The European Union is increasingly becoming a bastion of stability in a geopolitically tense environment, but faces challenges in competitiveness and innovation, especially compared to China. The Panorama Analysis 2026 by the Konrad-Adenauer-Stiftung assesses the EU's development across three dimensions: Innovation and Competitiveness, Attitudes of Member States towards the EU, and the Global Environment.
Innovation and Competitiveness:
- Stagnation: The EU's GDP grew moderately by 1.6% in 2025, but competitiveness and innovation capacity are under pressure. Research and innovation progress remains minimal, with significant regional disparities. Leading European universities have also stagnated in international comparisons.
- Progress: Sustainability initiatives show moderate positive trends, including increased renewable energy share, growth in sustainable securities, and progress on UN Sustainable Development Goals (SDGs) like quality education, economic growth, and reduced inequalities. The EU remains socially resilient, with low unemployment, even distribution of incomes, and high satisfaction levels (particularly in Nordic countries). Inflation was brought back towards the 2% target in 2025. Regulatory normalization continues, with state aid volume approaching pre-pandemic levels.
Attitudes of Member States towards the EU:
- Stability and Fragmentation: Public support for the EU remains high and slightly rising, with most citizens viewing EU membership as advantageous. However, political polarization, informal decision-making, and selective integration are increasing. Despite pro-European parties' dominance, Eurosceptic influence remains significant.
- Institutional Capacity: The EU's institutional capacity to act is intact but hampered by selective blockades. Structural conflicts are evident in foreign, security, and energy policies, with Hungary's dissenting votes and Slovakia's shifting positions on Russia highlighting the unanimity requirement's consequences. The EU's legal framework enforcement remains robust, with declining infringement proceedings.
- Trade Policy: Trade policy shows signs of revival, with progress on agreements with Mercosur, India, and Indonesia. The EU acts coordinately within the UN framework but faces limited strategic influence due to geopolitical shifts. Geopolitical action is becoming more coherent but has not yet reached full potential.
- Institutional Development: Potential enlargements have intensified debates on EU institutional reforms, particularly regarding majority voting and efficiency gains. Conflicting interests between larger and smaller member states block concrete progress. Economic integration within the EU is uneven, with some member states (e.g., Germany, France) becoming less consistent in implementing EU requirements.
Global Environment:
- Dysfunctional Multilateral Order: The EU operates in an increasingly dysfunctional multilateral order with eroding foundations for international cooperation. Deadlocks in the UN Security Council (Ukraine, Gaza, Sudan) limit the EU's foreign policy effectiveness. The WTO faces politicization of trade issues and weakening regulatory function despite reform initiatives.
- Democratic Governance: Global democratic governance is stagnating, posing challenges for the EU in promoting liberal democratic norms. Authoritarian states are increasing their coordinated influence within multilateral organizations.
- Security Situation: The global security situation is deteriorating, with high levels of armed conflicts, political violence, and terrorist threats (including within Europe). Irregular migration inflows may only provide temporary relief.
- EU Relations with Global Actors: Relations with Russia continue to deteriorate due to aggression and hybrid threats. Transatlantic relations are marked by strategic uncertainty despite security cooperation. Relations with China are ambivalent, balancing economic interdependence with geopolitical and trade tensions.
- Globalization: Globalization is fragmenting into distinct sub-regions, with trade, investment, and mobility influenced by political conflicts and security interests. This leads to a rebalancing of economic openness towards greater strategic security and resilience within the EU.
Recommendations for Germany and the EU:
- Implement a clear competitiveness agenda, simplify bureaucracy, and pursue bold integration steps within the single market, potentially through a coalition of the willing.
- Redirect economic resources towards innovation capacity, prioritizing public spending on R&D and allowing for economic structural change.
- Use market access proactively and consider targeted countervailing duties in critical sectors to offset unfair competition and demand technology transfer.
- Utilize positive public attitude towards the EU strategically, following the "big on big things, small on small things" principle, with greater integration in areas of clear European added value and restraint elsewhere.
- Extend majority voting in the Council following Hungary's change of government, requiring trustworthy internal cooperation and sound fiscal policy.
- Assume a greater geopolitical role, building a safety net for rules-based trade with middle powers and addressing capability gaps in defense, intelligence, and critical technologies, particularly given declining trust in the US.
