Brussels is Back: the EU's Autumn Agenda with Henry Foy

Welcome to the Eurofile, a podcast by CSIS, where we look at Europe through a Washington lens. I'm your host, Max Bergmann. Hello and welcome back to the Eurofile. Before we dive into today's show, a quick reminder to those who support and listen to the Eurofile, thank you. We appreciate you joining us and would also love to have your feedback, your ideas on how we can improve the show. You can send us your feedback, suggestions, or thoughts on future episodes, and anything else that you would like us to do or talk about on this show via email at erep@csis.org, or find us on social media, or leave a review wherever you get your podcast. After a long summer break, we're back in Washington. It is still very hot and humid here, but I'm here with Otto Svendsen, associate fellow with the Europe, Russia, and Eurasia program. Otto, great to have you. Great to be back. And we're going to discuss some of the recent news coming out of Europe, some of the big events that have have happened over the last few weeks that people are now sort of coming to grips with as they come out of their summer vacation. Some of the things that have happened, there was this past weekend, there was a referendum in Iceland about whether to restart EU negotiations. Uh there was also the Under Secretary of Defense for policy, Elbridge Colby, who had a visit to NATO headquarters, and he sent around a questionnaire that all European countries had to fill out, leading to some stress. And we had the CIA Director John Ratcliffe's mysterious unannounced trip to Moscow with all sorts of stories coming out later about what that trip was actually about. So, we're going to discuss all that. Then we'll turn to an interview with a fantastic Henry Foy, the Brussels Bureau Chief at the Financial Times, for his insight into what is expected to be a packed agenda for the fall semester at the European Union. And it's actually going to be a two-part conversation. The second part we're going to talk about the Brussels media bubble and what it's like being a journalist in Brussels. That conversation will come to you at a later date. So, Otto, let's dive into it. >> Let's do it. Let's start in Iceland. There was a referendum over the weekend. I think rarely has a political decision in a polity of about 300,000 people received as much attention. Uh we're talking about a country with the population size of Corpus Christi, Texas. >> It was August, you know, people are looking for things to follow, to track with with very little news. >> And this definitely scratched that itch. On August 29th, Icelanders went to the ballot boxes in a consultative vote on whether to restart EU accession talks. These were talks that had floundered in 2013 after initially beginning in 2009. But Prime Minister Frostadottir had framed this as sort of a now or never moment for her center-left coalition. The results were quite clear. 52.84% voted no against 47.16% voting yes with a turnout of over 82%. The most sort of delicate questions that were for debate include fishery sovereignty, which really drove the no campaign. There were some clear parallels to the Brexit vote. Iceland controls some of the richest fishing waters in the world and EU membership would mean submitting to the common fisheries policy and its quota system. There's also a sharp urban-rural divide and crucially the economic case for joining, which is often centered around monetary union, failed to land. Although Iceland's central bank rate is 8%. >> Interest rates are quite high. >> They're pretty darn high. >> So, joining the euro might have been sort of an economic stabilizer. It was one of the arguments that was big made. >> Perhaps, perhaps. In the end, the result was pretty clear and I think from a Brussels point of view, the mood is pretty gloomy. There was a clear hope that a yes vote would build momentum for the EU's enlargement agenda, which has kind of, you know, been treading water for a long, long time. Particularly by drawing support from these wealthier non-members, the Iceland's, the Norway's, the Liechtenstein's, to sort of provide a counterweight to the Western Balkans, which perhaps [snorts] accession tracks are not super popular, particularly with Western and and Northern European countries. So, Max, what does this mean for Europe? What does it mean for Brussels? What does it mean for the EU as a geopolitical actor? >> Yeah, it's never nice to be rejected. Uh people go and vote and do you want to date, marry and they come back and say, "No." I mean, it was decisive and that that wasn't 50-50 with coming down to a few ballots outskirts of Reykjavik. But, it you know, 53-47, it was close. Politico had a great line that said, "It's the fish, stupid." So, if you're Iceland and much of your economy revolves around fisheries, enabling or losing some control over that, so Portuguese trawlers or Spanish trawlers, I don't quite know the ins and outs. I know there are carve-outs and some protections, but that suddenly your waters could be fished by other EU vessels. This is fishing has been a major sticking point with the Brits upon their leaving. It's also the reason why Greenland in the 1980s or the principal reason why Greenland seceded from the EU. So, before Brexit, there was Grexit and it was Greenland leaving. I also think that part of what happened here was that the push for this referendum was