One of the clear losers from the European elections is the liberal Renew group. The most recent Europe Elects projections show the group dropping by 17 seats in the next parliament. The liberals will still be the third largest group in the European Parliament. But the ECR came ahead of the group in popular vote. Macron’s Renaissance party, the largest single entity in Renew, losing badly was a double-blow.

Now, however, the question will shift to what to do next. The campaign was pretty bad-tempered within Renew itself. This was mostly because of disagreements over how to deal with the far-right. The EPP, S&D, and Renew, the three core centrist groups, will still have an EP majority between them. That might delay the far-right issue for the group.

But it will come up again eventually. If Macron’s gambit in France is to draw the far-right into a co-habitation agreement, that may further complicate things. Valerie Hayer, Macron’s lead candidate, instigated an attempt to chuck the Dutch liberal-conservative VVD out of the group over its cooperation with Geert Wilders. Her own party may find itself in a similar position with Marine Le Pen and Jordan Bardella.

More fundamentally, however, there will have to be some soul-searching about the future of European liberalism. Macron’s famous slogan, ni gauche ni droit, is a kind of embodiment of the idea. But it is extremely difficult in practice to straddle both at the same time. You inevitably end up getting pulled in one direction or the other, based on who’s stronger, and political contingencies. This happened to Macron, and to the VVD. It led to the extinction of Ciudadanos, Spain’s own once-powerful liberal insurgents.

The result can be a disunited front that struggles to formulate a core message for its voters. Different liberal parties also instinctively lean in different directions. Liberal conservatives like the VVD face the temptation of just becoming a straightforwardly conservative party. Social liberals like D66, another Dutch liberal party, have to decide how close to the social democrats they want to get.

Part of this reckoning should be where to stand on European integration. Renew includes some of the most enthusiastic proponents of further integration. It also includes parties who either explicitly don’t want it to go much further than now, or say one thing in principle and do another in practice.

When the numbers come in on Sunday night, our advice would be to take a deep breath, and forget anything that measures the result relative to what was expected. We get a whiff of that with yesterday's publication of the Dutch exit polls. The Dutch Labour Party came first. But Geert Wilders appeared to have raised the number of his MEPs from one to seven.

There will be a similar story in Germany on Sunday. The AfD once polled 23%, and is now at 15%. It has a rival in Sarah Wagenknecht's new party. And it had a terrible election campaign during which the party managed to get itself excluded from the Identity and Democracy group in the European Parliament. The political adviser of the lead candidate has been arrested on charges of espionage for China. Another MEP has received money from Vladimir Putin. And yet at 15%, the AfD would still be stronger than last time. Marine Le Pen and Giorgia Meloni will be much stronger. Robert Fico and Viktor Orbán will still be strong, and so will assorted nationalists in the Nordic countries. The far-right, even after a merger between the two rival groups, will not have a majority. The smartest thing for them would be to become the main opposition group against a centre locked into an uneasy coalition. 

That would be the happiest outcome for everybody. But it's not clear that we will get it. The centre-right and the centre-left used to be the parties of government and opposition, switching positions from time to time. Now they are always the government together, and the far-right is in opposition. We will see on Sunday whether that is still a stable equilibrium.

The more fractured the parliament, the more difficult it will become to govern. Last time, the centre did hold. Ursula von der Leyen secured a majority for herself and her agenda. The Green deal has been a massive block of legislation. Under her leadership, trade policy became more geopolitical. The EU has introduced important new regulations on digital content, AI and crypto-currencies. Agree with them or not - we mostly don't - this has been a very busy Commission.

So far, the big question is whether the next Commission will also have an agenda backed by a political majority, whether the EU will resort to an Italian-style technical administration with a minimal agenda, or whether the EU will descend into legislative gridlock. The polls would suggest that we are at the knife-edge between those various scenarios. What to look out for on Sunday night is not whether the right gains more votes, but whether there will be a majority at all.

