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Abstract The International North–South Transport Corridor (INSTC) is a 7,200-kilometre multi-modal network connecting India, Iran, Azerbaijan, Russia, Central Asia, and Europe, offering a shorter and cost-effective alternative to the Suez Canal. Established in 2000 and expanding with key infrastructure projects like the Rasht-Astara railway, the corridor aims to boost trade volumes significantly by 2030, facilitating faster, cheaper freight movement and enhancing Eurasian integration. Russia and Iran’s collaboration is central, enabling a sanctions-resilient trade route that counters Western dominance and supports economic growth in transit countries. The INSTC also offers environmental benefits, with lower greenhouse gas emissions compared to deep-sea shipping. Strategically, it diversifies Russia’s transport links, reduces dependency on vulnerable Western routes, and strengthens geopolitical ties within the BRICS framework. However, challenges such as infrastructure gaps, sanctions, and regional conflicts persist. For the EU, INSTC presents both opportunities for cheaper trade and risks to its geopolitical influence, necessitating strategic responses to maintain Eurasian connectivity and sanctions effectiveness. Key Words: International Trade, North, South, Europe, geopolitics Introduction The International North–South Transport Corridor (INSTC) is a 7,200-kilometre multi-modal transportation network involving ships, railways, and roads designed to facilitate freight movement between India, Iran, Azerbaijan, Russia, Central Asia, and Europe.[1] Established in September 2000 under an agreement signed in St. Petersburg by India, Iran, and Russia, the corridor has since expanded to include additional members, including Belarus, Azerbaijan and several Central Asian countries. [2] Its primary aim is to enhance trade connectivity by linking major cities such as Mumbai, Tehran, Baku, and Moscow, and beyond, offering a shorter and more cost-effective alternative to traditional routes, including the Suez Canal. [3] Source: https://www.geopoliticalmonitor.com/geopolitics-of-the-international-north-south-transport-corridor-instc/ In 2025, container traffic along the eastern route (via Kazakhstan and Turkmenistan) nearly doubled, supported by discounts of 15 - 80% on shipments, which have been extended through 2026. [4] A milestone occurred in November 2025 when a cargo train from north of Moscow delivered 62 containers to Iran via Central Asia, highlighting the route's viability for India-Central Asia trade. [5] Overall, INSTC freight volumes reached 26.9 million tons in 2024 (19% up from prior years), with rail handling over 12.9 million tons, and projections aim for 15 million tons annually by 2027. [6] The INSTC operates through several interconnected paths. Western Route: from India via sea to Iran's Bandar Abbas port, then by road or rail northward through Iran to Azerbaijan, and onward to Russia. Central Route: involves transit across the Caspian Sea from Iranian ports like Bandar Anzali to Russian ports such as Astrakhan. Eastern Route: connects via Kazakhstan and Turkmenistan for land-based links to Russia. This setup allows for efficient cargo transit, with railways playing a crucial role, including ongoing projects like the Rasht-Astara railway in Iran, to fully connect the network. [7] Suez and its geopolitical importance The Suez Canal stands as one of the world's most strategically vital maritime chokepoints, connecting the Mediterranean Sea to the Red Sea and serving as a critical artery for global trade and energy security. Since its opening in 1869, the Suez Canal has fundamentally transformed global maritime trade patterns and geopolitical relationships. The canal provides the shortest maritime route between Europe and Asia, eliminating the need for the lengthy circumnavigation of Africa via the Cape of Good Hope. This strategic positioning has made the canal a focal point of international competition and a critical infrastructure asset whose security is of profound importance to the global economy. [8] The Suez Canal's economic importance cannot be overstated. The waterway attracts approximately 12 - 15% of worldwide trade and about 30% of global container traffic, with more than $1 trillion in goods transiting annually. An average of fifty to sixty ships transit the canal daily, carrying an estimated $3 billion to $9 billion in cargo value. [9] This concentration of trade flow makes the canal a critical node in global supply chains, particularly for trade between Asia and Europe.[10] The canal's strategic role extends beyond general cargo. It handles roughly 9% of global seaborne oil flows (approximately 9.2 million barrels per day) and around 8% of liquefied natural gas volumes. [11] his energy dimension amplifies the canal's geopolitical significance, as disruptions can directly impact global energy markets and prices. [12] The 2021 blockage of the Suez Canal by the Ever Given container ship demonstrated the canal's vulnerability, disrupting global supply chains and highlighting the systemic risks posed by maritime chokepoints. [13] The Suez Canal has long been recognised as a strategic asset of paramount importance. Historical analysis reveals that control of the canal has been central to imperial and regional power projection, particularly during the British Empire's dominance, when the canal was viewed as the "jugular vein of empire". [14] The canal's strategic value was dramatically illustrated during the 1956 Suez Crisis and its closure from 1967 to 1975, events that reshaped regional geopolitics and demonstrated how canal access could be weaponized. [15] Contemporary security challenges continue to underscore the canal's strategic vulnerability. Recent geopolitical threats in the Red Sea, including attacks on commercial shipping, have raised concerns about the canal's security and the potential for regional conflicts to disrupt global trade. [16] These hybrid threats demonstrate how the canal remains a potential flashpoint where regional instability can have worldwide economic consequences. [17] In brief, for the time being, the Suez Canal remains an indispensable component of global maritime infrastructure, whose geopolitical significance extends far beyond its physical dimensions. Its role in facilitating international trade, energy transportation, and strategic mobility ensures that the canal's security and accessibility remain matters of vital international interest. As global trade patterns evolve and new challenges emerge, the canal's strategic importance continues to shape relationships among nations and influence the calculus of regional and global powers. Iran-Russia Collaboration. Can INSTC be a viable alternative to the Suez Canal? In December 2025, Iranian and Russian officials met in Tehran to expedite the corridor, focusing on removing administrative barriers and finalising legal frameworks. Key projects include the Rasht-Astara railway (expected completion by mid-2026) and upgrades to Iranian ports, such as Bandar Abbas. [18] Russia and Iran's collaboration is central to operationalising the INSTC, involving joint infrastructure development, financial investments, and policy coordination to address connectivity gaps. [19] It is against this backdrop that Russia has funded the 162-kilometre Rasht-Astara railway in Iran (with a 1.3 billion euro loan, targeted for completion by 2027), which resolves a critical missing link in the western route by connecting Azerbaijan's rail network to Iran's, enabling seamless transit from the Caspian Sea to the Persian Gulf. [20] Iran, in turn, has upgraded ports like Bandar Abbas and Chabahar (the latter through a 10-year agreement with India signed in May 2024, involving $2.1 billion in investments to expand capacity to 8.5 million tonnes), while Russia has modernised Caspian ports such as Astrakhan and Olya, along with highways like the M6 Caspian and M29 Caucasus. These investments — estimated at 35% of total corridor funding from Russia and 34% from Iran — focus on railway electrification, port expansions, and digital tools such as electronic waybills to streamline border procedures, thereby reducing export times and costs, which are currently 5 - 7 times higher than EU averages. Bilateral agreements, such as the 1992 Russia-Iran transport pact and recent multimodal logistics deals (e.g., between Russian Railways and India's CONCOR for coal shipments via INSTC in June 2024), further support asymmetric trade flows, with north-to-south machinery and chemicals dominating from Russia, and south-to-north foodstuffs from Iran. In terms of international trade, this partnership enhances the INSTC's viability by boosting freight potential to 14.6 - 24.7 million tonnes annually by 2030 (including 5.9 - 11.9 million tonnes containerised, or 325 - 662 thousand TEU), with grains accounting for 8.7 - 12.8 million tonnes primarily via the eastern route through Kazakhstan and Turkmenistan. For India, the corridor unlocks untapped export opportunities worth up to $180 billion (nine times current levels) to Russia and Central Asia, while Russia's pivot to southern markets (Gulf, India, Africa) has seen bilateral trade with India surge to over $30 billion in 2022, driven by hydrocarbons. Iran's role as a transit hub could generate transit revenues exceeding oil income, potentially increasing 20-fold from $1 billion to support economic growth amid high inflation (54.6% in 2023) and unemployment (9.7%). Synergies with other corridors like the Baku-Tbilisi-Kars (BTK) and Central Asia Regional Economic Cooperation (CAREC) add 127 - 246 thousand TEU in traffic, fostering Eurasian integration. Geopolitically, Russia-Iran ties make the INSTC a tool to counter Western domination by creating a sanctions-resilient route that avoids U.S.-influenced waterways, especially amid the Ukraine conflict and U.S. sanctions on both nations. This "pivot to the South" by Russia and Iran, and their positioning as a Eurasian bridge, reduce dependence on the Suez Canal, which handles vulnerable global trade, and promote diversified connectivity outside Western frameworks such as TRACECA. Challenges persist, including infrastructure overloads (e.g., 8.8 million tons transported in 2022 despite capacity constraints), uncoordinated policies, gauge differences and sanctions that affect insurance and port access, though exemptions for Chabahar help mitigate these. Overall, the collaboration not only addresses these hurdles through targeted investments and digital harmonisation but also positions the INSTC as a sustainable alternative, with environmental benefits such as 25% lower GHG emissions from rail shifts, comparable to those of deep-sea shipping. How does INSTC serve Russian security interests? In a recent analysis of the subject, Prokhor Tebin offers relevant observations examining the strategic importance of the INSTC within the framework of Russian national security amid intensifying great-power competition. The author argues that Russia’s security and economic resilience depend on developing a cohesive Eurasian transport network through a ‘whole-of-government’ approach that integrates various ministries, regional authorities, and foreign partners. This network includes robust domestic infrastructure and diversified international corridors, with the INSTC being a key route linking Russia to the South Caucasus, Central Asia, and Iran. [21] According to Tebin, Russian national security is defined broadly, encompassing socio-economic development alongside defence. Robust transport infrastructure is vital for economic security, military mobilisation, and rapid crisis response, especially given Russia’s diminished strategic depth and growing threats on multiple borders, including NATO expansion to the west and instability in the south. Against this backdrop, the current overreliance on vulnerable Western transport arteries (the Baltic and Black Seas) underscores the need for alternative routes, such as the INSTC and the Northern Sea Route, to ensure resilience against potential blockades. Furthermore, Tebin stresses the importance of a networked transport system rather than isolated corridors, advocating for coordination via an interdepartmental group to optimise resource allocation and strategic prioritisation. While alternative regional projects exist, such as the Zangezur Corridor and Trans-Caspian routes, Russia should not oppose them outright but seek to enhance its own projects’ competitiveness and foster regional stability, as stable neighbours contribute to Russian security. Iran’s role in the INSTC is pivotal due to its geographic position and economic potential. Supporting Iran’s stability through the corridor reduces regional risks like mass migration and terrorism. The corridor also provides Russia with critical connectivity to the Global South and lessens dependency on NATO-controlled maritime routes. Ultimately, the INSTC, though currently limited in cargo volume, is strategically crucial for diversifying Russia’s transport links, enhancing military and economic security, and fostering Eurasian integration in a complex geopolitical environment characterised by long-term great-power rivalry. Other authors, Vinokurov, Ahunbaev and Zaboev stress the strategic importance and development potential of the INSTC, a multimodal transport network connecting northwestern Europe and the Nordic countries with Central Asia, the Persian Gulf, and South Asia. Accordingly, INSTC serves as a crucial alternative to traditional east-west routes by offering faster delivery times, supporting Eurasian economic integration, and enhancing connectivity for landlocked countries in the Eurasian Economic Union (EAEU), four of whose five members are landlocked. The above-mentioned authors estimate that by 2030, the aggregate freight traffic on the INSTC, including containerised and non-containerised goods, could reach 15 – 25 million tonnes, with container traffic potentially increasing twentyfold. The main commodities transported include food products, metals, machinery, textiles, and grain — the latter being the major non-containerised cargo. The corridor’s rail-based transport offers environmental advantages over road and air freight, emitting significantly fewer greenhouse gases. Despite its potential, INSTC faces several challenges: uncoordinated transport policies among member states, international sanctions (notably on Iran), infrastructure bottlenecks, legal and regulatory inconsistencies, border-crossing delays, and differing railway gauges. Overcoming these issues requires improved coordination, infrastructure investments, digitalisation, and streamlined customs and tariff policies. To sum up, fully operationalising the INSTC would transform it from a mere transport corridor into an economic development corridor, fostering regional connectivity, trade expansion, and sustainable growth across Eurasia. It would also help convert landlocked countries into “land-linked” ones, boosting their economic prospects and integrating them into global value chains. Consequently, it raises questions about the future of the EU as a geopolitical actor within the broader West-BRICS context. Possible consequences for the EU Geoeconomically, INSTC could have significant consequences, centred on trade diversion and supply-chain shifts. The corridor promises 30 – 40% reductions in transit time (e.g., 23 days versus 45 – 60 days via Suez) and costs, enabling faster India–Europe flows of pharmaceuticals, textiles, and machinery, as well as Russian energy and agricultural exports to South Asia. [22] Post-2022 Ukraine invasion, volumes have grown amid Russia’s pivot from European markets, with India–Russia trade surging to around US$50 billion. For the EU, this creates dual pressures: potential cost savings for importers accessing Indian goods or Central Asian resources, yet practical barriers from EU and US sanctions on Russia and Iran, which restrict participation and financing. EU ports and logistics hubs (e.g., Rotterdam) risk losing transit volumes as cargo reroutes through sanctioned territories, while the corridor competes with EU-supported alternatives like the Trans-Caspian Middle Corridor. [23] The EU’s Global Gateway strategy (€300 billion investment framework) explicitly promotes diversified, sustainable connectivity, allocating funds to bypass Russia - and Iran-dependent routes. Cargo between the EU and India is projected to double by 2032 under the prospective FTA, underscoring the need for reliable non-INSTC pathways. Overall, the INSTC accelerates Eurasian trade reorientation away from Western-dominated chokepoints, modestly eroding EU leverage in global logistics while exposing vulnerabilities to disruptions in sanctioned segments. [24] Geopolitically, the INSTC bolsters a Russia–Iran–India axis within BRICS, serving as a sanctions-circumvention tool that undermines the effectiveness of Western measures. By enabling Russia to monetise its geography for access to the Global South and Iran to gain transit rents, it advances multipolar narratives that challenge EU influence in the Caucasus, Central Asia, and the Persian Gulf. [25] For Europe, this reduces coercive leverage over Moscow — previously derived from transit dependence — and fragments the rules-based order the EU champions. It also counters EU efforts to deepen ties with India via transparent initiatives like IMEC, potentially tilting New Delhi’s connectivity choices toward sanctioned partners. Challenges include infrastructure gaps (e.g., rail gauge mismatches, Iranian sanctions-induced delays) and regional conflicts (Armenia – Azerbaijan), limiting scalability. Yet momentum persists through bilateral deals, such as Azerbaijan’s financing for Iran’s Rasht–Astara railway. [26] In conclusion, the INSTC presents the EU with limited opportunities for cheaper diversified trade but primarily poses geoeconomic risks of route competition and geopolitical challenges to sanctions efficacy and Eurasian influence. To mitigate, the EU should probably accelerate Global Gateway investments in the Middle Corridor and IMEC, harmonise sanctions enforcement, and engage India on value-aligned connectivity. Failure to do so could accelerate a shift toward BRICS-led corridors, diminishing the EU’s role in shaping 21st-century Eurasian trade architecture. References [1] International North–South Transport Corridor. (n.d.). Wikipedia. Retrieved October 2, 2026, from https://en.wikipedia.org/wiki/International_North%E2%80%93South_Transport_Corridor [2] Cross-border Infrastructure International North-South Transport Corridor (INSTC). (n.d.). Asia Regional Integration Center. Retrieved October 2, 2026, from https://aric.adb.org/initiative/international-north-south-transport-corridor [3] Vinokurov, E. Y., Ahunbaev, A., & Zaboev, A. I. (2022). International North–South Transport Corridor: Boosting Russia’s “pivot to the South” and Trans-Eurasian connectivity. Russian Journal of Economics, 8(2), 159–173. https://doi.org/10.32609/j.ruje.8.86617 [4] Aliyev, N. (2025, December 19). Russia’s Pivot to the Eastern Route: Balancing Azerbaijan with Kazakhstan and Turkmenistan? Iddle. https://ridl.io/russia-s-pivot-to-the-eastern-route-balancing-azerbaijan-with-kazakhstan-and-turkmenistan/ [5] Wani, A. (2025, November 27). INSTC Eastern Corridor: India’s Gateway to Central Asia. Observer Research Foundation. https://www.orfonline.org/expert-speak/instc-eastern-corridor-india-s-gateway-to-central-asia [6] Bochkarev, D. (2025, November 27). The North–South Transport Corridor and Energy-Related Exports. Energy Intelligence. https://www.energyintel.com/0000019a-c479-d672-a9be-c77f8c740000 [7] International North–South Transport Corridor. (n.d.). Wikipedia. Retrieved October 2, 2026, from https://en.wikipedia.org/wiki/International_North%E2%80%93South_Transport_Corridor [8] Helwa, R., & Al-Riffai, P. (2025, March 20). A lifeline under threat: Why the Suez Canal’s security matters for the world. Atlantic Council. https://www.atlanticcouncil.org/in-depth-research-reports/issue-brief/a-lifeline-under-threat-why-the-suez-canals-security-matters-for-the-world/ [9] Ibidem. [10] Ducruet, C. (2016). The polarization of global container flows by interoceanic canals: geographic coverage and network vulnerability. Maritime Policy & Management, 43(2), 242–260. https://doi.org/10.1080/03088839.2015.1022612 [11] Helwa, R., & Al-Riffai, P. (2025, March 20). A lifeline under threat: Why the Suez Canal’s security matters for the world. Atlantic Council. https://www.atlanticcouncil.org/in-depth-research-reports/issue-brief/a-lifeline-under-threat-why-the-suez-canals-security-matters-for-the-world/ [12] Rodrigue, J.