Between politics and geopolitics: has June 2025 been a turning point for Europe and the rest of the world?
The NATO Summit concluded a month marked by intense political and geopolitical tensions, both globally and within Europe. The ceasefire between Israel and Iran, ending what some have called “The 12 Days War”, and NATO’s understated stance on Ukraine were the two main uncertainties of the summit. In contrast, a well-anticipated development was the commitment of European countries to spend 5% of GDP on defence, notably more than double the current target of 2%.
NATO leaders confirmed their pledge to more than double defence spending by 2035, using words such as “crucial”, “momentous” and “quantum leap” to describe the decision. Yet the summit also exposed rifts between the US and Europe in their perceptions of Ukraine and Russia. However, the members of the alliance committed to spending 3.5% of GDP on core defence, covering military hardware and troop maintenance, as well as an additional 1.5% on defence-related investments.
These investments include dual-use initiatives to enhance military mobility, cybersecurity, civil-military cooperation and critical infrastructure resilience. During what US Secretary of State Marco Rubio referred to as the “Trump Summit”, some observers remarked that the 32 leaders gathered in The Hague shared a clear objective: to sufficiently meet the US President’s demands on defence spending in exchange for a continued US commitment to NATO.
Only Spain and Slovakia expressed their dissent, refusing to agree to increased military spending. Spanish Prime Minister Sánchez’s declaration was echoed by Slovak Prime Minister Fico, who stated that his country “has other priorities in the coming years than armament” and could manage without higher defence expenditures. However, this stance was marginal and, most importantly, as a commentator noted, “NATO leaders weathered the Trump storm, [..] now comes the hard part of actually paying up”.
Immediately after, EU leaders reconvened in Brussels for an EU summit focused primarily on trade. The second half of the EU-US negotiations resumed under the looming deadline of the 9th of July. While presenting the proposal of a “new World Trade Organization”, European Commission President von der Leyen stated that the EU is ready for a trade deal with the US but that “all options remain on the table”. Indeed, the international trade setting remains fluid as Europe has been active in forging new relationships and Beijing confirmed it has signed a trade agreement with the US. The EU, for its part, is preparing for yet another debate on how to advance the decarbonisation of its economy in light of these recent developments.
In this context, the political equilibrium of EU institutions has gained again the spotlight as the Socialists and Liberals are threatening to block the European Commission agenda. The centrist coalition that von der Leyen has often relied on to pass legislation has been strained due to the centre-right European People’s Party’s efforts to dilute the EU’s green policies, pushing the coalition’s strategic ambiguity to its limits. According to some, this internal divide has strengthened (far-)right groups in the European Parliament, who took credit for pulling the EPP toward their positions with special regard to immigration and climate-related issues.
On the 5th of June, the European Central Bank marked one year of its easing cycle by implementing another interest rate cut amid rising concerns over the eurozone’s weak economic performance and global trade tensions. The ECB lowered its key deposit rate by 0.25 percentage points to 2%, marking its seventh consecutive cut and the eighth reduction since it began decreasing borrowing costs in June 2024. The central bank also revised its inflation forecast downward for 2025, now projecting that consumer price increases will reach their 2% target this year.
With inflation stabilising after the post-pandemic surge, the ECB has shifted its focus toward reducing borrowing costs to support the struggling economies of the 20 euro-using countries. Meanwhile, tariffs imposed by President Trump have further clouded the eurozone’s economic outlook, with Europe becoming a primary target, raising concerns about significant impacts on the region’s exporters. When announcing the rate cut, the ECB adopted a cautious stance regarding the US tariffs and the possibility of retaliatory measures.
A CER Insight noted that European security cannot be fully assured by either expanding the EU’s role or reducing NATO’s. The US’s significant reduction in NATO commitments would leave gaps that need to be addressed. As a result, Europeans require a new platform to guarantee defense and develop capabilities. At the upcoming NATO summit in The Hague, leaders are concerned about Ukraine, Russian tactics and defense funding, the author argued. However, their main worry remains US President Trump’s possible intentions toward NATO, especially given his past threats of withdrawal. If Trump pursues withdrawal again, Europeans must consider alternative security arrangements to fill the void, he stated.
