Globalization and European Integration: A Central European Perspective

Abstract

Two decades after the biggest ever enlargement of the European Union, post-transition countries face a series of challenges, posed primarily by de-globalization and growing illiberalism. Declining European competitiveness, as highlighted by the Draghi Report (2024), calls for major restructuring both regionally and community-wide. This invited survey article attempts to solve a puzzle: if Europeanization has not been very successful, how could it promote globalization? Furthermore, Central Europe counts as a success story, both in terms of convergence and in terms of stabilizing west Europe’s previously restive neighborhood. Sustaining this success is not automatic. We posit the two main conditions. These are: more focus on Ordnungspolitik (single market, competition policy, and capital markets union) and de-emphasis of re-distrubution (CAP and Cohesion). We also show why and how Central Europe will decide the future of the EU and the ways it can cope with globalization.

1. Introduction

Globalization is conventionally defined in the international political economy literature as a process in which the logic of the market—revolving around practices of maximizing asset value—extend their working in a growing number of sectors and territories of the earth. Being a process going well beyond the economy and covering spheres of information, technology, culture, organization, and even family ties, this process has been around for at least five centuries, ever since the onset of colonization (Kolodko, 2023). European integration, by contrast, is a relatively novel and policy-driven phenomenon. This denotes the institutionalization of political, economic, social, defense, and intellectual convergence of those countries, who consitute first and foremost a community of values. The finalité politique is usually seen as a federal structure to emerge gradually in the distant future through the interaction of micro-, meso-, and macro-level processes. While it is policy-triggered, it has always been a largely spontaneous interaction among those levels. Following the classical Monnet Method, the process never focused on coherence, the main standard in the academe. Instead it followed—from the outset to this very day—the logic of the maximum practically feasible at any given point of time (Berend, 2021). In other words, there has always been a potential for further deepening and also for innovative improvement in all walks of life—a process we shall trace below. European integration has aimed, from the very outset, at encompassing ‘all European democracies’. Therefore, widening to the tipping point, set by the above initial definition of the Teaty of Rome of 1957, has been both a driver and a limitation of the process—an issue detailed in the definitive overview cited above.

In this paper, we attempt to highlight some of the salient new features of the interaction of thes two processes. Fundamentally, there are two approaches developed in the literature and in policy-making. One is the idea of ‘fortress Europe’. Following extensive classical literature, starting with Jacob Viner (1950/2014), European integration has been presented on the analogy of nation-state building, or ‘ever closer union’. The competing approach (Inotai, 1986) sees global orientation and thus global competitiveness as foundational for the success of regional, thus European, integration. With more than two decades of experience with the largest ever enlargement of the EU, the question arises: how has the accession of eleven Central and East European countries in 2004 to 2013 influenced this traditional and fundamental question? Adding a specific Central European perspective may provide some new insights in the global debates on competitiveness.

One of the most frequently invoked theses on the EU is that the main avenue of globalizaton for the transition countries is naturally via European integration. In this paper, we ask if, and under what conditions, this is the case. Globalization is thus seen as a given, and most of the challenges related to global transformations, from climate to peace creation and the mangement of unregulated mass migration, appeared as tasks to be outsourced to Community organs and policies. Central Europe serves thus as a testing ground for the success of EU policies. In line with the historiographic mainstream, we include Czechia, Poland, Slovakia, Hungary, and Croatia under this label, and exclude the Baltics and Romania, who often describe themselves as Mitteleuropa (Szűcs, 1983). The incremental move to supranational arrangements during crisis mangement in the EU in the nearly two decades since the Great Recession further strengthened the role of Community solutions.

In this paper, we refrain from a comparative analysis of individual country performances (Mátyás, 2024) and also spare the reader from lengthy analyses of the changing official positions of Central European countries on European integration. Legitimate though these avenues may be, we adopt a more abstract level of analysis. Namely what a specific group of nations, who share the Communist past, but also longer historical path dependence, could and will contribute to European integration. In the EU of 27, there are a number of groupings. Some of these are functional, as say the frugal countries or friends of cohesion. Others are more geographical, as with the Mediterranean countries, the Benelux, or Nordic EU members. These groupings do not overshadow in any way the national peculiarities of their constituents. Still, the Benelux, for one, has played an unmistakeable role in EU hisory. Likewise, Central Europe, as defined above, is composed of medium sized countries, above the size of Malta or Latvia, but below the engines of France, Germany, and Italy. Similarly, they are at a medium level of development, somewhere between Luxemburg and Bulgaria. Perhaps for these and other reasons, the Visegrád Group and Croatia have adopted a specific profile in the past decade or so, advocating ‘sovereignist’ policies, aiming at maximising the net EU transfer balance and resisting irregular mass migration. This moderately pro-Europen line has been complemented by a quite reserved attitude toward globalization, be that the movement of capital, labor, or technology, let alone regulations on the global scale such as the minimum corporate tax.

Central European countries—Slovakia, Hungary, Poland, and the Czech Republic—are rightly presented in the literature (Mátyás, 2022; Landesmann & Székely, 2021) as true success sories in European integration, and they are contrasted with the much more ambiguous path of Southeast Europe and the post-Soviet region. This is explained by their considerable convergence, and, in reverse, for the core EU, as a success of its strategy of appeasing and integrating a traditionally restive Eastern neighborhood, two interrelated processes elaborated in the extensive volumes cited above. We shall also prove why and how the position of Central Europe will be decisive for the future of the EU.