-P. (2005). Straits, Passages and Chokepoints A Maritime Geostrategy of Petroleum Distribution. Erudit, 48(135). https://doi.org/https://doi.org/10.7202/011797ar [13] Lee, J. M., & Wong, E. Y. (2021). Suez Canal blockage: an analysis of legal impact, risks and liabilities to the global supply chain. MATEC Web Conf., 339. https://doi.org/https://doi.org/10.1051/matecconf/202133901019 [14] Morewood, S. (1992). Protecting the Jugular Vein of Empire: The Suez Canal in British Defence Strategy, 1919–1941. War & Society, 10(1), 81–107. https://doi.org/10.1179/072924792791198995 [15] Bhattacharya, S. S. (1982). Strategic Importance of the Suez Canal. Strategic Analysis, 5(12), 686–693. https://doi.org/10.1080/09700168209427575 [16] Kotait, A., & Ismail, A. (2025). Geopolitical Threats in the Red Sea: The Future of the Suez Canal amid Regional and International Challenges. EKB Journal Management System. https://doi.org/10.21608/jces.2025.435103 available here: https://www.researchgate.net/publication/393195669_Geopolitical_Threats_in_the_Red_Sea_The_Future_of_the_Suez_Canal_amid_Regional_and_International_Challenges [17] Lott, A. (2022). Hybrid Threats and the Law of the Sea Use of Force and Discriminatory Navigational Restrictions in Straits. Brill. https://doi.org/https://doi.org/10.1163/9789004509368 [18] Iran, Russia Push To Fast-Track North-South Trade Corridor. (2025, December 17). The Media Line. https://themedialine.org/headlines/iran-russia-push-to-fast-track-north-south-trade-corridor/#:~:text=Iran%20and%20Russia%20announced%20that%20they%20aim,Pushing%20the%20project%20into%20an%20operational%20phase [19] Vinokurov, E. Y., Ahunbaev, A., & Zaboev, A. I. (2022). International North–South Transport Corridor: Boosting Russia’s “pivot to the South” and Trans-Eurasian connectivity. Russian Journal of Economics, 8(2), 159–173. https://doi.org/10.32609/j.ruje.8.86617 [20] Rawandi-Fadai, L. (2023, August 3). What North-South International Transport Corridor Means for Iran. RIAC Russian International. https://russiancouncil.ru/en/analytics-and-comments/analytics/what-north-south-international-transport-corridor-means-for-iran/ [21] Tebin, P. Y. (2026). The International North–South Transport Corridor in Russian National Security Optics. Russia in Global Affairs, 24(1), 134–148. https://doi.org/10.31278/1810-6374-2026-24-1-134-148 Vinokurov, E. Y., Ahunbaev, A., & Zaboev, A. I. (2022). International North–South Transport Corridor: Boosting Russia’s “pivot to the South” and Trans-Eurasian connectivity. Russian Journal of Economics, 8(2), 159–173. https://doi.org/10.32609/j.ruje.8.866171 [22] Fillingham, Z. (2024, September 10). Geopolitics of the International North-South Transport Corridor (INSTC). Geopolitical Monitor. https://www.geopoliticalmonitor.com/geopolitics-of-the-international-north-south-transport-corridor-instc/ [23] Kausch, K. (2026, February 11). Corridor Politics. Charting Europe’s de-risking route through Eurasia. G M F. https://www.gmfus.org/news/corridor-politics [24] Ghanem, D., & Sánchez-Cacicedo, A. (2024, June 18). From hype to horizon: what the EU needs to know to bring IMEC to life. European Union Institute for Security Studies. https://www.iss.europa.eu/publications/briefs/hype-horizon-what-eu-needs-know-bring-imec-life [25] Kausch, K. (2026, February 11). Corridor Politics. Charting Europe’s de-risking route through Eurasia. G M F. https://www.gmfus.org/news/corridor-politics [26] Delivorias, A., & Falkenberg, D. (2024). India's connectivity initiatives: A multi-faceted strategy (EPRS Briefing No. PE 762.471). European Parliamentary Research Service. https://www.europarl.europa.eu/thinktank/en/document/PE-762.471

I. Introduction As Figure 1 shows, Germany’s share of world GDP has declined from 6.99% in 1980 to 2.89% in 2025. Germany, which had been considered to be Europe’s economic powerhouse in previous decades, became the worst-performing major economy in 2023 with a 0.9% contraction, followed by another 0.5% contraction in 2024, leading to a recession. Several economists and business figures expressed concerns that Germany’s economic downturn could cause the country to reclaim its reputation as the “sick man of Europe” from the 1990s. [1] Economists argue that the German economy was in a permanent crisis mode, while the Handelsblatt Research Institute declared that it was in its “greatest crisis in post-war history” after projecting a third consecutive year of recession in 2025. [2]  Figure 1: Germany’s share of world GDP (based on PPP)  As Figure 2 shows, GDP in the United Kingdom in Q3 2025 was 5.2% above its pre-pandemic level of Q4 2019. This compares with Euro-zone GDP being 6.5% higher, with GDP in Germany up by 0.1% (the lowest among G7 economies). The United States has the highest GDP growth among G7 economies over this period at 13.3% (as of Q2 2025).  Figure 2: G7 nations’ GDP growth (source: OECD) With this information in background, this paper explores why the German economy has underperformed and fallen behind. This paper first describes the current economic situation of Germany and explains why the German economy has failed. II. Current economic situations of Germany The German economy has been sluggish. As Figure 3 shows, the average GDP growth rate in Germany during the 2013-2023 period was only 1.1%. And Germany experienced a 0.9% contraction in 2023 and a 0.5% contraction in 2024.  Figure 3: Average GDP growth rate in Germany, 2013-2024 In addition, as Figure 4 shows, the unemployment rate in Germany has recently increased following the Ukraine war. The unemployment rate dropped from 6.2% in January 2016 to 5% in January 2020, but then it rose following the Ukraine war in 2022. Unemployment rate increased from 5% in March 2022 to 5.6% in March 2023 and 6.3 % in December 2025.  Figure 4: Unemployment rate in Germany, 2016-2025 (source: Bundesagentur für Arbeit) Rising energy prices have been a main factor causing serious problems for the German economy. As Figure 5 shows, gasoline price in Germany has increased following the Ukraine war. Gasoline price in Germany averaged 1.73 USD/Liter from 1995 until 2025, but it reached an all-time high of 2.36 USD/Liter in May 2022. Gasoline price declined to 2.05 USD/Liter in December 2025, but it is still higher compared to the previous decade.  Figure 5: Gasoline price in Germany (source: Trading Economics) Moreover, fiscal imbalance has been a big problem for Germany. As Figure 6 shows, consolidated fiscal balance in Germany recorded a huge deficit in the 2020s. The deficit recorded $49,542 billion in January 2023 and $46,923 billion in September 2025, compared with an average of $13,425 billion from March 1991 to September 2025. Figure 6: Germany’s consolidated fiscal balance (source: CEIC Data) As a result, as Figure 7 shows, the German government’s debt as a % of GDP significantly increased in the 2020s. The German government’s debt reached an all-time high of 81% in December 2010 and then declined until 2019, but it started to increase from 2020. The German government’s debt as a % of GDP increased to 65.2% in October 2022.  Figure 7: Government debt in Germany: % of GDP (source: CEIC Data) Investment is a key to economic growth in every country. As Figure 8 shows, overall private investment in Germany has declined in the 2020s, particularly during the period of 2022-2024 after the Ukraine War. In addition, as Figure 9 shows, total government net investment in Germany has declined in the 2020s.  Figure 8: Private investment in Germany, 2010-2024 (Source: ECB, Eurostat, Destatis and European Commission calculations)  Figure 9: Government net investment in Germany, 2010-2024 (Source: ECB, Eurostat, Destatis and European Commission calculations) Reflecting Germany’s recent sluggish economy, as Figure 10 shows, the German manufacturing industry’s business expectation has been negative over the period of 2022-2025 after the Ukraine war.  Figure 10: German manufacturing industry’s business expectation III. Causes of the failure of German economy Why has the German economy failed? Germany’s economic decline can be attributed to multiple factors. The first factor is the energy crisis or energy policy in Germany. Economists cited Germany’s overreliance on cheap Russian gas as one of many primary factors for Germany’s economic stagnation. Prior to Russia’s invasion of Ukraine, as Figure 11 shows, 56% of Russia’s gas exports went to Germany. This caused German industry and the broader economy to become dependent on cheap Russian energy.  Figure 11: Russia’s gas exports in 2021 Germany’s phasing out of its established network of nuclear power, a process initiated and led by the Greens and ultimately enforced by the second Merkel government, increased Germany’s dependency on Russian energy. The German government’s decision to phase out its nuclear power was influenced by the high-profile Fukushima nuclear accident in 2011. Until March 2011, Germany obtained one-quarter of its electricity from nuclear energy, using 17 reactors. The following gap after phasing out of its established network of nuclear power was primarily filled by Russian natural gas, inadvertently increasing dependency on Russian energy. Despite early leadership in renewable energy adoption, Germany’s transition has been hampered by antiquated bureaucratic obstacles, complicated and slow processes for approving projects for renewable energy, and local resistance to infrastructure projects, each discouraging further investment in renewable sectors. As of 2024, renewable sources accounted for just over 52% of the country’s electricity supply, insufficient to meet industrial demands. Germany’s dependency on Russian gas became a vulnerability following the Ukraine War in 2022. The abrupt disruption of Russian energy forced Germany to rapidly diversify its energy sources, leading to a 32.6% reduction in gas imports by 2023. The subsequent sanctions against Russia and supply disruptions led to a 32% increase in Germany’s energy prices, contributing to economic instability and decline. As Figure 12 shows, energy consumer price in Germany skyrocketed in the 2020s following the Ukraine War. Energy consumer price in Germany increased 32% in September 2022 compared to the previous year.  Figure 12: Energy consumer price in Germany (source: OECD) Although energy consumer price in Germany significantly dropped in 2024 and has stabilized afterwards, the damage to industrial competitiveness has been lasting. Energy-intensive industries such as chemicals and metals have shrunk, forcing businesses to either cut production or relocate abroad, thereby contributing to economic decline. The second factor related to the sluggish economy of Germany is the under-development of the tech industry in Germany. Some experts argued that Germany’s economic troubles were partly due to its slow adaptation to technological advancements and shifting to low-productivity sectors, contributing to declining productivity. [3] This issue is about Germany’s insufficient investment in new technologies (computers, artificial intelligence (AI), software, etc.) and the low level of spending on research and development (R&D), compared to other advanced countries such as the US. When we compare OECD countries, we see that these two components have a strong influence on productivity differences between countries. The econometric estimate leads to the following effects: a 1-point increase in the rate of investment in new technologies leads to a 0.8 point increase per year in productivity gains. In a similar way, a 1 point increase in GDP for R&D expenditure leads to a 0.9 point increase per year in productivity gains. [4] As Figure 13 shows, gross domestic spending on R&D as a % of GDP in Germany in 2023 was higher than in many EU countries, but lower than in its Western rivals such as the US, Israel, Japan, Taiwan, South Korea, Sweden, and Switzerland.  Figure 13: Gross domestic spending on R&D as a % of GDP, 2023 Moreover, weak investment in public infrastructure and digitalization has further weakened Germany’s IT sectors. As Figure 14 shows, Germany has long underinvested in public infrastructure, ranking near the bottom among advanced economies in public investment levels.  Figure 14: gross public investment in OECD countries, 2018-2022 (source: IMF) As a result, as Figure 15 shows, there are no German tech firms among the global top 10 most valuable unicorns. The US and China lead the category of global tech unicorns.  Figure 15: Global top 10 Unicorns (source: https://www.hurun.co.uk/hurun-global-unicorn-index-2025#:~:text=In%20contrast%20to%20the%20UK's,the%20US%20and%20China%2C%20including The third factor related to the sluggish economy of Germany is the demographics. As Figure 16 shows, the working-age population in Germany has declined, while old people over 65 have significantly increased.  Figure 16: Age group in Germany (source: UN, World Population Prospects & Financial Times) The IMF posited that the fundamental structural challenges for Germany are accelerating population aging. The country’s working-age population, which had been declining over the three decades, was projected to decline sharply as baby boomers retired. As Figure 17 shows, Germany’s working-age population growth is the lowest among G7 countries. This demographic shift in Germany is expected to decrease GDP per capita, further hinder productivity growth, and cause increased demand for healthcare, potentially forcing workers to go into healthcare away from other sectors.  Figure 17: Working-age population growth, G7 economies (source: IMF) Under this circumstance, shorter working hours increasingly constrain Germany’s labor supply, thereby reducing economic growth. As Figure 18 shows, employees in Germany work shorter hours on average than in any other OECD country.  Figure 18: Employees in Germany work shorter hours on average than in any other OECD country Another issue related to the demographics is the size of the welfare state in Germany. As Figure 19 shows, Germany’s public social spending has expanded and is now at record level. As Figure 20 shows, Germany spent around 30% of its GDP on welfare and social benefits in 2024, placing it among the largest welfare states in Europe, as well as in the world.  Figure 19: German social welfare spending is at record levels, excluding the Covid-19 pandemic (source: OECD, Financial Times)  Figure 20: Welfare and social spending as a % of GDP in 2024 (Source: Eurostat (2024) Gwartney, Holcombe and Lawson (1998) showed empirically that as the size of general government spending has almost doubled on average in OECD countries from 1960 to 1996, their real GDP growth rates have dropped by almost two thirds on average (see Figure 21). According to them, as public social spending goes up, GDP growth goes down.  Figure 21: High government spending reduces growth Moreover, any increase in welfare costs automatically leads to an increase in non-wage labor costs for employers. Under German law, employers are obliged to cover half of their employees’ insurance contributions. Since the end of the Covid-19 pandemic, as Figure 22 shows, non-wage labor costs have risen at a faster rate than total wages, eating into companies’ profits and reducing the room for wage increases, thereby lowering economic growth.  Figure 22: Costs other than wages have started to make up a greater share of employers’ labor spending (source: Bundesbank & Financial Times) The fourth factor related to the sluggish economy of Germany is exports. Exports have been a driving force for Germany for a long time, but the year-on-year (YoY) exports growth rate indicates a decline over the 2023-25 period after the Ukraine War, as Figure 23 shows.  Figure 23: Year-on-year (YoY) exports growth rate in Germany (source: MacroMicro) In addition, German export performance against global competitors has not been so good, as Figure 24 shows. It was so bad in the 2020s.  Figure 24: Germany’s export performance against global competitors (source: Deutsche Bank Research & OECD) IV. Conclusion This paper showed that the German economy has been in big trouble with sluggish economic growth. This paper explained that the failure of the German economy can be attributed to an energy crisis, as well as underdevelopment of tech industry, a shrinking working-age population and shortest working hours of employees, a large size of welfare state, and sluggish exports. References [1] Germany, which had been considered to be Europe’s economic powerhouse in prior decades, became the worst-performing global major economy in 2023 with a 0.9% contraction, followed by further 0.5% contraction in 2024 leading to recession. [2] Partington, Richard (15 January 2024). "Germany on track for two-year recession as economy shrinks in 2023". The Guardian. [3] Fletcher, Kevin; Kemp, Harri; Sher, Galen (27 March 2024). "Germany's Real Challenges are Aging, Underinvestment, and Too Much Red Tape". International Monetary Fund. [4] https://www.polytechnique-insights.com/en/columns/economy/economy-why-europe-is-falling-behind-the-usa/

