Until Joe Biden announced his resignation as the Democrats' candidate yesterday, Benjamin Netanyahu’s visit to Washington was to be the biggest story this coming week. But the script has just been rewritten. Biden’s decision to put the country's interests ahead of his own will stand in sharp contrast to Netanyahu’s personal narrative of total victory, no matter what the price is.

Netanyahu is to address a joint session of Congress, and will be received by Joe Biden in the White House. The visit is to give Netanyahu political legitimacy eight months into the war in Gaza, amid increased pressures to resign at home. As an act of defiance of the International Court of Justice or the International Criminal Court it suggests that the only legitimacy necessary for Israel is US support.

Israel has become a partisan issue in these US elections, with the Republicans seeing themselves as the only pro-Israel party. For House Speaker Mike Johnson, even Biden’s decision to withhold the shipment of the 2,000-pound bombs that cause disproportionate civilian casualties is unacceptable. The Democrats are split between an older generation that sees it as its moral duty to support Israel, and a younger one that see Israel as a colonial power responsible for the deaths of Palestinian civilians in Gaza.

Now that Biden decided to end his political career, he has more liberty to do what he wants in his final six months. He could stand up to Netanyahu if he wanted to. He can shift how the world will remember him.

Biden has been a staunch supporter of Netanyahu throughout the past decades. Since Israel launched its military campaign in Gaza, Biden had warned Netanyahu many times to protect civilians. Still, Israel went ahead without having to fear many consequences from the US. Biden could change this in his last six months in office.

Some argue that Netanyahu may simply wait this one out, counting on Donald Trump to come to power. But this election is not yet decided. Voters also may not tolerate a prolongation of Israel’s war in Gaza until November or an escalation into the region via Lebanon or Yemen, and by extension Iran. Also, even if Trump may be a supporter of Israel, he will look after his own interests more than after Netanyahu’s. These interests may be aligned, or they may not. That is not entirely in the hands of Netanyahu. Don’t count on Trump’s loyalty. Biden’s offer could turn out be the best deal Netanyahu may get.

Another reminder that business as usual is no longer an option is last week’s landmark ruling from the ICJ. The highest court of the United Nation concluded that Israel’s continued presence in the entirety of the Palestinian territory is unlawful, as it violates the Palestinian right to self-determination. The court ordered that Israel should evacuate its settler population in the West Bank and East Jerusalem and return all land and assets seized, and offer reparations for any material damage caused by its wrongful acts. While not binding, this ruling is unprecedented in its extent, by calling for the return of the annexed land as soon as possible. It will be up to the UN member states to define the modalities of such a move. They could delay its implementation, but UN member states will have to decide whether or not Israel can continue to defy international law, and what consequences it has.

Benjamin Netanyahu is playing for time, amping up pressure on Gaza and hardening his conditions in current ceasefire talks. Ahead of his address to both US houses of Congress next week, the Biden administration had hoped to agree with him a long term deal leading towards a two-state solution under the stewardship of the United Arab Emirates. Yet Israel’s Knesset just rejected any notion of a two-state solution, while Joe Biden's position is weakening at home. Netanyahu may hope for Donald Trump and his vice-president J.D. Vance, a staunch supporter of Israel, to get elected in November before settling for anything. The war in Gaza, meanwhile, continues with daily military attacks and civilian casualties.

Compared to the US, the EU is not a key player in ceasefire talks. But it can shape itself a role for the post-war period. The EU has been the largest donor to Palestinian humanitarian needs, and has a strong interest in guaranteeing the security for Israel and its neighbours. EU member states all back the two-state solution as the ultimate guarantee for security in the region. This is a blueprint, and a mandate for the EU in its new legislative term.

It will be up to Kaja Kallas and her team to define the foreign policy towards the Middle East. She will be supported by Ursula von der Leyen’s Commission. Yesterday, von der Leyen promised to create a new portfolio focussed on the Mediterranean region. In a nod to Spain and Ireland, she promised a new agenda for the Middle East and more attention to Gaza. She pledged to increase humanitarian aid, up from €200m, and to work on a plan for the day after the war in Gaza ends.