largely due to security reasons, was a sense that the US was kind of an unstable ally. Iceland is in NATO. The US had designs on seizing Greenland. That was the major focus in January, February. I don't know precisely when this referendum was like activated, but it was clearly instigated by this concern that Iceland, like Greenland, is sort of on its own and might need protection. Now, this then leads to the point that the EU doesn't really offer that with Article 42.7. I also think that Greenland has sort of died down in the intensity of the coverage and the sense of concern that the US, that little green American men are going to be showing up in Nuke. So, I think the momentum behind the yes vote sort of was depreciated. I also think the government, and this this is I think one of the challenges that the EU has, the government that was advocating for joining didn't really feel like give it their all or, you know, it was sort of a little mushy. Reminded me very much of the Remain campaign. Wasn't really making sort of a positive affirmative case about taking back control. Iceland is in so Iceland gets all the benefits of being in the EU. It's in Schengen, so visa-free travel. It's part of the EU free trade zone, so, you know, it is economically for all intents and purposes a part of the EU. So, a lot of Icelandic voters were, "What are we actually getting from this?" And I would have argued that you're getting some influence and some control. And this deep irony, and this was true with Brexit as well, and also with Norway, is that the idea that you're maintaining sovereignty by being in a club where you don't get to vote and just make any decisions. There's a reason why the Brits can't really do the Norwegian model because you don't have control over your economic policies or your migration policies. So, it's this contradictory thing that we see with sovereignty. It's like, "Oh, I don't want to be part of that club." But you actually kind of are. >> Yeah, I completely agree with much of that. And on the security point, I think there was also a sort of fatalistic tinge to the no campaign in Iceland where there was a sense that if the US has to sign on North Atlantic European territories, including Greenland, potentially including Iceland, then if you're in Reykjavik, you're kind of screwed either way. I think this delivers sort of a not fatal, but pretty hard blow to defenders of the EU's Article 42.7 as some kind of counterweight to NATO's Article 5. >> Well, at least for now. All right, so right now there is no real Article 42.7. So, maybe if there were in 5 years >> if you're sitting in a European capital and that's to say Paris, completely made up hypothetical capital, and you're thinking this is it. This is the moment for greater integration on EU defense and security and at last some kind of a balance to NATO here, I think you're going to be pretty put down by if you view this election as sort of a bellwether for where is public sentiment towards the EU providing some kind of counterweight to NATO. I think this vote reinforces a kind of sort of kaleidoscopic narrative around what it means to be European. I think you on this podcast many times have advocated for, you know, the European Union as a federal actor. It's sort of the end-all, be-all for for European integration and European cohesion. I think this decision very much plays into a narrative that you actually have a much more sort of diversified institutional framework where you have things like the Joint Expeditionary Force led by the UK for security. You have Nordic Brigade. You have all sorts of different institutions that collectively make up Europe and >> Yeah, that make it a mess. >> That make it a mess. >> Or that's my view. >> There are so many drawbacks to that model, but I think there's a growing sentiment that there are many alternatives to EU membership. >> Yeah, I guess the one thing I would just say is I don't know if this is the bad for the EU that Iceland said no. I mean, they still basically pay into the EU budget. Maybe they would have paid in more. and the idea was that you were going to unlock enlargement for the Western Balkans. Maybe you would pair an Iceland membership with Montenegro, countries of similar size, one that's poor, one that's wealthy. Then you can bring them in, but uh what you know, bring Iceland in, a country of 300 to 400,000 people, and giving them a full vote at the European Council, and another veto point, and let's just say, I don't know, some random party wins 25,000 votes in some and suddenly Iceland is blocking stuff at the EU level. I'm not sure enlarging, bringing in a country like Iceland without the commensurate reform that enables the EU to start moving forward, makes a ton of sense. In this sense, this has basically been the French argument for a while, and one I sort of agree with, where how can the EU get bigger if it is still going to make decisions in this like crazy way of unanimity? And that wasn't on the table here. So, to me, it's an interesting outcome. I think, you know, one question for you, and then we wrap up Iceland, is what's going to be the impact on Norway? Does this sort of diminish the Norwegian interest in potentially joining? Do you think that kills some of the momentum? >> the impact is totally negligible. I think there's been so much chatter around whether or not this accelerates or dampens the enlargement agenda. I think the