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2024 was a transformative year in the European Union.
The outlook ahead in Brussels and the EU
2024 was a transformative year in the European Union.
On the one had there were the significant political changes flowing from the end of the 5 year political cycle. The European Parliamentary elections took place in June and the formation of a new executive – the European Commission – was finalised in December. The Parliamentary elections led to a growth of far right and extreme right parties at the expense of the Liberals and the Greens. The traditional “Grand Coalition centre” (centre left, centre right and Liberals regularly supported by the Greens) still hold a majority. However, with this outcome of the European Parliamentary elections, an alternative majority including the far right is now a possibility as well. This means that the European Parliament has moved to the right.
The newly reconstituted European Commission is again led by the German centre right Ursula von der Leyen, which means a certain level of continuity. However, also in the European Commission we see a move to the centre right with more than half of the 27 European Commissioners being affiliated to the centre right EPP group. Decision making is shared more between Commissioners which gives the president of the European Commission an even stronger position. The agenda of the new European Commission still includes the digital and green transition but the priority has now shifted to competitiveness and strategic sovereignty / security (including addressing immigration). It is a question whether the objectives of increasing competitiveness and introducing clean industrial deal are compatible.
On the other hand there were significant elections and political changes in the Member States of the EU. It should never be forgotten that the EU is a voluntary cooperation of 27 member States to jointly address key issues. This means that the political sentiment within the EU Member States strongly influences the decisions made in the EU. In this context it must be noted that there are many member states where the national government is not very stable. Notably the early elections in France (leading to political instability), the fall of the coalition government in Germany (most likely leading to a change in government) and the move to anti establishment parties in other countries such as the Netherlands, Austria and Slovakia have influence on the capacity of the EU to set out a clear agenda and execute on that.
This comes at a time when decisive action at a European level is needed. Not only on physical security and defence of democracy but also on economic development and challenges to economic security. In reports commissioned by the European Commission and the Member states on the internal market and competitiveness of the EU, former ECB president and Italian prime minister Draghi and former Italian prime minister Letta set out bold agenda’s of changes needed to reinvigorate the European economy and boost the resilience if the EU to outside challenges. The recommendations include making significant investments in the green transition and defence and security as well as revising thinking on industrial policy and European level capital markets.
The challenges are clear. Yet addressing these challenges requires agreeing on priorities, financing and the basic idea of taking joint action. At a time when member states are more inward looking than ever, the European politicians, including those leading the European Commission and the European Parliament, have their work cut out for them in 2025.
“2024 was a transformative year in the European Union.
On the one had there were the significant political changes flowing from the end of the 5 year political cycle. The European Parliamentary elections took place in June and the formation of a new executive – the European Commission – was finalised in December. The Parliamentary elections led to a growth of far right and extreme right parties at the expense of the Liberals and the Greens. The traditional “Grand Coalition centre” (centre left, centre right and Liberals regularly supported by the Greens) still hold a majority. However, with this outcome of the European Parliamentary elections, an alternative majority including the far right is now a possibility as well. This means that the European Parliament has moved to the right. “
The outlook ahead in the UK
Following a year of major electoral change, 2025 presents a political paradox for the UK. On the one hand, politics is stable: Labour under Keir Starmer holds 411 out of 650 seats in the Commons, a commanding Parliamentary majority until the next general election in 2028 or 2029. On the other hand, Labour has not enjoyed an electoral honeymoon; its initial political announcements were inexpertly handled; and it has made itself the hostage to fortune on a number of electoral promises, the greatest of which is growth. A bold Budget has divided opinion and Labour is not commanding strong polling leads. All of this sets the scene for a febrile 2025.
But there is no doubt that 2024 was Labour’s year. Whether it was the right call for Rishi Sunak to call a snap election in May will be a matter for political historians, but the prospect of the election going any other way was never really in question. Nonetheless, regardless of their majority, government is more difficult than opposition, and Labour now finds itself with three major electoral difficulties to grapple with.