It makes sense to split the portfolio of the Directorate-General for Neighbourhood and Enlargement Negotiations into one for EU candidate countries and one for neighbourhood policy in the Middle East and Africa. It separates the necessities of EU accession talks from defining, almost from scratch, an urgently needed neighbourhood agenda for the Middle East and Africa.

While politics and security of the Middle East is at play between the US and the regional powers, economic cooperation is a matter the EU knows well enough to make it work. EU countries also are much closer than the US to the region, and thus can play a crucial role in stability efforts. Energy, economic stability, job creation, security, and migration are all of mutual interest to both regions, the EU and the Middle East. It needs more attention to set up relations, and have a positive impact in the region. One migration deal here or there is not the only thing the EU should be remembered for.

After this month’s British election, the UK’s foreign policy will not change overnight. But there is a significant shift in thinking that has taken place. The idea that, like the US, the UK would after Brexit tilt more to the Indo-Pacific now looks like it is gone. Instead, the new direction of security and defence policy is more Europe-first. The problem is that Europe is not just the UK. Labour will need interlocutors on the other side of the English Channel. There are not too many options.

For Labour, security and defence take priority of place in its plans for re-setting relations with the EU. The party has said that it wants to agree a new security pact with the union relatively quickly. An obvious priority is support for Ukraine. But Labour’s own ideas around security are wide-ranging. David Lammy, now the British foreign secretary, has said that he wants the agreement to cover irregular migration, energy, climate change, and pandemics.

The other side is pivoting away from the Indo-Pacific. This is partly about interests, but also capabilities. John Healey, the new British defence secretary, has been the firmest voice here. He had described the aforementioned Indo-Pacific tilt as a serious flaw of the previous British government’s defence and security policy footing. According to Healey, the UK’s most pressing needs and interests are in Europe, whilst the British navy in particular is not equipped to play as major a role on the other side of the world.

Taken in isolation, it is hard to disagree with this attitude. What happens between China, the US, and its Pacific allies affects everyone, the UK included. But since the UK is in Europe, and has limited means to defend itself, focusing on Europe makes more sense. So does Lammy’s more expansive idea of common security issues. All of the issues he talked about affect both the EU and UK in tandem because of their geographic proximity. The English Channel is wider conceptually than it is physically. 

But it risks repeating an old problem with British attitudes to the EU: having a conversation with itself without considering what’s going on elsewhere. The difficult part with making any security pact work in practice, beyond empty statements of intent, is going to be finding willing partners.

France barely has a functioning government right now. Emmanuel Macron is strongly supportive of Ukraine. But without enough budgetary support from the National Assembly, he is mostly limited to rhetoric. If the far-right gains further in strength, it is unlikely to be amenable to the UK on defence, energy, climate, or immigration policy. Germany is undergoing another round of debt brake-induced consolidation. It will be cutting its defence expenditure in real terms, and wants to also cut its own direct support for Ukraine. This basically leaves Poland, a big spender on defence relative to the size of its economy, but smaller in absolute terms than France or Germany.

Not so long ago, Greece used to be the bearer of bad news for the EU, be it on its fiscal position, migration, or tensions with Turkey. Today, it reads like a beacon of hope, at least on two fronts. The Greek government under Kyriakos Mitsotakis manages to deliver better than expected fiscal performance and lifted the credit rating with a positive outlook. Outperforming goals seems to come easy to this administration. In the first half of this year, GDP and expenditures were less and tax revenues more than expected resulting in a budget surplus that was €1.7bn above target. Those times when Greece’s deficit figures exploded and the government had difficulties to adhere to the targets set by the bailout programmes in the ten years between 2009 and 2018 seem far behind in the past.

Similar when it comes to foreign policy relations to its closest neighbour, Turkey. Their diplomatic relations are currently enjoying a period of detente after a period of border and migrant disputes with the potential for armed confrontation over the 2018-2022 period. The disputes have not disappeared, but they agreed to disagree and postponed any resolution to later. Now the two sides are considering whether the time has come to talk about those controversial issues, ranging from Cyprus to maritime demarcation borders for economic exploitation rights and demilitarisation on Greek islands close to Turkey. Recep Tayip Erdogan and Kyriakos Mitsotakis are to meet in September at the sidelines of the UN’s General Assembly. They are the two to decide whether the time is ripe to talk about issues that involve concessions. Trying to deliver solution comes with some political risk. Any concessions would embolden the hardliners in each of the two countries and foster the rise of nationalism.