It is legitimate to investigate how the EU, while struggling with is own crisis management, has succeeded in elevating Central Europe out of the doldrums, which other postcommunist countries equally aspired to but have not managed. Over and above specific issues of systemic change, not being the subject of the present article, the fundamental strategic question for Central Europe has been if European integration assisted their global competitiveness. This is a non-trivial issue, especially in light of the recent Draghi Report (2024), which analyzes the reasons for European lagging behind. Thus our puzzle is: how come a Community lagging in global competitivenesss could be of avail for Central Europe to become winners in globalization?

2. Watersheds in European Integration After the Crisis

During and because of joint management of the Great Recession, and particularly the sovereign debt crisis of 2008 to 2015, European integration has incremntelly abandoned its basically inter-governmental nature. It has given way, step by step, and largely outside of the formal framework provided by the Treaty on the Funcioning of the EU/TEFU1, to increasingly supra-national arrangements.

Trade policy, in the case of international treaties, was transferred to the exclusive compentence of the Commission a long time ago. Turning the European Central Bank into a de facto lender of last resort—at least since the ‘whatever it takes’ watershed moment of July 2012—which has been followed by the ensuing unlimited supply of liquidity and the subsequent use of unconventional monetary policy instruments2, has made the basically inter-governmentalist model of the EU a matter of the past. While in several areas, particularly in the Common Foreign and Security Policy, the joint strategy is rather fragmentary, in the above two major areas, especially the Green Deal of 2019 and the NextGen EU, its centerpiece, the Recovery and Resilience Facility (RRF),3 or the extension of qualified majority voting, all have turned the EU into an increasingly supranational construct (Buti & Fabbrini, 2023).

Thus our research question revolves around the mismatch between European policies and global challenges. This includes the ups and downs of global capital markets, global banking regulations, global accounting standards, the global trading system as represented in the WTO, and its disciplines, migrations, pandemics, and technological changes. Long-term statistical analyses indicate that clustering of economic activity—primarily among structurally similar countries—tends to intensify, but this does not follow formal integrational structures (Casagrande & Dallago, 2024), which were shaped along political considerations and resulting alliances/value communities.

The real challenges are the newly emerging ones, which did not used to be in existence at the time of the adoption of the Treaty on the Functioning of the European Union in December 2009. The Lisbon Treaty represented a political compromise following the Dutch and French rejection of the Constitutional Treaty in 2005. In other words, it failed to address any of the structural—or indeed financing—gaps in the EU architecture.4

Among the new major challenges, we may mention the issue of de-globalization (Forum Discussion, 2022; and Halmai, 2023), the proliferation of bilateral trade agreements—the EU signed over 47 of these, while the US only is engaged in 1 major—and several minor—FTAs, the major being the successor to NAFTA, the USMCA, signed on 30 September 2018 by the first Trump Administration.

Furthermore, many of the processes of globalization, such as the workings of the multinational corporations, the global flow of foreign direct and portfolio investments, the trade in services, as well as the flow of individuals, are not being managed by any global organization. Europeanization, by contrast, is, and this makes it different from other forms of regional groupings (Nagy, 2025). The General Agreement on Trade in Services of 1994 is though a discipline of the WTO, but unlike many other elements, it is based on national treatment, i.e, the protection of national providers as a rule, not based on free market access. This is due to resistance by the advanced societies who wish to protect their social standards from the inflow of cheap labor and services. This issue is a weighty one, contrary to global trade in farm products. The latter over-politicized issue is dwarfed by the fact that agriculture accounts to a mere 1 percent of the GDP of advanced economies and 2 to 5 percent of GDP in the Central European countries. By contrast, services account to close to four fifths of GDP in all rich and postcommunist countries.

Multilateralism still matters (Hoekman et al., 2023). Still, fragmentation, once considered to be just a short term reaction to COVID hysteria, seem to have survived as the ‘new normal’. In other words, the building of politico-economic blocs and bilateralism in trade have become formative.

For small open economies, being part of a tried and tested regional institutional system is beneficial. Still, this would presuppose the availability of a more flexible European Union (Dallago & Rosefielde, 2021). But calls for flexibility are often relegated to accomodating vested interests, as we observe in the car industry, in large scale farming, or politically loaded fiscal management, openly disregarding any rules since 2019.

3. What the European Integration Solves

The above observations were wrong to be interpreted as denying the uses and efficacy of each and every European arrangement. It goes without saying that European integration has been a big success story. First and foremost, the international architecture securing prosperity in Europe has been built on the European Union (Wagener & Eger, 2014). While NATO members Greece and Turkey have often been led by their historic animosity to the brink of armed conflict, members of the European Union have been more like a South Italian family: loud and conflicting, but closing their ranks in times of crisis. The latter was exemplified by the unregulated mass migration of 2015, the COVID pandemic and the ensuing recession in 2020–21, and certainly the war in Ukraine. The latter has been going on since 2014, but reached new dimensions since the Russian frontal attack on 24 February 2022. While EU countries tended to adopt nationally different answers to these challenges, cooperation rather than confrontation shaped the ways individual adjustment measures were articulated. While criticism on the lukewarm and often formal ways of these are legitimate, these discords have never escalated into open conflicts. This shows the quite concrete educational role played by the decades of institutional cooperation in all walks of life. While Europe has not spoken with a single voice, the relapse into nationalism could be averted.