The first is the demographic change in Labour support. Labour pursued a strategy of winning over the middle-class centre ground while losing left-wing votes in existing Labour-leading urban areas. That gave them more seats but spread the vote thinly: good for the short term, difficult for keeping on to those seats at the next election. The second is the weakness of support for Labour, in raw numbers; 33.7% is a historically low number that makes it difficult to claim any great mandate. The third is the rise of alternative parties in the form of the Liberal Democrats, Reform, Green and left-wing independents, all of whom are hoping to make significant further gains at the next election.
Whether they do make those gains depends in no small part on the performance of the Conservative party. It is early days for Kemi Badenoch. All of the signs are that she will continue the robustly combative approach she has built her career on. Whether that will resonate with the country – or indeed, with an increasingly fractious parliamentary Conservative party, not all of whom see the world her way – will be one of the big political stories of 2025.
The main political story will, however, be the performance of the government under Keir Starmer. On issues such as the winter fuel allowance and inheritance tax for farmers, policies that may have seemed innocuous enough on paper unravelled in real life with notable opposition. And key electoral promises made, for instance on planning, energy and homebuilding, are turning out not to be quite so simple to deliver though it remains early days and the legislation needed to drive forward these changes is only just being introduced.
Yet already big changes have taken place and the government has been anything but paralysed. The October 30 Budget was a major political moment that signalled a new approach to taxation and public spending: essentially announcing significantly more of both. A raft of other legislation has also been introduced in a busy Parliamentary schedule.
On foreign policy, the election of Donald Trump offers the UK an interesting opportunity to play a distinctive global role moderating the fundamentally different approaches of America and Europe. His advisers have openly invited the UK to take a different tack, consciously choosing a regulatory regime closer to the USA’s than the EU’s – a suggestion that will hold appeal to some given the closeness of the two markets in business terms, albeit whether this invitation will be taken up by a left of centre government is plainly not straightforward. Domestically, there remains the appetite to tackle long-standing complex issues that Conservatives couldn’t or wouldn’t touch, most notably NHS reform. Privately, Labour strategists argue there is unlikely to be a better time to grip the agenda.
In that context, gripping the agenda is likely to be the dominant theme for the UK government in 2025. So far, the narrative has been about dealing with the mess left behind by the Conservatives. That only goes so far. The first Labour Budget offered the British public a deal that higher taxes would ultimately lead to higher growth and better living standards for them. If that gamble pays off, it could signal a handsome electoral consolidation at the next election, as well as helping manage the issues of social cohesion that are increasingly bubbling up. If it doesn’t, expect turbulence.
“Following a year of major electoral change, 2025 presents a political paradox for the UK. On the one hand, politics is stable: Labour under Keir Starmer holds 411 out of 650 seats in the Commons, a commanding Parliamentary majority until the next general election in 2028 or 2029. On the other hand, Labour has not enjoyed an electoral honeymoon; its initial political announcements were inexpertly handled; and it has made itself the hostage to fortune on a number of electoral promises, the greatest of which is growth. A bold Budget has divided opinion and Labour is not commanding strong polling leads. All of this sets the scene for a febrile 2025.”
The outlook ahead in Germany
Germany has been a political and economic leader in Europe for many decades. Today, it faces the biggest economic challenges in Europe and has slipped into recession for the second consecutive year. A high tax burden, high energy prices and excessive bureaucracy are jeopardizing the competitiveness of German companies. As a result, 7,000 industrial jobs are lost every month. The automotive industry is particularly affected. On the other hand, Germany’s government often struggled to agree on a unified voting stance at the European level. In political terms, the “German Vote”, an abstention from important votes in the European Council, has become a symbol of Germany’s declining influence at European level.
The causes of Germany’s problems can be traced back to Chancellor Angela Merkel’s time in office. Energy prices in Germany have risen dramatically because of the phase-out of nuclear energy. Renewable energies cannot yet be used efficiently due to an inadequate infrastructure of grids, transmission lines, and storage systems. The war in Ukraine has added the import of expensive gas as a further price driver. Social spending accounts for a large portion of the federal budget. There is a lack of public funding for the expansion of digitalization, roads, and railways. Additionally, the partially uncontrolled immigration of millions of migrants is straining public budgets, increasing security problems, and leading to growing tensions among the population.