This is Israel’s fifth conflict in Gaza, and it won’t be the last if Israeli and Palestinians do not find a way to reimagine a new way forward despite their difficult history. The land was not without a people when the people without a land arrived. And there will be no security for Israel without granting Palestinians their rights on this land.

A majority of Palestinians are for a two-state solution that guarantees Israel’s right to exist. Israel focuses on Hamas, a minority, and uses this as a reason not to engage in negotiations for a two-state solution. Attending only to the extremists won’t strengthen the healthy part of the Palestinian society. On the contrary, the killing and destruction in Gaza drives the next generation towards extremism. This policy won't guarantee Israel’s security. Repeating the same thing again and again, expecting a different outcome, is madness as Einstein attested. And the next cycle of violence could be worse than Oct 7.

The EU remains divided over Israel’s war, but not about the two state solution as an ultimate goal. Many of those disagreements are about the immediate steps to take and how a two-state solution is to come about. Wait-and-see until Israel and Palestine sort this out has proven to be ineffective strategy already under the Oslo accords. It is no option today either. How to support turning a two-state solution a more concrete option for the future?

The EU sent a letter yesterday to invite Israel’s foreign minister to an ad-hoc association council to talk about Israel’s compliance with human rights obligations under the EU-Israel trade deal. The EU is on the road towards sanctions. The invitation is unlikely to picked up any time soon. What will the EU do if no one in Israel is interested in coming? Forget about it and move on?

It could also lend its support to the Arab states, whose work will be essential for any deal with Israel. They presented their peace plan last week to EU foreign ministers, and linked the normalisation with Israel to the two-state solution.

Some EU member states chose to act instead of waiting. Spain, Ireland and Norway went ahead and recognised Palestine as an independent and sovereign state last week. Slovenia did so this Tuesday. Malta may be next. Cyprus and Sweden recognised Palestine in 2014. The total number of EU states is 10. Altogether, 140 UN states that have recognise Palestine statehood. 

With this move, Spain is emerging as the coordinating leader within the EU on the recognition of Palestine. Another large member state, France, is working alongside the US to prevent another major Israeli offensive in Lebanon against Hezbollah.

A two-state solution will be a win-win for both sides, respecting the Palestinians' right to their own land and Israel’s need for security. It will reduce the threat from Hamas and Hezbollah. It will take the fire out of the conflict.

China’s pivotal role in global trade is undeniable. Whether the US slaps tariffs on Chinese imports or not, China will find other markets or ways to circumvent restrictions. Its strategy in the Middle East and Africa makes China an indispensable partner for many infrastructure projects in those parts of the world. And as the de facto leader of the Brics+, the trade association starts to attract countries not only from the Middle East but also Turkey, a Nato country with a customs union with the EU. Hakan Fidan, Turkey’s foreign minister, told the press on his visit to China yesterday that he will attend the Brics+ meeting in Russia next week as Turkey explores new cooperation opportunities. Brics+, once a loose term to describe China, Russia, Brazil, India and South Africa, made more concerted efforts in recent years to organise and encourage trade across the bloc and to become less dependent on the US. It also admitted Egypt, United Arab Emirates, Ethiopia, and Iran as new members.

The US used to be China’s biggest trading partner. This is no more. The US import share from China fell from 21% to 14% over the past six years. Average customs duties jumped from 3% in 2018 to 20% in 2023, and are likely to rise further with the latest round of customs duties, such as the 100% tariff on electric cars, 25% on lithium, and 50% on solar panels and semiconductors.

The fall in trade with the US has not harmed China’s exports, however. On the contrary, China more than doubled its exports in dollar terms over the 2018-2023 period. Of the $200bn lost in exports to the US, $154bn have been added to exports into the EU over this period, which in itself represents a 36% increase compared to 2018. The French research institute Rexecode also finds that China is using third countries such as Mexico and Vietnam for trading with the US. What has been lost in direct China-US trade, is now mirrored by triangular trade flows between China’s exports to Mexico and Vietnam and US imports from those two countries. Access to the US market has thus been preserved by using those transit routes. Chinese price competitiveness and the depreciation of the yuan against the dollar also means that the effects of tariffs have been more or less off-set. Circumventing tariffs by adding transit destinations is not without costs. It increases risks to the value chains, and leads to higher prices.