Staying at the level of ‘negative integration’ (Viner, 1950/2014), in terms of classical theory, can be continued. While market protection has been gathering momentum even prior to the pandemic and the defensive measures it induced, it is important to remind us of the studies (Fetzer & Schwarz, 2021) that have shown several counter-intuitive elements that explain why those ‘temporary’ measures solidified and survived under the Biden administration. The steel tarriffs were introduced in 2017 as part and parcel of the first Trump Administration’s attack on multilateralism and global free trade. These measures clearly followed political targeting, and thus produced calculated benefits for a group of the US electorate that might have been involved in swing voting.

From this angle, we may esteem even more highly the fact that intra-EU attempts to segment the single market have invariably been thwarted. The single currency continued functioning, and the Fiscal and Banking Union of 2012 has contributed to the joint and efficient crisis management of the Eurozone. By having turned the European Central Bank into a de facto lender of last resort—a function needed to combat sovereign debt crises—and by providing an unlimited supply of liquidity, Community level crisis management has reached a new quality—more on that can be found in Dallago et al. (2016). While external imbalancess inside the EMU increased, supranational action, including liquidity provision by ECB, took place outside the TEU framework and the original mandate of the ECB. Also, de facto supranationalism preceeded de jure formalization at the level of TFEU.

However, this implied, if anything, a further—unplanned—deepening of the single market and erecting a common, if incomplete, defense line against the ups and downs of the global capital market.5 By creating the Single Supervisory Mechanism and the Single Resolution Mechanism, and through a special treaty, the intergovernmental European Stability Mechanism/ESM of EUR 750 billion, member states of the Eurozone created a joint and permanent ‘firewall’ against the shock of global markets and speculation. ESM is, furthermore, relevant as an instrument of regularly raising money, i.e., embodying the long resisted idea of joint debt issuance at the Community level, rather than by the individual member-states or the ECB or the EIB. In so doing—together with the Recovery and Resilience Facility6—it embodies the trend towards more supranationalism. This is grounded both in the technical neccesities of crisis management and the changing economic policy paradigm calling for a multiplication of fiscal efforts in order to ensure and assist post-COVID recovery. While this remains a contested issue in the literature, fact of the matter is that fiscal rules of the Stability and Growth Pact were suspended for 2020 to 2024, with the compromise of December 2023 giving way to interpretations of rules that are much more flexible than they originally had been (Jankovics et al., 2023).

Since the major postcommunist countries, including Poland, Hungary, Czechia, Romania, and Bulgaria, are not members of the Economic and Monetary Union, they cannot benefit from these new defenses provided by the unlimited supply of liquidity and joint bank resolution and supervision. It goes without saying that at times of global tremors, both the possibility to rely on the liquidity provision of the ECB (which is free of charge for the Eurozone members), the availability of joint and pre-planned procedures and measures of resolution, as well as the mere economic size of the zone of single currency deters attacks both on central banks and on systemically relevant commercial banks.

Thus, the decision to abstain from EMU membership, which is explained officially by a mixture of criticism of the original Maastricht criteria and the need to accelerate growth via nationally specific measures (Virág, 2020), comes at a heavy cost, namely, the safety belts created by a series of practical and effective measures by the European System of Central Banks and supported by special modifications in the Treaty on the Functioning of the EU, lastly amended by the ESM, effective after the ratification by all members, except Italy, by August 2023. The consequence of this negative vote is that the amended Treaty could not yet enter into force (Gramegna, 2024).

By far the biggest and most unforeseen global challenge for the entirety of the Union has been the big one-shot migration wave in 2015, a case for the impacts of globalization. The inflow of 1.3 million people has found the continent completely unprepared, despite the ongoing crises in the Arab World and the Sahel Belt of Africa.

It is straightforward and well analyzed in the economic literature (Cavaillé & Van der Straeten, 2023; Stoetzer et al., 2023) that the significant inflow has had immediate political consequences. For one, social support for redistribution has been declining, or as the authors put it, the approach has been more ‘Americanized’. Second, support for right wing populist movements has been growing, with traditionally liberal contries like Sweden, Austria, and the Netherlands seeing anti-migration right wing forces gathering momentum at the level of parliamentary elections and even to the formation of governments.

The EU has, by and large, been reacting in a spontaneous panic. Its legal system was constructed mostly under the impact of the horrors of World War II, thus institutionalizing refugee protection at a high, constitutional level. The Union level rules, called the Dublin-III Regulation, originating in 2013 and modified in 23 September 20207, make it the right and duty of the first safe country to assess whether a migrant, if and under what conditions, can apply for refugee status. Residence permits remain in the competence of national authorities. These basic arrangements have been overhauled by the new Migration Pact, adopted by the Council—following Parliament, but overruling formal opposition by Poland and Hungary—on 14 May 2024.8

The supranational system aims at fair burden sharing in order to relieve the disproportionate challenge mastered by the border countries like Italy, Spain, and Greece. It aims at redistributing migrants or making the defector countries pay a compensation for those willy-nilly hosting the irregular migrants, arriving in hundreds of thousands at the Community level each year.

