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[Outlook on Global Affairs 2025 - Special Issue No. 8] Outlook on European Affairs in 2025 |
| December 24, 2024
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Peter WardResearch Fellow, Sejong Institute | pward89@sejong.org
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As 2024 comes to an end, Europe finds itself in a challenging political and economic landscape. The three major EU countries—Germany, France, and Spain—are either without functioning governments or governed by minority administrations. Other nations maintain majority governments but face critical elections in the near future. This year has seen political instability spreading across Europe due to economic struggles, rising debt, and the need for fiscal austerity.
Meanwhile, the Russian invasion of Ukraine continues to pose a persistent threat to Europe. The uncertain stance of incoming U.S. President Donald Trump on NATO and European defense against Russian expansionism has fueled concerns among Europeans. While some European nations have significantly increased defense spending, others are grappling with the financial burdens of maintaining welfare states amid aging populations and rising security threats. These structural challenges have been exacerbated by sluggish growth in many European countries. Germany, Europe's largest economy, experienced a recession for most of 2024, while France and the UK also faced low growth. Consequently, healthcare and welfare budgets remain under pressure due to rising costs and stagnant revenues.
Russia, on the other hand, has faced setbacks, including the collapse of one of its allies, Syria, and manpower challenges both on the battlefield and in its economy. In this context, Russia deepened its ties with North Korea by signing a strategic partnership agreement in June 2024. Subsequently, Russia took the unprecedented step of requesting military support from North Korea, with reports indicating that approximately 10,000 North Korean troops were deployed to the front lines. Additionally, North Korea continues to supply Russia with artillery shells and missiles, posing an increasingly direct threat to European security.
With respect to future technologies, Europe faces the risk of growing dependence on China amid the intensifying U.S.-China strategic rivalry. While Europe seeks to "de-risk" its relationship with China, it aims to avoid full decoupling. To this end, EU member states are subsidizing semiconductors and batteries, with some projects involving Chinese companies establishing facilities within Europe. At the same time, measures such as tariffs on surging imports of Chinese electric vehicles are being implemented.
Relations between South Korea and Europe have strengthened in recent years, with South Korea emerging as a key partner in economic and defense industries. However, South Korea’s current political uncertainty is likely to hinder high-level diplomatic activities, such as political negotiations and summits, until its constitutional crisis is resolved. Despite this, the foundational ties between the two regions remain solid, with growing potential for collaboration. As one of the world’s leading producers and exporters of weapons, advanced semiconductors, and batteries, South Korea holds significant potential to enhance cooperation with Europe. In the context of the ongoing war in Ukraine, South Korea is expected to work with European nations to bolster collective security. -
The second Von der Leyen Commission began its five-year term in December 2024, facing significant challenges, including potential diplomatic and trade tensions with the new U.S. administration. However, the most pressing issue remains the political fragmentation across Europe. While this fragmentation is unlikely to have a direct impact on relations with South Korea, it could complicate efforts to maintain meaningful cooperation beyond formal diplomatic engagements, necessitating a closer examination of the issue.
Europe is increasingly divided along party lines, with centrist forces weakening and retreating in major countries. This trend was evident in France's European Parliament elections, where the far-right National Rally emerged as the leading party, while the ruling Ensemble coalition suffered significant losses.
In Germany, the Alternative for Germany (AfD) saw moderate gains compared to France, and in Spain, the conservative Vox party advanced, albeit with limited impact. These developments highlight the broader rise and consolidation of far-right populism in European politics since the Eurozone crisis of 2009. Italy stands out as a notable example, with the populist Brothers of Italy leading a coalition government and winning the most votes in the European Parliament elections. Historically, some of these parties have been linked to Russia or received financial support from Moscow, raising concerns about their commitment to Ukraine. However, in Italy, such fears have not materialized, as Prime Minister Giorgia Meloni has maintained a strong pro-Atlantic stance.
The greater concern now revolves around the long-term fiscal sustainability of European governments. Most populist parties are reluctant to consider necessary austerity measures, with Italy being a notable exception. This issue is particularly pronounced in France, where President Macron called parliamentary elections after his party's significant losses in the European Parliament elections. The July elections resulted in a divided assembly, with the left-wing New Popular Front gaining the most seats, the far-right National Rally securing the highest vote count, and a minority government being formed under Prime Minister Michel Barnier of the Republican party. This government failed to pass a budget, leading to a no-confidence vote. Under French constitutional law, no new elections can be held until July 2025, leaving Macron in a weakened position. Questions remain about whether he can complete his term, though the likelihood of resignation or impeachment appears low.