impact is totally moot. I think if you look at public opinion polling for EU membership in Norway, it's been pretty consistent over the past decade. Even, you know, a Russian invasion of Ukraine, American designs on Greenland, there's still a pretty solid, if slight, majority against pursuing EU membership talk. I think the idea that this Icelandic vote would be some kind of accelerant has been completely overblown. But with that, let's move on to a similarly dramatic development in continental Europe, in Brussels to be specific, because last week Under Secretary of Defense uh Elbridge Colby visited NATO headquarters, meeting with Secretary General uh Router and briefing the North Atlantic Council. His message was basically that Europe must take primary responsibility for its own conventional defense, line that has been delivered by several Trump officials. And this includes continuing support for Ukraine. Some context that sort of surrounded this visit, the Pentagon's Europe Force Posture Review, which was launched uh formally on June 18th. It's now a few months underway. Secretary Hexeth is expected to announce decisions in November on the future of roughly 80,000 US troops in Europe. There was also a leaked three-page document titled Questions for NATO allies and other key stakeholders, which asks allies whether they have been publicly supportive of US foreign policy priorities, including in the Middle East and in the Western Hemisphere. You also had mysterious visit by the CIA Director John Ratcliffe to Moscow. People were debating whether or not this entailed some kind of warning to the Kremlin about advances against a NATO ally, whether it had to do with Iran or negotiations uh over the future of the war in Ukraine. But Max, allies seemingly described Under Secretary Colby's visit as positive, but preliminary. But between the expected troop drawdown review, the loyalty questionnaire, many other dramatic developments in the transatlantic relationship, what's your read on where the US-NATO relationship actually stands right now? >> Yeah. >> I think it's been very transparent from the beginning of this administration that their ultimate goal is to reduce the US force presence in Europe and to begin a transition from a US-led NATO to a European-led NATO. They wanted to do that last year through a shock-and-awe force posture review, where it's rip the band-aid off, immediately pull out tens of thousands of US forces, have TV cameras of US troops getting on planes and and coming home and that would send the signal to Europe that it's really now on Europe to take charge. They weren't able to do that for a number of reasons that a lot of these bases, you know, really serve US interests, allies stepped in with their relationship with Trump. So, it was all very messy. And so, there was talk all of through 2025. Everyone was like, "When's this force posture review? When's this force posture review happening?" And I think what Bridge Colby in the Pentagon has done is taken their own war and said, "Okay, now we are going to do a methodical process. We're going to do a questionnaire. Spain, you know, you have bases, you have troops. Are you going to be there if we want to bomb, you know, Iran or whatever country?" And the answer is like, "Probably not." So, that then gives Bridge and Bridge Colby and and others, it helps their internal argument to say, "Okay, we need to reduce our forces here. They're not reliable. What's the point of this base if we can't even use it to do what we want." So, what we're seeing is I think a craftier bureaucratic way of getting to what they were trying to do last year and I would have to say a slightly more a collaborative way of reducing US force presence. It's being more transparent with Europeans, which I think is positive and saying that this is the direction of travel. Now, I think there's real problems with it. I think the big problem is that the gaps that the US will leave behind are incredibly deep. There was talk at NATO of like the spreadsheet sort of blinking red basically of all the areas that like Europe would have real gaps. And I also think the biggest flaw in this is that there is no such thing as Europe at NATO. NATO is just a bunch of countries that all come together and they all work through the United States. There is no European coordinator and there is no vision on the American side and there's no plan on the European side of how you actually replace the US in that role. I think there's a sense that the US will keep playing the role of coach, quarterback on the field, general manager, you know, back in to do all the things to be the motherboard that Europeans dock into. But if we're going to have like no skin in the game, very few troops on the ground, very few assets in Europe, how does that make any sense? So, to me a very chaotic handoff, even if this is more coordinated than it might have been a year ago. >> So, it feels like the Pentagon is ready to sort of suggest some pretty drastic action. How do you view Colby and the Pentagon writ large authority to actually implement something that is quite severe? We've often seen, you know, Pentagon put forth a position that then gets pulled back because President Trump has a good call with the leader of Poland or Romania, kind of dampens whatever has been put forth by the Pentagon. >> No, this looks much more integrated. I think it's more integrated with the State