Meanwhile, Home Affairs is an area where Community methods are not very deep, since it relates to the essence of sovereignty. While some decisions may be taken by qualified majority voting, individual administrations must respond to their local constituencies. Multi-culturalism is condoned at the abstract level, but traditionally multi-ethnic countries, from Belgium to France, Sweden, and Germany, face regular disruptions, up to the point of street clashes. In sum, the European Union is unlikely to become the main avenue of managing mass migrations, even if the opposition of the two Central European member-states—supportend tacitly by Austria, Czechia, Slovakia, and Finland—were to be overcome by diplomatic trickery.

The fourth major point is if and to what degree European integration has served the purpose, that being the stabilization of a restive and historically conflictual Eastern neighborhood. For a long time, it seemed that this objective has actually been reached (Turley & Hare, 2013), and at a relatively low cost. This holds especially if compared to the expensive and never fully overcome challenge of Southern enlargement by assertive and politically ambitious medium sized powers. Postcommunist countries were not slow to join EMU, with Slovenia introducing the Euro as early as 2007 and Slovakia back in 2009.

This consensus assessment has slowly but steadily been changing in the second decade of EU membership of Central Europe. The Baltic States have proven to be cases of successful and fast adjustment and catching up, introducing the single currency one by one, with Estonia joining in 2011, Latvia in 2014, Lithuania in 2015, followed by Croatia in 2023. The medium-sized members of Central Europe, Poland, Czechia, and Hungary, have decided not to join, though meeting the criteria has not posed an insurmoutable task to them. As the sources cited above explain, staying out of the EMU has primarily been a political option in order to retain sovereignty in terms of economic policy-making, and rejecting even the soft rule-based arrangements, such as the December 2023 edition of the Fiscal Compact.9 While retaining the original principle of balanced budgets over the business cycle, the new version stipulates incremental correctives in the range of 1 percentage point of GDP per year, provision of a medium term schedule of adjustent, and drops the original threat of fines for countries in excessive debt and deficit. Thereby, most of the critical propositions in the literature have found their way in the new rules.

Such behavior in the medium-sized members-states bears the imprint of growing interventionism. While this is beyond doubt a global trend, both in terms of ideas and policy practice (Csaba, 2022), the fundamental assumption in terms of the Europeanization literature has been the opposite. Namely: capacity, the willingness and the power of Community arrangements to enforce, through a combination of direct and indirect means, the prevelance of liberal intergovernmentalism. This would mean the application of formal rules but perhaps, even more, the spirit of legislation.

The establishment of the Fiscal and Banking Union in 2012, the informal turning of the ECB into a de facto lender of last resort, and a joint supervisory agency for systemically relevant finacial institutions all consitute deepening and supranationalism. The Single Supervisory Mechanism and the Single Resolution Mechanism are located in Franfurt, but are by no means part of the ECB. Both possess specialized staff and separate budgets. In addition to these major changes comes the Green Deal of December 2019,10 the pet project of the first von der Leyen commission. With its obligatory targets, it also moves toward increasing supranationalism and diminishing intergovernmentalism.

This issue is certainly of immediate relevance since the December 2023 Council has agreed to launch accession talks with Ukraine, Moldova, and Georgia.11 The change has immediate policy relevance. First, no post-Soviet country except the Baltics were allowed to join western alliances (the current war in and on Ukraine is waged on the percieved security threat of that country moving out of the Russian orbit). Second, adoption of the anti-spy law in Georgia in May 2024, modelled on its Russian equivalent, was already a clear indication how little even pro-western governments progressed in adopting the values of modern democracy, leading to the suspension of talks in the autumn (Politico, 30 October 2024). Nielsen and Siljak (2024) provide a detailed scrutiny of the immediate economic aspects of this controversial situation. Last, but not least, several countries in the Balkans, from North Macedonia to Montenegro, have long been queuing without membership prospects becoming more realistic than a decade ago. As long as EU policies focus on specific issues, from rule of law to green transition, industrial policy, and social protection, the relevance of the single market is declining among the policy fields. These focal issues, neatly analyzed in the Letta Report (Letta, 2024), while crucial for deepening, have willy-nilly been de-emphasized, at least in relative policy terms. The focus on further widening and special policies, as well as preparing for American disengagement under Trump 2.0 in defense matters, is likely to turn the EU more, rather than less, inward-looking. The propositions of the Draghi Report, cited in the introduction, with its call for extensive Community funding in the range of an additional EUR 750 billion, while the fate of a second RRF is still in limbo, and focusing on industrial policies modelled on the US Inflation Reduction Act, would definitely constitute such a turning inwards. Knowledgeable analysts (Voszka, 2024) rightly see it as an EU equivalent of the change in the global policy paradigm.

