Geopolitical risks are on the rise and expected to persist for a protracted period. The rule-based system that has supported trade liberalization over the past few decades has been weakened, making way for a power-based system. A multipolar and less integrated global trade environment represents a formidable challenge for Europe with significant medium- and long-term consequences.

 

Europe is likely to face considerable spending needs, including higher defence spending and investment in key sectors to protect Europe from supply chain disruptions. This policy response needs to address also long-term structural challenges like ageing and climate, which threaten growth and innovation (ageing) while requiring deep structural changes.

 

In this context, in the longer term Europe needs to adapt its economic and governance architecture to remain relevant and competitive in an increasingly challenging geopolitical environment.

 

The policy discussion will focus on the policy mix to effectively balance the existing trade-offs while mitigating debt sustainability risks. Securing the financing necessary to support spending in key areas is likely to prove challenging in a closer, inward-looking world. The policy session will discuss the available options and explore new ones.