The price of gold has risen to over US$5,000 (£3,662) an ounce for the first time ever, after doubling in value over the course of a very strong 2025 for the precious metal. The usual explanation for such strong rises is that gold is considered a safe bet for investors when other options look a little shaky. High inflation for example, when cash quickly loses value, is often linked to gold price rises. Trade wars and actual wars usually have a similar effect. A common view then, is that gold performs well in moments of instability. But the research I was involved with suggests that gold prices are not simply a reaction to short-term economic events. Instead, they are a response to something deeper, reflecting an overall level of confidence in how economic systems are managed over time. During recent periods of sustained economic stability in the west, gold prices have remained largely flat. The steady growth, moderate inflation and predictable policy of the early 1990s and 2000s for example, were not good times for gold. And rather than responding to every economic peak or dip, the thing that really pushes gold prices up is instability in what’s known as “monetary credibility”. In other words, when there are doubts about whether central banks and governments will be able to maintain discipline over inflation, public debt and currency value over the coming decades. At times like this gold becomes more desirable. This helps explain why gold can continue to rise even as inflation falls, as has happened recently in several big economies, including the US and parts of Europe. And although recent weakness in the dollar and political uncertainty in the US have probably added momentum to gold’s rise, these factors amplify a deeper shift in confidence rather than explain it on their own. Our findings suggest that no single set of macroeconomic variables (like inflation, interest rates and stock prices) consistently explains gold prices across developed and emerging economies. They matter sometimes, but not always. So simple narratives (whether they’re about inflation, or trade wars or the weakening of the US dollar) are not enough to account for today’s gold market. Inflation alone cannot explain why gold prices remain elevated even as headline price pressures have eased. What gold tells us about the world There is more evidence for this in the fact that, according to the World Gold Council, central banks have been buying gold at the fastest pace in decades, particularly since 2022. This has continued even as inflation has fallen in many countries, again suggesting that these decisions are driven by longer term considerations rather than short term price movements. The decisions of central banks reflect concerns about resilience, diversification and trust. And to those banks, gold’s appeal lies squarely in the fact that it carries relatively little risk. It is not issued by a government like fiat currencies. It cannot be created at will like paper money. And it does not depend on the credibility of any single institution. So, in a world of high public debt, geopolitical fragmentation and increasing pressure on central bank independence, gold offers stability and insurance. And its price rises when confidence in the rules governing money becomes uncertain. That uncertainty can persist even when growth resumes or inflation falls. Seen in this light, gold’s recent surge does not signal a kneejerk panic or imminent collapse. Instead, it reflects a reassessment of long-term monetary confidence at a time when governments face difficult trade-offs between debt sustainability, political pressures and price stability. With its current high value, gold is not predicting a specific crisis. Nor does it provide a clear forecast for inflation. But it is revealing something important about the current moment. Markets appear less certain that the frameworks governing money, debt and policy will remain unchanged. That does not mean those systems have failed, but it does suggest their credibility is no longer taken for granted in the way it has been in the past. Gold does not predict the future. But it does offer a window into how confident markets are about the foundations of the world’s economics system.

On 3 January 2026, the US carried out a surprise military operation in Venezuela, capturing President Nicolás Maduro and his wife, Cilia Flores. The US has made little effort to cloak its operation in either solidarist language, such as appeals to democracy promotion, human rights, or liberal peacebuilding – or in pluralist rhetoric emphasizing the preservation of international order. Instead, Washington has presented the action in largely instrumental and strategic terms, signalling a willingness to sidestep both dominant justificatory traditions within international society. While Maduro and Flores are charged with narco-terrorism conspiracy and cocaine importation conspiracy, international debates focus on the future of Venezuela’s oil (Poque González 2026). On 7 January administration officials said the US plans to effectively assume control over the sale of Venezuela’s oil “indefinitely” (Sherman 2026) and President Donald Trump confirmed that he expected the US to run Venezuela, insisting that the country’s interim government was “giving us everything that we feel is necessary” (Sanger et al. 2026). Attention is fixed not only on Washington’s plans for Venezuela’s oil sector and control over its export revenues, but also on the replies from Moscow and Beijing, Maduro’s chief foreign backers and heavyweight players in energy politics. Consequently, this article asks two questions. First, to what extent does American control of Venezuelan oil threaten China’s and Russia’s energy interests? Second, what does the resulting US–China–Russia triangle imply for how energy security itself is being redefined? A constructivist perspective, recognizes that oil is an idea—valuable not only because it burns but because control over it symbolizes power and authority (Kuteleva 2021). Thus, when the US claims the right to supervise Venezuelan oil revenues, it is not only increasing leverage over barrels, but asserting the authority to define legitimate energy exchange itself. In this context, while the material threat is limited for China and already largely sunk for Russia, the symbolic, institutional and political threat is profound. A straightforward constructivist interpretation of the US–China–Russia triangle centres on status. China had cultivated Venezuela as an “all-weather strategic partnership” (Ministry of Foreign Affairs of PRC 2025b) and major debtor, only to watch Maduro captured days after senior Chinese officials visited Caracas (Ministry of Foreign Affairs of PRC 2025a). In constructivist terms, this is an obvious status injury: China appeared present but powerless. China’s energy diplomacy had functioned as proof of its global influence, and the nullification of China’s energy ties with Venezuela by US force undermines China’s narrative as a protective patron for the Global South. Beijing accused Washington of “hegemonic thinking” (Liu and Chen 2026), “bullying” (Global Times 2026a), and violating Venezuelan sovereignty and “the rights of the Venezuelan people” (Global Times 2026b). This strong pluralist language is not incidental—it is a bid to reclaim moral authority and redefine the event as norm-breaking rather than capability-revealing. Similarly, Russia’s involvement in Venezuela was never purely economic. Moscow saw the alliance with Venezuela as a way to advance its anti-American agenda and to signal that it could cultivate allies in Washington’s traditional backyard (Boersner Herrera and Haluani 2023; Gratius 2022; Herbst and Marczak 2019). It used Venezuela as leverage against the US, subsidised the regime during periods of domestic recession, and framed support as proof of great-power reliability. As senior Russian executives put it, “economic considerations took a back seat to political goals of taking swipes at the US” (Seddon and Stognei 2026). US control of Venezuelan oil thus removes a symbolic platform on which Russia enacted its identity as an energy superpower and geopolitical spoiler. While Russia continues loud sovereignty talk, its demonstrated incapacity to protect partners pushes it toward opportunistic bargaining (“concert” deals, see Lemke 2023) rather than overt defense of UN-pluralist restraint. As such, Dmitry Medvedev (2026) bluntly claimed that the US special military operation in Venezuela all but justifies Russia’s own actions in Ukraine. Venezuela is not a core supplier for China in volumetric terms. In 2025, Venezuelan exports to China averaged roughly 395,000 barrels per day—about 4% of China’s seaborne crude imports, according to Kpler data cited by the FT (Leahy and Moore 2026). China has diversified routes, strategic reserves covering at least 96 days of imports, and strong purchasing power in global markets (Downs 2025). Hence, from a narrow supply perspective, the loss of Venezuelan oil is manageable. That said, around one-fifth of China’s crude imports come from suppliers under US or western sanctions, primarily Iran, Venezuela and Russia, much of it disguised via transshipment near Malaysia (Downs 2025). Independent “teapot” refiners (Downs 2017)—who account for about a quarter of China’s refining capacity—are structurally dependent on this discounted, politically risky oil. Consequently, Trump’s seizure of Maduro alarmed China not mainly because of Venezuela itself, but because it demonstrated Washington’s capacity to escalate from sanctions to physical control of an energy sector, and thus potentially to Iran. Here, constructivism reveals the problem: “sanctioned oil” is not simply cheaper crude; it is a political category—oil marked as illegitimate by a dominant legal-financial order. The US move signals that this stigma can be converted into coercive authority, turning commercial vulnerability into geopolitical dependence. This reclassification transforms Chinese domestic actors into security subjects. “Teapot” refiners are no longer just businesses; they become strategic vulnerabilities whose survival depends on US tolerance. Analysis warn that a cutoff of Iranian oil could force many to shut down entirely (Leahy and Moore 2026). In this context, US control of Venezuelan oil reshapes Chinese energy security discourse from one of diversification and market access to one of hierarchy and exposure to political permission. Russia’s oil interests in Venezuela were largely written down years earlier. In 2020, Rosneft had sold most formal assets after pouring around $800m into loans and projects that produced little return (The Economist 2020). Much of the remaining exposure consisted of debts and shadow ownership arrangements. More important is the damage to Russia’s sanctions-evasion architecture. Russia had become the leading marketer of Venezuelan oil by trading crude as debt repayment and using banks partly owned by sanctioned Russian institutions, creating what the 2019 Atlantic Council report described as “a counter financial system to the one dominated by the West” (Herbst and Marczak 2019). The recent reporting on the US tracking a tanker linked to Venezuela, Russia and Iran illustrates how this counter-order is being contested operationally (Sheppard et al. 2026). The vessel sailed under false flags, was sanctioned for carrying Iranian oil, later re-registered under Russian jurisdiction, and became vulnerable to boarding under the UN Convention on the Law of the Sea because it was “without nationality.” Such episodes show that energy security is increasingly constituted by maritime law, insurance rules, and surveillance practices. US control over Venezuelan oil expands this regime of enforcement, making Russia’s informal trading networks less viable. A constructivist approach suggests that American control of Venezuelan oil is best understood not as a supply shock, but as an act of social stratification in the international system. Energy markets have always been hierarchical, but the hierarchy was largely implicit: reserve currencies, shipping insurance, futures exchanges, and contract law already privileged Western institutions. What is new is the explicit performance of hierarchy—the public demonstration that a great power can redefine ownership, legality, and access through coercion and administrative authority. This produces a stratified energy order: First, rule-makers – states whose legal systems, sanctions regimes, and corporate actors define what counts as legitimate oil (primarily the US and its allies). Second, rule-takers – states whose energy security depends on access to these institutions (most importers). And third, rule-evaders – states forced into informal networks (Russia, Iran, Venezuela) whose energy becomes socially “tainted.” China occupies an unstable middle category: economically powerful but institutionally dependent. Venezuela’s takeover publicly signals that material power is insufficient without normative control over legality. Referencias Boersner Herrera, Adriana, and Makram Haluani. 2023. ‘Domestic and International Factors of the Contemporary Russo–Venezuelan Bilateral Relationship’. Latin American Policy 14 (3): 366–87. Downs, Erica. 2017. The Rise of China’s Independent Refineries. Geopolitics. Global Energy Policy at Columbia University, School of International and Public Affairs. https://www.energypolicy.columbia.edu/publications/rise-chinas-independent-refineries/. Downs, Erica. 2025. China’s Oil Demand, Imports and Supply Security. Global Energy Policy at Columbia University, School of International and Public Affairs. https://www.energypolicy.columbia.edu/publications/chinas-oil-demand-imports-and-supply-security/. Global Times. 2026a. ‘China Condemns US Demands for Venezuela to Partner Exclusively on Oil Production as “Bullying,” Breaches of Intl Law: FM – Global Times’. Global Times, January 7. https://www.globaltimes.cn/page/202601/1352547.shtml. Global Times. 2026b. ‘China’s Legitimate Rights and Interests in Venezuela Must Be Safeguarded, Chinese FM Responds to Claim about US to Sell Venezuelan Sanctioned Oil – Global Times’. Global Times, January 7. https://www.globaltimes.cn/page/202601/1352555.shtml. Gratius, Susanne. 2022. ‘The West against the Rest? Democracy versus Autocracy Promotion in Venezuela’. Bulletin of Latin American Research 41 (1): 141–58. Herbst, John E., and Jason Marczak. 2019. Russia’s Intervention in Venezuela: What’s at Stake? Policy Brief. Atlantic Council. https://www.atlanticcouncil.org/in-depth-research-reports/report/russias-intervention-in-venezuela-whats-at-stake/. Kuteleva, Anna. 2021. China’s Energy Security and Relations with Petrostates: Oil as an Idea. Routledge. Leahy, Joe, and Malcolm Moore. 2026. ‘Donald Trump’s Venezuela Action Raises Threat for China’s Oil Supplies’. Oil. Financial Times, January 8. https://www.ft.com/content/f64826fa-5c36-4fb3-8621-ee0b9d9a1ff5. Lemke, Tobias. 2023. ‘International Relations and the 19th Century Concert System’. In Oxford Research Encyclopedia of International Studies. Liu, Xin, and Qingqing Chen. 2026. ‘US Reportedly Sets Demands for Venezuela to Pump More Oil; Experts Say “Anti-Drug” Claims a Pretext, Exposing Neo-Colonialism – Global Times’. The Global Times, January 7. https://www.globaltimes.cn/page/202601/1352544.shtml. Medvedev, Dmitry. 2026. ‘Год начался бурно’. Telegram, January 9. https://t.me/medvedev_telegram/626. Ministry of Foreign Affairs of PRC. 2025a. ‘Foreign Ministry Spokesperson Lin Jian’s Regular Press Conference on January 5, 2026’. January 5. https://www.fmprc.gov.cn/eng/xw/fyrbt/202601/t20260105_11806736.html. Ministry of Foreign Affairs of PRC. 2025b. ‘Xi Jinping Meets with Venezuelan President Nicolás Maduro Moros’. May 10. https://www.fmprc.gov.cn/eng/xw/zyxw/202505/t20250513_11619919.html. Poque González, Axel Bastián. 2026. ‘Energy Security and the Revival of US Hard Power in Latin America’. E-International Relations, January 12. https://www.e-ir.info/2026/01/12/energy-security-and-the-revival-of-us-hard-power-in-latin-america/. Sanger, David E., Tyler Pager, Karie Rogers, and Zolan Kanno-Youngs. 2026. ‘Trump Says U.S. Oversight of Venezuela Could Last for Years’. U.S. The New York Times, January 8. https://www.nytimes.com/2026/01/08/us/politics/trump-interview-venezuela.html. Seddon, Max, and Anastasia Stognei. 2026. ‘How Russia’s Venezuelan Oil Gambit Went Awry’. Venezuela. Financial Times, January 9. https://www.ft.com/content/e09a6030-325f-4be5-ace3-4d70121071cb. Sheppard, David, Chris Cook, and Jude Webber. 2026. ‘US Tracking Oil Tanker off UK Coast Linked to Venezuela, Russia and Iran’. Shipping. Financial Times, January 6. https://www.ft.com/content/a699169a-983a-4472-ab23-54bceb9dd2bd. The Economist. 2020. ‘Why Putin’s Favourite Oil Firm Dumped Its Venezuelan Assets’. The Economist, April 2. https://www.economist.com/leaders/2020/04/02/why-putins-favourite-oil-firm-dumped-its-venezuelan-assets.