4. Global Challenges—Local Actions

Globalization is an ongoing process, at least in the past two and the half centuries since the emergence of the industrial revolution and colonization, which have together solidified the system of global trade and finances. From today’s perspective, the main aspects include the irreversibility of the process, the secular tendency of welfare improving items, the technologically driven processes of systemic transformations which all require policies to become adaptive, pragmatic and foreward looking, i.e preparing for the unforeseen rather than believing in formal models, which are good at forecasting the extended reproduction of by and large given structures but fail at critical junctures (Kolodko, 2023). While hyper-globalization has not been a monotous process, but one interrupted by reversals, especially due to the locally bound nature of political systems in general and democracies in particular (Rodrik, 2011), four major trends of ongoing globalization have prevailed as secular tendencies, which we will cover below.

This explains the large number of policy changes of the past fifteen years that have gradually penetrated economic theory under the heading of ‘new normal’. The global financial system is perhaps an area where worldwide cooperation is required, both during normal and exceptional times. The post-Bretton Woods arrangement, aptly termed by Robert Triffin as a ‘non-system’, does require concerted actions by the major players in order to manage the expectations of millions of agents. The chief economist of the IMF, Gita Gopinath, in her article with J. C. Stein (Gopinath & Stein, 2021), explains that while invoicing practices of large firms will retain the fundamental role of the US dollar in the global system, this does not allow for the Federal Reserve and the US Treasury to act single handedly, disregarding the interest of the others and the need to gain their timely and voluntary cooperation, especially at times of difficulty. Therefore, the European Central Bank is just one of the several players that must keep an eye on what others are doing. Thus, it is by no means in the position to orchestrate any policy it deems necessary, say for attaining lower levels of unemployment, or higher levels of output, as southern EU members tend to require.

From this line of thinking, it follows that the first major risk is to stick to a national currency in a global economy ruled by a dominant currency, which serves first and foremost the interest of the world hegemon and its domestic considerations. Sustaining sovereign monetary policy runs the risk of being caught in a whirlwind should any new finacial crisis emerge. The longer most Central European countries decide to reject the safety belt of the Fiscal and Banking Union and the unlimited provision of liquidity by the ECB, the more adventuresome this option is likely to be. Further, as long as global private capital markets trade a multitude of values as compared to markets set by central banks themselves, the thinner the potential defense against a global finacial tremor is going to prove.

The second major challenge, which is truly global, has been that of migration. Migration has been a feature of globalization ever since the onset of the modern era, with the industrial revolution, the colonial system, and the gold standard constituting the main pillars. The 19th century witnessed major flows of persons, primarily to the Americas, which played a major role in managing overpopulation in Europe, not only in the South, but also in Scandinavia (Hutton & Williamson, 2008). The interwar period saw an age of restrictions, but following World War Two, migration has been stepping up. The massive arrival of guest workers to France and Germany and the inflow of persons from former colonies to the UK and Spain are well known and documented processes, as detailed in the above cited book. In the 21st century, the revolution in telecommunications and transport have synergically enhanced both the lure and the possibility of the relocation of persons. More recently, the mass migrant flows of 2015 to western Europe have illustrated an inflexion point. Likewise, the constant inflow of migrants to the United States in the past decade has become a focal electoral issue, depite the country traditionally being a melting pot of cultures.

Europe has tried to constrain the inflows, as discussed above, though with limited success. The main focus of activity has been the attempt to get several of the neighboring countries, from Turkey to Morocco, to take over control. Investigations have found enhanced and undifferentiated efforts to keep people where they are through indiscriminate, forcible means, disregarding globally accepted humanitarian accords.12

While these measures have contributed to dampening the inflow of irregulars, even its advocates are aware of the fact that these can not address the core issues. Global migration has been shown to be an outcome of basically demographic processes and, as such, is secular and irreversible (Dao et al., 2021). This means, first and foremost, that the problem can not be ‘solved’ by reverting the flows, but through a combination of a series of interconnected mesures. First, conditions in the sending countries must be calmed down, with civil wars and physical uncertainity overcome, as in the Sahel and the Middle East. Second, it must be acknowledged that the ageing societies of Europe definitely are in need of inflow of young and productive labor. Third, it is a human right anchored in international law to relocate abroad in the hope of better political and economic status, not only under threat of life.

Without digression into this specific and complex problem, it is becoming clear that solutions to such issues must be searched for on a global scale via global coordinated efforts by governments, corporations, communities, and individuals. This could and should be complemented by a series of actions on the local scale to help integrate newcomers into the recipient societies.

Herewith we have come to the third main challenge, the disorder replacing the postwar liberal international architecure. On the one hand, the need to act in a concerted way is the requirement of our age, as seen above and below, and not only in the global economy. On the other hand, Russian aggression in Ukraine, the protracted Mideast conflict, the growing strains in the South China Sea, civil wars in many countries, and the proliferation of nonstate actors and violence committed by them, exemplified by decades-old recurring attacks on carrier ships in the Red Sea, all point to a different direction. Analysts rightly reflect on the fragmentation and decline of the established global order (Kendall-Taylor & Fontaine, 2024).

From our perspective, this is bad news, out of which we underscore just two factors. First, traditional international relations theory rests on the rationality postulate and has traditionally been state centered. While new forms tried to encapsulate irrationality (Mearsheimer & Rosato, 2023), this has not been more far-reaching than mainstream economics integrating the non-rational, non-materialistic behaviors widely observed in everyday reality. The emergence of nonstate actors, neatly exemplified by Hamas or Boko Haram, which seem to have been incorporated in the pre-existing system of governance, only to show the limitations of the latter with the passage of time, speaks for itself. Russian revival of imperial symbols has been but one illustration of the re-emergence of those forms of power brokerage, which seemed to have long been relegated to the relics of theory. Russian unilateralism, which has been observable since 2007 at the latest, if confronted with American unilateralism in the format of a stongman revival, is unikely to bode well for global and European security and democracies (Kagan, 2025).

