Global Risk Indexes (19-02-2025)

Global 98 (0 —)
MENA 98 (-1 ▼)
APAC 98 ( —)
Europe 98 ( —)
Africa 98 ( —)
AMERs 98 ( —)
Markets 98 ( —)
Markus Schmidt, Europe region analyst at Worldwise Analytica

Markus Schmidt

Analyzing Today, Anticipating Tomorrow

Europe at a Crossroads: Strategic Autonomy or Marginalization as U.S.-Russia Talks Redefine Power Balances

The U.S.-Russia peace talks in Riyadh are not just sidelining Europe—they are reshaping the global balance of power. With Washington and Moscow dictating the terms of a potential settlement, European leaders face the stark reality that their role in shaping Ukraine’s future is being systematically diminished. The Kremlin’s demands—NATO’s formal abandonment of its 2008 promise of Ukrainian membership and de facto recognition of Russian-controlled territories—would signal a catastrophic blow to European security. This is not just about Ukraine; it is about whether Europe retains agency in its own defense strategy or becomes a subordinate actor in great-power negotiations.

Germany’s economic fragility is accelerating, with risks now extending beyond national borders. The latest Bundesbank forecasts suggest that Trump’s tariffs could shrink Germany’s GDP by 1.5 percentage points over three years, deepening recessionary pressures. More than 37% of German municipalities are financially insolvent, raising concerns about cascading fiscal instability. The economic downturn is fueling the far-right Alternative for Germany (AfD), which is increasingly positioning itself as a ‘Germany First’ economic party—challenging Berlin’s commitment to EU solidarity and free trade. If the AfD continues gaining momentum, it could lead to major disruptions in Germany’s approach to EU economic policy.

The U.S.-EU trade war is no longer just about tariffs—it is a direct challenge to European economic sovereignty. With Washington escalating tariffs on key European exports, Brussels faces a dilemma: pursue aggressive countermeasures or seek diplomatic de-escalation. The problem is structural—Trump’s administration is openly targeting European trade policies that it sees as anti-American. European Commission President Ursula von der Leyen is pushing for retaliatory tariffs, but key EU economies, especially Germany, fear an all-out trade war could push the Eurozone into recession. The bigger question is whether Europe can develop a true economic counterweight to U.S. dominance in global trade.

Russia’s hybrid warfare has entered a more aggressive phase, targeting Europe’s financial and energy infrastructure. The cyberattacks on Italy’s financial sector, linked to pro-Kremlin groups, are part of a broader destabilization effort against key EU economies that support Ukraine. Moscow is also stepping up disinformation campaigns in Germany, hoping to manipulate public opinion before the February 23 elections. These tactics are not new—Russia has a long history of using cyber and psychological warfare to weaken European unity. The key difference now is that these operations are being conducted while diplomatic negotiations are underway, signaling that Russia intends to use hybrid tactics to shape the political climate in Europe before any settlement is reached.

Ukraine’s energy sector remains Moscow’s primary target, as Russia intensifies its energy warfare strategy. The latest missile strikes on Ukrainian power plants, leaving over 200,000 civilians without electricity, are not just military attacks—they are part of a long-term effort to break Ukraine’s economic viability. If the war drags on into another winter, Kyiv could face severe electricity shortages, which would not only impact civilians but also cripple industrial production and military logistics. This raises the urgent question of whether Europe can accelerate alternative energy supplies to Ukraine to counterbalance Russian energy blackmail.

NATO faces a strategic dilemma over whether to deploy a peacekeeping force to Ukraine. The idea of European troops on Ukrainian soil—whether as monitors or active defenders—would have been unthinkable a year ago. But as the prospect of a negotiated settlement grows, NATO faces pressure to establish a military presence to prevent Russia from consolidating its gains. However, a peacekeeping force without U.S. support would be a major risk—if Russia were to violate a ceasefire, European forces could be drawn into direct conflict without American backing.

The EU is exploring radical defense funding reforms, including joint borrowing and exemptions from fiscal rules to finance military investments. But Germany and the Netherlands remain reluctant to commit to such measures, fearing long-term financial instability. If Europe cannot find a way to finance its own defense buildup, it will remain dependent on the U.S. for security—a reality that many European policymakers are beginning to recognize as unsustainable.

As Europe navigates this unprecedented convergence of crises, the decisions made in the coming weeks will determine whether the continent asserts its strategic independence or continues its dependence on external powers.

Geopolitical Risk Assessment for the Europe
(19-02-2025)

Europe faces one of its most critical geopolitical moments in decades, as it risks being sidelined in shaping Ukraine’s future while economic, security, and political crises converge. The U.S.-Russia talks in Riyadh, taking place without European involvement, are not just a diplomatic setback but a fundamental challenge to Europe’s role in global security. The U.S.-EU trade war is escalating into a broader economic conflict, jeopardizing Europe’s fragile recovery. Meanwhile, Russia is intensifying hybrid warfare, including cyberattacks and energy blackmail, while NATO debates the feasibility of a peacekeeping force in Ukraine. Europe must now decide whether to pursue strategic autonomy or accept continued reliance on U.S. leadership—an issue that will shape the continent’s future for years to come.

Geopolitical Risk Index

Developments to Follow for the Europe (See All Global)

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