Department, with the NATO ambassador that's there. And also, I think sort of coordinated with Trump as sort of a response to Iran. Well, I think last year it was just the Pentagon moving out on doing something that then clever diplomats and other European leaders found ways to sort of mitigate. And also, generals in the Pentagon, I think still pretty much functions. The military is there to say, "That's not a good idea. That's a bad idea." And I think what's happened now is that there has been a better plan about how to actually implement these changes on the US side of how to do that bureaucratically. So, I think this is going to happen. I think there is a constraint put in by Congress that set a floor, I think of around 76,000 US troops. Now, we'll see if there's ways around that. I think there might be for the administration. But overall, I think this represents a big shift. Now, I think what's interesting about what Secretary Colby said when he was at NATO is it doesn't seem like there's any real talk of Russia, right? So, you you a situation where the Pentagon's like, you handle your own security, and it sort of feels like it's happening in a vacuum of if there isn't like the biggest war on European soil since World War II, and that Russia basically pays no threat, and that's where we have this sort of bizarre visit of the CIA director to Moscow, where the reporting is all over the place. Was this about Iran? Was this about warning Russia not to do hybrid attacks? Was this about warning Russia not to just attack Europe out of fear that it might be thinking of a conventional attack on Europe? I don't know. I think all of the reporting basically sounds plausible. What was the actual trigger to go? I don't know. Is this about restarting talks? I don't know. But there is a lot of concern and nervousness that I think is justified in Europe of the threat posed by Russia to Europe, to the EU, to NATO, to the Baltic states. And for a number of reasons, but one is that if America's pulling back, how committed is it? And I think we're going to see the Russians really testing that. The second thing is that there is no Europe, so how does Europe actually run a war without the United States? It's not, all respect to my British and Baltic colleagues, it's not going to be the joint expeditionary force. Uh so, who actually plays is the number 10, is the quarterback, is the coach, is a big question. And as we had a report out here at CSIS about the Russian defense industry, I mean, it's humming. So, if the war in Ukraine dies down, the Russians will keep producing weapons at a wartime rate and will be able to recapitalize their forces. Meanwhile, Europe doesn't know who's calling the play and has a peacetime defense industrial base. So, Russia may see in the short term that actually has a military advantage. So, there are real security concerns for Europe as it looks at Russia at the same time the US is just like sending around a questionnaire about pulling out. And final point here is when I think back, I think back to the 2024 summit that was held here in Washington 2 years ago. The Biden administration very pro-NATO, very pro-Europe. It operated as if everything was just going to continue as it always was. America was always going to be committed to Europe. And that was the administration, that was probably the summit to really focus on implement beginning a transition, laying out a plan, and now it's happening in a very haphazard way. >> Well, I think we're going to have to leave it at that. So, let's turn to your conversation with Henry Foy. >> [music] >> Today, we're joined by the fantastic Henry Foy. Henry is the Brussels Bureau Chief at the Financial Times covering EU affairs and leading the charge on all reporting focused on European politics and policy at that the FT team does in Brussels. Henry is also the lead writer of Europe Express, the FT's agenda-setting weekday newsletter on European affairs. It's really read by everyone in Brussels, and we'll put a link to the show notes if you don't already read it. Henry joined the FT in 2013 from Reuters, where he was a correspondent in India. Before landing in Brussels, Henry has reported from postings in Warsaw, London, and was the FT's Moscow Bureau Chief, where he interviewed President Vladimir Putin and covered the Russian regime's descent into repression. Today, Henry joins us from the eye of the storm and with a lot expected to unfold at the EU level this fall, and so we're thrilled to have him to help us understand what Washington should be watching in Brussels as we sort of come out of the summer doldrums here in Washington. It's now September, although the weather here is I don't know what it is in centigrade, but it's in the 90s with a humidity of Satan. So, Henry, first thanks for joining us on the show. Um What are What are you sort of watching out for as everyone kind of returns to Brussels, as the engines start to purr, as the commissioners start to work and the streets start to get clogged? What are the kind of issues that kind of animating the city, animating you? What are you thinking about right now? >> Thanks, Max. And thanks so much for having me. Great to chat. I mean, look, this is going to be a really busy and pretty horrendous semester leading up to Christmas. You have the sort of ongoing constants that we've had for the last couple of years. Number one being manage Donald Trump, don't start a