collision between wishful thinking about Ukraine and its inevitable rendezvous with reality. Kaja Kallas, the EU’s High Representative, yesterday treated us to unfiltered display of wishful thinking when she set out a concrete target date for EU accession by Ukraine, Moldova, and various legacy candidates like Montenegro and Albania. She spoke on the occasion of a report that – if you read it – makes it very clear that Ukraine is moving further away from meeting the criteria – and it’s not all war-related. The EU, too, would need reforms, especially on finance and majority voting, for which we do not detect support either.

An FAZ editorial on this issue is right to call out Kallas’s wishful thinking. But comfort blanket-type thinking is also present in this comment. Ukraine’s supporters never say: we need to raise taxes, cut social spending, buy weapons and then send them on to Ukraine. What they say instead, as FAZ did this morning: Europe must do more. In other words, someone else.

This is why Ukraine is losing this war. There is still fighting going on in Pokrovsk, but Russia is now in control of most of the town. The industrial city of Kramatorsk will be the next target. There now is a plausible scenario that Vladimir Putin will achieve the occupation of the four oblasts, which he set out as his original war goal.

What Kallas’s virtue-signalling comment tells us is that they have no strategy whatsoever.

Greece, Cyprus and Israel are seeking to revive the energy triangle under the 3+1 format with the US. A meeting has been arranged between energy ministers of the three countries and the US counterpart at the sidelines of the Transatlantic Energy cooperation conference hosted by Greece this week.

Talks are expected to focus on the major energy projects in the region:  the Vertical Corridor towards Ukraine and the India-Middle East-Europe Corridor (IMEC). Both projects are US priorities, writes Macropolis.

The vertical corridor is a major European energy infrastructure initiative designed to create a north–south natural gas transmission network between Southeastern and Central Europe, involving Greece, Bulgaria, Romania, Hungary, Slovakia, Ukraine and Moldova. It is a major transport extension route for LNG when it arrives in the ports of Greece to reach the landlocked Eastern European countries. It is not hard to see the business case for the US and its own LNG exports.

The IMEC was launched at the G20 summit in New Delhi in 2023 as an infrastructure initiative to connect India to Europe through a series of rail, road, and sea networks across the Middle East. It is a flagship project for economic cooperation in the region and to reduce reliance on transportation bottlenecks such as the Suez Canal. Though the idea of linking ports in the Gulf, like Jebel Ali in Dubai and Haifa in Israel via rail through Jordan, are heavily dependent on the stability of Israeli-Arab relations. The project includes plans to lay cables, green hydrogen pipelines and high-speed data cables to increase energy diversification and digital connectivity.

This ambitious project is as geopolitical as it could get, involving key players and some of the most conflicted regions. The war in Gaza has delayed its start, but partners have returned to the negotiation table with new enthusiasm this year in their desire to secure supply chains. The project is now in a critical phase with many meetings to define the next phases with a focus on operationalising logistics and tangible outcomes.

For the US, the project is of strategic importance and is a counterbalance to China’s dominance in the region. It is often portrayed in the media as the western backed alternative to China’s Belt and Road Initiative. The EU too, included IMEC in its Mediterranean Pact as one of their flagship projects.

When Aleksandar Vucic and Viktor Orbán jointly opened the Novi Sad railway station in 2022, it was meant to be a symbol of Serbia’s progress and regional connectivity. But as the one-year anniversary of the station’s collapse was marked over the weekend – a tragedy that killed sixteen people – that image has come to capture the uneasy tension between the EU’s strategic interests and a regime marked by corruption and an increasingly authoritarian drift.

The EU is dependent on President Vucic to safeguard its interests in the Western Balkans – notably, securing access to Serbia’s lithium. The resource is central to the EU’s efforts to reduce dependence on China and secure critical minerals for its green transition, a goal reinforced in the Critical Raw Materials Act. Serbia holds one of Europe’s largest lithium deposits in the Jadar Valley mine, which could supply up to 90% of Europe’s lithium demand. However, this reliance has tied Brussels to an increasingly authoritarian government at odds with its own citizens, where corruption, media control, and democratic backsliding have fuelled widespread mistrust of both Vucic and the European project.