On January 25, 2011, thousands of Egyptians took to the streets in mass demonstrations demanding freedom, social justice, and the resignation of President Hosni Mubarak, who had held office since 1981. Just 18 days later, on February 11, 2011, newly appointed Vice President of the Arab Republic of Egypt Omar Suleiman announced on state television that Mubarak was stepping down as president and transferring power to the Supreme Council of the Armed Forces. Hundreds of thousands of Egyptians took to the streets to celebrate the victory of the revolution and the beginning of a new chapter in the country's history. However, within months, the general euphoria gave way to the realization that the "new republic" faced serious political and economic challenges. The dramatic events of early 2011 marked the beginning of a long, complex, and at times painful process, the consequences of which can still be seen today. As the fifteenth anniversary of the revolution approaches, Egypt has managed to maintain internal stability and demonstrate sustainable economic growth, but at the same time, the country faces several complex internal and external challenges in politics, economics, security, and other areas. From revolution to counterrevolution Having taken the reins of power in February 2011, the Military Council immediately declared itself no alternative to a civilian government, and by late June 2012, power was transferred to the first president elected since the revolution, Mohamed Morsi, a candidate of the Freedom and Justice Party, the political wing of the Muslim Brotherhood*. Having received 51.73% of the vote in the second round of the presidential election, Morsi narrowly defeated the last Mubarak-era prime minister, Ahmed Shafik, and became the first president in modern Egypt without a military background. However, the now-deceased Morsi, who came to embody the rise and fall of political Islam in Egypt, was not destined to remain in power for long. Just a year later, on July 3, 2013, he was ousted by Defense Minister Abdel Fattah el-Sisi amid mass demonstrations. Supporters of the Muslim Brotherhood* considered the incident a military coup, while el-Sisi, who later became president, repeatedly repeated that the army intervened only after mass demonstrations against Morsi. Morsi's ouster provoked diametrically opposed reactions among regional players. While Saudi Arabia and the UAE quickly became key external donors and allies of the new Egyptian authorities, relations with Qatar and Turkey (the main sponsors of Islamic political movements in the Middle East) deteriorated sharply. Relations with the United States, Egypt's key ally since the 1979 peace treaty with Israel, also cooled somewhat. Following the dispersal of a Muslim Brotherhood* protest in Cairo in August 2013, then-US President Barack Obama canceled joint US-Egyptian military exercises, declaring that traditional cooperation could not continue as usual. The allocation of $1.3 billion in annual US military aid has repeatedly become a subject of political bargaining. Strengthening relations with Moscow Against this backdrop, Egypt has moved toward some rapprochement with Moscow. Since 2014, el-Sisi, first as Defense Minister and then as President, has made a series of visits to Russia, attending two celebrations marking the anniversaries of Victory over Nazi Germany in 2015 and 2025. Furthermore, el-Sisi participated in two Russia-Africa summits in Sochi in 2019 and St. Petersburg in 2023, and attended the BRICS summit in Kazan in October 2024. In December 2025, the second Russia-Africa ministerial conference was held in Cairo, with the participation of Russian Foreign Minister Sergey Lavrov, with whom el-Sisi met. However, relations with Russia were seriously tested by the terrorist attack on board a Kogalymavia (DBA Metrojet) Airbus A321 on October 31, 2015, en route from Sharm el-Sheikh to St. Petersburg. As a result of the incident, Russia completely suspended direct air service to Egypt for several years, dealing a painful blow to the country's tourism sector. Meanwhile, Egyptian authorities steadfastly refused to classify the incident as a terrorist attack, hold those responsible for negligence accountable, or provide appropriate compensation to the families of the victims. Nevertheless, the positive dynamics in Russian-Egyptian relations have now been fully restored. According to the Association of Tour Operators of Russia (ATOR), Egypt has once again become one of the top five most popular foreign destinations for Russians, behind Turkey, China, and the UAE, having welcomed over 1.4 million Russian tourists in the first nine months of 2025, a 36.8% increase compared to the same period in 2024. By effectively exporting Egyptian services to the Russian market, tourism offsets the imbalance in the two countries' trade balance, which traditionally skews heavily in Russia's favor. Furthermore, Russia contributes to the food security of Egypt, the world's largest wheat importer, accounting for over 60% of its total imports. Egypt, in turn, is also actively increasing its agricultural exports to Russia — oranges, mangoes, and other Egyptian origin agricultural products are increasingly found on the shelves of Russian retail chains. The flagship project of Russian-Egyptian cooperation is, without a doubt, the construction of the first nuclear power plant, El Dabaa, in the Matrouh Governorate on the Mediterranean Sea, which is being carried out by the Russian state corporation Rosatom. In terms of scale, this project is often compared to the Aswan High Dam, built with Soviet support in the 1960s. Relations with external players Gradually, el-Sisi succeeded in restoring allied relations with the United States. "My favorite dictator," Trump described el-Sisi during his first term. Following the summit in the Saudi city of al-Ula in early 2021, which marked the restoration of relations between Saudi Arabia, the UAE, and Bahrain, on the one hand, and Qatar, on the other, Cairo followed its Arabian partners in quickly restoring relations with Doha. In November 2022, photos of a meeting between el-Sisi, Emir of Qatar Tamim bin Hamad Al Thani, and Turkish President Recep Tayyip Erdoğan during the opening ceremony of the FIFA World Cup in Doha circulated around the Arab world. This trilateral meeting marked the starting point for the normalization of relations between Cairo and Ankara. Regarding relations with Israel, el-Sisi continued the unpopular rapprochement, openly praising the success of the Egyptian-Israeli peace model. EgyptAir's national carrier began flying to Tel Aviv under its official livery, rather than under the brand of its subsidiary Air Sinai, as it had previously. However, the national carrier's direct flights to Israel were suspended in October 2023 amid the escalation between Israel and the Palestinian movement Hamas in the Gaza Strip. In the energy sector, Egypt is actively purchasing natural gas from Israel's Leviathan field offshore the Mediterranean. Consolidation of power by al-Sisi In terms of domestic policy, el-Sisi has managed to significantly consolidate power in recent years. In 2019, Egypt held a referendum on constitutional amendments allowing el-Sisi to remain in power until 2030. el-Sisi has positioned himself as a leader who successfully confronts domestic and external challenges. Under his leadership, major national projects have been implemented, including the expansion of the Suez Canal, the construction of a new administrative capital, and the country's first nuclear power plant. Following the purge of the Muslim Brotherhood leadership, Egyptian authorities have moved to tighten control over the most influential media outlets. Recent years have seen the rise of the media holding company United Media Services, which is believed to be affiliated with the General Intelligence Service. Founded in 2016, the company has now grown into one of the largest media giants in the Arab world, encompassing over 40 subsidiaries, including approximately 15 television channels. Economic challenges Post-revolutionary Egypt faced several economic challenges amid political instability and a deteriorating security situation. To secure new IMF loan tranches, el-Sisi implemented a series of unpopular measures that Mubarak had resisted, including a gradual increase in fuel and electricity prices. In 2024, a decision was made to quadruple the price of even subsidized bread, a staple food for the poor. Given the importance of subsidized flatbread in the diet of the poor, Egyptian authorities had resisted raising the price for three decades, which stood at just five piastres (about 0.1 cents at the current exchange rate). However, even constant IMF tranches and financial assistance from the Gulf monarchies failed to help Egypt avoid a deep economic crisis amid declining tourism revenues, a population explosion, and a high degree of dependence on external factors. Following the outbreak of the war in the Gaza Strip in October 2023, the economic situation was exacerbated by regular shelling of ships in the Red Sea by Yemeni Houthis, which led to a more than halving of Suez Canal revenues. According to Egyptian Foreign Minister Badr Abdel Ati, Egypt's total losses from shelling of ships in the Red Sea as of October 2025 amounted to $9 billion. Amid constant political and economic turmoil, the Egyptian pound was gradually devalued from 5.6 pounds per dollar in 2010 to 47 pounds per dollar by early 2026. At its peak, the US currency exceeded 50 pounds per dollar. The discovery of new large gas fields (particularly the Zohr field offshore the Mediterranean) allowed Egypt to increase its liquefied natural gas (LNG) imports to 3.5 million tons by 2019. However, amid a population explosion and growing local consumption, this positive effect quickly faded, and by 2023, Egypt had abandoned gas exports during the peak summer season and transitioned to a model that combines exports and imports depending on seasonality. In advance of peak consumption during the hot summer season, in early 2026, Egypt signed a memorandum of understanding to purchase 24 LNG cargoes from Qatar. Despite significant challenges, a significant influx of investment from Gulf countries (particularly the UAE and Saudi Arabia) is helping to keep the Egyptian economy afloat. Qatar has also steadily increased investment in the Egyptian economy in recent years. The main sources of income for the Egyptian economy are exports, tourism, the Suez Canal, and remittances from Egyptians abroad. According to the World Bank, Egypt consistently ranks among the top ten countries in the world by this last indicator. And according to the Central Bank of Egypt, in the first 11 months of 2025, Egyptians transferred $37.5 billion to their homeland, a 42.5% increase compared to the same period in 2024. According to the World Bank, Egypt has demonstrated steady economic growth year after year, measured by nominal GDP, which amounted to approximately $389 billion by the end of 2024. The country consistently ranks among the fifty largest economies in the world. Based on GDP at purchasing power parity (PPP), the picture looks even more optimistic — Egypt is among the world's twenty largest economies. However, constant natural population growth negates the potential positive impact of economic growth on well-being. Per capita GDP by the end of 2024 was only approximately $3,300 (158th place in the world). Social inequality remains a separate and acute socioeconomic challenge for Egypt. According to official data, 29% of Egyptians live below the poverty line. Meanwhile, according to the international consulting firm Henley & Partners, Egypt is home to 14,800 dollar millionaires, 49 individuals with a net worth exceeding $100 million, and 7 billionaires. Given the discrepancy between macroeconomic indicators and per capita well-being, demographics pose a distinct challenge for Egypt. Thus, Egypt's population grew from 91 million in 2011 to 118 million in 2025 (13th in the world and first among Arab countries), posing a serious challenge to social infrastructure, healthcare, education, and the labor market. However, according to the Ministry of Health, a slight slowdown in population growth and a decline in the fertility rate from 3.5 children per woman in 2014 to 2.41 in 2024 are expected recently. External challenges In terms of security, Egypt remains hostage to a number of destabilizing external factors, such as hotbeds of tension along virtually its entire border amid the de facto split of Libya and Sudan, as well as dubious prospects for sustainable peace in the Gaza Strip. In developing its foreign policy stance in the region, Egypt is forced to perform diplomatic feats, balancing its own interests with the often-conflicting interests of key partners in the Gulf and the United States. However, it should be acknowledged that Trump's ceasefire initiative in Gaza allowed Cairo to strengthen its status as a key mediator in the Middle East at the Sharm El Sheikh Peace Summit last November, where Trump, el-Sisi, Al Thani, and Erdogan signed a peace agreement on the Gaza Strip. A separate and serious external challenge for Egypt remains the Blue Nile Renaissance Dam, commissioned by Ethiopia, which threatens to deplete the country's water resources. However, abundant rainfall in Africa in recent years has mitigated this issue and even led to floods in Sudan in 2025. *** The main outcome of the 15 years since the Egyptian revolution of 2011 is the restoration of a political system in which the army and security forces act as the de facto guarantors of statehood. Egypt has demonstrated a high level of political resilience compared to other countries engulfed by the events of the Arab Spring, such as Libya, Syria, and Yemen. In the economic and security spheres, Egypt remains vulnerable to external factors that directly impact Suez Canal revenues, tourism, and foreign investment. Despite steady nominal GDP growth, the past 15 years have not led to an improvement in the overall well-being of the population. However, Egypt has succeeded in developing infrastructure and new cities, as well as in implementing major national projects such as the new administrative capital and the El Dabaa Nuclear Power Plant, which could become drivers of economic growth and further development in the medium term. The declining birth rate creates the preconditions for eliminating the imbalance in the ratio of the working-age to non-working-age population, which will also contribute to balanced growth in the long term. In the absence of major internal and external shocks, Egypt can be expected to enter a trajectory of sustainable growth and consolidate its status as a key political and economic player in the region. * The organization was recognized as terrorist in Russia by a decision of the Supreme Court.