trade war, keep everything calm on that front without sort of completely selling your soul. The second one, of course, is maintain support for Ukraine, both financial and in terms of defense products. These are two things that kind of the EU cannot ever take a breath from. It cannot sort of be complacent in terms of Trump or Ukraine. Added on to that, you've got a lot of big policy files that are coming up at the moment. The Industrial Accelerator Act, which is essentially a cool word for Europe trying to get its competitiveness back on track. Europe for a long while now has seen its big industries sort of decay, lack of investment, lack of productivity, falling behind the US and China in particular in terms of output. So, there's this new act that's supposed to sort of gee this up, more investment, more rules in terms of public procurement, which brings me on to the second point, which is buy European. It's been accelerated by Donald Trump and the tariffs. It's been accelerated by what they see as Chinese illegal anti-dumping and trade practices. But, the buzzword around here at the moment is buy European. And essentially, to what extent will the Commission force EU governments and EU businesses to buy European products and to have to buy European products. And this is across the board from from cloud computing to defense. This is a really controversial issue. Go back 10 years, it was really just the French talking about this and even then kind of a niche section of the French political elite. Now, it's much, much more widespread and you even have big kind of free-trading countries, even Germany in certain areas talking about buy European being important. And then, military things I would add is, of course, the multiannual financial framework, which is a horrible phrase, which turns everyone to sleep, but essentially is the EU budget. They have to agree it by December so that it's in place for 2028. That basically every 7 years, European countries come together, decide how much money they're going to give to Brussels, and how Brussels can spend it. They're looking at about 2 trillion euros this time. It's the biggest political fight this town ever sees every 7 years, and the gloves come off, and everyone gets very nasty about spending. It pits the poor against the rich. It pits the farmers against the tech investors. It's really quite grim. And then there's China. The EU has been struggling, as I said previously, to deal with China, to do with how China conducts its trade policy. This has reached a point where it's now unsustainable. You've got about a billion euros a day in trade deficit with the Chinese. Every single EU country now has a deficit, which is new. And Ursula von der Leyen, the Commission president, has promised action by October if the Chinese don't change their ways. That means that a summit in October of EU leaders is going to have to come up with some kind of response. Otherwise, the EU is going to look very scared of China if it doesn't do anything. So, these are some of the big issues, and they've all got to be dealt with this year. There's no real way that any of these can slip. >> The agenda is packed. One name you didn't mention is Mario Draghi, the Draghi report. There's also the Letta report. I'm curious, in a lot of the things that you mentioned, is the Draghi report, the Letta report, about European competitiveness, is this sort of an extension of that? Are a lot of what's on the agenda that their leaders are going to be addressing? Or has this sort of fallen off the agenda of implementing the the core of the Draghi report? Now, there was a ton in there, so not everything was going to be done. I guess how do you see has the EU sort of dropped the ball on implementing these two grand reports that were really highlighted and promoted by Ursula von der Leyen and by the European Council? >> Mhm. So, yeah, these two former Italian prime ministers, Enrico Letta and Mario Draghi, wrote these reports about how terrible the European economy was and all these ways to fix it. There's two ways of looking at it. One is glass half full, which is we now finally have a sort of road map, a load star for the commission to follow. And if you do all of these things, says Professor Mario Draghi and Enrico Letta, you will fix European economy. If they don't get done, Draghi described it as slow agony for the European economy. But more importantly, we will look back in 10 years and be able to say to Ursula von der Leyen, "Look, you had a recipe to fix it and you didn't do it." So that's the glass half full approach. Like if we can hold their feet to the fire and make sure they do this, that's good. The glass half empty is that they're not really doing it. That they're about between 15 to 25% of the way through, depending on how you measure it. And even then, they've done the easy bits. The really hard stuff, which none of this stuff is groundbreaking, Max. Like we've known about a lot of this stuff for a very long time. The reason it hasn't got done is because all the countries disagree on how to do it. It's things like banking regulation. It's things like capital markets. It's things like integrated telecoms markets. Blah, blah. All the stuff that America takes for granted cuz it's one country. Europe had this sort of spurt of integration under Jacques Delors decades ago, where you created a single market, where everyone could buy and sell stuff across