An Ifri Paper remarked that, on the 2nd of April 2025, the US broke from its usual trade policies by announcing “reciprocal tariffs”. The administration’s moves seem rushed, inconsistent and driven by its own interests, the author emphasised. This confusion is harming trade partners, including the European Union which should answer firmly, but avoid mirroring the US’ aggressive tactics, he continued. The EU’s slower decision process may help reveal US contradictions, whilst broader counteractions, including anti-coercion measures, should remain on the table, he further stated.
In a Project Syndicate Commentary, Pinelopi Koujianou Goldberg, a former World Bank Group Chief Economist and Professor of Economics at Yale University, stated that, given recent events at home and worldwide, European policymakers now view America’s withdrawal as an opportunity for their nations to advance in the modern economy. However, to make real progress, they will need to tackle four politically sensitive issues that have been ignored for too long, she affirmed.
On the question of Europe’s relationship with the so-called “global south”, a Clingendael Report highlighted that the expansion of BRICS and changes in US policy are speeding up a multipolar world order. This shift means the EU must broaden its strategic and economic ties to stay globally competitive, it also evidences. Engaging with BRICS nations, which now make up around 41% of global GDP (PPP), will be vital, the author stated. To succeed, the EU needs to recognise and accept differing worldviews among these partners, the author added.
On the same note, an ECDPM Commentary highlighted that the Council of the EU has adopted its official position ahead of the Fourth International Conference on Financing for Development. It reaffirms commitment to multilateralism, the SDGs, and gender equality in a rapidly shifting global environment. However, the authors stated, the conclusions largely preserve traditional approaches, lacking innovative responses to new fiscal and geopolitical realities. The document also misses the chance to present a forward-looking vision aligning development goals with trade and investment strategies, they argued. Greater emphasis on leveraging private capital is urgently needed amid declining concessional finance, they added. Overall, the EU’s stance reflects continuity, but risks falling short of the moment’s transformative potential, they concluded.
Regarding the new German government’s impact on the EU, an ECFR Policy Brief stressed that Germany’s recent election saw the far-right Alternative for Germany (AfD) coming second, breaking historic norms, and that the new chancellor signalled openness to cooperating with these forces, reflecting shifting conservative attitudes. As younger conservatives are more nationalist, less tied to post-war caution, Germany is adopting more assertive domestic and foreign policies, the author highlighted. This process may lead to a right-leaning bloc in the EU, creating a two-speed Europe alongside France and Italy. The author also expressed the opinion that that EU policymakers should harness this shift to drive deeper, more flexible EU integration.
Whereas, an SWP Commentary acknowledged Germany’s shifting international context calls for a strategic reorientation of its European policy. The EU is increasingly vital to Berlin as both an economic and security guarantor for itself and its partners and Germany’s new coalition government aspires to take on a pragmatic leadership role within the EU, they argued. To fulfil this role, enhanced coordination in European policymaking is essential, while a broadened partnership approach should support efforts to bolster EU autonomy and resilience, they said. Ultimately, Germany’s leadership must aim to strengthen the Union’s collective ability to act decisively.
On the question of EU Defence, a Finabel Publication argued that recent European defence spending reflects a strategic use of military Keynesianism. Though not explicitly stated, this approach underpins EU and Member State responses to insecurity and economic stagnation. Defence investment is being tied to industrial renewal, regional development and political consensus-building. In addition, military expenditure thus serves both economic and strategic purposes within EU policymaking. The publication also highlighted a secondary form of military Keynesianism that integrates defence with broader fiscal goals, marking a notable shift in the EU’s combined approach to security policy and economic strategy.
