The European Union is increasingly becoming a bastion of stability in a geopolitically tense environment, but faces challenges in competitiveness and innovation, especially compared to China. The Panorama Analysis 2026 by the Konrad-Adenauer-Stiftung assesses the EU's development across three dimensions: Innovation and Competitiveness, Attitudes of Member States towards the EU, and the Global Environment.
Innovation and Competitiveness:
- Stagnation: The EU's GDP grew moderately by 1.6% in 2025, but competitiveness and innovation capacity are under pressure. Research and innovation progress remains minimal, with significant regional disparities. Leading European universities have also stagnated in international comparisons.
- Progress: Sustainability initiatives show moderate positive trends, including increased renewable energy share, growth in sustainable securities, and progress on UN Sustainable Development Goals (SDGs) like quality education, economic growth, and reduced inequalities. The EU remains socially resilient, with low unemployment, even distribution of incomes, and high satisfaction levels (particularly in Nordic countries). Inflation was brought back towards the 2% target in 2025. Regulatory normalization continues, with state aid volume approaching pre-pandemic levels.
Attitudes of Member States towards the EU:
- Stability and Fragmentation: Public support for the EU remains high and slightly rising, with most citizens viewing EU membership as advantageous. However, political polarization, informal decision-making, and selective integration are increasing. Despite pro-European parties' dominance, Eurosceptic influence remains significant.
- Institutional Capacity: The EU's institutional capacity to act is intact but hampered by selective blockades. Structural conflicts are evident in foreign, security, and energy policies, with Hungary's dissenting votes and Slovakia's shifting positions on Russia highlighting the unanimity requirement's consequences. The EU's legal framework enforcement remains robust, with declining infringement proceedings.
- Trade Policy: Trade policy shows signs of revival, with progress on agreements with Mercosur, India, and Indonesia. The EU acts coordinately within the UN framework but faces limited strategic influence due to geopolitical shifts. Geopolitical action is becoming more coherent but has not yet reached full potential.
- Institutional Development: Potential enlargements have intensified debates on EU institutional reforms, particularly regarding majority voting and efficiency gains. Conflicting interests between larger and smaller member states block concrete progress. Economic integration within the EU is uneven, with some member states (e.g., Germany, France) becoming less consistent in implementing EU requirements.
Global Environment:
- Dysfunctional Multilateral Order: The EU operates in an increasingly dysfunctional multilateral order with eroding foundations for international cooperation. Deadlocks in the UN Security Council (Ukraine, Gaza, Sudan) limit the EU's foreign policy effectiveness. The WTO faces politicization of trade issues and weakening regulatory function despite reform initiatives.
- Democratic Governance: Global democratic governance is stagnating, posing challenges for the EU in promoting liberal democratic norms. Authoritarian states are increasing their coordinated influence within multilateral organizations.
- Security Situation: The global security situation is deteriorating, with high levels of armed conflicts, political violence, and terrorist threats (including within Europe). Irregular migration inflows may only provide temporary relief.
- EU Relations with Global Actors: Relations with Russia continue to deteriorate due to aggression and hybrid threats. Transatlantic relations are marked by strategic uncertainty despite security cooperation. Relations with China are ambivalent, balancing economic interdependence with geopolitical and trade tensions.
- Globalization: Globalization is fragmenting into distinct sub-regions, with trade, investment, and mobility influenced by political conflicts and security interests. This leads to a rebalancing of economic openness towards greater strategic security and resilience within the EU.
Recommendations for Germany and the EU:
- Implement a clear competitiveness agenda, simplify bureaucracy, and pursue bold integration steps within the single market, potentially through a coalition of the willing.
- Redirect economic resources towards innovation capacity, prioritizing public spending on R&D and allowing for economic structural change.
- Use market access proactively and consider targeted countervailing duties in critical sectors to offset unfair competition and demand technology transfer.
- Utilize positive public attitude towards the EU strategically, following the "big on big things, small on small things" principle, with greater integration in areas of clear European added value and restraint elsewhere.
- Extend majority voting in the Council following Hungary's change of government, requiring trustworthy internal cooperation and sound fiscal policy.