In this fragmented world, the US can no longer coerce its trading partners with tariffs as it used to. We have seen a similar pattern with sanctions on Russia. In a globalised, fragmented world, there is always a way around for resourceful countries.

Young people are more drawn to novelty and risk. Studies suggest that this is why they are attracted to new far-right parties, be it the Portuguese Chega or Spanish Vox. We will see next weekend how far this attraction can go. Green parties seem to be the novelty of the past. Anti-immigrant and anti-establishment parties are the new outlet for a youth that seems hungry for change. This is not a phenomenon only reserved for those with a grudge or low-income background. A social media post showing young people partying on the posh German island of Sylt chanting anti-immigrant songs suggests that what used to be behind closed doors of some obscure fraternities is no longer ashamed of coming out into the open.

There is a gender divide though in voting behaviour according to Politico, which looked at young peoples’ voting intention for the upcoming European elections in Germany, France, Belgium, Portugal and Finland. With the exception of France, women are more likely to vote for the Greens or the left while young men are clearly favouring far-right parties.

This gender gap may reflect the social tone of the agenda and the leading figures of those far-right parties. Marine Le Pen and Giorgia Meloni are role models for women to engage with far-right parties. Their agendas also include a social and cultural component young women can identify with. For young men, party leaders such as Jordan Bardella for Rassemblement National in France, Tom Van Grieken for Vlaams Belang in Belgium or macho types such as André Ventura for Chega seem appealing. The gender difference is the strongest in Belgium, while the number of undecideds is the highest in Germany.

Traditional parties have a hard time appealing to first-time voters. Will those 18-24 year-olds who turn away from classic parties come back once they settle down in their lives? Nothing is more uncertain. These emerging parties could become the new normal, while traditional parties have a hard time reinventing themselves in this fast changing environment where a presence on Tiktok is more influential than any press conference.

Sometimes it’s not about the figures, but what lies behind them. The most notable thing about Opec+’s latest meeting in Riyadh was not that the cartel kept its output cuts in place. It was the slightly chaotic way the meeting came about, as well as the increasingly Byzantine structure of the output quotas that determine how much oil its members can produce. For the meeting itself, first the idea was to hold it via video-link rather than in person, in the cartel’s headquarters in Vienna. But then the plan quickly changed when Saudi Arabia invited other oil ministers to its capital.

This last-minute shift is less surprising when you consider how complex Opec+’s arrangements have become. The total production cuts compared to baseline quotas that the cartel has dialled up amount to a bit under 6m barrels per day.

But they come in a three-layer cake. First you have cuts that the entire group has agreed to, across the board. That is worth about 2m barrels per day. Then there is one nine-member set of voluntary cuts, which account for another 1.66m. after that, there is another eight-member set, worth another 2.2m. On top of this, you also have some so-called compensation cuts, recompense for not meeting previously agreed-on production drops.

If all of this sounds a bit confusing, you are not the only one. Javier Blas has recently pointed out that this maze of different cuts, with variable end-dates pencilled in, is confusing even to the more seasoned observer. He offers one possible explanation: that the complex structure helps conceal that countries are not actually meeting their cut commitments. Iraq, Russia, and Kazakhstan all seem to be pumping more oil than they said they were.

The backdrop to this is a series of competing pressures that the world’s big oil producers are facing. Russia relies on oil revenue to help pay for its war in Ukraine. Iraq is in a tight spot budget-wise. But on the other hand, Saudi Arabia, the biggest producer in the group, needs higher long-term oil prices to make the sums add up for its own expensive economic diversification plan.