Under Vucic, Serbia has maintained close ties with Russia and China while continuing to present itself as a leading EU candidate. The accession process has been marked by selective oversight, with Brussels providing roughly €300 million in annual grants and exerting limited pressure over Serbia’s democratic backsliding and refusal to align with EU sanctions against Moscow. Vucic’s close alignment with Orbán has also raised concerns that Serbia’s accession could strengthen the pro-Russia camp led by Hungary and Slovakia. Yet in 2024, Belgrade supplied around €800m worth of arms to Kyiv, and fears of pushing Serbia further towards Beijing and Moscow have deterred stronger criticisms from Brussels. This caution is reflected in the EU’s relatively measured response to the protests, in the form of a recent European Parliament resolution condemning state repression.

The protests that began after the Novi Sad railway station collapse last November have evolved into a nationwide movement demanding accountability and free elections. Over the weekend, tens of thousands returned to the streets to mark the first anniversary, observing sixteen minutes of silence for the victims before renewing calls for Vucic’s resignation. Many Serbs now view Brussels as complicit in sustaining Vucic's regime, with support for EU membership falling from 64% in 2020 to just 33% in 2025, according to a Eurobarometer survey.

Unlike earlier demonstrations in Serbia, this movement has persisted, fuelled by deeper anger and a growing loss of trust in Vucic’s government. And as the protests continue a year on, the EU’s ambitions in the Western Balkans remain tied to a mistrusted and brittle regime.

The German car industry had a really bad year. The chip shortage problem is the latest crisis, and the industry is absolutely dependent on this issue being resolved. At least, there is now a mechanism in place that could resolve the issue as we write in our lead story.

But the bigger long-term problem are not related to this. VW downgraded its forecasts three times this year. We have seen problems popping in all areas of the Germany car industry – at Mercedes and Porsche in particular. BMW is the best of the bunch.

The Nexperia chip shortages give the industry an excuse for finger-pointing, but this does not deflect from the underlying trend - that they are all struggling with electro-mobility. They were late in the game – and massively underestimated the transition. The watering-down of the 2035 deadline for the fuel-driven car will provide some relief, but no solution. This would be like producing typewriters in the 21st century.

We hear a lot of comments lately that it is regulation that killed the car industry. We disagree. It is mostly poor decisions by companies. In Europe, the car industry has been a virtual co-regulator. The industry supported the 2035 target. The long-term success of the German car industry depended critically on its ability to set regulatory standards for the entire industry, globally through the EU. This is also what gave the EU the confidence to do the same in the area of tech regulation. They found, very much to their surprise, that this success did not translate to new sectors, and especially not to sectors where the EU is not a leading producer. The big problem for the German car industry is that they cannot set the standards for the next generation of cars. They are in the business of trying to catch up. They are in the process of losing their regulatory monopoly.

There is already pressure coming from the US to accept mutual recognition of standards for vehicles. Ursula von der Leyen agreed to this in her trade deal with Trump. We will see similar issues coming up in the EU’s trade relations with China.

We still see some hope for the Germans in the luxury end of the market. But a mid-range self-driving car is ultimately more luxurious than a high-end German limousine, unless you have a chauffeur. The business model of the German car industry is that it innovates at the top end of the range, letting the technological benefits trickle down the ranges over time, eventually reaching the smallest cars. This is not how it works in China.

The car industry will not die. But we are struggling to see a healthy ecosystem for mass-market cars in the future.

How often have we heard it. Ideas for a political union in Europe are politically unrealistic. Whenever we hear people discuss the future of the EU, someone can be relied upon to make that point. This is true especially of Brussels these days. The apparent lack of political realism has almost reached the status of a fact – the kind that you can include in a multiple-choice exam or a TV political quiz show– where politically unrealistic is the right answer.