When the previous federal government, consisting of the Social Democrats (SPD), Greens, and Liberals (FDP), took office in 2021, they agreed on one thing in particular: after 16 years of Angela Merkel, they wanted to form a government without the participation of the Christian Democrats (CDU). However, after Russia’s invasion of Ukraine and the need to redefine the political and financial priorities of government policy as part of the “turnaround,” the sometimes irreconcilable ideological differences became apparent. The SPD and Greens sought to drive the transformation and decarbonization of industry and households through government funding programs, while the FDP aimed to provide citizens and businesses with the financial flexibility to make their own technology-neutral choices via tax relief. After three years, the government fell apart due to its many contradictions. The current problem is that both businesses and citizens are lacking a clear direction from the parties on how Germany should be made fit for the future.
Disappointment with the misguided course set during Angela Merkel’s time in office, combined with the failure of the new federal government, has contributed to the rise of political forces on the fringes. Right-wing and left-wing populists are projected to receive around 30% of the vote in the next general election. Due to the lack of cohesion among the parties in the center, this will necessitate a coalition of parties with significant ideological differences to secure a majority in parliament. It remains to be seen how the required policy changes will unfold in such a divided political landscape.
“Germany has been a political and economic leader in Europe for many decades. Today, it faces the biggest economic challenges in Europe and has slipped into recession for the second consecutive year. A high tax burden, high energy prices and excessive bureaucracy are jeopardizing the competitiveness of German companies. As a result, 7,000 industrial jobs are lost every month. The automotive industry is particularly affected. On the other hand, Germany’s government often struggled to agree on a unified voting stance at the European level.
In political terms, the “German Vote”, an abstention from important votes in the European Council, has become a symbol of Germany’s declining influence at European level.”
The outlook ahead in Spain
In 2024, Spain stood at a crossroads, balancing political fragility with economic dynamism. The government faced persistent challenges, including public protests and corruption scandals that weakened its support, particularly among nationalist parties crucial for its stability, limiting the its ability to effectively navigate legislative agenda.
Despite these setbacks, Teresa Ribera’s appointment as EU Commissioner highlighted Spain’s strengthened mandate on the international and European stage, and underscored Ribera’s key role in advancing the EU’s green agenda.
Economically, Spain thrived with a projected GDP growth of 2.9%, improved employment figures, decreased inflation and significant foreign direct investment, positioning the country as Western Europe’s third-largest destination.
This economic dynamism was supported by a favorable regulatory environment, including the presentation of initiatives like the Industrial Law, aimed at fostering renewable energy investment and furthering Spain’s leadership in sustainability. Nevertheless, challenges such as high living costs and housing shortages persist, requiring targeted policy responses to maintain public confidence.
Regionally, the most notable political shift occurred in Catalonia, where, for the first time, leadership moved away from nationalist parties, marking a historic milestone. In the Basque Country, a near tie between the PNV and EH Bildu reshaped the political landscape, while opposition-led regional governments amplified their criticism of Sánchez’s policies, leveraging platforms like the European elections to magnify public discontent.
Looking ahead to 2025, Spain is poised for political stability, tempered by legislative constraints such as the approval of the national budget. However, the new leadership in the European Commission, with prominent figures like Nadia Calviño at the European Investment Bank and Teresa Ribera in a key green transition role, promises enhanced coordination and synergy with the EU, particularly in advancing renewable energy initiatives.
On the economic front, Spain’s positive trajectory is set to continue, with a regulatory framework designed to attract investment and boost strategic sectors such as energy. The government’s commitment to implementing EU funds remains central, with key regulations expected to materialize during this term, opening significant opportunities for businesses in Spain.
Despite these prospects, challenges remain. Tensions within the coalition may hinder substantial legislative progress, while corruption scandals and ongoing opposition criticism will continue to erode public trust in the government.
Spain enters 2025 with a nuanced mix of political stability, economic opportunity, and structural challenges. Its resilience in navigating the complexities of 2024 provides a foundation for cautious optimism, but where sustained progress will depend on the government’s ability to navigate domestic increasing scrutiny and polarization while attempting to lead international challenges effectively.