Thus we observe that global cooperation along the lines of the classical United Nations can not be taken as given. Therefore, the normative and the descriptive lines of argument diverge even more than conventionally. Global cooperation has never been more needed13, not least because of the processes of globalization. On the other hand, global governance, including regulating the behavior of multinational firms, which dominate global economic interchange, is in its infancy. Foreward-looking analysts correctly warn of the need to restructure the global security architecture built on a single responsible sovereign when the agent is conspicuously lacking (Papaconstantinou & Pisany-Ferry, 2025).

The trend towards more global governance has become uncertain in the past decade. In the post-1989 era, a new type of global order seem to have been emerging, where norms based behavior was on the rise. Still, the establishment of the International Criminal Court, with its seat in The Hague, in 2002 was seen by many as a watershed, and its procedures against war crimes have set precedents (even with the US abstaining). The Magnitsky Legislations, originating in the US in 2012, followed by Canada in 2017 and finally by the European Union and its 27 member states in December 2020, make individuals, even in government positions, personally accountable for human rights violations and corruption, including the freezing of their assets abroad, a measure with a potential for concrete action currently discussed at the highest policy-making levels (Foy, 2024a). These innovations point towards a global rules-based regime. This holds even if application on the ground is conditional on domestic balance of forces and interpretation of law (Labuda, 2023). Trump 2.0 is likely to test, but unlikely to abolish, those arrangements, norms, and procedures that ensure the minimum calculability needed for a peaceful, rather than a fully anarchic, global architecture and system of conflict mangement.

By contrast, real world events, not least the emergence of private armed groups as arbitrators of international disputes, from the Wagner Group of Russian mercenaries and the American Blackwell in Africa to Hamas and the Taliban, all point in a different direction. The de facto disintegration of the multilateralism of the World Trade Organization (Hoekman et al., 2023) is a clear case indicating the move towards governments acting single-handedly, even in issue areas regulated by binding international treaties, signed or even initiated by the very same actors. Without denying the growing relevance of various non-state actors like Al Qaida (a network of networks across three continents), we should stress the focal role of a different type of major state actor. Here, we refer to the change of attitude in Russia (since 2008) and China (since 2019) vis-a-vis this rules-based international order. Their revival of the old anti-colonialist discourse and actions to re-create what they term as a ‘multipolar world’ have led to a fundamental rearrangement in the global architecture. Rules anchored in the regime sketched above may or may not apply, which is a real challenge to each participant and the global community alike. Unilateralism, preached and practised by the Trump 1.0. Administration, but also continued under Biden, has done little to convince weaker partners about the value of voluntary rule-abiding behavor.

This truly global phenomenon renders the management of processes of globalization all the more difficult. As long as actors do not abide to the rules set and accepted by themselves, the Hobbesian bellum omnia contra omnes becomes the order of the day, and this at a time when truly global solutions are more needed than ever. Climate change is a clear warning sign of what dangers the no-go scenario has already yielded.

A fourth issue area of globalization is certainly climate change, an issue where the need for common action is on the agenda of policy-making. A recent book by Falkner and Buzan (2022) provides comprehensive theoretical and policy analysis, focusing on each major power with a significant environmental impact, of how these new trends in international relations meet challenges of global environmental governance. In their framework, great powers like the USA, Russia, China, and, of course, the European Union all have a special responsibility to act and protect.

Suffice it to cite that while in the EU, bureucratic decision-making may slow down interpretation, in Russian decision-making, this is not a problem due to its inherent centralization. However, the pre-eminence of military and economic considerations have tended to marginalize ecological issues and its civic advocates already prior to the war on Ukraine. India and China have both made committments to improve their environmental performance. However, recent analyses have shown that the post-COVID rebound in China does not follow, in reality, the new normative, but continues on a previous path of neglecting and damaging the environment, despite evidence that stricter regulations pay off economically (Ahmed & Khan, 2024).

5. Impetus from Central Europe

The jury is still out on whether the processes of globalization and Europeanization are complementary or contadictory. Once globalization is dominant, the EU may become more competitive owing to the move to supranationalism and deepening, described above. It is more than certain that Central Europe is in no position to downsize its involvement in the globalization process. If for no other reasons, the stagnation of European integration, owing to political discord and contrarian economic intersts, simply leaves no room for this type of shortcut. For instance, once trade is regulated under the multilateral WTO, there is a limited, if any, chance for any EU member to strike a special deal with the Trump 2.0 Administration or China in disregard of European arrangements. The global minimum tax on corporations is another example, but the Green Deal also limits the scope for nationally distinct solutions.

It is, in part, the nature and severity of global challenges that underscore the relevance of processes extending over the European scene. Both triggers and incentives are such that any answer restrained to, or focusing on, specific and narrowly European options is likely to fail. Reliance on Chinese technology in many areas, or continued exploitation of the huge manufacturing capacity of the Middle Kingdom, looks to be inevitable and advantagous for all European economies, starting up with the powerhouse of the Community, Germany.

