In Episode 4 of 2025 in Review, our special year-end podcast series where we revisit the forecasts made during The World in 2025 Masterclass in January, we turn to Europe with Philippe Le Corre, professor of International Relations and Asian Studies at ESSEC Business School in Paris, and Senior Fellow at the Asia Society.

Back in January 2025, he spoke about Europe’s emerging strategic dilemmas: the pressures of the war in Ukraine, economic fragmentation within the EU, and the three-way balancing act between Washington, Brussels, and Beijing.

Now, as the year draws to a close, Dinesh Narayanan, senior journalist and anchor for this series, returns to those themes to ask:

• How has the Ukraine conflict evolved, and what does it mean for Europe’s security architecture?

• What does the new EU-US trade deal signal about transatlantic alignment under Trump’s second term?

• How resilient is the EU economy, and what’s happening inside the bloc on cooperation and competitiveness?

• And where do EU-China relations stand after a year of recalibration and uncertainty?

Key Takeaways

(Read Time: 3 min)

1. Ukraine War: No End in Sight—and a Strategic Headache for Europe

• Trump is trying to impose a “peace deal”—including recognition of occupied Ukrainian territories—without consulting Europeans or Ukrainians.

• Zelensky recently announced he wanted to buy European fighter jets. This adds friction with a US president pressing countries to buy more American military equipment. Which in itself is a contradiction as he’s also asking Europe to raise the defense budget to become strategically autonomous—you cannot be strategically autonomous if you buy defense equipment from another power.

• There have been a number of instances of Russian drone incursions into NATO countries such as Poland, Estonia and Latvia, and naval incidents near the UK. Europe sees this as proof Putin has no intention of backing down.

• The US doesn't want to withdraw from NATO, contrary to expectations, but wants to keep an upper hand.

• Europe is edging toward a “war economy”. At the NATO summit in June, European countries agreed to spend 5% of their budget on defense. Europe is militarizing out of necessity, not choice—without unity on how far or fast to go.

2. Transatlantic Relations: An Uncomfortable Shift in Power

• A lopsided EU-US trade deal imposed 15% tariffs on Europe (vs. 10% for the UK), signed in Scotland under Trump and European Commission President Ursula von der Leyen. 

• Similarly, for the EU-China meeting, the Europeans had to go and meet the Chinese leader in Beijing. 

• It shows the uncomfortable position of European leaders who have to compromise with either the US or China on many things. 

• Europe is in transition, with new leaders or leaders who will leave the stage in the next year or two. 

3. EU Economy: Fragmented Responses, Slow Action

• People are concerned that Europe is not exporting enough and that other countries want to export more to Europe. They’re also concerned that Europe is lagging on technology. 

• Germany is reassessing its economic model—to reduce reliance on China, and relaunch its defense industry massively. It is also concerned with Russian drone incursions in Poland, its neighbour to the east. 

• The Draghi Report calls for $800+ billion in annual investment. But Europe continues to lag in AI and strategic tech. France and Germany are investing, but others are not keeping pace.

• Europe is doing well in reducing its carbon footprint, but most of the other big players, including the US, China, and India are not. So, people are questioning whether Europe is doing the right thing.

4. China-Europe Relations

• The relationship between the two is tense.

• At the meeting between High Representative Kaja Callas and China’s Foreign Minister Wang Yi, in July, in Brussels, the Chinese passed a message to Europe that they did not want Russia to fail in the war—and that there was no point discussing this.

• The tariffs imposed by Europe on electric vehicles have still not been digested by the Chinese. 

• Some countries, including Spain and Hungary, have made the mistake of welcoming too many foreign investors, including Chinese investors, as opposed to investing for their own car manufacturing industries.

5. Broader Shifts Challenge European Values

• On the big issues, there is a consensus that Europe needs to get its act together.

• The EU concept is still there. The problem is, with Trump, Xi Jinping, Putin, and to some extent Narendra Modi, it feels like the European approach to international relations, the post-war rules-based international order, is weakened.

• When you hear Donald Trump addressing the Chinese leader with the G2 concept, it reflects the way that he's seeing international relations. 

• Europe is built on consensus, with 27 members around the table. Now there's a shift happening in Europe due to this acceleration of history.

• The relationship with the U.S. will no longer be the same, even when Donald Trump leaves the stage.

• Many countries are facing a populist backlash. 

• How to re-industrialise Europe—that’s very difficult. You've seen this in France, where the Parliament is re-discussing a pension reform that was voted on two years ago. Because of the country’s political instability (three prime ministers in a year), the far right is in a position to vote against laws that were enacted in previous years by the very same president, but when he had an overall majority in Parliament. 

• Germany too is seeing the rise of the far right. 

• Italy stands out for relative stability—helped significantly by large EU COVID recovery funds and Meloni’s unexpectedly pragmatic stance.

6. Europe’s Strategic Autonomy: Still an Ambition, Not a Reality

• Despite years of rhetoric, Europe remains squeezed between the US and China.

• The real question is, are European countries prepared to help each other by building a European procurement for submarines or jet fighters? That would help the defense industry and give the EU real strategic autonomy.

• France, which is at the core of the Eurozone, is facing significant debt levels. The irony is that it has been given a rebate by Greece. France was at the forefront of helping Greece 10 years ago in the debt crisis.  

Follow the 2025 in Review series here

Coming Soon:

Episodes with

• Shyam Saran, former Foreign Secretary, Government of India