Last but not least, a CEPS Publication tackled the question of Europe’s financial market by acknowledging that Sweden’s capital market is distinguished within the EU by its depth, inclusiveness and long-term focus, shaped by pragmatic reforms over decades. The publication also highlighted that the market benefits from strong alignment among firms, unions and public authorities, underpinned by broad trust. Indeed, according to the author, Sweden’s model exemplifies how coherent policies and institutional credibility support economic and social resilience, and offers valuable lessons for the EU’s Capital Markets Union and efforts to mobilise household savings for productive investment.
This editorial is authored by Massimiliano Gobbato, Communications Director. Contributions by PubAffairs Communications Team’s Nicole Finucci, Kristina Vilenica and Jacopo Bosica to the drafting of ‘The Finder’ are gratefully acknowledged.
From our Editorial Partners
NATO summit 2025: Time to build a proper European pillar? | Centre for European Reform (CER)
Neither an ‘EU-plus’ nor a ‘NATO-minus’ could fill all the gaps that would be left in European security if the US radically reduced its commitment to NATO. Europeans need a new forum to provide substitute defence guarantees and defence capabilities.
Trump’s trade war: What answers for the European Union? | Institut français des relations internationales (Ifri)
The announcement, on April 2, 2025, of “reciprocal tariffs” by the United States has opened a sequence of profound break with decades of established trade policy practices, where the administration behaviour has been marked by dogmatic blindness, amateurism, and self-serving interests.
Image credits: Tomas Ragina/Shutterstock.com
America’s retreat is Europe’s big opportunity | Project Syndicate
In light of recent domestic and global developments, European policymakers increasingly see America’s retreat as a chance for their own countries to catch up and thrive in the twenty-first-century economy. But to succeed, they will have to address four politically difficult questions that have long been swept under the rug.
The BRICS and the emerging order of multipolarity | Clingendael
The BRICS group – originally consisting of Brazil, Russia, India, China, and South Africa – has expanded exponentially in 2024-2025. Four new official members – Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE) – joined on January 1, 2024, and Indonesia did so a year later. Saudi Arabia is listed on the website of the BRICS as a full member, but has yet to formally accept the membership.
Image credits: Restricted-format meeting at the 2024 BRICS Summit in Kazan, Russia / ©Kremlin.ru
Beyond continuity: Rethinking the EU’s offer to the Global South at FfD4 | ECDPM
The Council Conclusions highlight a strong commitment to multilateralism and sustainable development amid a complex and rapidly evolving global landscape. Despite some promising elements, the EU’s position falls short of offering a fundamentally new approach to development finance that reflects geopolitical, economic and fiscal realities.
Image credits: Andrea Fontalvo via Unsplash
The kids are all right: What Germany’s conservative turn means for Europe | European Council on Foreign Relations (ECFR)
Germany’s future involvement in European integration will be more entrenched in domestic power politics, shaped particularly by the need to counter the far right.
Image credits: Friedrich Merz at a CDU event in Oberhausen, Germany, February 21, 2025 Image by picture alliance / photothek.de | Dominik Butzmann ©
Turning the EU into a life insurance policy | German Institute for International and Security Affairs (SWP)
Germany’s international and European policy environment is changing drastically. This necessitates a reorientation of Germany’s European policy. The European Union (EU) is becoming increasingly important for Germany as a powerful community of action and should be further developed into an economic and security life insurance policy for Germany and the EU’s other member states.
Defence spending as economic policy? Military Keynesianism in today’s European context | Finabel
This paper explores how recent European defence spending reflects a strategic application of military Keynesianism rather than a purely threat-driven response. While the term remains largely absent from official rhetoric, EU institutions and Member States have embraced its logic to confront a dual challenge: growing geopolitical insecurity and economic stagnation.
Learning from Sweden: a blueprint for building resilient European capital markets | Centre for European Policy Studies (CEPS)
Sweden’s capital market stands out in the EU for its depth, inclusiveness and long-term orientation, shaped by decades of pragmatic reforms. Key drivers of its development include pension restructuring, tax simplification and the introduction of accessible savings vehicles – all fostered within a broader culture of trust and openness to financial innovation.
Image credits: www.vecteezy.com