Similarly, many other challenges require cooperation and even coordination on a truly global scale. Most prominent among these is mass migration. This issue originates in factors on which European Union, as an international organization, has next to no immediate leverage. These include demographics, local military conflicts, poor governance allowing for rampant corruption, and authoritarian forms of rule, which have survived the third wave of democratization in Africa and Asia.

Truly effective measures to manage climate change in the medium and long run can be planned and implemented only at the global level, such as through the G28. We have not ventured into the intricacies of poor functioning of the United Nations system, but it is hard to overlook that in part similar, in part the very same disagreements that hinder the better use of existing global fora are bound to re-emerge should new gatherings be convened. The meagre, if any, results of the COP29 Summit in November 2024 in Baku, which was marked by disregard of major powers and a pro-fossil eruption of the host, illustrate our point.

In terms of the EU, the already ongoing deliberations on the new Multiannual Finacial Framework for 2028–2034 render the rethinking of priorities both possible and necessary. For instance, the expiry of the Resilience and Recovery Facility raises questions about the assessment of this innovation. One strand of the literature highlights the singular nature of the arrangement as an ad-hoc reaction to COVID along the lines of Keynesian thinking. Others are of the opinion that this form is a long overdue strengthening of Community budget owning to the growing number of commonly supported aims (Buti & Fabbrini, 2023). The Green Deal is just one—a project whose timeline runs until 2050. Neighborhood policies—the interface of global and EU processes—definitely require more spending even if we are to adopt the narrowest possible focus. Ongoing negotiations with old and new candidate states all should trigger a recalibration of existing expenditures. The most important two priorities are the farming needs of Ukraine, a country with already sizable agricultural potential but considerable lags in environment-related spending, and the cohesion needs of the countries of the Balkans on a broad range of issues, from transportation to institutional infrastructure.

In both cases speculative preliminary estimates of costs under non-reform expenditure scenarios run into the tens of bilions of euros, with two possible options. One would be to sustain RRF spending and integrate it in the Community budget, which would allow for the funding of the above noted needs. The alternative is the replica of the practice of the eastward enlargement in an even tougher form. To put it bluntly, if Ukraine is serious about membership, it should accept leaving its agriculture out in the cold (Brzezinski, 2024)—a proposition which runs counter to the interest of large export-oriented farms. In both cases, the angles of intra-bloc solidarity and global competitiveness are confronting. In theory, the doubling of current EU budget is conceivable, however it seems to be politically unrealistic due to the decreasing popularity of the entire European project, especially in net contributing countries.

The geopolitical turn, started by Trump 1.0 but sustained by Biden, especially by extensive industrial support schemes under the Inflation Reduction Act, has triggered a European answer in the form of industrial policy embraced by the already cited Draghi Report. This is remarkable, since even the term used to be an anathema for most actors on the European scene. This new policy was, to date, a set of softening measures in various industries, not exclusively in passenger car production, that aim to take out the teeth of EU competition policy. The latter, through subsidy control, tended to be one of the most powerful components of European policy action. What is obvious that this European action was, up to now, reactive rather than pro-active. However, analysts (Seidl & Schmitz, 2023) rightly talk about a similarly dirigiste turn towards supranational market creation.

Taking note of these new developments, we may still stick to our guns (Csaba, 2003) in terms of claiming that globalization neither calls for nor allows the homogenization of policies. This means that the room for nationally distinct solutions is given, and even positively called for, by the specificity of context. This holds for most of the options for hedging against finacial market risks, an issue explained in great sophistication in Salachas et al. (2024). Regarding the interaction of global and European trends, Central European countries are certainly interested in a powerful and resilient Community, able and willing to protect their interest in global processes, be that the emerging trade wars and bilateralism, or environmental concerns, or social protection against models where welfare is basically a family business.

6. The Way Ahead: Towards Capital Market Union or Industrial Policy?

European integration has taken an ambiguous road since its Eastward enlargement over two decades ago. On the one hand, crisis mangement has gradually but irreversibly strengthened its supranational components against inter-governmentalism. The creation of the Fiscal and Banking Union in 2012, turning the European Central Bank into a provider of unlimited supply of liquidity,14 creation of the Single Supervisory Mechanism and Single Resulution Mechanism, creation of its fiscal leg, the European Stability Mechanism, and the joint issuance of bonds, in part by ESM and in larger part to fund the New Generation Fund, have all implied steps that are not to be undone.

Brexit was the last radical attempt to reverse the flow of the times by the referendum in 2016 and ensuing formal leave in 2020. However, this step has not been followed by Dutch, French, Czech, or other exits, as feared by many. Despite this, it is undisputable that the sovereignist trend, represented most openly by Poland and Hungary, but supported tacitly behind closed doors by a number of other members, has also been present and seems to block any further move toward open supranationalism by means of extending qualified majority voting or multiplying contribution to common funds over the current 1 plus 1 percent of GNI.

All in all, the Central European experience indicates the value of being part of a common pool, the impact of which is often decisive on global affairs. The common currency, as well as the safety belt provided by the innovations of the Fiscal and Banking Union, are major bullwarks against global finacial tremors. Implementation of the Capital Markets Union, long delayed by national egoisms of regulators and fears of loosing protected national insurance and banking markets, pension funds, and other nonbank forms of savings, would be a step in the right direction. Measures have been intensified in 2021–24,15 but resistance of national regulators remains.