Thank you dear Prime Minister Modi, for welcoming us on this special occasion. We were privileged yesterday to be your Chief Guests for the Republic Day celebrations, such an impressive display of India’s capabilities and diversity. Today is a historic moment. We are opening a new chapter in our relations – on trade, on security, on people to people ties. I am the President of the European Council, but I am also an overseas Indian citizen. Then, as you can imagine, for me, it has a special meaning. I am very proud of my roots in Goa, where my father’s family came from. The connection between Europe and India is something personal to me. Also, because we conclude today our trade negotiations, we relaunched at the Leaders’ meeting that I had the pleasure to host, in May 2021, in my previous capacity. Our summit sends a clear message to the world: at a time when the global order is being fundamentally reshaped, the European Union and India stand together as strategic and reliable partners. Today, we are taking our partnership to the next level. As the two largest democracies in the world, we are working hand in hand: • to deliver concrete benefits for our citizens; and • to shape a resilient global order that underpins peace and stability, economic growth, and sustainable development. I would like to share three messages. First: the European Union and India must work together towards our shared prosperity and security. India is the world's fastest-growing major economy. Trade has flowed between our two continents for centuries. Trade is a crucial geopolitical stabilizer. And a fundamental source of economic growth. Trade agreements reinforce rules-based economic order and promote shared prosperity. That’s why today’s Free Trade Agreement is of historic importance. One of the most ambitious agreements ever concluded. Creating a market of two billion people. In a multipolar world, the European Union and India are working together to grow spheres of shared prosperity. But prosperity does not exist without security: • strengthening our cooperation to better protect our citizens and our shared interests; • working together to counter the full range of security threats we face, in the Indo-Pacific, in Europe and around the world; • reaching a new level of strategic trust between us. That is the significance of our agreement on a Security and Defence Partnership. The first such overarching defence and security framework between India and the European Union. And the first step towards even more ambitious cooperation in the future. This brings me to my second message: as the world's largest democracies and champions of multilateralism, the European Union and India share the responsibility of upholding international law, with the United Nations Charter at its core. Earlier this morning, we had the opportunity to pay tribute to Mahatma Gandhi. And I reflected upon his words which still hold true today: “Peace will not come out of a clash of arms but out of justice lived and done by unarmed nations in the face of odds.” Our summit reaffirmed our commitment to supporting efforts towards a comprehensive, just and lasting peace in Ukraine. One that fully respects Ukraine’s independence, sovereignty and territorial integrity. This is a key moment. We are supporting all efforts to reach a just and sustainable peace. Ukraine has shown its readiness, including at the cost of difficult compromises. I know, dear Prime Minister, that we can count on you to help create the conditions for peace, through dialogue and diplomacy. And this is my final message: together we must show leadership on global issues. Cooperation between the European Union and India will help shape a more balanced, resilient, and inclusive global order. Just two examples: I am proud of the commitments we are making for greater cooperation on clean energy, green transition, and climate resilience. And our collaboration through the Global Gateway and on the India–Middle East–Europe Economic Corridor is decisive for global connectivity. By implementing the ambitious Joint Comprehensive Strategic Agenda towards 2030, we will align our priorities with concrete actions for the next five years: delivering real benefits to our citizens. Today, we have tangible progress and set an example of cooperative leadership on global issues. With: • our Free Trade Agreement; • our Security and Defence Partnership; and • our Joint Strategic Agenda for 2030. These outcomes are a crucial milestone on a longer path. We look forward to continuing the journey. Together, as always. Thank you very much. Press statement by President António Costa following the EU–India Summit, 27 January 2026. © European Union / Council of the EU. Reproduced with permission; original meaning preserved.

I. Introduction The European economy is in big trouble. Szu Ping Chan and Hans van Leeuwen, the economics editors of the Telegraph, a British daily newspaper, claim that the European Continent is stuck on a path of disastrous decline. [1] As Figure 1 shows, EU share of world GDP has continued to decline from 27% in 1990 to 17% in 2024.  Figure 1: EU share of World GDP (source: IMF) As a result, EU’s GDP in 2000 was six times larger than Chinese GDP, but EU’s GDP in 2025 is expected to reach the similar level of China’s GDP as Figure 2 shows. EU’s GDP in 2000 was $3 trillion smaller than US GDP, but EU’s GDP in 2025 is expected to be over $ 10 trillion smaller than US GDP.  Figure 2: EU, US, China, Japan GDP, 2000 & 2025 (source: Alcott Global) Moreover, the Ukraine war in 2022 brought more uncertainty to Europe by creating energy problems for the European economy. Europe’s reliance on external energy sources has been a long-standing issue. The energy crisis that began in 2021, fueled by the Ukraine war and climate change, has exposed how fragile the region’s energy infrastructure remains. Skyrocketing LNG prices, unreliable renewable energy production, and Russia’s strategic use of fossil fuels as leverage have left the European continent struggling with record-high energy costs. With this information in background, this paper explores why the European economy has under-performed and fallen behind. This paper first describes the current economic situation of Europe and explains why the European economy has failed. II. The Current Situation of European Economy Europe may be a great place to live with free health care, generous welfare, and great cities. However, when we compare the economy of three major economies, the US, Europe, and China, it is obvious that the European economy is in big trouble. Europe is being squeezed by the US and China. As Figure 3 shows, economic growth has been anemic across Europe. Germany has been its worst performer in recent years. The German economy is the same size today as it was in the fourth quarter of 2019. In other words, it has had five years of lost growth. But the rest of Europe has not fared much better. The French economy is only 4.1% larger than it was in the final quarter of 2019, while Italy’s economy is 5.6% bigger. (See Figure 3.) And while Spain’s GDP has increased by 6.6% since then, this has been helped greatly by an influx of immigration that meant that GDP per capita has increased by only 2.9% over the same period. By contrast, the US economy has grown by 11.4%.  Figure 3: Real GDP (Q4 2019 = 100) (Source: LSEG, Capital Economics) As Figure 4 shows, over the period 2020-2024, the EU’s total GDP growth was 12.2% compared to 23.4% for China, 15% for the US.  Figure 4: Growth, EU, US, China, and Japan, 2020-2024 As Figure 5 shows, the EU grew only 1.1% in 2024 compared to 2.8% for the US and 5.0% for China. Figure 5: GDP growth, EU, US, China, and Japan, 2024 Moreover, when we compare the economies of two Western rivals, the US and Europe, it is obvious that the EU has grown slower than the US, as Figure 6 shows.  Figure 6: US grow faster than EU countries, 2010-2024 (source: World Bank) As Figure 7 shows, Europe’s unemployment has been higher than the US.  Figure 7: EU unemployment is higher than US, 2000-2024 As Figure 8 shows, Europe’s LNG price has been higher than US price during the 2020-2024, and higher than Asian price immediately after Russia invaded Ukraine, thereby burdening the European economy.  Figure 8: LNG price, EU, US, Asia, January 2000-January 2024 Furthermore, when it comes to new engines of growth – big tech, AI, electric cars, Europe has slipped behind both the US and China. Europe is being squeezed by cheaper imports in China and better tech in America. III. Causes of the Failure of European Economy Why has the European economy failed? According to Neil Shearing, a chief economist of Capital Economics, Europe’s under-performance has been due in part to the effects of the energy crisis following Russia’s invasion of Ukraine as Figure 9 shows Europe’s skyrocketing gas prices. [2]  Figure 9: Natural gas prices, Europe, US, Japan, January 2021- end 2024 In addition, as Figure 10 shows, energy prices in the Euro area reached an all time high of 171.75 points in October of 2022 following the Ukraine war. It decreased to 145.49 points in November 2025, but it is still too high.  Figure 10: Energy price, Euro zone (source: Eurostat) As Table 1 shows, dependence on energy imports has shown divergent trends since 2000: The US has dramatically reduced its reliance on energy imports and become a net exporter, while the European Union has maintained a high level of energy dependence, and China’s dependence has generally increased along with its enormous economic growth. The US has undergone a remarkable transformation. Around 2005, US crude oil imports reached a peak at about 60% of their consumption. Thanks to the shale revolution and growing renewable energy use, US domestic production soared, and the US became a net energy exporter in 2019. By 2024, US energy imports made up only 17% of its energy demand. China’s rapid economic growth has driven a massive increase in energy demand. As a result, its dependence on energy imports has increased significantly since 2000. China is the world’s largest importer of crude oil. While China is also the leading investor in renewable energy, which meets a portion of its growing energy demand, the absolute need for fossil fuel imports to power its industrial sector remains high. In 2024, energy imports met around 25% of their total energy demand. Table 1: Dependence on Energy Imports, 2000–2025 As Figure 11 shows, the EU consistently shows high dependence on energy imports over the last three decades during the 1993-2024 period. The EU’s dependence on oil and gas imports have been much higher than the US and China. EU’s dependence on oil imports was over 90%, while EU’s gas import dependence reached over 90% in 2023 following the Ukraine war. While the EU has made progress in renewable energy, it remains heavily reliant on oil and gas imports, and has recently shifted its import sources from Russia to other partners such as the US and Norway. This high dependence on energy imports and energy crisis in Europe following the Ukraine war led to a deterioration in the region’s terms of trade that manifested itself in a large squeeze in real incomes and loss of competitiveness of energy-intensive industries, thereby lowering economic growth in Europe.  Figure 11: Dependence on energy imports, EU, US, and China, 1993-2024 In addition, European households have also become more reluctant to spend, thereby leading Europe to lower growth. The household saving rate in Europe is now three percentage points higher than it was before the Covid-19 pandemic in 2019, while the savings rate in the US is now lower than it was in 2019. (See Figure 12.) The tendency of Europeans to spend less leads to lower growth in Europe.  Figure 12: Euro-zone household savings rate (% of disposable income) However, the weakness of the European economy is fundamentally structural. There are several elements to this. The first key issue related to low growth in Europe is regulation in Europe that stifles competition and innovation. The EU has become increasingly protectionist, mainly through regulation. While convenient, this strategy proves counterproductive. It eliminates the incentives for creativity and efficiency. The Digital Services Act and increasingly narrow interpretations of the General Data Protection Regulation (GDPR) were intended to rein in US tech giants, but have instead held Europe back in these same sectors. The AI Act and supply chain laws are similarly damaging. It is perhaps no surprise that the major disruptive and innovative firms of the past two decades have come from the US and China rather than from the Euro-zone countries. Robot taxis are a good example. One in three taxi rides in California is already in a robot taxi. The growth has been exponential and they are set to overtake ordinary taxis. The market opportunity is huge; they will be cheaper than paying a driver. In Texas, Tesla charges just a dollar a mile. They are safer too – 90% fewer accidents. And that means cheaper car insurance. They will save income, decrease emissions and reduce the need to buy an expensive car. It’s not just America; 2,000 self-driving cars have already been transporting millions across the big cities in China. But, for Europeans, the idea of a self-driving car, is still the stuff of science fiction. Or more accurately, something blocked by the European love of regulation, risk-aversion, and a powerful car lobby still stuck in the combustion engine era. [3] Another example is the tech industry. Europe is hampered by fragmented and excessive regulation. A US start-up can launch a product under a single regulatory framework and immediately access a market of more than 330 million consumers. The EU has a population of about 450 million but remains divided among 27 national regulatory regimes. An IMF analysis shows that internal market barriers in the EU act like a tariff of around 44% for goods and 110% for services – far higher than the tariff levels that the US imposes on most imports. [4] True, Europe has some successes such as Revolut, Klarna and Spotify, but these are dwarfed by the US giants of Meta, Google, Microsoft and Apple. Today, approximately half of the world’s 50 largest technology firms are American, while only four are European companies. [5] Over the past five decades, 241 US firms have grown from start-ups into massive unicorn companies. The EU’s response has been to seek to regulate the murky world of big tech surveillance, but in a way, the sledgehammer of GDPR regulation has done more to increase costs for local European business and tech startups as Figure 13 shows. While California alone has produced a quarter of the world’s tech unicorns, Germany-a similarly sized economy-has produced just 2% of high-value start-ups. Without urgent reform, Europe risks being sidelined in the global technological race.  Figure 13: GDPR regulation and EU & US Venture capital There is an old saying: the US invents, China imitates, and Europe regulates. Harsh, but an element of truth. Though the big change is that China no longer imitates, but produces goods much cheaper than in Europe. But Europe is still stuck in a regulatory mind-set. The result is that productivity growth in Europe - which is the key determinant of economic growth over the long run - is substantially lower, averaging 0.3% a year over the past decade compared to 1.6% a year in the US. The second issue is Europe’s insufficient investment in new technologies (computers, artificial intelligence (AI), software, etc.) and the low level of spending on research and development (R&D). When we compare OECD countries, we see that these two components have a strong influence on productivity differences between countries. The econometric estimate leads to the following effects: a 1- point increase in the rate of investment in new technologies leads to a 0.8 point increase per year in productivity gains. In a similar way, a 1-point increase in GDP for research and development (R&D) expenditure leads to a 0.9 point increase per year in productivity gains. [6] The fear is that Europe will be drawn into a vicious circle By 2022, investment in new technologies represented 5% of GDP in the US and 2.8% of GDP in the Euro zone. The EU’s efforts in advanced technologies, such as AI and cloud computing, far from match those of the US. The main instrument available to the EU, the European Innovation Council, had a budget of 256 million euros in 2024, while the US allocated more than 6 billion dollars for this purpose. The situation is repeated when looking at venture capital investment. In 2023, they invested about $8 billion in venture capital in AI in the EU, compared to $68 billion in the US and $15 billion in China. The few companies that create generative AI models in Europe, such as Aleph Alpha and Mistral, need large investments to avoid losing the race to US firms. However, European markets do not meet this need, pushing European firms to look outside for funding. [7] As a result, for example, the EU has been losing the open model contest as Figure 14 shows.  