Europe aims to regain momentum amid multiple crises

Europe’s hunt for an economic reset has stretched across two turbulent years, ever since the abrupt end of cheap Russian oil and gas collided with a steady slide in competitiveness against the United States and China.

Each time a fix seemed within reach, President Donald Trump shifted the terms of debate—first with his Liberation Day tariffs, and now with the Iran War.

Yet, in a twist, the very disarray Mr Trump provokes has jolted into motion reforms long stalled by member-state pushback.

Chief among them is “EU Inc,” unveiled this week by Ireland’s EU Commissioner Michael McGrath, a plan billed as a step-change for innovative start-ups seeking to scale across the bloc.

EU Commissioner Michael McGrath unveils the EU Inc proposal

Its twin initiative, the Savings and Investments Union (SIU)—intended to unlock household savings and channel them into the kind of start-ups that EU Inc would nurture—was blocked for years but is now gathering pace.

More files are lining up: an Industrial Accelerator Act, an updated Cyber Security Act, new rules for AI and cloud computing, and the “e-declaration” single digital portal to streamline posting of workers. All are being steered by a roadmap and action plan targeting completion by 2028 under the banner “One Europe – One Market”.

Irish diplomats point out that this week’s EU summit communiqué namechecks ten legislative files that could land during Ireland’s EU presidency.

“There’s a chance now and a momentum that things which were stuck could become unstuck,” says Georg Riekeles, associate director of the European Policy Centre (EPC).

“As so often, the EU is forged in crisis, and now there’s a sense of dire urgency, be it in security, defence, economic security.

“It’s very much a matter of finding the collective capacity to mobilise energies behind those turnarounds – and some will require much energy and a capacity for compromise. But there’s a sense of heightened crisis which, if it wasn’t here three or six months or two years ago, it’s certainly here now,” said Mr Riekeles.

That urgency, however, arrived late for the landmark reports by former Italian prime ministers Mario Draghi and Enrico Letta which, two years ago, laid bare deep flaws in Europe’s competitiveness and the operation of the Single Market.

A year of Donald Trump changed that.

Leaders at a mid-February informal summit in Alden Biesen—a castle in Belgium’s Limburg province—crystallised a new consensus: the military threat from Russia in the east now sits alongside an economic shock from the west.

The Alden Biesen summit focused on the EU’s competitiveness

Beyond lagging growth, Europe had drifted into risky dependence on trade and critical raw materials from partners (the US and China) whose reliability could no longer be taken for granted.

The prescription was sweeping: rework trade strategy, tame energy costs—now two to three times those in the US—reinforce the single market, and explore preferential treatment for EU firms in public procurement without crossing into outright protectionism.

“Alden Biesen focused on this,” says a senior EU official, “the need to map those dependencies so we can structure the best way to tackle them. We’re talking about not only dependencies in strategic sectors, [but also about] the need to implement a European preference that is targeted and proportional”.

The informal accord was to be locked in at this week’s summit—until the US-Israel attack on Iran upended the agenda.

Since then, Europe has struggled to align its message on the strike’s legality or whether to help Donald Trump ease the crisis in the Strait of Hormuz.

Global trade through the Strait of Hormuz has been severely disrupted

On Thursday, Spain’s Pedro Sanchez was adamant: “This is a defining moment for the European Union. We need to send a clear message to our citizens and the rest of the world, that Europe is [for] multilateralism and international law, and we are against this war. We are against this war because it is illegal.”

But by the time leaders arrived on Thursday—after overnight news of an attack on Qatar’s Ras Laffan LNG hub that sent European gas prices soaring—the debate had already shifted toward nuance.

“European countries did not start this war,” said a senior EU official ahead of the summit. “They were not even consulted about the beginning of this war. But what we have to deal with first are the consequences of the war.”

“The new consensus which has begun to emerge,” says Peter Ludlow of Eurocomment, “is, however, firm and meaningful: Iran’s new rulers have no friends around the [European Council] table, it should be said, and ‘Iran must never be allowed to acquire a nuclear weapon’.

“The United States’ and Israel’s war is not ‘our’ war, however. And ‘the protection of civilians and civilian infrastructure and full respect of international law by all parties, including the principles of the United Nations Charter and international humanitarian law’, – which … apply in Gaza and Lebanon too – are not optional but fundamental.”

Heads of state and government devoted most of Thursday afternoon to the Middle East.

The Taoiseach intervened repeatedly on Israel’s ongoing restrictions on humanitarian aid into Gaza, creeping annexation in the West Bank, withheld revenues from the Palestinian Authority, and Israel’s deeper push into Lebanon.

While leaders did not press him about his Oval Office meeting with the US President, it is understood Micheál Martin signalled that Mr Trump wants an off-ramp from the Iran War, mindful of rising US energy prices ahead of November’s mid-term elections.

French President Emmanuel Macron pushed for language—ultimately reflected in the communiqué—urging both sides to pause strikes on critical energy and water infrastructure.