The times for the left may be over but the rise of the right is still in the making. Alexis Tsipras was the leader who rose from the left on the promise to end austerity policies during the bailout years. It never happened, and his Syriza party lost support. Now Greece is in the hands of a conservative government that keeps on outperforming fiscal expectations. This will not always remain so, the more public debt is shifted to be hold by the private sector rather than European institutions, the more they also become subject to interest rate rises. Growth may also not always outperform in its long stretch towards repaying its debt to the EU. But this time the political threat comes from the right, with various far-right parties on the rise. Three of the four far-right parties made it into the European parliament and got nearly 20% of Greece’s total seats. The Greek Solution, Niki and Voice of Reason are a mix of nationalist, religious and patriotic parties. Opening up the disputes with Turkey is within their domain. Will they rise and fall like Syriza did over Turkey and migrants?

There is only one way to deal with the likes of Viktor Orbán: move forward in important areas of European integration, leaving Hungary behind. For as long as the EU sticks to the Maastricht/Lisbon format of integration, there is no way that the EU can fight a member state that has veto rights: over the EU’s budget, and the most important aspects of foreign policy and security policy, especially economic sanctions. The EU miscalculated in 2020 when it pushed for its rule of law procedures that it would later deploy against Poland and Hungary. They thought that as a net recipient of EU funds, Orbán could be tamed. What he did is to use the sanctions as blackmail tool against the EU when it needed his vote to impose sanctions against Russia.

Yesterday, Ursula von der Leyen doubled down in her vendetta against Orbán with the announcement that no commissioners would attend future informal ministerial meetings in Hungary. The European Commission will only dispatch senior officials. The Commission will also not proceed with the traditional inaugural visit to the Hungarian EU Presidency – all in protest against Orbán’s visit to Moscow and to Florida, where he met Donald Trump. Earlier yesterday we heard that Josep Borrell organised a meeting of the foreign affairs council at the same time when the Hungarian presidency had tried to convene an informal meeting of foreign ministers.

This has a certain playground-fight quality to it. It happened before. In 1965, it was Charles de Gaulle who refused to send ministers to Council meetings because he did not want the EU to assume supra-national powers. This was a battle de Gaulle lost. Six months later, the EU and France agreed what became known as the Luxembourg compromise, which allowed de Gaulle to retreat from his position in a face-saving manner. We would not have thought that the EU itself would consider using empty chair tactics. For the Commission to do this sets precedents. Did they think this through?

While integration is the only long-term solution to the Orbán problem, the best response in the short-run would be simply to ignore him, and to make it clear to everyone that he does not represent the European Council, not even the EU Council, in matters relating to foreign and security policy.

The media have been gushing about the victory of the Left in France and the UK that they did not focus on an issue they would undoubtedly have focused on had these elections gone the other way. The polling was way out – this time also in France.

The Labour's Party share of the vote results had been around 40% before election day. The final result was under 34%. 

We are not blaming pollsters. The BBC’s exit poll got the main result right to an eery degree of precision, but it admitted the poll was not sufficiently robust to be confident about Nigel Farage’s reform party. And so it turned out. The hectic realignment in French during in the run-up to the second round also made the task for pollster exceedingly difficult.

What we do see is a lot more volatility. In the UK, the Labour Party’s victory was taken for granted by almost everybody, including us, and yet, we know that the outcome was entirely due to tactical voting on both sides, the left – in favour of Labour – and the right – against the Conservatives. Had Rishi Sunak and Nigel Farage cut a deal with Farage contesting the Brexit seats and the Conservatives the rest, that alone could have prevented an outright Labour majority – though it would still not have produced a victory of the right either. Similar in France. The shocking result is that Marine Le Pen’s RN got 37% of the vote in the second round of the legislative elections. We struggle to think of any European party in any country that enjoys such a strong support.

Voting systems are what they are. They deliver different results in any one election. Labour achieved a landslide parliamentary majority with only 34%. The experience shows that voting systems matter in the short-run but not in the long-run. Politicians and voters on the right cannot be counted on forever to shoot themselves in the foot.