We read it again this morning, in a commentary in FAZ, where the author told us about Europe’s decline. He argue that a politically integrated Europe was the only way to respond to the EU’s geopolitical squeeze. And then, as you might have guessed it, he dismissed this idea as politically unrealistic.

More often than not poor arguments are often framed in the passive tense: something must be done is an old favourite. The expression politically unrealistic hides a passive tense. It puts us into the position of a passive onlooker, subject to other people's political preference. Another, more recent example of the distortive use of the passive tense is: Russia must not be allowed to win in Ukraine. Ukraine’s tragedy is that its strongest supporters are people behind computers with the Ukrainian flag in their social media profile. They are passive tense kind of people. An active supporter is someone who calls for changes in fiscal policy at home to finance military supplies. 

We doubt that future historians of European integration will content themselves with the idea that European integration was politically not realistic. They will ask: When Europeans were aware of their decline, why did they not do anything about this?

The United Arab Emirates is one of the major hubs for financial innovation in the Middle East. It is becoming increasingly attractive for European fintech companies to develop innovative products there. According to a 2025 report by Globenewswire, the UAE's fintech market is projected to grow from $2.97 bn in 2024 to $6.42 billion by 2030, at a compound annual growth rate of 13.8%.

Digital payments and blockchain have been revolutionising the financial landscape. AI and machine learning are next. It is the combination of the various technological breakthroughs that create novelty in a way we have not seen in our lifetime. And the UAE offers the laboratory with its young and pro-business population. The Dubai International Financial Centre offers a financial services hub that attracts companies and talents. The government reformed its regulations to accommodate a growing business. Last month the UAE finance ministry signed a global crypto tax reporting framework.

Sifted looks at the business case for why more European fintech companies are increasingly turning to the UAE today. Checkout was one of the first pioneers to come to the UAE ten years ago and successfully grew its business from there. The British Revolut or Austrian crypto exchange Bitpanda are now there too.

Founders of both mature and early stage companies appreciate zero income tax and the ease of doing business there with a young and wealthy population ready to spend. In Dubai, one gets access to different types of founders and their business models, irrespective where they come from. There is a huge expatriate population, which makes up 90% of the 11m living in the UAE. It is one of the 15 richest countries in the world by GDP per capita in purchasing power terms according to Global Finance survey.

The challenges in the region are also offering opportunities for expanding a new business. There is a lot of money in Middle East countries, but little infrastructure to connect it with the rest of the world. Experts interviewed by Sifted concede that the general environment may be more difficult than in the UK, but the market also offers many opportunities. Regulation is still fragmented across the Gulf, unlike in the EU where a banking license in one country can be passported over to another. Each of the regulators in the Gulf region is now working on building a framework to adapt to this fast-developing ecosystem.

Economists like Paul Krugman taught us that innovation thrives best in clusters, in an eco-system that nurtures collaboration, creativity, and spillovers. The Dubai International Financial Centre and Saudi Arabia’s Vision 2030 have been pivotal in attracting talents to the Middle East. The technological breakthroughs in digital banking or AI come at a time when the region looks to diversify from its oil-heavy past towards a pro-business future. Europe with its fear-driven attitude towards those new technologies cannot compete with this new dynamic.

China’s Cross-Border Interbank Payment System is not nearly as mature as the global clearing and settlement systems used by the west. But it is growing fast, and it is maturing. This week we read that China Development Bank agreed a loan of $290m to South Africa channelled through CIPS, the first intra-Brics loan agreement, denominated in renminbi. There will be a lot of firsts going forward. The overall size of CIPS compared to western payment systems is small. But the infrastructure is now there, and it gives China and its trading partners a route to diversify away from dollar-dominated flows. Another layer of this system is Brics Pay, a blockchain-based technology that connects CIPS and other domestic payment systems of the Brics countries. CIPS also has its communication layer, which makes it independent of Swift, the inter-bank communication system dominated by the west.