“In 2024, Spain stood at a crossroads, balancing political fragility with economic dynamism. The government faced persistent challenges, including public protests and corruption scandals that weakened its support, particularly among nationalist parties crucial for its stability, limiting the its ability to effectively navigate legislative agenda.
Despite these setbacks, Teresa Ribera’s appointment as EU Commissioner highlighted Spain’s strengthened mandate on the international and European stage, and underscored Ribera’s key role in advancing the EU’s green agenda.
Economically, Spain thrived with a projected GDP growth of 2.9%, improved employment figures, decreased inflation and significant foreign direct investment, positioning the country as Western Europe’s third-largest destination.”
The outlook ahead in France
In 2025, French politics find themselves at a crossroads following the democratic and political decisions of 2024. We saw the emergence of a new normal, very different from 2023 : the European and legislative elections results reshaping the country, a dissolved National Assembly, and a new government relying on a fragile relative majority. This new balance will tilt again in 2025 with political, economic, social and geopolitical pressures, all of this creating a climate of uncertainty for corporate leaders.
First, political instability remains extremely high, the highest in the last 4 decades in France, as the far-right Rassemblement National (RN), and the left-bloc (NFP) emboldened by recent electoral successes, pressures the government. President Macron’s administration, with a narrow coalition, faces the real possibility of having its government overthrown, and being forces into a parliamentary dissolution again in 2025. Balancing policy reforms and securing a budget, while opposing a strong far-right opposition places immense strain on the government’s cohesion and raises concerns about its ability to deliver.
Second, economic challenges are front and center. France is struggling to contain a mounting public debt and fiscal deficit, prompting a budget focused on austerity. Plans for €60 billion in spending cuts and tax hikes aim to reduce the deficit, but economists warn of potential stagnation, while social unrest simmers, driven by layoffs at companies like Michelin and Vencorex. With unemployment and economic anxiety on the rise, the government faces mounting social tensions that could threaten stability.
At the same time, France grapples with shifting climate priorities. The country’s new National Plan for Climate Change Adaptation emphasizes resilience to projected temperature increases of 4° in 2100. While necessary, this pivot to adaptation has sparked debate, with critics concerned it may weaken carbon reduction commitments. Balancing immediate climate resilience with long-term mitigation remains a complex and divisive issue.
Let’s add that France’s geopolitical position is equally challenging. The return of Donald Trump as U.S. President complicates transatlantic relations, with potential disputes over trade and NATO commitments. In Ukraine, France remains steadfast in supporting Kyiv, a position that requires European unity amid concerns about changing U.S. support. France’s diplomatic balancing act extends to its relations with China, Russia, and Africa, where it seeks to maintain influence amid competition from other global powers.
Domestically, tensions over trade and agricultural policy are exemplified by the EU-Mercosur free trade agreement, which French farmers oppose due to concerns about unfair competition. Macron’s government has resisted the deal to protect local interests. Yet, social discontent, particularly among rural communities, and we remember the violent protests last year during the agricultural fair in Paris, during which President Macron negotiated during hours with farmers, underscores the broader challenges facing French leadership.
Let’s say it, the stakes for 2025 are high. After the democratic/electoral moment of 2024, now is the time of adaptation. Maintaining stability, fostering economic growth, and addressing social unrest while managing complex diplomatic relationships is the to do list of 2025. The decisions made now will shape France’s trajectory and role in the world, potentially for years to come. Whether the government can maintain its fragile hold on power or succumbs will depend on its ability to adapt.
In this context, it is our conviction that a course of action is possible. That chief executive officers (“CEOs”) can take proactive steps to safeguard their organizations’ interests and ensure long-term resilience by investing in government relations, public and regulatory affairs. This emerges as a high return-on-Investment and crucial strategic imperative for CEOs seeking to start 2025 in a winning position and make it last in 2026-2030.
“In 2025, French politics find themselves at a crossroads following the democratic and political decisions of 2024. We saw the emergence of a new normal, very different from 2023 : the European and legislative elections results reshaping the country, a dissolved National Assembly, and a new government relying on a fragile relative majority. This new balance will tilt again in 2025 with political, economic, social and geopolitical pressures, all of this creating a climate of uncertainty for corporate leaders.”
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