borders, but they didn't completely do it. And so all of these little national barriers that were sort of left unattended then have grown and grown and grown and grown. You've then added new technology, new banking approaches, new financial tools, which never got properly integrated. And the single market, it's sort of like this thing everyone likes to talk about as this wonderful EU invention, but it doesn't in practice function properly. So fixing all that stuff is incredibly difficult. You will need an enormous shock that forces the Germans to say, "Okay, we're going to give up regulation of our banks." Or forces the Irish to say, "Okay, fine. We're going to not give these tax breaks to all these American tech companies." I mean, some of this stuff is just not going to get done. It's politically unfeasible unless you have such a catastrophic crisis in Europe that the only way to get out of it is for these countries to abandon their long-held positions. So Draghi's great. It's not been forgotten, but you're getting to a point where it's going to get harder and harder to implement it and people aren't going to want to talk about it too much. >> Maybe to turn to the multi-annual financial framework that you budget, fantastic name. >> The EU budgets seven-year cycles. Now, that's I think much better than we have in the United States where we are constantly having government shutdowns and budgetary fights and and it happens every year and sometimes they punt for three months to keep the government open six weeks. One year maybe a little too soon, but seven years is a long time. The last time the EU did this, it was before the war in Ukraine, so there was an expansion in spending on defense and security, but not anywhere kind of what, you know, in retrospect that would would be needed. I guess a question, how important is this? You know, in some ways is this just sort of it's not that much money in the EU budget? And and when the EU needs to find money to spend things that now is figuring out ways to do it with some ways similar to what we do in the United States where you just do it sort of off-budget, that's how Ukraine and my understanding is being funded by the EU. So, you know, is this a fight about who gets that 50 20 million dollars more for this account or that account? How do you see it? It is this collision of interest very zero-sum? >> Mhm. >> What are you looking for out of that conversation? >> Yeah, look, I mean, 2 trillion euros sounds like a lot, but over seven years it's 1.1% of EU collective GNI. So, it's really not that much. Member states themselves, you know, on a monthly basis are spending more than that on on on their hospitals, on their schools, on their armies. The importance of the MFF is in setting priorities and setting policy focus areas for the next seven years. If there's no money for it, the EU can't do it. That's the simple way to put it. And so, this is why the debate at the moment is about can we please stop spending two-thirds of this money on farmers and roundabouts and airports in poor towns? That's a very, very unfair stereotype, but in person this conversation is fine. Basically, a third of it is spent on the common agricultural policy, which is subsidies for farmers, and a third is spent on cohesion policy, which is this sort of long-held kind of bargain, grand bargain, that when poor countries join the EU, they open their markets to rich companies and rich countries like France and Germany, and in exchange they get French and German taxpayer money to make their villages less poor. The modernizers, as they're calling themselves, the frugals, which others call them, are saying, "Look, let's cut back all this money to farmers. Let's cut back all this money to regional development aid. It's not going to help the European economy in the long run. It's last generations' industries. We need to be spending on tech investment. We need to have startup funds. We need to get defense investment funds. We need to AI dreams." A lot of it's rhetorical, but importantly, it's about saying, "Okay, we are going to focus on these things." And if that stuff starts to be pulled out of the budget, which it could because the Germans and others are saying like, "2 trillion is too much. You've got to cut it back a couple of hundred thousand billion at least." The important thing, say these people who believe in the European economy becoming more more more more forward-looking and more more green and and with more technology, is you can't cut back the new stuff. You've got to cut back the farming subsidies. You've got to cut back the the regional subsidies. So, that's the really big battle. >> The keyword there, though, is cut, right? >> Correct. >> So, they're saying "Modernize, but cut." >> Yep. >> There is no modernize and grow. And I guess that Is there a counter to I mean, I assume that some other Europeans others are saying, "Why would we cut back the EU budget? For anything, the EU needs to be doing a lot more than what it has been over the last 7 years." >> Yeah, yeah, but then you bring in the rise of far-right parties across the EU, the rise of Eurosceptic parties, and not a single leader in Europe knows they can stand up in their parliament and say, "We've agreed to give X billion extra to Brussels." Because the problem with giving money to Brussels, and you know, I'm a Brit, and I don't judge me, we left, but the debate in Britain around