If Macron were to resign in 2025, the National Rally might have a chance to take the presidency, potentially leading to fundamental shifts in France's stance toward the EU and NATO. However, such a scenario seems unlikely in the near term, with France instead facing continued political paralysis. The results of the expected elections in July 2025 could play a key role in breaking the political deadlock.
In Germany, the "Traffic Light Coalition" of the Social Democrats (SPD), the Greens, and the Free Democrats (FDP) collapsed amid disagreements over military spending to counter Russia's invasion of Ukraine and the economic strain of recession recovery efforts. Disputes over raising taxes and the country's debt brake mechanism were central to the coalition's breakdown.
Polling suggests the opposition Christian Democrats (CDU) may become the largest party in the Bundestag. However, their natural coalition partner, the FDP, may not secure enough seats, raising the likelihood of a grand coalition with the SPD. Such an arrangement could provide a stable government and maintain amicable relations with other centrist governments worldwide, albeit with potential friction with Washington. A significant wildcard is the AfD, with a stronger-than-expected performance potentially destabilizing efforts to form a stable majority.
Spain and Poland, while also experiencing political fragmentation, have been comparatively stable. Spain continues under a minority government, while Poland, despite having a far-right populist president wielding veto power, has maintained a functional government since its 2023 elections. Poland's presidential election in May 2025 could pave the way for greater political coherence.
The rise of far-right populism poses significant challenges to the EU's stability and foreign policy. Many of these parties are skeptical of free trade, seek to restructure the EU to weaken supranational authority, and often adopt strong anti-China sentiments, opposing trade and investment ties with Beijing due to security concerns. Views on NATO are more divided; some Western European far-right parties may seek rapprochement with Russia, while many Eastern European populists are strongly anti-Russia and pro-NATO.
The EU's free trade policies may face headwinds due to protectionist and anti-China sentiments. However, contradictions among far-right parties, especially on Russia and NATO, are more likely to result in policy paralysis than fundamental shifts in EU policy. -
The Franco-German relationship remains central to European politics, particularly since the UK's decision to leave the EU in 2016. The current power vacuums in both France and Germany are far from ideal as Europe navigates a complex intersection of political, geopolitical, and economic crises.
Italy and the UK, in contrast, have maintained relative political stability. The UK achieved political stability with a majority government following its July general elections. However, as a non-EU member, the UK's influence within the EU remains limited. Italy, while playing a stabilizing role as an EU member, lacks sufficient leverage to fully offset broader instability across Europe.
The new U.S. administration faces a NATO alliance that has grown with Finland officially joining in 2023 and Sweden following suit in March 2024. President Trump has repeatedly warned that NATO members failing to meet their defense spending commitments may not receive U.S. defense support. However, Sweden and Finland already meet the 2% GDP defense spending threshold.
Ironically, given the Italian prime minister's and major parties' close ties with American conservatives, President Trump may be less likely to label Italy as a “problem country” that does not contribute adequately to defense spending. This may reduce the pressure on Italy compared to other NATO member states—such as Spain, Portugal, Belgium, and Croatia—that have not met the 2% GDP defense spending target.
NATO faces growing internal discord and external challenges. Ukraine has lost significant territory since early 2024, amounting to thousands of square kilometers, according to the Institute for the Study of War. Despite these losses, Ukraine has refrained from fully mobilizing its male population under 25, likely avoiding this step unless the threat of territorial division becomes imminent.
Russia has made significant advances in its war with Ukraine, but at a substantial cost. In November 2024 alone, an estimated 45,000 casualties occurred, and Russia is facing military challenges to sustain further advances on the battlefield.
Russia signed a comprehensive strategic partnership treaty with North Korea in June 2024 and has increasingly relied on North Korea for the supply of materials, such as shells and missiles, since late 2022. The signing and ratification of this agreement appear to have provided the basis for deploying North Korean troops to the war in Ukraine. This highlights Russia’s efforts to secure new resources for its war efforts amid massive military and economic costs.
It remains uncertain whether the threat posed by Russia’s advances, supported by North Korea, will lead to additional aid for Ukraine from the U.S. or Europe. President Trump appointed Keith Kellogg, a hardliner on Russia, as special envoy for Russia and Ukraine. Kellogg has previously argued that both sides should be forced to negotiate and that aid to Ukraine should depend on its willingness to make concessions, including potentially ceding territory to Russia. At the same time, he views additional support to Ukraine as a means of pressuring Russia to negotiate under reasonable terms.