We would therefore also be careful about what the attempted assassination of Donald Trump means for the election outcome. Or Joe Biden’s debate performance against Trump. This is still an open race. The two candidates are within polling error margins of each other. What has changed in the last few weeks, and especially over the weekend, is that voters have become more aware of the two candidates’ mortality. Based on actuarial life tables, Joe Biden’s probability of dying in the next terms is around 36%, probably higher given the presence of the obvious neurological ailments he seems to be suffering from. It would therefore be rational for voters to attach a much larger importance to the vice-presidential candidates than they did in the past.

Across Europe, the energy relationship with Russia looks like it is dead. But in Austria, it is as healthy now as it was before the war. Up to May of this year, almost all of the country’s gas has come from Russia via pipeline. Austria’s justification for this has been that it receives the gas, piped into the country via Ukraine, via so-called take-or-pay long-term contracts. These would force Austria to pay Gazprom even if it did not accept the gas it is allocated under the terms of those agreements.

This may not be the case forever, though. Earlier this week, Leonore Gewessler, the Austrian energy minister, set up a commission to look into a contract between Austrian energy firm OMV and Gazprom, which runs to 2040. One objective of the commission is to see if there is a legal exit route from the contract. Another is to investigate the circumstances under which it was signed in 2018. This was, incidentally, the 50th anniversary of the Austria-Russia energy relationship.

Some of this may be politicking. Austria will hold elections in 2024. Ahead of these, the coalition between the centre-right ÖVP and the Greens has started fragmenting. Gewessler, a Green, was also the one responsible for the nature restoration law stunt in the EU Council last month that saw her defying Karl Nehammer, the ÖVP chancellor. The ÖVP was in power, with Sebastian Kurz as chancellor, when the current OMV-Gazprom deal was signed.

But there are other reasons to think that the Austria-Russia energy relationship could eventually meet the same fate as, say, the German one. Last month, an arbitration tribunal ruled in favour of Uniper, formerly the biggest German buyer of Russian gas, in a dispute with Gazprom over the status of its own long-term contracts.

That ruling invalidated Uniper’s obligations, which is significant since it was the single largest holder of these contracts prior to 2022. The terms of Uniper’s contracts may not be the same as OMV’s, and if it went to arbitration another tribunal could always rule a different way. Circumstances are also different, since an explosion knocked out the Nord Stream pipeline in 2022. But if there is a way out for Uniper, there may eventually be one for OMV.

This is especially since the route Austria’s gas supplies from Russia relies on could soon not exist. Ukraine has said that it will not extend its transit agreement with Russia when it expires at the end of this year. Austria was the first country in western Europe to start receiving Russian gas via pipelines from the east. It may be one of the last to stop soon. 

The legal mess that has followed the 2022 energy crisis, and what could come after the end of this year, should tell us a bit about the likelihood of a return to the status quo ante bellum in our relationship with Russia after the war too. That year saw a relationship that survived some of the scariest moments of the Cold War break down completely. Building it back up again in the future would not be impossible. But we should not underestimate the difficulty of doing so. 

We don’t get the sense that the Democratic Party has a lot of people who have been thinking this through. The degradation of Joe Biden’s neurological health has been evident since before the start of the primaries. The issue is also not whether he can debate Trump or win the elections – but whether he is able to fulfil his duties as president. One would have thought that the prospect of another Donald Trump presidency would have focused minds. But it did not.

The Wall Street Journal reports that the current wave of pressure on Biden to step aside seems to be fading. The Democrats are now ending up with the worst of all worlds, an incapacitated candidate and internal divisions. We noted that Trump has chosen to stay out of this debate to let the Democrats tear each other apart.

It is probably easier to see this from the outside: with less than four months to go until the elections there are not many good options for the Democrats now. The polls cannot tell you how any hypothetical candidate would fare against Trump. Some of the Democratic governors have been preparing for 2028. They are not politically or financially prepared. Harris is the only candidate with access to Biden’s campaign funds. If you try to squeeze a candidate past Harris – a white guy – without the democratic legitimacy of a primary campaign, you are not only going to lose the elections, you risk destroying your party.

The intelligent way to have addressed this problem is not to get George Clooney on the stage but to prepare a coherent plan that gives Biden a dignified exit, that puts Harris in charge, surrounded by a united team of the top Democrats lawmakers and governors. If this is not possible, your second-best strategy is to leave things as they are. 