Figure 14: Cumulative downloads, 2023-25 (source: ATOM project, Hugging Face) Moreover, the EU falls behind the US and China in terms of R&D spending. R&D spending in 2022 amounted to 3.5% of GDP in the US and 2.3% of GDP in the Euro zone. What’s more, from 2007 on, as Figure 15 shows, R&D spending in the US and China increased significantly compared to that of the Euro zone. The lag in technological investment and R&D explains a large part of Europe’s lag behind the US in terms of labor productivity and GDP. [8]  Figure 15: Gross domestic spending on R&D, 2007-2023 The third issue related to lower growth in Europe is the size of welfare states in Europe. The size of welfare states differs markedly across OECD countries. European countries have the largest welfare states in the OECD and among the highest in the World. As Figure 16 shows, European welfare states are significantly larger than in the US, with EU countries allocating approximately 27% of GDP to social benefits in 2024, compared to roughly 19.8% in the US. Some European countries like Austria, Finland, and France spend over 30% of GDP on social benefits in 2024. While the US spends 7% of GDP on public provision of pensions, it is 16% in Italy and it is 13% in France.  Figure 16: Public social spending as a % of GDP in 2024, EU countries & US Big welfare states have a complex, debated impact on economic growth, with evidence showing they can both impede growth through higher taxes and reduced work incentives, or foster it by boosting education, stability, and innovation. However, there has recently been a groundswell of opinion among economists that the scale of the welfare state is one of the elements responsible for slower economic growth and that a retrenchment in the welfare state is necessary if growth will be revived in Europe. The welfare state is indicted with the charge of becoming a barrier to economic growth in Europe through higher taxes and reduced work incentives. As Figure 17 shows, the tax burden is higher in the EU than in the US for most taxpayers. The overall tax-to-GDP ratio for the EU averages approximately 44%. By contrast, the US ranks as one of the lowest among developed countries, with a tax-to-GDP ratio 35% in 2022 approximately 9% lower than the EU average.  Figure 17: Tax burden, EU and US, 2022 (source: OECD Government at a glance, 2023) Figure 18 shows the total tax wedge for average single workers in each member country of EU. Belgium, Germany, Austria, and France confiscate more than half of their workers’ pre-tax compensation. Compared to the EU member countries, workers in the US face the lowest average tax wedge. This distorts work incentives for Europeans and renders everyone in Europe poorer. [9] High taxes and less work incentives make EU citizens spend less than US citizens, thereby lowering economic growth in Europe as Figure 19 shows.  Figure 18: EU workers pay more taxes than US workers, 2022 (source: OECD Government at a glance, 2023)  Figure 19: Americans spend 70% more on EU citizens (Average individual consumption per capita, 2020; United States indexed to 100). (source: National Accounts of OECD countries) In fact, Gwartney, Holcombe and Lawson (1998) showed empirically that as the size of general government spending has almost doubled on average in OECD countries from 1960 to 1996, their real GDP growth rates have dropped by almost two thirds on average (see Figure 20). According to them, the worst economic performers were some Southern European countries that increased the size of the government the most.  Figure 20: Big government spending reduces growth. At the height of the Euro-zone crisis in 2012, German Chancellor Angela Merkel tried to make the case that Europe’s welfare states were too large, as Europe accounted for 7% of the global population, for a quarter of global GDP and for 50% of global social spending. The situation has not improved since then. On September 9, 2024, Draghi presented his report “The Future of European Competitiveness,” a 400-page document, to deal with Europe’s sluggish economy, but he kept untouched Europe’s over-sized welfare state, while he strongly called for reforms and investments to reinforce productivity growth. [10] The fourth issue is the Euro. The Euro has been a mixed blessing for Europe. It lowers transaction costs but highlights an unbalanced EU economy. Germany runs a large current account surplus, fringe economies like Portugal and Greece running deficits. But there is no scope for Germany to appreciate, weaker countries to devalue. One size fits all. But, this can have disastrous effects. The Euro Debt Crisis of 2012, led to high bond yields and a response of austerity, which contributed to weak growth in the last decade. Mario Draghi’s intervention reduced bond yields, but the European Central Bank has been criticized for a deflationary bias, and it has certainly struggled since the Covid-19 era, with growth in Europe much less. IV. Conclusion This paper showed that the European economy is in big trouble with lower growth. This paper explained that Europe’s economic under-performance & sluggish economy can be attributed to energy crisis and high saving, as well as over-regulation, large size of welfare state & high taxation, and lack of innovation & low investment in new technology and R&D. Referencias [1] https://www.telegraph.co.uk/business/2025/12/14/rising-fear–europe-really-is-doomed-and -taking-britain-down/ [2] https://www.capitaleconomics.com/blog/its-not-just-france-europe–faces-ongoing-decline- without-fundamental-reform-its-core [3] https://www.capitaleconomics.com/blog/its-not-just-france-europe–faces-ongoing-decline- without-fundamental-reform-its-core [4] https://www.project-syndicate.org/commentary/europe-most-serious-problem-not-immigra tion-but-technological-backwardness-by-nouriel-roubini-2025-12 [5] https://www.project-syndicate.org/commentary/europe-most-serious-problem-not-immigra tion-but-technological-backwardness-by-nouriel-roubini-2025-12 [6] https://www.polytechnique-insights.com/en/columns/economy/economy-why-europe-is-falllling-behind-the-usa/ [7] https://www.polytechnique-insights.com/en/columns/economy/economy-why-europe-is-fall ing-behind-the-usa/ [8] https://www.polytechnique-insights.com/en/columns/economy/economy-why-europe-is-fall ing-behind-the-usa/ [9] https://mises.org/mises-wire/europes-economy-slows-its-welfare-state-grows [10] https://www.csis.org/analysis/draghi-report-strategy-reform-european-economic-model

Western countries are facing a critical inflection point in immigration governance, where outdated policy frameworks have struggled to balance humanitarian obligations, labor market needs, and social cohesion. Rising irregular migration, overstretched asylum systems, political polarization, and fragmented border management have collectively contributed to a perception of disorder rather than opportunity. Yet immigration, when governed strategically, remains a powerful driver of economic growth, demographic renewal, and innovation. A new immigration policy for the West must therefore move beyond reactive control and crisis management toward a coherent, development-oriented framework that is predictable, fair, and enforceable. By aligning migration pathways with labor demand, strengthening legal entry channels, restoring credibility to asylum systems, and embedding integration as a core policy objective, Western states can transform immigration from a source of chaos into a catalyst for sustainable development and social stability. Below, we will discuss different aspects of this New Immigration Policy. Policy of Each Western Country to do a complete Evaluation of its Economy A key aspect of the new immigration policy requires Western countries to conduct thorough, evidence-based evaluations of their economies, analyzing beyond fundamental indicators like GDP and unemployment. This includes examining sector-specific dynamics, productivity gaps, and labor needs in industries that rely heavily on labor mobility, such as healthcare and agriculture. The goal is to establish data-driven workforce strategies that fulfill actual economic demands, enhancing domestic labor utilization through education and training. Immigration is to complement, not replace, local workforce development. Only after optimizing domestic labor should countries assess immigrant labor needs, creating targeted and regulated immigration pathways to address specific labor shortages. This method links immigration to economic necessity, promoting business growth and public service sustainability while fostering long-term financial stability. Most Western immigration systems employ pre-entry screening mechanisms to manage security risks and improve labor market matching, though their scope and rigor vary significantly. Points-based systems in countries such as Australia and Canada illustrate how education, language proficiency, and occupational demand can be systematically incorporated into selection decisions. At the same time, overly rigid credential recognition frameworks have been shown to underutilize the skills of migrants, particularly in regulated professions. Security screening and health assessments similarly reflect a balance between risk prevention and administrative proportionality. Analytical evidence suggests that pre-entry screening is most effective in contributing to integration outcomes when it is transparent, interoperable across agencies, and complemented by post-arrival credential bridging and skills recognition. Screening, therefore, functions less as a gatekeeping tool than as an anticipatory governance mechanism that shapes downstream integration trajectories. Policy of doing complete thorough checks on Immigrants before coming Another core element of the new immigration policy is the implementation of a standardized pre-entry screening framework across Western countries. This framework includes comprehensive background checks, such as international criminal record verification, biometric identity authentication, and strict validation of educational and professional credentials to prevent fraud. Degree verification should occur directly with accredited institutions, while professional licenses need recognition by certified regulatory bodies. These measures aim to enhance national security, protect labor markets, and maintain the integrity of skilled migration systems. The policy also sets clear entry readiness standards centered on integration capacity and public welfare. This encompasses mandatory language proficiency benchmarks relevant to workplace and civic participation, comprehensive health screenings to safeguard public health, and assessments of employability and sectoral fit. Health evaluations focus on prevention and readiness, ensuring transparency regarding healthcare access upon arrival. Additional factors, such as verification of financial self-sufficiency and orientation training on laws and social norms, are suggested to minimize integration risks. By adopting thorough, fair, and transparent pre-arrival checks, Western nations can transition their immigration governance from a reactive stance to proactive planning, ensuring newcomers are equipped to contribute to economic growth and social stability from the outset. Comparative experience suggests that policy effectiveness depends less on the severity of stated rules than on the consistency and credibility of their implementation. For example, Australia’s offshore processing and maritime interception policies significantly reduced unauthorized arrivals, but also generated sustained legal and ethical debate regarding human rights compliance. In contrast, several European Union states have combined stricter border controls with expanded legal entry pathways, producing mixed outcomes where enforcement gaps continue to incentivize irregular entry. These cases indicate that the deterrence of irregular migration is most effective when enforcement is predictable, legally bounded, and accompanied by accessible lawful alternatives. From an analytical perspective, the key policy trade-off lies between institutional legitimacy and deterrence: overly permissive systems risk erosion of rule compliance. At the same time, excessively rigid approaches may provoke legal contestation and humanitarian backlash. Effective governance, therefore, requires calibrated enforcement embedded within a coherent legal framework for migration, rather than categorical prohibition alone. Policy of doing complete, thorough checks on Immigrants before coming A new immigration framework introduces a structured rotation-based labor migration system, allowing immigrants to be admitted on defined, time-bound contracts of typically one to two years based on prior economic assessments linked to specific sectors and employers. At the end of these contracts, migrants are expected to return to their countries, ensuring a controlled flow of labor that mitigates long-term settlement pressures and public service burdens. This system promotes fairness by broadening access to work opportunities, enabling more individuals to participate in legal labor migration, provided they meet eligibility criteria. To incentivize productivity and integration, the policy includes a performance-based extension mechanism, allowing immigrants with exceptional work performance, language acquisition, and favorable evaluations to qualify for contract renewals or longer-term status. This balanced approach reinforces immigration as a regulated, development-oriented partnership, offering opportunities without defaulting to permanence, thus alleviating concerns about demographic shifts in host societies. Temporary and rotational labor migration schemes have been widely adopted to address sector-specific labor shortages while limiting permanent settlement pressures. Programs such as Canada’s Temporary Foreign Worker Program and the Gulf Cooperation Council’s contract-based labor systems illustrate both the advantages and risks of rotation models. On one hand, time-bound contracts offer employers flexibility and allow governments to regulate inflow volumes with greater precision. On the other hand, weak labor protections and limited mobility rights have, in some cases, produced worker exploitation and reduced productivity. Comparative evidence suggests that rotation systems are most effective when combined with enforceable labor standards, transparent renewal criteria, and return incentives linked to skills transfer or development benefits in the countries of origin. Thus, rotational migration should be understood not as a control mechanism alone, but as a policy instrument whose outcomes depend on regulatory design and bilateral cooperation. Policy of No Free Welfare or No Free Money for Immigrants, Refugees, or Asylum seekers Another key aspect of the proposed immigration framework is the separation between labor migration and welfare entitlement. This policy enforces a “no free welfare, no free money” principle for immigrants, refugees, and asylum seekers during their initial stay, aiming to prevent welfare dependency and protect public systems. Welfare systems are intended as safety nets for citizens and long-term contributors; giving unrestricted access to newcomers could jeopardize their sustainability. The focus is on self-reliance through work, with immigrants admitted based on their employability and the labor market's demands. Limited conditional support may be provided to avert humanitarian crises, but not as a substitute for employment. For refugees and asylum seekers, prompt access to work is prioritized to reduce long-term dependence and restore dignity. Eligibility for broader social benefits may eventually be linked to stable employment and tax contributions. This approach aims to reframe immigration as a system based on effort and contribution, thereby enhancing social cohesion while safeguarding public resources. Access to welfare benefits for immigrants, refugees, and asylum seekers remains one of the most politically sensitive dimensions of immigration governance. Empirical evidence from countries such as Germany and Sweden suggests that early access to social assistance can help stabilize newcomers during their initial settlement. Still, it may also delay labor market integration if not accompanied by strong activation policies. Conversely, systems in countries such as Canada and the United Kingdom are increasingly conditioning access to benefits on factors like employment participation, language acquisition, or residency duration. These models suggest that welfare design functions as a policy signal, shaping incentives for self-reliance and integration. Rather than adopting unconditional inclusion or total exclusion, comparative analysis indicates that welfare regimes should be conditional, striking a balance between humanitarian protection and fiscal responsibility. The analytical challenge lies in designing thresholds that prevent long-term dependency without undermining social cohesion or violating international protection norms. Policy of a Complete ban on illegal migration A strict commitment to the rule of law characterizes the proposed immigration framework, which enforces a ban on illegal entry and unlawful presence. Western countries would reject immigration and asylum claims resulting from immigration law violations, such as unauthorized border crossings and document fraud. This policy aims to uphold institutional credibility, as tolerance of illegality at entry undermines compliance and public trust. Furthermore, unchecked illegal migration is linked to transnational crime, with organized networks exploiting irregular routes for human trafficking, drug smuggling, forced labor, and more. A zero-tolerance approach towards illegal entry, coupled with robust enforcement and deportation, seeks to disrupt these criminal activities and prevent the exploitation of vulnerable populations. The policy requires swift removal procedures for individuals entering or remaining in the country illegally, ensuring