North Korea is now perceived as a direct and growing threat to many European countries and NATO. The immediate threat posed by Russia was evident during Romania’s first round of presidential elections in December 2024, where evidence of Russian interference led Romania’s Supreme Court to annul the election. Similar allegations were made regarding Moldova’s parliamentary elections in November 2024. These concerns highlight the multifaceted threats posed by Russia across the European continent.
The possibility of Russia transferring technology or other forms of military support to North Korea is a concern for South Korea. Particularly worrisome is the prospect of North Korean forces gaining expertise and experience in modern warfare, which is perceived as a serious threat. This shared recognition of danger forms a basis for common interests between South Korea and Europe, suggesting significant potential for collaboration. In particular, both sides are likely to expand military, technological, and diplomatic cooperation to deter North Korea’s threats and enhance international security. However, such cooperation must proceed with careful consideration of Washington’s position. Aligning with U.S. foreign policy is a critical factor that will determine the effectiveness and sustainability of this partnership.
Defense industry production is one area where greater cooperation is especially required. South Korea’s interest in Poland’s Orca submarine project is one example. However, as the Ukraine war demonstrates, preparing for modern warfare requires both Europe and South Korea to stockpile munitions and develop new weapons to counter drone threats.
The proliferation of drones and their asymmetric applications are rapidly changing the nature of battlefields. Consequently, developing precision-strike weapons, electronic warfare technologies, and drone defense systems has emerged as an important area for collaboration. Simultaneously, stabilizing supply chains and sharing production technologies to increase the manufacturing capacity for shells and other munitions will benefit both Europe and South Korea in the long term. Through such collaboration, both sides can enhance their defense industry capabilities while improving their collective ability to respond to global security challenges. -
Many European countries are struggling with the aftermath of the COVID-19 pandemic. Most European governments had to borrow significant amounts to fund emergency welfare and healthcare expenditures, while the EU itself incurred considerable debt to support the economic recovery of its member states. Europe has been hit hard by inflation, a situation exacerbated by Russia's invasion of Ukraine and the subsequent surge in energy prices. These circumstances have increased the financial burden on the European economy, making cooperation and coordination of economic policies among member states more critical than ever.
As a result of the pandemic and geopolitical shocks, Europe faces structural challenges to secure energy security while dealing with financial pressures on its welfare and healthcare systems. These challenges further exacerbate political instability within Europe. Many Western European countries, including France, Spain, the UK, and Italy, are already grappling with high national debt and rising fiscal burdens. Conversely, in countries like Germany, an aversion to debt rather than excessive borrowing seems to pose a greater challenge. This situation significantly complicates efforts by European governments to address external security threats, rising unemployment, and structural costs caused by an aging population and stagnant productivity growth since the financial crisis.
Germany’s strict fiscal rules, such as the Debt Brake, limit the ability to implement additional spending to respond to economic crises. This rigidity complicates fiscal policy coordination across the EU. At the same time, achieving sustainable economic growth has become more challenging due to an aging population and declining productivity, highlighting the need for innovative and cooperative approaches to address Europe’s economic and social structural issues.
Europe’s energy costs, driven by surging natural gas prices, remain significantly higher than those in the United States. These elevated costs have weakened the competitiveness of Europe’s manufacturing sector. In particular, European automakers are struggling in the face of the rapid rise of China’s electric vehicle (EV) industry, led by companies such as BYD. This has prompted widespread factory closures and layoffs. The bankruptcy of Sweden’s Northvolt, a battery company once seen as a leader in Europe’s green transition, underscores the severity of these challenges. It highlights Europe’s structural issues in competing with Chinese companies that dominate key sectors of next-generation green technologies.
Chinese firms hold significant advantages in production scale, cost efficiency, and control over mineral and raw material supply chains. In comparison, Europe faces risks of falling behind due to high energy costs, fragmented policies, and a lack of robust domestic supply chains. To address these issues, Europe must pursue strategic measures, including sustainable energy policies, supply chain diversification, and increased investment in research and development.
Europe’s response to these challenges has been somewhat contradictory. On the one hand, the EU has imposed tariffs on Chinese EVs, arguing that they undermine European competitiveness. On the other hand, Chinese battery giant CATL and European automaker Stellantis are jointly investing €4.1 billion to construct a lithium battery plant in Spain.