What you have added to all of this is a not-great demand outlook compared to the start of the year due to persistently higher inflation, and therefore interest rates. Plus longer-term trends, like the rise of non-Opec producers in the US and elsewhere in the Americas, as well as vehicle electrification. All of these put pressure on the cartel to somehow defend higher oil prices while also producing enough to keep revenues healthy.

It also provides a glimpse into what a more multipolar world looks like in practice. Opec is its own little rules-based order, where countries rely on a set of agreements to pursue their common interests. Thanks to external pressure, plus those interests beginning to diverge, the agreements are getting more esoteric and difficult to maintain. This is perhaps a lesson for the rest of us, even if we aren’t petrostates.

Is a far-right supergroup for real, or just an aspiration that fails then once it is to be implemented? Marine Le Pen, Giorgia Meloni and Viktor Orbán want all so-called sovereignist parties to join forces in such a supergroup to shift the balance of power in favour of the right in the European Parliament. If achieved, it would indeed be a significant shift. According to Euractiv such a supergroup of the Identity Group, European Conservatives and Reformists and several non-aligned parties could gather 160 seats in the upcoming elections. Such a supergroup would be the second largest after the European People’s Party.

But how would it work in practice? A collaboration between the ID and ECR is not such a straightforward matter. Eurosceptic parties and those from the far-right have a very different DNA and history in their national contexts. They are disunited on major EU policy topics, such as the support for Ukraine. Not all of them get along with each other on a personal level. They may have excluded some of the most contentious ones, such as the AfD, that would have made such a supergroup unpalatable for many ECR members. But there are other feuds between national parties, for example between Rassemblement National and Reconquête! in France, or between Romania’s AUR and Hungary’s Fidesz. Differences between the communitarian and economically liberal versions of the far-right are likely to surface.

There are organisational arrangements to deal with such tensions, as Euractiv reminds us. There is, for example, the model the British Conservatives spearheaded when they founded a more eurosceptic subgroup in the EPP called the European Democrats. This subgroup was semi-autonomous inside the EPP from 1999 onwards, until they split away to create the ECR in 2009. The second model is the European Free Alliance inside the Greens group. The EFA is a small number of regional, separatist, and ethnic minority political parties, which share common political objectives and values with the Greens, but run independently and autonomously inside the group.

Even if members do not see eye to eye on matters, there are advantages to be in a group together, be it to get a bigger budget, more speaking time, or even some top jobs in Brussels. Ideological unity or coherent voting has never been a priority anyway for either the ID or the ECR, which have both allowed their MEPs to vote according to their national interests. What the far-right supergroup will have to come up with is some common political objectives when they present their formation act to the president of the European Parliament. The delegations may clash over Ukraine, but could unite on a roll-back of climate change legislation or the delegation of EU powers back to the member states.

Is a far-right supergroup for real, or just an aspiration that fails then once it is to be implemented? Marine Le Pen, Giorgia Meloni and Viktor Orbán want all so-called sovereignist parties to join forces in such a supergroup to shift the balance of power in favour of the right in the European Parliament. If achieved, it would indeed be a significant shift. According to Euractiv such a supergroup of the Identity Group, European Conservatives and Reformists and several non-aligned parties could gather 160 seats in the upcoming elections. Such a supergroup would be the second largest after the European People’s Party.

But how would it work in practice? A collaboration between the ID and ECR is not such a straightforward matter. Eurosceptic parties and those from the far-right have a very different DNA and history in their national contexts. They are disunited on major EU policy topics, such as the support for Ukraine. Not all of them get along with each other on a personal level. They may have excluded some of the most contentious ones, such as the AfD, that would have made such a supergroup unpalatable for many ECR members. But there are other feuds between national parties, for example between Rassemblement National and Reconquête! in France, or between Romania’s AUR and Hungary’s Fidesz. Differences between the communitarian and economically liberal versions of the far-right are likely to surface.

