The ultra fast-fashion retailer platform Shein is a showcase for how tensions can quickly escalate between Europe and China. Shein, originally from Guangzhou but operating from Singapore, has been in the crosshairs of the French authorities after the discovery of sex dolls representing little girls and firearms on their platform.

Shein has since removed those products from its website, now showing only its own brand rather than the vast marketplace for toys, homeware and gadgets that it increasingly made money with. Its CEO assured that they will fully cooperate. The timing is quite remarkable, the story hit the news cycle just when Shein opened its first department store in Paris. It also comes amid tensions over anti-dumping and anti-subsidy investigations between China and the EU.

The French government’s response was heavy-handed. Yesterday, they launched a large scale inspection operation of packages arriving at Paris airports and initiated several proceedings against Shein. The first was giving the online retailers 48 hours to comply with regulations. The retailer has to comply with the L521-3 of the  Commercial Code and Art. 6-3 of the law for confidence in the digital economy to operate in France. Under these procedures, the worst that can happen is that Shein is delisted. This means in practice that the site’s pages won’t appear in online searches on Google or other search engines. But access is still available by typing in their URL. A parallel procedure was launched by the interior ministry with a threat to block the site for serious damage to public order. This goes further and would require internet service providers to block access to the site almost immediately.

At the European level, the French launched a third procedure, asking the European Commission to investigate Shein’s compliance with the Digital Services Act. A European investigation would be more serious with penalties that could reach up to 6% of global turnover. It could allow EU member states to block the platform if a systemic risk was identified.

Shein has become a symbol of China’s aggressive export strategies. With nearly 146m of monthly users in the EU according to its latest DSA report, the retailer is swamping the European market with cheap products arriving in millions of small parcels. Shein and other platforms benefit from the EU waiver exempting parcels below €150 in value from customs duties.

Not adhering to the EU’s regulatory standards also helps lower the price. Germany's Stiftung Warentest found that 110 out of 162 tested items from Shein and Temu did not meet EU standards, citing unsafe toys and toxic jewellery. The Commission asked Shein earlier this year to document on risks linked to illegal goods and content on its market place. Separately it is investigating Temu for not doing enough to prevent sale of illegal products.

As for politics, Shein and Temu are relatively unknown in China. They are tailored exclusively for export markets. So far it does not seem to be much of a news story there. But it was picked up by a few influencers on social media. Nicolas Forissier, France’s trade minister, raised the possibility of Shein’s suspension during his meeting with Chinese authorities. The minister was in Shanghai this week to support about 120 French companies at China’s International Import Exo in Shanghai. The Shein affair also comes after China retaliated against EU tariffs on Chinese electric vehicles by launching three anti-dumping and anti-subsidy investigations into cognac, French pork, and milk.

Shein and Temu represent a changing world. Those ultra-fast fashion platforms are to the French fashion world what electric cars are to the German car industry. They threaten a symbol of cultural identity as we know it. And for France, nothing gets more personal for the fashion world than Shein opening a department store in Paris. It was boycotted by incumbent retailers but cheered by those looking fo luxury fashion at a cheap price. In that sense, Shein already succeeded where Chinese cars still have to convince European consumers.

One side of the anti-green agenda backlash in the EU is pressure from abroad, especially but not exclusively from the US. See our separate story on how the German government is responding to US and Qatari threats over the EU’s supply chain law. But another is fear from within the EU itself, and its businesses and politicians, about their ramifications. A wholesale reversal of the agenda may be a bit far-fetched. But an incremental rollback is entirely feasible.

We can see that in part from how the EU’s 2040 climate target negotiations went. The EU Council does finally have a deal ahead of a leaders’ summit for the COP30 climate conference that is supposed to kick off today. EU countries can use foreign carbon credits, essentially bought from decarbonising developing countries, to cover 5% of the 90% emission reductions target compared to 1990 levels. This is more than the 3% that the European Commission initially pencilled in. It also contains an option for an additional 5% which can be accounted for by foreign carbon credits. A 90% target has, in effect, become an 80% target.

But that wasn’t the only change the EU countries agreed on. One of the next potential green agenda battlegrounds is an upcoming carbon price for road transport and building emissions. It was initially supposed to come into effect in 2027. The compromise agreed to get the 2040 climate targets through is that the start date will be knocked back by a year, to 2028.

The Commission has already proposed toughening up measures that are designed to keep carbon prices under the scheme at relatively low levels of €45-55 per metric ton of carbon emissions. This would happen by beefing up the so-called Market Stability Reserve for the scheme. We do not expect this to be the last we will hear of the so-called ETS2 either. Even if the scheme comes into effect, we would not be surprised to see these price limits extended further. In the original agreement, they were supposed to go from 2030 onwards.

The Council’s deal on the 2040 target also touched on another carbon market hot potato: what will happen to free allowances under the current carbon pricing regime for industrial emissions. The idea is that with the phase-in of new carbon tariffs, the so-called carbon border adjustment mechanism, or CBAM, free allowances for emissions will gradually be phased out through to 2034. According to the Council’s position statement, it wants the Commission to consider a slower phase-out from 2028 onwards. That would also presumably mean a slower CBAM phase-in.

At the same time, the EU’s biggest emissions targets are not changing. We are still supposed to reach net-zero by 2050, and 55% emissions reductions versus 1990 levels by 2030. But the intermediate targets and carbon pricing mechanisms to get there are being watered down. This has a certain Augustinian quality to it. How long this contradiction can continue for remains to be seen.  

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.