In the realm of critical future technologies, Europe has been offering subsidies for foreign investments to counter competition with China. Germany’s efforts to attract investments from Intel through government subsidies to establish "self-reliant" semiconductor production is a prime example. However, the lack of a unified financial framework and limited borrowing capacity has hindered progress toward a European equivalent of the U.S. CHIPS Act. The European Commission is leveraging the EU’s market size and tariff barriers to encourage Chinese companies to establish production facilities within Europe and transfer technology to European partners as part of investment agreements. Simultaneously, there are moves to establish a European version of the Committee on Foreign Investment in the United States (CFIUS) to strengthen investment oversight. This body would empower the EU to block investments in strategic sectors by companies posing security risks. These regulations are expected to directly impact firms in critical fields, such as artificial intelligence, semiconductors, batteries, and telecommunications, which are vital to Europe’s economy and security. These measures are part of Europe’s broader effort to enhance technological sovereignty, achieve supply chain independence, and safeguard strategic assets. However, they may also heighten tensions in EU-China economic relations and provoke debates within member states over balancing economic interests and security concerns.
If implemented, a European CFIUS would provide the EU with a robust mechanism to protect its security and economic interests through foreign investment scrutiny, akin to the U.S. system. However, achieving policy alignment and regulatory consistency among EU member states will remain a significant challenge in its execution.
Overall, this approach aims to strengthen Europe’s competitiveness and diversify supply chains. However, collaboration with Chinese companies carries inherent risks, such as deepening technological dependence and exposing strategic vulnerabilities. As a result, Europe must ensure policy coherence, bolster supply chain independence, and strike a balance between attracting strategic investments and safeguarding technological sovereignty.
South Korea, with its advanced technological capabilities, can play a critical role as an alternative to China for Europe. By establishing production facilities and enhancing R&D collaboration in Europe, South Korean companies can not only expand their market share but also foster knowledge and expertise exchange with European firms. Such partnerships could generate mutual benefits, particularly in strategic sectors like semiconductors, batteries, green energy technologies, and next-generation telecommunications.
Furthermore, by strengthening localized investments and partnerships within Europe, South Korean companies could mitigate the impact of emerging trade protectionism within the EU. Expanding their production footprint in Europe would enable South Korean firms to secure a more advantageous position within the EU’s regulatory framework. In doing so, South Korea could solidify its status as a strategic partner for Europe, fostering deeper economic and technological collaboration while advancing shared security and economic interests. -
The political fragmentation in Europe is likely to create significant challenges for the South Korean government in pursuing practical diplomatic and economic cooperation with some European countries next year. The political stalemate in France could pose substantial obstacles to expanding relations between Paris and Seoul throughout 2025. While Germany is expected to form a stable majority government following elections scheduled after February, the possibility of a continued deadlock cannot be entirely ruled out. Other European countries are relatively more stable but still face internal divisions.
This fragmentation and political deadlock negatively affect the unity of Europe and NATO, forming significant challenges, especially as they coincide with the return of President Trump to office. At this point, many European nations will likely have met his demand of spending 2% of GDP on defense to address the threat posed by Russia. However, there is uncertainty about how President Trump will handle Russia’s invasion of Ukraine, as he has previously promised to mediate peace and improve relations with Russia.
In this security context, South Korea needs to work closely with the U.S. regarding the provision of lethal weapons as part of a response to North Korea’s deployment of troops to the war in Ukraine, requiring a cautious approach. Meanwhile, South Korea and Europe are already exploring cooperation on expanding arms exports and investments related to ammunition production. However, some European countries may perceive South Korea as a competitor in the defense industry, necessitating a balance between cooperation and competition.
The mutual focus of both sides is more on securing missiles and artillery than advanced weapon systems. Strengthening cooperation between NATO and South Korea in this area could lead to tangible benefits for both parties. Additionally, Europe is expected to become increasingly dependent on China in future technology sectors. China is rapidly emerging as a leading producer of electric vehicles and batteries, a trend occurring as Europe’s key security ally, the United States, engages in geopolitical and economic competition with China. As such, Europe needs partners that can serve as alternatives to China. Depending on the tariffs and investment restrictions imposed on Chinese companies, South Korea could secure a competitive advantage in many future industries. In this context, South Korea must effectively utilize its cooperation with Europe to generate mutual benefits not only in military and security domains but also in emerging high-tech industries.
| Political Landscape in Europe
| Foreign Policy and International Security
| Economic Situation in Europe
| South Korea's Strategic Response
※ The contents published on 'Sejong Focus' are personal opinions of the author and do not represent the official views of Sejong Institue
