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For companies and investors in Europe, 2024 saw a clear articulation of a new potential policy agenda: more focussed on the economy, including targeted deregulation; more coordination on defence procurement and industrial support; and a reluctant embrace of a more assertively unilateralist trade policy, whether directed at Beijing or Washington. There was also a watershed moment in working with – if not yet embracing – right wing parties outside the traditional mainstream.
2025 is already testing whether the EU institutions and European capitals have the political will and practical bandwidth to implement this, handicapped by a divided and inward-looking France and a German election that is likely to take time to translate into a new government.
However, the signs early in the “first hundred days” are that reappointed Commission President Ursula Von Der Leyen is serious about her priority of increasing private investment and winning business confidence, even at a cost of losing some supporters from her first term.
There are three key tests that will need to be met to translate high level intentions – supported by the harsh diagnosis delivered by Mario Draghi – into action by the EU as a whole.
First, can new Council President Antonio Costa and the Polish Presidency find sufficient common ground in areas requiring unanimity? Of the new priorities, only deregulation and trade measures can be achieved through the traditional community method, and these are the Commission’s focus in the first half of 2025. By contrast, a serious ‘Savings and Investment Union’ requires member states to cede control (if not sovereignty) over barriers to financial integration created by taxation and pension systems. Filling any funding gap for Ukraine created by US withdrawal will require acquiescence or at least abstention of Viktor Orbán. Loosening restrictions on subsidies and merger control to support “European Champions” arguably also depends on consensus for de facto treaty change of the kind we saw during the Eurozone crisis.
Second, can centre-right EPP leaders – particularly Roberta Metsola and Manfred Weber – build majorities in an unprecedentedly divided European Parliament to set a more business-friendly and market-led approach to achieving net zero, when even its own members are jockeying for position in their home countries. This will be particularly challenging if a politically sensitive sector – like the automative sector – enters a crisis of the kind that hit energy intensive industries in 2022 and requires real-time regulatory support.
Third, which geopolitical events will absorb political attention and capacity? Two defining aspects of the last Commission’s term of office – the covid-19 pandemic and Russia’s invasion of Ukraine – were (for obvious reasons) completely absent from that Commission’s Political Guidelines. Meanwhile the most substantial item of inherited business – negotiating a new EU budget for 2027-2034 – is shaping up to be highly divisive both for its scale and its priorities, between traditional support for agriculture, regional development and research, and new priorities such as defence and industrial policy. This is even before we take into account the need for diplomatic and political attention on President Trump’s second term agenda in Washington, DC.
Overall, this is a political environment in which substantive, nimble and constructive engagement by businesses and investors will be critical. Each new Commissioner is tasked with holding structured business dialogues and coming forward with proposals for streamlining regulation and reducing the burdens. A comprehensive strategy for deepening the single market is promised for June 2025. For firms and sectors, this is effectively a competition for relevance. The winners will move quickly and know how to align their aims with those of decision-makers.
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The views expressed in this research can be attributed to the named author(s) only.