Even so, the final text settled for vague lines about member states helping to reopen the Strait of Hormuz with regional partners “once conditions are met,” effectively after some form of ceasefire.

Mr Macron also floated cooperation with Japan and South Korea, as most delayed oil cargoes are bound for Asia.

UN Secretary-General Antonio Guterres, who joined leaders for lunch, picked up the idea. In a multipolar world, he argued, countries can act together not as allies but out of shared interests—in this case keeping oil and gas flowing—and to defend the multilateral order Mr Trump has pounded.

Italy’s Giorgia Meloni likewise suggested building a freedom-of-navigation framework through the UN Security Council, where Bahrain currently sits as a non-permanent member.

Another outcome—pressed firmly by Ms Meloni and Denmark’s Mette Frederiksen—was agreed language to prevent the Iran War from triggering a migration surge akin to the 2015 wave sparked by Syria’s civil war.

No leader offered explicit backing for Donald Trump’s war. However abhorrent Tehran’s regime, the consensus held that the US-Israel operation is roiling energy prices and destabilising the region.

Fuel prices in Ireland have surged since the war began

Still, senior EU figures caution that the “not our war” line may fray if the conflict drags on.

Despite anger at a US president—who only recently threatened to invade Greenland and has often treated European allies with disdain—EU capitals may have to react if conditions deteriorate.

One source said Europe had underestimated the sheer volume of Iranian drones and ballistic missiles fired at small Gulf economies, which will now scrutinise where their long-term security guarantees truly lie.

Put bluntly: mishandling the fallout could nudge Gulf states closer to Moscow or Beijing.

There’s also the global south to consider. After the 2022 invasion of Ukraine, the collapse of Russian fertiliser exports alienated many would-be supporters. Brussels now warns that a similar drop in Gulf fertiliser exports could trigger food shortages across Asia and Africa next year.

On energy costs, leaders sidestepped sweeping EU-wide fixes, reflecting the patchwork of national tax regimes and electricity systems.

European Commission President Ursula von der Leyen showed slides illustrating wide divergences: taxes and levies on power range from 0% to 20% across capitals, while carbon costs passed through via the Emissions Trading System (ETS) vary from 2% to 24% by member state.

A slide presented by Ursula von der Leyen at the leaders’ summit

The ETS dominated discussion. Giorgia Meloni complained that Italy bears a heavier burden under the scheme because of its reliance on increasingly expensive gas. Even so, sources said there was broad agreement that the ETS has accelerated Europe’s pivot from imported fossil fuels to renewables. A planned review appears set to move up from July to June.

In the short to medium term, leaders agreed that countries should pare back taxes and levies where possible, with EU rules allowing flexibility on state aid to shield energy‑intensive industries.

Frustration crept in as both the Middle East and energy debates were squeezed by time lost to Viktor Orban’s renewed veto of €90 billion in emergency loans for Ukraine—funds he signed off on in December but has since walked back.

Hungary’s PM Viktor Orban with Italy’s PM Giorgia Meloni at the EU summit

European Council President António Costa spoke with Mr Orban two days before the summit, and it was already evident, sources say, that the Hungarian leader would not shift.

“This is a decision that [President Costa] believes the leaders have already committed to and now needs to be implemented,” said a senior EU official ahead of the summit. “And this message has also been conveyed very clearly by the President of the European Council to Prime Minister Orban.”

Mr Orban’s stated rationale is Kyiv’s failure to reopen the Druzhba pipeline carrying Russian oil across Ukraine to Hungary and Slovakia—an exemption permitted under EU rules until 2027.

The Druzhba pipeline transports Russian oil to Hungary and Slovakia, via Ukraine

A pumping station on the line was bombed by Russia on 20 January, and Mr Orban has accused President Volodymyr Zelensky of dragging his feet on repairs; Ukrainians counter that their own devastated energy grid must take priority.

To seek a compromise, the European Commission has dispatched experts to Kyiv to assess damage at the pumping station—about four hours from the capital—and to reassure Budapest with a credible repair timetable.

Mr Orban—whom many member states accuse of weaponising the issue as he trails in polls ahead of Hungary’s 12 April election—has stood firm, telling reporters there will be no money for Ukraine without oil for Hungary, calling the matter “existential”.

Even knowing he would not budge, Mr Costa concluded a principle had to be defended bluntly at the leaders’ table: summit agreements must be honoured or the trust underpinning the European Council will erode.

Afterward, Mr Costa—long viewed as adept at keeping Mr Orban onside—labelled the Hungarian stance “totally unacceptable”.

“Nobody can blackmail the European Union,” he said.

Officials see little chance of movement before Hungary votes on 12 April. Whether Mr Orban would soften afterward is unclear. Meanwhile, Ukraine could run out of cash by early May, degrading its ability to shield cities from Russian missiles and drones.

As Ireland’s EU presidency nears, the bloc is racing to assemble the tools it says are vital for greater economic and security autonomy in an ever harsher world.

But when it comes to stopping President Trump’s war in the Gulf, Europe’s toolbox remains conspicuously bare.