Steven Everts
Director, EU Institute of Security Studies
Europe’s biggest underpriced risk is financial dependence on the United States. This matters as U.S. President Donald Trump is doing to the global financial architecture what he has already done to the global security order.
Foreign policy types in Europe are full of doom. They discuss the threats where the signs are flashing but solutions are not forthcoming: Ukraine, Russia’s hybrid war, U.S. unreliability on NATO, China’s weaponization of critical minerals. Plus, our polarized politics, the poison of social media, and the fact that all this is happening when we are broke.
One issue, however, is largely ignored: a possible end to the U.S.-led, dollar-centered financial system. Trump is openly threatening the independence of the Federal Reserve, undermining confidence in the dollar, while U.S. debt is surging, to more than $2 trillion, or over 6.2 percent of GDP last year. Investors are hedging: Chinese bonds now trade at lower yields than U.S. Treasuries, despite China’s weaker credit rating. Most of the BRICS coalition’s trade is conducted in local currencies.
Europe is dangerously exposed to a world of economic coercion where the old financial rules no longer apply. Europeans hold over $3 trillion in U.S. debt. What if the U.S. imposes an arbitrary tax on interest payments to foreigners? How much of our gold is held on U.S. soil? If we ask for it back, say in the middle of a Greenland-related crisis, are we absolutely sure we would get it?
Ian Bond
Deputy Director, Center for European Reform
The Southern Neighborhood.
As Vladimir Putin attacks it militarily and Donald Trump attacks it politically and it suffers domestic political and economic woes, Europe needs first to concentrate on tackling these problem.
Europe cannot ignore its Southern neighborhood, however. Since the 2014-2015 migration crisis, Europe has tried to treat the symptoms of problems in North Africa, the Sahel, and the Horn of Africa by attempting to stop desperate people reaching Europe. But it has not tackled the causes, which include climate change, conflict, and population growth. From the Atlantic to the Gulf of Aden, the political, economic, security, and humanitarian situation is deteriorating.
Meanwhile, Russia and China are pursuing their interests in the region, to Europe’s detriment. Every Maghreb country suffers or will soon suffer from absolute water scarcity—having less than 500 cubic meters of fresh water available per person per year, against the 1,700 cubic meters required for good health. In the Sahel, jihadists exploit conflicts between herders and farmers that are driven by water shortages. The region’s population growth rates are among the highest in the world—Chad’s population will double in fifteen years. People in intolerable conditions will try to escape, and Europe is an attractive destination. It needs to wake up.
Sophia Besch
Senior fellow in the Europe Program, Carnegie Endowment for International Peace
Fragmented rearmament risks fragmenting Europe itself—this is the issue Europe cannot afford to continue ignoring in 2026. The defense procurement decisions being made now will shape Europe’s defense-industrial base for decades. If they are taken narrowly, country by country, Europe could spend record sums only to lock itself once again into duplication, underinvestment in innovation, and renewed dependency on external suppliers.
The political temptation to go it alone is understandable. Large states—Germany above all—now feel emboldened by new budgets and industrial capacity. There is little appetite to be slowed down by cumbersome European cooperation and integration. But this is a strategic miscalculation. Embracing Europe is not just an economic necessity, it's a political imperative. A purely national course for a country like Germany will unsettle smaller allies, fuel fears of asymmetric power, and ultimately weaken the European project itself.
Europeans are no longer asleep at the wheel. But they are flying a plane they must rebuild mid-flight, through turbulence. The money is there, the political will is there, so are the firms, and the talent to make European rearmament a success. But trying to build the foundations for a truly European way of war without a shared European defense industrial plan risks turning rearmament into a source of division rather than strength.
Elena Lazarou
Director General, Hellenic Foundation for European and Foreign Policy (ELIAMEP), Greece
Space is becoming a battlefield, and while the EU has acknowledged the danger, that acknowledgment does not translate into preparation at an adequate pace. By all accounts, 2026 will be an extremely important year for space, with major lunar and planetary missions planned by several actors, including the United States and China. But this expected mobility in space will also raise the bar for risks and heightened antagonism for and in space.
Life in Europe depends on satellites that are easy to jam, hack, or destroy. Antisatellite weapons could shut down economies in a matter of hours. The United States has responded by creating a relevant force, increasing financing, and conducting orbital conflict simulation exercises. China is gaining a significant lead in the field of anti-space capabilities. Russia has already demonstrated its willingness to weaponize orbit.
Resilience, standards, research and development, and space policy are all now part of the EU lexicon, and proposals are on the table to increase spending for space— for both civilian and defense initiatives—in the next multiannual financial framework. But this will only begin in 2028, and even then, the sums mentioned still reflect a civilian perspective, not the reality of a rapidly contested domain. The slow pace of the EU's strategic shift risks toward space autonomy may leave Europe strategically blind in the event of a crisis, even as early as the current year.
Dimitar Bechev
Senior Fellow, Carnegie Europe
The issue which Europe is not quite ignoring but certainly not paying enough attention to is China.