The message for us over here in Europe is that we should no longer merely consider Trump as a potential winner, but as the most likely winner, and start make preparations now. Would we still want Ursula von der Leyen as a Commission president in a post-Biden era? The Nato summit in Washington is the final curtain for the old trans-Atlantic relationship. As happened in another place, the ageing lead actor has fallen off the stage. The EU’s job is to start the long and painful route towards its strategic independence. This includes defence, but the most important aspect we think is technology. Trump will be better advised this time. A partial US disengagement from Europe is likely. Judging by the state of political discussions in Brussels, Paris, and Berlin, we don't think the EU is ready for this. Not even close.

When looking at our economies, there is often a disconnect. Some metrics may be useful, but they do not tell us as much about how people are living their lives, or experiencing economic conditions. If you try to isolate those, what you will find right now is quite a different story. It explains a lot of the current political mood, in our opinion.

One recent example of this is the findings from the OECD’s most recent employment outlook. It sets out a striking contrast between relatively healthy employment figures, in the US but especially in the euro area, compared to pre-pandemic levels, and real wages. Total employment growth in the euro area has outpaced GDP growth.

But real wages tell another story. As of Q1 2024, they have fallen since Q4 2019 in a number of different European countries, including Germany, Italy, Spain, Belgium, and Sweden. In Italy, real wages have fallen by 6.9% since 2019. Real wage declines have often been even more dramatic since Q4 2021, when inflation took off and Europe’s energy crisis began in earnest.  In Poland and the Netherlands, real wages have both increased since 2019: slightly in the case of the Netherlands and significantly in Poland’s case. Both countries have, however, seen real wage falls since 2021.

This is, we think, one of the key figures to look at if you want to understand political outcomes. In the US too, it is important: real wages have dropped there, both since the pre-pandemic era and since 2021, a different picture to rosier economic statistics. This helps explain why many Americans feel less buoyant about the economy than GDP growth numbers show.

Whether this translates to governments keeping or losing power over one election cycle, or being plunged into chaos or not, is imperfect, of course. Other factors, like political polarisation, differences in political system, and tactical voting come into play. But if it is a sustained pattern, it is a difficult one to escape.

These real wage drops have also come despite a pre-pandemic trend towards shorter average working hours continuing, and even accelerating, across the OECD. This may tell us something about the broader societal factors at play. In some countries, it could also point to misaligned incentives, such as income tax or benefits cliffs that disincentivise working, and therefore earning, more.

France’s RN and the Labour Party had approximately similar vote shares in the recent parliamentary elections around one third. The difference, of course, is that Labour won with a massive majority whereas the RN did not. The difference is not so much due to voting systems as such. Both are versions of winner-takes-all voting systems. The main difference is tactical voting. Never before have we seen tactical voting playing such a decisive role.

Even the normally reliable French polls got this wrong. The UK polls were hopeless. Labour’s share of the votes was really very low, outside of all polling error margins. The data are telling us that Labour was after all not assured of victory as people had anticipated. The Labour victory, and certainly its scale, is to a large extent due to the entry of Nigel Farage, which fatally split the votes of the right. Had Farage and the Conservatives instead formed a strategic alliance, with Farage’s Reform contesting the strong pro-Brexit constituencies, and the Conservatives the erst of the country, the outcome would have been very different. We have yet to see the numbers, but our best guess would be a hung parliament, with a Labour/LibDem coalition.

Tactical voting is always and everywhere an artefact of voting systems. Even in purely proportional systems people might vote tactically to support one coalition over another. In systems like France's or the UK's, tactical voting can produce violent swings. But this goes both ways. What goes up this time, can go down next time.

In the long run, tactical voting increases volatility, but not political outcomes. In France, the centre and the left cannot sustainably collude to keep the right from power. They will now have to govern together. If they fail, the ire of centrists and moderate conservatives, and possibly even moderate Socialists, would turn against the Left, just as the voters of the hard left might see the centre, not the right, as its main opponent.

If you take a sufficiently long-term view, these fluctuations even out. Electoral systems matter, but as we saw in the UK and the US, they don’t keep extremes away. In France or Germany, they don’t either.