- Assume a greater geopolitical role, building a safety net for rules-based trade with middle powers and addressing capability gaps in defense, intelligence, and critical technologies, particularly given declining trust in the US.
The European Union – the difficult path
Results of the Panorama Analysis 2026
Johanna Hohaus, Tim Peter
›The results of this year’s Panorama Analysis, whichmonitors developments in 2025 compared to 2024,
›Despite occasional blockages, the EU proves capableof taking action and should make use of the window
›On the international stage, the EU and its memberstates should work together in a coalition of middlepowers to build a backup for the rules-based world
›Whilst the EU and its member states have madeprogress in the areas of sustainability and societalresilience, their competitiveness and innovative
Stagnation meets progress
In the Innovation and Competitiveness dimension, two opposing trends of the past two yearsare continuing: on the one hand, the EU is stagnating in the fields of economy and innova-tion. On the other hand, the transition to a sustainable economy is steadily progressing, and
According to estimates, the EU’s gross domestic product grew moderately by 1.6 per cent in2025. The euro has proved to be a stable currency against the dollar, a situation attributableboth to the dollar’s weakness and volatility and to the euro’s increasing strength. At the same
As in the last Panorama Analysis, there has been little change in the Research and Innovationindicator. For example, according to itsInnovation Scoreboard, the EU failed to improve over-all in 2025. There continue to be significant regional disparities between innovation leaders,
Europe’s innovativecapacity is stagnating.
Progress in the area of sustainability is moderately positive. The share of renewable energyin gross final energy consumption has risen slightly, the volume of sustainable securitieshas increased once again, and European companies remain competitive in the clean techsector despite growing competition. The implementation of the United Nations Sustaina-
Once again, the EU is proving resilient in the area of socio-economic development, despitegeopolitical upheavals. The unemployment rate remains low, incomes continue to be dis-tributed relatively evenly compared with other economic regions, and overall satisfaction
The Regulation indicator has improved year-on-year. For example, the volume of state aid inthe European single market has almost returned to 2019 levels. This marks a continuationof the normalisation process following the COVID-19 pandemic and the energy price shock
Stabilisation with reservations
Compared with the previous year, the attitudes of member states towards the EU appear tobe broadly stable, yet more fragmented. Whilst support for the EU and legal and institutionalcohesion remain largely stable, political polarisation, informal decision-making processes and
Public support for the EU remains high and is even rising slightly. A majority of citizens view EUmembership as an advantage – particularly with regard to security, stability and cooperation.This general sentiment contrasts with political developments within several member states.
The EU’s institutional capacity to act remains intact overall, though it is hampered by selectiveblockades. Structural lines of conflict are becoming apparent, particularly in foreign, securityand energy policy. Hungary’s repeated dissenting votes and Slovakia’s shifting positions onissues relating to Russia highlighted the consequences of the unanimity requirement in 2025.
There are clear signs of a revival in trade policy. Progress on trade agreements with theMercosur bloc, India and Indonesia reflects a new pragmatism. Within the multilateralsystem of the United Nations, the EU continues to act in a coordinated and visible manner,
New pragmatism inEuropean trade policy
The debate on the institutional development of the EU has intensified against the backdropof potential enlargements. Member states recognise the need for wide-ranging reforms, for
Economic integration within the EU is progressing unevenly. Following a temporary impro-vement, some member states have recently become less consistent in implementing EUrequirements in the context of the single market, including major countries such as Germany
The multilateral order under pressure
The Global Environment dimension shows that the EU is operating within an increasingly dys-functional multilateral order in which the reliable foundations for international cooperation areeroding. Whilst the EU continues to champion rules-based cooperation and actively supports
Tensions betweenEuropean aspirations
From the EU’s perspective, the ability of the United Nations – and in particular the SecurityCouncil – to act remains limited. Major conflicts such as those in Ukraine, Gaza and Sudanhighlight persistent deadlocks that also constrain the EU’s effectiveness in foreign policy. TheGeneral Assembly continues to serve as an important forum for the EU to set the norma-
The global development of democratic governance is stagnating. For the EU, this means anincreasingly challenging environment for promoting lib