it was like, no one ever saw the money that came back from Brussels. People only saw the money that went to Brussels. And that's the same for pretty much every single country in the Union. The biggest recipient of EU funds, net, is Poland. And yet, roughly half the Polish population votes for parties that says, what has the EU ever done for us? You know, this is nonsense. We need to stop giving Brussels our sovereignty. And like, who cares that they fund some of these things? It's like, the Polish economy today is not completely reliant on, but would not be anywhere near what it looks like today without EU funds. And so, the EU budget is crucial in member states setting their their priorities and having the Commission acknowledge that. is a grand bargain. There are 27 states. They've all got to agree to it. You know, four or five of the big guys mainly pay for it. And they feel like they're never really getting enough of the say. But at the same time, if there's no budget, the poorer countries don't get any money out of the coffers. So, it's a prisoner's dilemma, and it's all going to come to a head in December where they will lock the leaders in a room for essentially as long as it takes until they leave with a budget. >> The problem with holding this in December is because the farmers, they don't have anything to do in December, and then they send on Brussels and burn manure. So, probably avoid Brussels right around the European Council summit. Can I ask you about Hungary? >> Mhm. >> The EU lost Viktor Orbán last April, no longer the leader of Hungary. The last major budget fight, it was a big standoff between him and Mark Rutte, if I remember correctly, where he was, you know, very much holding out. Rutte wanted more accountability and rule of law for a lot of Hungarian funding. But Orbán has been a thorn in the side, increasingly so, basically this decade. And now he's not at the European Council table. How is this going to impact decision-making, the processes at the European Council? Was Orbán just sort of providing cover for others? What's the impact of that on how the EU will function? >> Yeah, it's a great question. And frankly, you know, a few months on from the Hungarian election and the election of Peter Magyar, we don't really have a clear answer. What I would say is this, there isn't one Viktor Orbán and there certainly wasn't one Viktor Orbán at the EUCO table. There was the pro-Russian Viktor Orbán, the Viktor Orbán who would veto sanctions on Russia, who would veto support for Ukraine, who famously held essentially financial support to Kyiv to ransom for months on end. That Viktor Orbán's gone and there isn't anybody who's replaced him. So, if you're Ukrainian or if you're a pro-Ukrainian European, that's a good thing. That Viktor Orbán is gone. But there's another Viktor Orbán who was very Eurosceptic, who believed [clears throat] in less European integration, not more, who didn't want to see more power shifted to Brussels. There are lots of other Viktor Orbáns around the table who remain. And so, removing him takes away some of the bombast and some of the aggressive rhetoric and certainly the sort of very personal anti-Ursula von der Leyen rhetoric that at sometimes sort of edged into into sexism and xenophobia. That's gone, but there are lots of other leaders around the table who share his general views on making sure Brussels doesn't overstep. So, that's not going to change. And then there's a Viktor Orbán who was very pro-business, you know, had huge amounts of German investment in his country, believed very strongly in the EU sort of taking good trade policies with regards third countries. I mean, that Viktor Orbán lives on through many, many of these people and actually some of them I think might miss having somebody who could take the commission to task on some of these issues and scare the commission a little bit, if I'm honest. And saying, "No, no, no, we need to be free trade. We need to be open." And he was too pro- He was more pro-Chinese than the sort of general, the average, but he believed in free trade with the rest of the world and he believed in investment and investment in defense. That was the great irony of Viktor Orbán. He didn't want to give any weapons to Ukraine, but he wanted Rheinmetall to build them all in Hungary. >> Maybe just final question on the fall semester and it's sort of a two-parter of looking both at the transatlantic relations, relations with Washington, and Brussels relations with Beijing. It It me that the EU is in a very tricky spot where it's kind of recognizing, as you noted in your lead-in, that it's got to take action against Chinese trade practices that's demolishing the European industrial sector. And so a trade fight with China appears to be on the horizon. And yet there's also concern, you know, I've come here from Washington. We're currently in a massive trade fight with our hated neighbors to the north, those dastardly Canadians. For whatever reason, we don't like French. So there's also a lot of French spoken in >> Indeed. >> And so the EU has to kind of worry that it's getting in two trade fights with both China and United States potentially simultaneously. How is it How is it navigating this dynamic? And is this the EU sort of just not knowing what to do and that's sort of sixes and sevens about how to approach both. How would you assess this current sort of triangle? >> I mean, it is so