These days, managing an increasingly fragile relationship with Trump's United States takes too much of the bandwidth of policymakers in Brussels and member states' capitals. Yet it is the rise and rise of China that poses a tough dilemmas for European economies—and therefore for societies. Beijing's policies and the Chinese manufacturing's overcapacity threaten core sectors in Europe's heartland like automaking as well as industries of the future where we still have an edge such as wind power.
All the same, Europeans need to partner with China on tackling climate change, especially in light of U.S. disengagement. And then there is Ukraine where Beijing is enabling Russian aggression. EU—as well as the UK—have a tough balancing act to pull off: push back against the Chinese but also engage on issues of common interest. The challenge will likely become even starker in 2026.
Jakub Janda
Director, European Values Center for Security Policy
A strategic escalation synchronized between Russia and China is the potential threat Europe must get ready for in 2026. The Russian war machine is enabled and boosted by enormous Chinese material, technological, and financial support. At the same time, Russia is actively preparing to be able to attack Baltic NATO members, while China is practically conducting rehearsals of maritime blockade of Taiwan. The likelihood of full-scale kinetic conflict on a global scale is lower than a sub-kinetic escalation in both theaters, forcing Europe, the United States, and Asian like-minded partners to difficult choices in terms of deploying military and economic assets.
This year, we might see China start a partial naval quarantine of Taiwan, blackmailing European countries to submit to Chinese geopolitical demands. China is actively using economic and technological dependencies of European democracies, while most European leaders do nothing substantial to decrease these strategic vulnerabilities on this hostile totalitarian power—and a closest ally of Russia. Unless European capitals start urgently derisking from China, Beijing will keep sabotaging European rearmament programs. If Moscow attacks European NATO members, China would likely squeeze Europeans to aid the Russian strategic attack.
Kristi Raik
Director, International Center for Defense and Security, Tallinn
Developments in Russia. Recent events in Venezuela and Iran remind us that no dictator stays in power forever. Regimes that rely on violence and fear and fail to meet the basic needs of their citizens eventually come to a miserable end, one way or another. One of the countries that can hardly escape such a trajectory is Russia, whose history has followed a pattern of hardening and decay of regimes that seem unbreakable until they collapse.
2026 will be the most difficult year for Russia under President Vladimir Putin’s rule, amidst the growing economic, social, and human costs of the war against Ukraine. Europe should not focus on restoring dialogue with the current regime but precipitating its demise.
The breaking point will likely be accompanied by a period of domestic turbulence that creates openings for Russia’s neighbors to strengthen their sovereignty—as it happened when the tsarist and Soviet empires collapsed in the twentieth century. It will be Europe’s moment to offer decisive support to the nations in Russia’s neighborhood that aspire to a European future: above all Ukraine, but also Armenia, Belarus, and Georgia. In the longer term, this might be the best way for Europeans to shape the future of Russia.
Sinikukka Saari
Leading Researcher, Finnish Institute of International Affairs
The South Caucasus is rapidly becoming a geopolitical living lab, where new incentives for security, connectivity, and regional engagement are being tested in real time. As Russia’s long war of aggression against Ukraine absorbs its political and military bandwidth, local states are reassessing long-standing dependencies and seeking alternative alignments. Russia’s reduced capacity to act as a regional power broker has created space for Armenia and Azerbaijan to pursue a peace process with diminished reliance on Moscow’s traditionally self-serving mediation.
This opening has not gone unnoticed by other external actors. The United States, China, and Turkey are actively advancing strategic and economic interests, from connectivity and transport corridors to broader security engagement. Proposals such as the Trump Route for International Peace and Prosperity reflect a transactional approach that links peace, infrastructure, and geopolitical realignment, embedding new external stakes in the region’s future.
By contrast, EU engagement remains uneven and reactive. While Brussels increasingly acknowledges the importance of the South Caucasus for energy diversification and connectivity, its political incentives fall short of the region’s accelerating dynamics. Crucially, cross-regional linkages—particularly how the South Caucasus intersects with Middle Eastern security, economic, and geopolitical trends—remain underappreciated. This reflects a deeper constraint: The EU continues to operate within an integrationist and normative modus operandi that limits its ability to think and act geopolitically, at a moment when the world is being reshaped by power politics rather than institutional convergence.
Minna Ålander
Analyst, Stockholm Center for Eastern European Studies (SCEEUS) at the Swedish Institute of International Affairs
Neither Europe’s most urgent problems, nor possible solutions to them, are new.
The digital realm is at least as important as the obvious dilemmas that Europe’s ongoing military transformation present and this issue can make or break Europe’s ability to withstand U.S. pressure. Europe urgently needs to set up its own payment methods and European alternatives for the widely used American digital systems.
There is also opportunity in chaos: Trump’s unprecedented attack on the U.S. Federal Reserve can open a unique chance for Europe to offer an attractive alternative for U.S. bonds. It is an opportune time to start issuing Eurobonds on a large scale, which would improve Europe’s fiscal ability to face current challenges and give it more leverage vis-a-vis U.S. blackmail.
A second important element of a more assertive strategy is the use of Russian frozen assets. The European Council summit last December was a missed opportunity to start squeezing Russia. The frozen assets remain one of Europe’s most significant points of leverage to inspire real interest in the Kremlin to start negotiating in good faith.