that deportations observe due process and human rights standards while preventing procedural loopholes. Legal migration and asylum pathways are maintained and must be accessed lawfully, thereby reinforcing that opportunities are tied to compliance with the law. This ensures that order is restored, security is enhanced, and humanitarian provisions are protected for law-abiding individuals. Policy of a Complete ban on Ads or the use of Western women to entice people for Immigration The new immigration framework incorporates a complete ban on misleading advertising practices that exploit the objectification of Western women to attract migrants from developing nations. Such advertisements, often propagated via social media and unregulated agencies, misrepresent realities and take advantage of gender stereotypes, promoting social or romantic opportunities as migration pathways. These practices distort the fundamental purpose of immigration, which should be focused on lawful work, skills, or protection, while undermining women's dignity by treating them as marketing tools. The policy addresses the disproportionate targeting of uneducated, unemployed, and economically vulnerable populations, leading to false expectations and irregular migration attempts. Furthermore, these deceptive campaigns often involve fraudulent intermediaries, resulting in financial losses, legal risks for migrants, and inflows that do not align with labor market needs. To combat this issue, Western countries should establish specialized cyber-monitoring units to dismantle and prosecute deceptive practices, collaborating with digital platforms and regulators to eliminate illicit content and enforce penalties. Legal prohibitions against gender manipulation in migration advertising must be implemented to ensure that migration decisions are made in a manner that is legal, informed, and respectful of women’s dignity. Additionally, while Western nations often depend on migration to address declining fertility rates, studies suggest it is not a long-term solution for stabilizing dependency ratios. Countries like France and Hungary demonstrate that demographic sustainability is closely tied to labor market conditions, gender equality, and family policies, rather than relying solely on financial incentives. Immigration and demographic policies should be viewed as complementary, with a focus on balanced investments in family policy to mitigate migration pressures and foster social cohesion. Policy of exceptional facilities and rewards for Western women who become new mothers A new demographic and development strategy aims to incentivize Western women to have children in response to declining birth rates, aging populations, and shrinking workforces. Instead of relying solely on immigration, which has been the common compensatory mechanism, this policy reframes motherhood as a public good and essential for national sustainability. Women who give birth would benefit from a range of financial incentives, including income tax reductions, property tax waivers, preferential mortgage rates, and enhanced childcare and healthcare support. These measures aim to alleviate financial pressures that discourage childbearing. The policy emphasizes a cumulative support system were increased family size leads to greater long-term assistance, creating transparent incentives for family formation without pressure. This shift aims to reduce economic penalties associated with pregnancy and child-rearing, thus empowering women in their family decisions. Unlike short-term monetary bonuses, the sustained fiscal relief reflects a long-term commitment from the state, providing stability during challenging years of child-rearing. By focusing on boosting native birth rates, the policy also challenges the justification for mass immigration, advocating for a sustainable demographic policy that lessens dependency on foreign labor. Ultimately, this approach aims to harmonize labor supply with cultural continuity and fiscal sustainability, positioning immigration as a selective tool rather than a primary solution to demographic challenges. Several Western countries implicitly rely on immigration to offset declining fertility and population aging, yet comparative demographic research suggests that migration alone cannot fully stabilize dependency ratios in the long term. Countries such as France and Hungary have experimented with pro-natalist policies, offering fiscal incentives and childcare support to encourage family formation, with uneven but instructive results. Hungary represents a more explicitly pro-natalist budgetary model. The government has introduced lifetime income tax exemptions for women who have four or more children, subsidized housing loans for families, and preferential mortgage schemes for new parents. These cases demonstrate that demographic sustainability is influenced by labor market conditions, gender equality, housing affordability, and work–life balance, rather than financial incentives alone. From a policy framework perspective, immigration and demographic policy should be treated as complementary instruments rather than substitutes. Overreliance on continuous labor inflows may defer structural reforms, while balanced investment in family policy can moderate long-term migration pressures and enhance social cohesion. Policy of Citizenship Restriction and Long-Term Residency without Naturalization Some Gulf Cooperation Council (GCC) states, particularly Saudi Arabia, the UAE, and Qatar, have adopted an immigration governance model that clearly differentiates between long-term residency and citizenship. This model grants renewable residence visas to foreign nationals while hindering access to birthright citizenship or naturalization, treating citizenship as a privilege linked to lineage and national identity. By doing so, these nations manage demographic control, depend on foreign labor for economic growth, and strengthen state authority over demographics and welfare, while lessening long-term fiscal obligations associated with pensions and social security. Thus, migration remains temporary, creating a significant divide between citizens and non-citizens. Although the model offers administrative clarity, it faces challenges such as limited rights for residents, restricted social integration, and reliance on employer-sponsored visas. GCC countries impose strict immigration regulations, contrasting with Western democracies that prioritize equality and human rights. In these Western contexts, conversations around birthright citizenship and naturalization are evolving, with some nations opting for conditional citizenship that requires stricter residency criteria while still permitting a naturalization process. This analysis highlights the diversity in policy approaches, ranging from permanent residency without automatic citizenship to merit-based naturalization. While the GCC's system focuses on demographic control rather than political inclusion, it serves as a valuable case study for Western nations examining migration management and its implications for nation-building. Recognizing the complex interactions between citizenship and residency is essential, as it transforms these concepts from automatic rights to strategically managed political assets. Policy of Privatizing Religion and Restricting Public Religious Expression Policies aimed at privatizing religion attempt to limit religious belief and practice to private settings while prohibiting public expressions such as symbols, prayers, or proselytization. Advocates argue this fosters civic neutrality and diminishes religious conflict in diverse societies. However, it raises significant legal and normative issues, particularly concerning international human rights, with Article 18 of the International Covenant on Civil and Political Rights underlining the necessity of allowing public religious manifestations. Evidence suggests that broad prohibitions on religious expression may be counterproductive, as seen in judicial cases like S.A.S. v. France, emphasizing proportionality in legal restrictions. Experiences from France and Quebec show that secular governance can respect visible religious expressions without harming societal unity. Research indicates that strict state-imposed religious limitations may lead to social tensions instead of harmony. While proponents highlight the benefits of administrative simplicity and equality, excessive restrictions risk undermining individual freedoms and alienating minority religions, pushing expressions underground and possibly increasing conflict. Policies that anonymize religious identity to prevent political exploitation may also infringe on freedom of expression and personal identity. As such, privatization strategies must navigate a careful balance of equality, liberty, and social cohesion to avoid undermining the very stability and inclusiveness they aim to promote. Strategic Risks with Final Remarks Strategic immigration frameworks offer potential economic and social benefits but also pose significant risks that require proactive management. Key risks include institutional overreach due to inadequate administrative capacity, which may be mitigated through phased implementation and investment in digital infrastructure. Labor market distortions can arise from dependency on migrant labor, necessitating integration with broader labor reforms. Social polarization and political backlash may emerge from perceived exclusionary policies, which can be addressed via transparent communication and participatory design. Human rights concerns related to stricter enforcement require adherence to legal safeguards in policy development. Lastly, external spillovers affecting countries of origin highlight the need for equitable development-linked migration agreements. Overall, careful consideration of these risks and corresponding mitigation strategies is essential for effective immigration policy reform. In summary, the proposed new immigration policy for Western countries reframes migration as a disciplined, development-oriented system grounded in legality, economic realism, and social sustainability. By aligning immigration with verified labor needs, enforcing strict entry and conduct standards, eliminating welfare dependency, rejecting illegality and exploitation, and simultaneously investing in domestic demographic renewal, governments can restore public trust and policy coherence. Immigration is neither dismissed nor romanticized; it is regulated as a strategic instrument rather than a substitute for weak governance or demographic inaction. Implemented cohesively, this framework offers a credible pathway to end systemic chaos, strengthen national resilience, and ensure that both development and social stability are achieved on lawful and ethical foundations.

After years of blockages and renegotiations, the European Union approved the agreement with Mercosur, yet the decisive battle — the ratification — has only just begun. On January 9, 2026, the Council of the European Union (EU) approved the long-awaited trade agreement with Mercosur. This decision contrasts with what happened just a month earlier, when the President of the European Commission, Ursula von der Leyen, had to cancel her planned trip to Brazil to sign the instrument, as she had failed to secure the Council’s green light. Now, the signing will take place in Paraguay on January 17. How did we get here, and what lies ahead? What happened: Overcoming internal resistance The basis of the so-called Interim Trade Agreement (ITA), the commercial pillar of the deal, dates back to the “agreement in principle” announced in June 2019 by the leaders of both blocs. That announcement quickly led to the formation of a powerful opposition coalition in Europe, which ultimately brought the approval and ratification process to a standstill. This coalition coalesced around two main components: a traditional one, made up of European agricultural producers, and an emerging one, composed of civil society organizations focused on environmental protection. In a short time, the world changed and, for reasons predominantly associated with the new global geopolitical context, the Commission resumed its efforts to finalize this agreement. To do so, it needed to neutralize the aforementioned opposition coalition, which, taken together, had the capacity to block it — either through national governments in the Council or through their political representatives in the European Parliament. The Commission’s strategy was to deactivate the environmental component of the coalition. To that end, beginning in 2023 it embarked on a renegotiation with Mercosur, particularly with Brazil, aimed at increasing the binding environmental commitments included in the agreement. In exchange, it was willing to forgo some of the market access gains achieved in the 2019 arrangement. On the basis of this trade-off, both blocs announced a new agreement in December 2024. While environmentally based opposition declined markedly after this announcement, agriculturally based opposition persisted. And, as expected, it found a channel for representation in countries with strong agricultural communities. Thus, the governments of France, Poland, and Ireland expressed their opposition to the agreement and sought to build a blocking minority to prevent its approval in the Council. Because this required at least four countries representing at least 35% of the EU population, the opposing countries needed new allies. Along the way, they found an unexpected partner, given its historical support for the agreement: Giorgia Meloni’s Italy. From December 2024 onward, the Italian government sent ambiguous signals, alternating between rejection and conditional support. But when the time came for approval in December 2025, the Italian government did not cast its vote, and as a result the signing could not be finalized. However, Italy’s position turned out to be transactional. After the failure in early December, the Commission negotiated with the Italian government a series of side payments in exchange for its favorable vote, the most significant of which was an advance on agricultural subsidies provided for under the Common Agricultural Policy. In parallel, the European institutions approved a specific mechanism to activate the bilateral safeguards set out in the text of the agreement, which provides for the automatic launch of investigations for a range of sensitive agricultural products if domestic prices or exports from Mercosur fall or rise by 8%, respectively. It should be noted that these safeguards complement the fact that the opening offered by the EU for these sensitive goods is partial, via quotas, which in itself already limits the scope of liberalization in this sector. And although this set of concessions was not sufficient to appease agricultural opposition — leading France, Poland, Ireland, Austria, and Hungary to vote against it (with Belgium abstaining) — the agreement was ultimately approved by a qualified majority in the Council. What comes next: The challenge of ratification Following approval, the ratification stage of the ITA shifts political action to the European Parliament and to the national parliaments of the Mercosur countries. In the former, the emergence of a new battle between supporters and opponents is highly likely. The two largest political groups in the European Parliament — the Popular Party (center-right) and the Social Democrats (center-left), which together underpin the governing coalition in the EU — have already announced their support. However, driven by opposition from agricultural producers, it is to be expected that a significant share of Members of the European Parliament from countries such as France, Poland, and Ireland, among others, will vote in line with their country’s opposing position rather than that of their political group. Thus, while the baseline scenario is one in which there is a majority in favor of ratification, it will certainly be a narrow one, meaning that marginal shifts in position could end up tipping the balance one way or the other. In parallel, there will be efforts by some Members of the European Parliament to refer the agreement to the Court of Justice of the EU, with the formal objective of determining the instrument’s compatibility with European law. Indirectly, these efforts aim to delay the ratification process and buy time to build an opposing majority. There is no certainty that initiatives of this kind will succeed, but in any case, they will be an additional factor to monitor in the coming months. In the Mercosur countries, by contrast, a less contentious parliamentary process is expected in principle. Those who could theoretically be negatively affected in distributive terms—namely, different segments of the manufacturing industry — have supported the agreement (in Brazil) or at least have not actively opposed it (in Argentina). Moreover, in 2019 the Mercosur countries agreed on provisional bilateral entry into force as each member of the bloc, together with the EU, ratifies the agreement. In addition to effectively loosening the adoption of preferential agreements with third parties, this measure is intended to encourage ratification in each national parliament. As each Mercosur member ratifies, the cost of remaining outside preferential access to the European market increases. In short, ratification is the next and final step before the agreement enters into force. As of 2019, the focus will remain predominantly on what may happen in the EU.

