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Mrs Von Der Leyen, President of the EU Commission, began her State of the Union Address in September 2025 by telling Europe it was “in a fight”. This year facing the continuing war in Ukraine she told the EU it faces serious external and internal threats. Quoting Dickens from his Tale of Two Cities she showed equal concern about President Putin prosecuting his war against Ukraine, a candidate for EU membership, and about radical and populist parties within the EU seeking more nationalist and independent solutions. The choice of Dickens was curious, as the author portrayed London and the UK as relative havens of peace and prosperity compared to the violence and poverty of Revolutionary Paris.
She said “Whether it is the ultranationalists or the anti-Europeans, whether it is Russian interference or disinformation, the names may be different, but their goal is the same. They despise our values, and they want to shatter our European unity. So, let’s not only fight back against that, let’s fight together for our European idea”.
Although she did not refer to election results in any particular EU state, she doubtless had on her mind the recent shockingly bad results for her own CDU party in Germany, now the loser in three important German state elections. The triumph of the AFD in two of them, with an agenda that is both anti migrant and more nationalistic, is not to her liking. She must also be concerned about the strength of National Rally in the French polls in the long run up to next year’s Presidential election. She dislikes populist parties seeking to loosen EU ties and threaten the pro EU political consensus. For her, too much illegal migration and too little growth in living standards is undermining support for the ideals of European solidarity and common action.
Priorities include supporting European states to re arm, and the EU to take a bigger role in organising and equipping European armed forces. Russia is perceived as a threat that is getting only worse, with President Putin testing European defences more widely. Worry that the US is no longer so committed to European defence is tempered by a wish to break away further from US influence.
The US has recently attempted to move forward a negotiated peace between Russia and Ukraine to end the four and half year war. US negotiators found both sides unwilling to give much ground. Ukraine insists that all her former territory should be returned, that Russia’s invasion was illegal, and that Russia is losing too many soldiers in trying to defend what they have taken. Russia claims Ukraine belongs to Russia, that peoples in the Donbas would rather be under Russian than Ukrainian rule, and on the winning side of the conflict.
Russia has achieved her aim of creating a land bridge to Crimea, a territory she seized in 2014. Russia held an unsupervised referendum to claim strong consent from the people there to Kremlin control. She has also secured warm water ports along the Black Sea allowing a more effective extension of naval power into the Mediterranean and the Middle East. The lands she has taken by force did have some pro-Russian people at the outbreak of the invasion, with civil war or angry protests underway against Ukrainian government in parts of the Donbas. But the cruel invasion has united more Ukrainians behind Kiev, creating an even more acute distrust of Russia.
The US probably wishes Ukraine to surrender its claims to sovereignty over some territory Russia has conquered, which President Xelensky of Ukraine says he cannot and will not do. The US may also be asking Rusia to end its claims on the rest of Ukraine. Any negotiated truce or peace will require strong security guarantees as Ukraine fears Russia will rekindle the war after a pause to rebuild the Russian economy and reinforce its military.
Both sides seem to be settling into a further winter of war. This means yet more suffering, death and economic damage. However, the Ukraine war is something markets can now live with after the first year’s big impact on energy markets, forcing Europe off most of its dependence on Russian oil and gas. Agricultural markets have also adjusted to lower supplies of grain from the former large Ukrainian harvests. Today the main economic impacts of the war are on defence procurement and on the stretched finances of the western states supporting Ukraine.
Throughout, the EU has encouraged Ukraine to become a member state and has looked at ways of accelerating membership despite not all requirements being met. The EU intervened in Ukraine in 2014 when Ukraine was led by a pro Russia elected President; then, closer ties with the EU were at risk. The risks have multiplied, and the EU continues to augment the financial and military aid that EU states, led by Germany, have offered to Ukraine.
About the author
Lord Redwood is a well-known commentator on governments and economies, with long experience of investment markets. Trained as an analyst at Robert Flemings, he moved to N.M. Rothschilds where he became a Manager and Director of pension and charitable funds and Head of Equity Research. He was seconded to become Head of the Downing Street Policy unit before chairing a large, quoted UK industrial business. He served as an MP and a government minister.
In 2007 he set up Pan Asset with a colleague, an investment management business that pioneered active/passive funds and models in the UK. Following the sale of the business to Charles Stanley, a quoted investment manager in the City, he became their Global Chief Strategist advising on non-UK markets and economies. He also ran a demonstration fund for the FT, writing articles about it and illustrating the use that can be made of ETFs in portfolios.
John provides insights into the big investment issues of the day from the debt and spending problems of the major governments to the green and digital revolutions which have so much impact on equity markets. He is a Distinguished Fellow of All Souls College, Oxford, where he helps with their Endowment investments and gives occasional lectures on modern economics and politics.
Lord Redwood has supported the team at EPIC Markets with regular thought pieces, and with their migration to WH Ireland, will continue to add his personal views on topical matters.