The dollar is the single biggest global chokehold enjoyed by the US. The fact that all dollar transactions at one point go through the US gives the US government the ability to impose secondary sanctions on foreign companies and banks.

We are observing this in many areas: when countries apply their choke-holds, the rest of the world innovates around this, and diversifies away from it. Alternative payments systems exist only because the US has made excessive use of its financial powers. When the foreign policy community in the US discovered the potential of the dollar as a coercion tool, they did not factor in that the potential of the tool depletes the more frequently it is used. When the Biden administration used its choke-hold on high-performance semiconductors by banning their sale to China, they also misjudged China’s ability to develop their own.

We expect the same to happen also with China exercising its choke-hold over rare earths. While it will not be easy for the rest of the world to make itself independent on magnets that are essential for electric engines, it is not impossible to reduce one’s reliance on China, as Japan did in 2010 when China first applied its rare-earth choke-hold by banning their sale to Japan after an incident near the disputed Senkaku Islands in the East China Sea.

One of us recalls asking that question in a German newspaper commentary many years ago. It suffices to say that the reaction to that article was not very positive. It is a bit like asking in France whether the French revolution was a mistake.

We noted that David Marsh just wrote an article pushing in a similar direction with an article entitled: Europe never recovered from the fall of the Berlin wall. We agree with this statement. This was indeed the pivotal event in modern European history – not because it symbolised the end of communism, but because it ended up destroying what people used to call the European project. The sad state of the EU today has deep roots in the events of that period.

We disagree with almost everything else in this article, including the assertion that if the UK and France had prepared for unification, it would not have happened. There is nothing that those two countries could have done on their own. They were already geopolitical minions back then. Margaret Thatcher and Francois Mitterrand tried. We remember the so-called 2-plus-4 process – the two Germanys, plus the US, the Soviet Union, UK and France. In the end, the diplomacy was entirely between George HW Bush, Mikhail Gorbatchev, and Helmut Kohl, and then-foreign ministers. The deep reason why nobody could have stopped it is that the east Germans wanted it badly. They were ready to pay any price. They would have been vastly better off today if they had agreed a looser confederation with West Germany and kept their currency and labour market rules separate in the first decade, and joined the EU along with Poland and the other countries of central and eastern Europe in 2004. But economic arguments played no role whatsoever in the debate at the time.

Europe’s historic failure was not to go beyond the Maastricht Treaty in substance. A half-baked monetary union was the last meaningful area of European integration. That was in 1992, only two years after German unification. The real tragedy was that Kohl was genuine in his desire for European political unification, but his four successors failed to take up the baton. Nor did other EU leaders.

Europe’s weakness is not about the failure to adopt the Draghi report, or the failure to proceed with the banking union. Of course, the EU should have done this. The failure was not to develop into a deeper political union, when they still had majorities for such a project. Now they pursue integration through the backdoor, with EU-issued debt funded by transfers. Gorbatchev once said in a warning to fellow communists:

“Those who are late will be punished by life itself.”

This is what happened to the EU.

Donald Trump’s peace deal for Gaza needs to hold and develop into the next phase. Time is pressing as ceasefire violations happen daily, and Hamas increasingly imposes its grip over the strip. The deal remains fragile for as long as the next phase is not even shaped. This also puts on hold advances in other neighbouring countries such as Lebanon and Syria. Everyone is waiting for what is happening next.

One of the crucial parts of the peace deal is the international Stabilisation Force, or ISF. The UN Security Council members and regional powers are currently in discussions over its structure and mission. The US, UK and France are pushing a draft for the ISF assuming broad security control of the Gaza strip as Israeli forces withdraw. They also want the ISF to play a role in disarming Hamas. Marco Rubio said the US may want to seek a UN mandate for the ISF. Such a mandate take weeks or even months until it passed through the Security council and the General Assembly. What will be the responsibilities and provisions for the civilians in Gaza during this time?