commonly understood to be trite to now say that, you know, Europe is a little bit adrift. It doesn't have America supporting it anymore. But I will say this about China. That there were three things that the EU and NATO actually thought in advance of Donald Trump coming back to power that they could do to make sure he liked them. First was take on all the support for Ukraine financially and militarily. They did that. Trump said, "Thanks a lot." Second was to spend 5% on defense and to buy a lot of American weapons. They did that. Trump said, "Thanks a lot." Third was, "Oh, and we'll be really hawkish on China, just like Trump wants us to do, and we'll support the Americans in an anti-Chinese front on critical raw materials and on investment and on trade practices, and he'll love us for that." And that never materialized. And there are still people here in Brussels who are waiting for Trump to finally be anti-Chinese. But he hasn't. So now the Europeans are caught. They are caught in a position where they sort of turned their tanks, metaphorical tanks, uh towards China expecting the 101st Airborne, I'm really stretching my metaphor here, to come join them in this trade war with China, and they just never arrived. And so the Europeans know they can't go into a war with China without the Americans or at least a large global coalition of Western liberal trade open trade partners. But they're not going to get that from America or it looks very very likely that they won't. And so the Chinese know that the Europeans are in a bind. They know that they're having to protect their transatlantic flank cuz they never know when Trump's going to tweet something about tariffs on something else. And they can't rely on on backup from G7 G20 on China. And that's a really difficult position and one that Europeans haven't really been in on trade a very long time. So everyone's everyone's saying writing and talking about how does Europe fight Russia without America, which is becoming more and more of a real question. But the bit that also needs to be written about is how does Europe fight a trade war with China without America? Because it's not just like having the Americans support your policies and enforce them. It's having the Americans supply you some of the stuff that the Chinese are going to cut you off from at some point in retaliation. So and it's the reason why they had a big strategic debate on China in June that the EU leaders came up and decided to kick the can down the road because it's really really tough. I would say the rhetorical center has moved much more hawkish. You know, even the Germans now the Spanish are still they're sort of they still say, "Oh, you know, let's not cast the all the aspersions on the Chinese." But in general the 27 have moved into a much more hawkish position. So that the commission have them in a place where they can start to deploy anti-Chinese measures. It's just working out how to do it is fiendishly difficult. And of course every day you wait you give the Chinese more time to prepare to read the signs and to come up with tactics to hit back. >> Do you anticipate in October that we're going to see sort of the EU throw a punch here? And just to hit on the sort of multi-level game that could be European politics, Spain might be reticent to go along with this. On the other hand, they have a position on the multiannual financial framework on the budget that you know, this is where the multi-level game can sometimes work where deals can be made. >> Yeah, I mean look, I think every single country now is looking at certain industrial sectors that have been completely hollowed out and recognizes something has to be done. The question will be finding something that everyone is comfortable with but also has an impact on China. That's difficult. You can find certain things that would hurt the Chinese, but it would disproportionately hurt the EU-27. So, personally, Max, I think there will be a grand fudge where the EU sort of says they'll do something scary, the Chinese step back a little bit, but it's not really a step back, but the EU can position it as a step back and they can say, "Okay, we've reduced the trade deficit down to like 900 million a day instead of a billion, and you know, weren't we all so clever in DG Trade that we managed to get them to do that?" >> It's a slow death as opposed to getting sort of initially pulverized. >> [laughter] >> And we're going to have to watch out. It's going to be, I think, a fascinating fall semester. It actually, you know, sort of kicks off in some ways with Ursula von der Leyen giving her State of the Union address, you know, totally stolen from Washington with our State of the Union address that happens in January, February. >> Indeed. >> Henry, this has been a fantastic conversation. Thank you so much for joining us. We hope to have you back on the Euro file sometime soon. >> Thank you so much. >> That's it for today's episode. As always, if you enjoyed the show, please subscribe and leave us a review wherever you get your podcast. You may also be interested in our sister podcast, Russian Roulette, which covers the latest on Vladimir Putin's Russia and the ongoing war in Ukraine. Our thanks to our producers, Shannon Young, Otto Svendsen, and Lexi Linsenfelter for coordinating and researching this episode. We'll be back soon with another assessment of Europe through a Washington lens. Until next time.