Introduction Technological innovation is accelerating at an unprecedented pace, reshaping how societies generate energy, transport people and goods, produce food, fight disease, and explore space. Across multiple sectors, groundbreaking solutions are emerging in response to global challenges such as climate change, public health threats, energy insecurity, and resource scarcity. This article examines seven transformative technologies — from wireless electric-vehicle charging roads and regenerative ocean farming to graphene applications and disease-eliminating robots — each demonstrating how science and engineering are redefining sustainability, resilience, and human capability in the 21st century. 1. Wireless Electric Vehicles Charging Roads Electric Vehicles (EVs) have become key technology to decarbonise road transport, a sector that accounts for over 15% of global energy-related emissions. The increase of their sales globally exceeded 17 million in 2024, and it is forecasted to surpass the 20 million units by 2025. (IEA, 2025) Source: IEA analysis based on country submissions and data from the European Automobile Manufacturers Association (ACEA), European Alternative Fuels Observatory (EAFO), EV Volumes and Marklines. Despite this growth, several concerns continue to slow down their widespread adoption. Limited charging infrastructure, battery-related autonomy issues, high purchase costs, slow charging times, and the environmental impact of the battery productions remain major obstacle. The broader EV industry, however, is actively developing new technologies to overcome these challenges. (Automotive Technology, 2025) In this context, one of the most pressing challenges is energy supply – specifically, the need for better batteries and more accessible charging points. To address this bottleneck, a promising new trend has emerged: wireless roads capable of charging EVs while they drive. This technology could fundamentally transform the charging experience and significantly reduce dependence on stationary chargers. The idea is simple, a system that supplies power to EVs while driving, using embedded inductive coils (wireless charging) or conductive rails on the road, in other words a dynamic or in-motion charging on the road. In fact, this technology already exists and there are several examples worth mentioning: - South Korea: introduced in 2013, the first road-powered electric vehicle network, in which electrical cables were buried below the surface and wirelessly transfer energy to the electric vehicles via magnetic resonance. An electrified road has the advantage of eliminating the plug-in infrastructure and vehicles usually require a smaller battery, reducing weight and energy consumption. In 2009, KAIST introduced the OLEV (online electric vehicle), a type of EV that uses wireless dynamic charging through inductive coils embedded in the road. The OLEV public transport buses were later used in the 2013 first electric road in the city of Gumi, which consisted of a network of 24 km, by 2015 the number of OLEV buses increased to 12 (Anthony, 2013) and another bus line was launched in Sejong that same year. (SKinno News, 2021)- Sweden: a 1.6 km road linking Stockholm Arlanda airport to a logistic site outside the capital city was a pilot project achieved in 2016. (The Guardian, 2018), (Carbonaro, 2022) However, the Swedish government didn’t stop there and by 2020 they built a wireless road for heavy trucks and buses in the island city of Visby, and they are planning to expand it to the 13-mile E20 highway – logistic hub between Hallsberg and Örebro – and even have a plan of further 3,000 km of electric roads in Sweden by 2035. (Min, 2023), (Dow, 203)- USA: a quarter mile (400 m) section of road through the Corktown area of Detroit was changed to a wireless electric road. Electreon was the company in charge of the project. (Paris, 2024), (6abc Philadelphia, 2025)- France, Norway and China: Electreon – a leading provider of wireless charging solutions for EVs – has partnered and gained projects for wireless highways in France – a section of the A10 highway (Electric Vehicle Charging & Infrastructure, 2023) –, Norway – evaluation of wireless charging for AtB’s BRT routes in Trøndelag (Foster, Electreon to install the first wireless electric road in Norway, 2023) – and China – not wireless but in an 1.8 km electrified highway in Zhuzhou. (Foster, China demonstrates electrified highway, 2023) While all these examples show a “tendency” to switch into wireless roads, it is important to highlight three points to keep that are decisive and have slowed down the transition: in first place, these wireless roads are being targeted mainly for freight trucks and buses, the second point is the initial cost of the infrastructure is high and third point is the technology that should be added to the EVs. 2. Fire Suppression Using Sound Waves Seth Robertson and Viet Tran, engineering students from George Mason University in Virginia designed a fire extinguisher that uses sound waves to put out flames. Their device emits low-frequency sound waves that disrupt the conditions necessary for a fire to sustain itself, meaning that no foam, powder, chemicals or water are needed to extinguish a fire, just sound. In order to understand how it can be possible to extinguish fire with sound it is necessary to remember that a fire needs heat, fuel and oxygen to survive, if one of these elements does not appears, there is no fire, under this principle, Robertson and Tran’s prototype uses sounds to separate the oxygen from the flame, as a result, the fire extinguish. The interesting part is that the sound must have the right frequency, specifically between 30 to 60 Hz – low frequency sounds. The sound waves will act as pressure waves moving the air molecules back and forth, and in the right frequency, the movement will disrupt the flames’ structure, separating the oxygen molecules and the fire will simply die out with the lack of these molecules. Potential applications include small kitchen fires or small fires, while unfortunately, large-scale structural or wildland fires still remain a challenge, mostly due to the environmental factors, like wind, air density and flame intensity, that can be a hurdle in uncontrolled environments. Moreover, the generation of low-frequency sound waves powerful enough to suppress fires requires a significant amount of energy. Nonetheless, an early prototype consists of an amplifier to generate low-frequency sound and a collimator to focus the sound waves directly on the fire, and as mentioned before, one limitation is that specialized equipment is required to produce the high-pressure sound waves. Still, research has been carried out recently and it is expected that this technology could be a non-destructive and less damaging method for firefighters soon. https://www.youtube.com/watch?v=uPVQMZ4ikvM 3. Regenerative Ocean Farming Regenerative ocean farming is a climate-friendly model of aquaculture where seaweed and/or shellfish are grown in a way that requires no freshwater, feed or fertilizer, as the crops naturally filter nutrients from the water and capture carbon and nitrogen. This farming model can benefit coastal ecosystems and communities by increasing food security, creating jobs, improving water quality, protecting coastlines, supporting ocean justice (Urban Ocean Lab, 2023) and most importantly, mitigating climate change. Ocean farming can rely on a polyculture system – cultivate a mix of shellfish and seaweeds – or just a single species system. While the climate conditions determine the species to grow, it does not affect the system itself. The system follows a vertical layer farming way, in which farms use ropes that extend vertically from the surface to the seabed, in addition to the use of different levels and cages for scallops, oysters or clams, for example, as shown in Figure 2. Other species like kelp, abalone, purple sea urchins or sea cucumbers can also be harvested. Figure 2: Ocean farming diagram. Source: Urban Ocean Lab The big advantage is the maximization of the ocean space, producing more food in a smaller footprint, in addition to the use of the benefits of the species – seaweed and shellfishes – which are both natural filters that help to clean the water and absorb excess nutrients, combating ocean acidification and reducing marine pollution (Hassan, 2024) naturally. Moreover, the versatility of these species allows them to use them in other areas, such as biofuels, soil fertilizers, animal feed or cosmetics and not only for human food. Around the world, there are several projects that have adopted this methodology (Hassan, 2024): 1. GreenWave (USA): increased biodiversity by 50%, reduced nitrogen level in water by 20% and created sustainable job opportunities for locals.2. Ocean’s Halo (Ireland): annual harvest of 500 tons of kelp, creation of 20 jobs in rural areas and carbon footprint reduction by 30%3. Kitasaku Marine (Japan): Nori production increased by 25%, coastal water quality improved by 15% and local support of 50 locals.4. Catalina Sea Ranch (USA): harvested 1 million pounds of mussels annually, increased local biodiversity by 20% and created 10 new jobs.5. Blue Ventures (Madagascar): harvested 146 tonnes of red seaweed, plus they have created a sea cucumber market with a value of $18,000 and 700 farmers have been trained to farm in the ocean. (Blue Ventures Conservation, 2015)6. Havhøst (Ocean Harvest) (Denmark): they are growing seaweed, mussels and the European flat oyster in 30 communities along the Danish coast. In addition, they focus on educational activities to introduce ocean farming to more people. (Waycott, 2022) Overall ocean farming creates a positive environmental impact; it provides a sustainable food source and economic opportunities for the local people and the industry. Of course it faces challenges, but it has become a way to mitigate climate change and protect the ocean. 4. Wave Energy Generators There are two types of waves. Surface waves are generated by a combination of wind passing over the sea’s surface raising up water and gravity pulling it back down. In a technical way, warm air rises and expands, creating areas of low pressure compared to places with cooler air. Air then moves from high-pressure areas to low-pressure areas. This movement of air is wind and when it rushes across the surface of the Earth it creates waves in oceans. (Lumley, 2025) On the other hand, underwater waves are sound waves produced by earthquakes or volcanic eruptions; these waves travel by compressing and expanding the water. (Kadri, 2025) In both cases temperature variations and other factors can affect the nature of the waves. For instance, wave energy or wave power harnesses the ocean’s waves to generate energy by converting a wave’s kinetic energy into electricity. Wave power is a form of renewable and sustainable energy which has potential cost benefits over solar and wind but faces technological challenges limiting its large-scale adoption in electricity generation and water desalination. (Lumley, 2025) The nature of the waves makes wave energy the world’s largest source of energy with a potential of annual global production of 29,500 TWh, according to the Intergovernmental Panel on Climate Change (IPCC, 2012). In addition, it works well in tandem with other renewables such as wind. (Ocean Energy Europe, s.f.) In terms of technology itself, wave energy has relied on the next devices: 1. Point absorbers: floating buoys that capture the vertical movement of waves, which then is harnessed through a cable anchored to the seabed. The vertical movement of the waves is subsequently transformed into electricity via converters (alternators, generators or hydraulic systems). These are usually mounted on the seabed in shallower water and are connected to the floating buoys.2. Oscillating water columns (OWCs): a partially submerged, hollow structure connected to an air turbine through a chamber. These devices use the rise and fall of the waves to compress air, the air is forced to move back and forth in the chamber and creates a strong air flow that powers the turbine, generating electricity.3. Overtopping devices: a floating structure made of segments linked together, which lifts up and down with the waves. These devices harness wave energy by allowing waves to flow into a reservoir, which then releases the water through turbines to generate electricity. Design, flow dimensions, turbine efficiency and structural elements influence their efficiency. Source: BKV Energy Despite its huge potential and considering it as a clean energy source with no GHG emissions, the main concern related to wave energy is the marine life affectation – including habitat alteration, noise pollution or collision risks for marine life. On the other hand, high costs, complex design, maintenance and technological constraints also have become a problem, still, the potential of this continuous energy is huge compared to the more limited wind energy, for example. (Lumley, 2025) Despite all that, there are some active projects being developed in different parts of the world, for example: Azura Wave Power (tested in Hawaii), Anaconda WEC (UK’s prototype), CalWave (in California), CETO (tested in Australia and expected to be tested in Spain too), Crestwing (tested in Denmark), HiWave-5 (Swedish-based tested in Portugal), the Wave Energy Program (in India) or the Ocean Grazer WEC (developed in The Netherlands), among many others. (Wikipedia, 2019) 5. SpinLaunch SpinLaunch is a spaceflight technology development company working on mass accelerator technology to move payloads to space. This innovative space company is known for their Meridian Space and their Suborbital Accelerator. The Meridian Space is a low-cost, highly differentiated LEO satellite communications constellation which offers speed, reliability and flexibility (SpinLaunch, 2025). The company has partnered, and investments have been achieved in order to launch 280 satellites (Berger, 2025) as part of their satellite constellation, which will satisfy the needs in any area needed such as maritime, national security, communications, corporate networks, aviation, military, etc. The highlight of these satellites is their mass that is only 70 kg, and its facility to be launched in one or two rockets. On the other hand, SpinLaunch is aiming to build a kinetic launch system that uses centrifugal force instead of traditional rockets and spins a rocket around at speeds up to 4700 mph (7,500 km/h) before sending it upward toward space. At 60 km or so altitude, the rocket would ignite its engines to achieve orbital velocity. To achieve this, they have built a Suborbital Accelerator prototype, in Spaceport America, New Mexico. This prototype is a 33-meter vacuum chamber that can launch payloads from 800 to 5000 mph. Several tests have already been carried out, being the 10th the latest on September 27th, 2025. (Young, 2025) SpinLaunch hopes to have a 100-meter Orbital Lauch system by 2026. The engineering behind these systems is as follows: both systems are circular accelerators, powered by an electric drive that uses a mechanical arm to sling payloads around in circles to reach incredibly high speeds of up to 5,000 mph. They then release the payload through a launch tube and spaceward. (Young, 2025) The company claims that their method is cheaper as it eliminates 70% of the fuel compared to the traditional rocket launch, in addition, the infrastructure is less, and it is more environmentally friendly than the traditional methods. However, the limitations are seen in the payload weight (no more than 400 kg per payload) and their resistance (payloads must be able to withstand up to 10,000 G’s of force during the centrifugal acceleration process) Source: SpinLaunch. 6. Disease-Eliminating Robots “Disease-eliminating robots” encompass a diverse set of robotic and AI-driven systems designed to prevent, monitor, and treat infectious diseases while minimizing human exposure to risk. These technologies operate at multiple scales — from environmental disinfection in hospitals to microscopic interventions inside the human body. Environmental disinfection robots are among the most established applications. Devices such as Xenex and UVD Robots utilize pulsed ultraviolet (UV-C) light to destroy viral and bacterial DNA, effectively sterilizing hospital rooms within minutes (UVD Robots, 2023; Xenex, 2024). Others deploy vaporized hydrogen peroxide (VHP) to disinfect enclosed environments like train carriages and operating rooms (WHO, 2022). These systems substantially reduce hospital-acquired infections (HAIs) and cross-contamination risks. In medical and clinical settings, robotics contribute to precision and safety. Surgical robots such as Intuitive Surgical’s da Vinci and Ion platforms enable minimally invasive operations with reduced infection risk and faster recovery times (Intuitive Surgical, 2024). At the microscopic level, nanorobots are under development for targeted drug delivery, capable of navigating the bloodstream to deliver chemotherapy agents directly to tumor sites, thereby minimizing systemic side effects (Lee et al., 2023). Meanwhile, biofilm-removing microbots are being engineered to eradicate bacterial colonies on medical implants and dental surfaces (Kim et al., 2022). Automated systems are also emerging for precise injections, such as intravitreal therapies for ocular diseases, helping reduce clinician workload and human error (Zhou et al., 2024). Beyond clinical contexts, robots support public health surveillance and disease prevention. Prototypes like MIT’s “Luigi” sewage-sampling robot autonomously collect wastewater data to monitor community-level infections and anticipate outbreaks (MIT News, 2025). In precision agriculture, AI-guided robotic systems detect infected crops early, controlling plant disease spread and protecting global food security (FAO, 2023). Collectively, these robotic systems demonstrate the increasing convergence of automation, biotechnology, and artificial intelligence in safeguarding human and environmental health. By taking on tasks that are dangerous, repetitive, or biologically hazardous, disease-eliminating robots represent a pivotal advancement in the global strategy for infectious disease control and public health resilience. 7. Graphene Graphene is the world’s thinnest material, consisting in a single layer of carbon atoms arranged in a hexagonal honeycomb lattice. Despite its thinnest it is stronger than steel and diamond. In addition, graphene is flexible, transparent, conductive, light, selectively permeable and a 2D material. In summary it is a versatile material with many different applications and that has gained attention since its isolation in 2004 by Russian and Nobel prize scientists Andre Geim and Konstantin Nocoselov. (Larousserie, 2013) The characteristics of graphene make them an important player in the energy, construction, health and electronics sectors. In a deeper analysis, its high conductivity is valuable for battery life, autonomy and energy efficiency. Its lightness is suitable for manufacturing drone batteries, which reduce their weight, and the drone’s weight too. Graphene’s transparency and flexibility could be used in screen devices including cell phones, televisions or vehicles – Samsung already produced a flat screen with graphene electrodes. In addition, its high resistance and excellent heat and electric conductivity make them valuable for the light industry. Other sectors that are beneficial from graphene include the construction and manufacturing sector. For example, adding 1 g of graphene to 5 kg of cement increases the strength of the latter by 35%. Another example refers to Ford Motor Co., that is adding 0.5% of graphene to increase their plastic strength by 20%. (Wyss, 2022) Graphene has become a promising material, and it has been studied and tested to be used as a replacement or equivalent of silicon in microelectronics. It has been used in sports, like tennis rackets made by Head or in electric cars concepts like BASF and Daimler-Benz Smart Forvision. Bluestone Global Tech partnered with mobile phone manufacturers for the first graphene-based touchscreen to be launched in China. (Larousserie, 2013) Paint with graphene for a better thermal regulation in houses; bones, prosthesis, hearing aids or even diagnosis of diseases could also rely on graphene. (Repsol, 2025) Nowadays, its costs are high, but the graphene is going through a moment of intense academic research that surely in some years will end up with even more promising results and applications. Conclusion Together, these seven emerging technologies form a powerful snapshot of the future. Their diversity — spanning transportation, renewable energy, aquaculture, aerospace, robotics, and advanced materials — reflects the multi-sectoral nature of today’s global challenges. Yet they share a common purpose: to create more sustainable, efficient, and resilient systems capable of supporting a rapidly changing world. Wireless charging roads challenge the limits of mobility; ocean farming and wave energy reimagine how we use marine ecosystems; SpinLaunch and graphene redefine what is physically possible; and disease-eliminating robots transform public health. These innovations are still evolving, but they show that the solutions to some of humanity’s most pressing problems already exist — they simply need investment, scaling, and political will. By embracing these technologies and continuing to pursue scientific discovery, societies can accelerate the transition toward a cleaner energy future, safer communities, healthier ecosystems, and a more equitable and technologically advanced world. References 6abc Philadelphia. (2025, Juky 11). Electric vehicle tech: The rise of wireless charging roads. 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