There are organisational arrangements to deal with such tensions, as Euractiv reminds us. There is, for example, the model the British Conservatives spearheaded when they founded a more eurosceptic subgroup in the EPP called the European Democrats. This subgroup was semi-autonomous inside the EPP from 1999 onwards, until they split away to create the ECR in 2009. The second model is the European Free Alliance inside the Greens group. The EFA is a small number of regional, separatist, and ethnic minority political parties, which share common political objectives and values with the Greens, but run independently and autonomously inside the group.

Even if members do not see eye to eye on matters, there are advantages to be in a group together, be it to get a bigger budget, more speaking time, or even some top jobs in Brussels. Ideological unity or coherent voting has never been a priority anyway for either the ID or the ECR, which have both allowed their MEPs to vote according to their national interests. What the far-right supergroup will have to come up with is some common political objectives when they present their formation act to the president of the European Parliament. The delegations may clash over Ukraine, but could unite on a roll-back of climate change legislation or the delegation of EU powers back to the member states.

The hollowness of European support for Ukraine was on full display yesterday when the German government spokesman sought to clarify Olaf Scholz' surprise remark that Ukraine was entitled to use western weapons to hit targets in Russia. 

The media reported this story with a blue-eyed naiveness. The German government never disputed that it is legitimate under international law for a country under attack to hit the territory of the aggressor. This is why he does not supply medium-range missiles that would enable Ukraine to do just that. It's a question of policy, not the law. 

During the press conference, Steffen Hebestreit, the spokesman of the German government, was confronted with a statement by Scholz in 2023 that weapons can only be used on Ukrainian territory. Hebestreit responded that this was a statement of fact, not an interpretation of the law. That comment caused some confusion amongst reporters. We think that confusion is due to the idea that there has been a change in the German position. Once again, Scholz managed to scholz everybody.   

There may be some movement on this question from the Biden administration. The official US position has been the same as Germany's - that supplied weapons should not be used to hit targets in Russia. Antony Blinken said that when the situation changes, so can the policy. As Russia's insurgence continues, albeit at a slow speed, we may well get to that point. 

International law is not the problem here. It is about the rules of engagement. US policy may change. Scholz won't change.  Even if he did, we struggle to see how this could have a decisive effect on the outcome of the war. 

Most of our economic models focus on growth and how to achieve it. Economies and their companies know how to grow, but how to shrink well is still a mystery. Recessions are to be endured and their effects to be lessened. Structural changes are of a different nature.

Structural decline changes the whole economic ecosystem and its benefits may not be tangible for some time. We are reminded of Detroit, a once vibrant metropolitan car producing city that has been in utter decline for decades after plants left to the outskirts, taking with them jobs and people and leaving behind a ghost town. This year the city is seeing a rise in population for the first time in decades, as well as some optimistic growth forecasts for the next years to come.

Germany will have to go through some painful changes too as its engine car industry markets are about to shrink with no clear economic profile yet emerging of what is to replace this industry that had defined Germany’s economic success over the past century.

The digital tech sector is now considered worldwide as the new promising frontier. But these are early stages, and what is sustainable and what is not has yet to emerge. While language-based AI systems are the current state of the art, we doubt that they will be still driving innovation in 10 years time. The funds available to frontier companies in the capital markets are mind boggling. Elon Musk just raised $6bn for his xAI to challenge the market leader OpenAI. This is a bonanza that will play out over the time, competing with other AI models such as those designed for production processes developed in China.

The European market is about to find its niches too. In Q1 2024, European tech companies raised €29.9bn for over 970 deals, with the main focus being on green and transportation technologies. Sweden has been in a leading position, followed by France and Germany. Europe seems like a much more fragmented market, which may be a benefit for survival in the early stages of the innovation cycle. Funds spread over smaller deals spread risks across a wider spectrum, and allow larger companies to emerge more naturally through a selection process in the market.