It goes without saying that CMU would be a further step towards supranationalism. However, creating the space for private persons and firms to draw on other members’ savings, thereby extending the Single Market and making it more lucrative for external players fom tranditional capital exporting regions, would be the proper answer to Europe’s growth problem (Aslund & Djankov, 2017). The lattter is structural and not related to lack of liquidity; thus, any amount of cyclical measures/QE remain insufficient to overcome this structural challenge.

The big strategic issue facing Central Europe remains the interaction of the global and the European (Csaba, 2018). This issue is easy to illustrate. The Franco-German engine of the EU adopted propositions on the competitiveness strategy for the coming period, focusing on less bureaucracy and more joint funding.16 This is much more in line with what management studies and sectoral analyses would suggest, provided the RRF is indeed not taken as a one-shot event. This is a manageable task, as it involves no major new spending to be approved for Europe.

The European Parliament voted with an overwhelming majority in June 2023 for sustaining a resilient agriculture and sustained self-sufficiency for the Community. This is equal to the extension of the current funding of the Common Agricultural Policy until 2026 and perhaps also longer. The gravest threat to the no-go scenario is potential Ukrainian membership of the EU, which seems a rather speculative option at the time of finalizing this paper. Sustaining traditional CAP supports as a priority obviously contradicts the Green Deal, which is likely to soften up further under the second von der Leyen Commission. Assessing the situation, a joint World Bank and EU Commission study characterized the state of affairs as a ‘hot mess in a hurry’, citing social and political resistance to the actual funding of green projects that the quanitative targets approved would require.17 This is exactly the opposite to what academically informed policy analysis suggests, namely more focus on digitalization and green transition as the two focal elements of the new grand strategy for the EU (Grevi, 2024).

Analysis of the second major expenditure channel of Community support, structural funds and investments (Spilioti & Anastasiou, 2024), have underscored their often questionable efficiency. The authors conclude that similarly to farming, it is the quality of national governance that is decisive on whether EU funds are put to good use.

In sum, the interplay of national, EU level, and global challenges are to become even more complex. Major reassessment of ongoing projects, re-calibrating competing and overlapping priorities with a view of funding possibilities, and the need to improve global competitiveness are urgent. The Draghi Report (Draghi, 2024) is a new strategy in the right direction (Forum Discussion, 2024). It is yet to be reflected in the Multi-Annual Finacial Framework for 2028–34.

There is no royal way ahead, and ongoing debates on funding18 do not point in the desired direction. As a recent paper by Benoit Couré (2024), Chair of the Autorité de la Concurrence, rightly reminds us, there remain at least two problems. First: four fifths of the budget meant for industrial support remains in the competence of national authorities. Second, out of the EUR 750 billion earmarked for that purpose at the Community level, only 20 percent has actually been committed in 2021 to 2024. Judging by the nature of the controversies cited above, this situation is unlikely to change under the new MFF in 2028–34. Third, as Couré rightly notes, the two strong points in the new strategy, single market and competition policy, let alone the Capital Markets Union, are unlikely to be strengthened substantially. The focus on redistributive policies is to stay. In the case of further enlargement with Ukraine and the Balkans, it is even likely to grow. Thus, a strategy built on globalization and competitiveness is likely to continue to face the traditional hurdles of national egoism.

From this angle, the decisive question for the future is the following: Will Central Europeans, as under the Kaczynski and Orbán Administrations, continue to remain the mavericks of the EU and stick to a maximum redistribution possible, preferably via unreformed spending priorities on agriculture and cohesion? Or, alternatively, are they willing to accept broader economic rationality dominating low politics? In the latter case, they should join the vanguard of those advocating Capital Market Union and liberalization of the services sector, in line with challenges of globalization.

Either way, as long as there is no breakthrough in qualified majority voting in EU affairs, Central European positions will be decisive for the future of Europe. This is anchored in their veto power, but not constrained to it. The more they go on with their ‘sovereignist’ policies, not confined to the radical Right, the more probably so. As it stands today, they are unlikely to support the two major calls of the Draghi Report, namely the increase of Community spending for innovation rather than wasteful traditional redistribution channels, and the further increase of supranational decision-making. The growing momentum of Euroskeptics, especially on the radical right, in post-election Austria, France, the Netherlands, Sweden, and Czechia may erect additional hurdles to such reform.

7. Conclusions

We have argued in this paper that joining in globalization—more rather than less—is in the interest of Central European countries. Should this insight materialize, European integration could also become more efficient, both globally and locally. Thus, Europeanization is not the ante-chamber of globalization, but–if manged properly—can be a vehicle in the broader process. The theory of globalization serving Europeanization, rather than the other way around, seems to hold under conditions of the 21st century, too. Being globally competitive is always good for European integration, and thus the reverse causality may hold. In turn, globalization and Europeanization are mutually supportive in theory. In policy practice, this holds only if the EU reforms advocated by the Letta and Draghi Reports materialize. Central European countries may foster it by adopting a set of more enlightened and less self-centered policies focusing on competitivenes, not redistribution.