Disarming Hamas is the most difficult part of the next phase of the peace deal. Will Hamas agree to disarm? Hamas leadership agreed to the peace deal, but when it gets concrete, will its fighters follow through with it? So far seven UN members have showed an interest in joining the ISF: Indonesia, Azerbaijan, Pakistan, Turkey, Egypt, Qatar, and the United Arab Emirates. But the only disarmament that happened so far was from one clan in Khan Yunis handing over their weapons to Hamas.

If Hamas refuses to disarm, and the ISF would act without force, would Gaza could be split into one zone cleared of Hamas where the ISF can operate and another where Hamas fighters remain in charge and subject to Israeli operations? Even if Hamas agrees to disarm, doing so takes time. In Northern Ireland, it took nine years for the Provisional IRA to fully disarm. They called it decommissioning, a less offensive term for the fighters. It also took the determination from the PIRA's leaders to face down opposition in their own camp. How much can the Irish experience inform the process for Hamas? Each group and process is unique.

Phase three of the peace deal is the reconstruction of Gaza and its governance structures. Gulf countries have already pledged to invest in the reconstruction, but they won’t do so as long as Hamas operates. The same is happening in Syria, where Saudi Arabia promises investments but holds off as long as there is no agreement between Syria and Israel, including over the protection of Suweyda.

The EU offered to play its part in the process. Dubravka Suica, the EU's commissioner for the Mediterranean, told the European Parliament that Europe is uniquely positioned to play a pivotal role in the peace process. While we don’t quite see this at the senior diplomatic level, there is plenty to do for the EU elsewhere. She listed large scale humanitarian aid operations, deploying search and rescue, rubble removal and decontamination operations, helping to secure border crossings, and extending police training to Gaza.

At the high level of diplomacy, this phase in the peace process is still quite fragile, and needs constant attention. Senior members of the US administration are flying into and out of Israel. The Knesset provoked while JD Vance was visiting with a vote to annex the West Bank, while Jarad Kushner imagines Gaza as the new West Bank. The realm of ideas is still looming large while reality on the ground continues to be perilous for the civilians in Gaza.

The UK is seeking to outsource its migration problem to the Western Balkans, a move that shows how its foreign policy is increasingly driven by domestic pressure to cut irregular immigration. The push to relocate rejected asylum seekers abroad is part of a wider European trend toward externalising migration control, where wealthier countries offer money or security guarantees to others willing to contain migration on their behalf. The approach has made migration a key currency in regional diplomacy.

Sir Keir Starmer hosted leaders from six Western Balkan countries in London as part of the Berlin Process, launched in 2014 to support the region’s path toward European Union membership. In practice, however, migration appeared to overshadow much of the discussion. Kosovo became the first country to indicate it will host a migrant return hub for people whose asylum claims in the UK have been refused and whose appeals have been exhausted. The proposal would allow Britain to transfer rejected asylum seekers to facilities abroad while deportation arrangements are made.

A similar approach has already been tested in Italy’s migrant deal with Albania. The plan to process asylum seekers in Albanian facilities was presented as a way to ease migration pressures but has faced legal challenges, high costs, and limited results. Albania’s intended political gains were clear, to strengthen its EU accession prospects through Italian backing and economic cooperation. However, with the UK outside the EU and unable to offer similar incentives, Kosovo’s calculation is different.

The answer lies in security guarantees more than anything else. As the summit began, the UK extended its participation in the NATO peacekeeping mission in Kosovo until 2028 and pledged further defence and border support. With tensions with Serbia periodically flaring and Russia backing Belgrade, these commitments carry weight. Yet as the UK pursues its own version of externalised asylum processing, it is likely to encounter similar hurdles to Italy’s deal, particularly over the legality of offshore asylum procedures and the protection of detainees’ rights.

The UK also announced sanctions on Balkan criminal networks accused of people smuggling and committed to joint policing efforts, including deploying drones and scanners along regional routes. Together, these moves show how migration policy is becoming part of Europe’s broader security agenda, and how smaller states like Kosovo are leveraging this to reinforce their security in a volatile region.