Europe
How Poland became Germany’s indispensable economic backyard
Border controls between Germany and Poland are facing increasing resistance from the German economy. A major factor in this is the critical role Poland plays for German capital.
Last week, Dirk Jandura, President of the German Foreign Trade Association (BGA), stated that serious damages would occur if trucks were caught in traffic jams and Polish workers could not reach their jobs in Germany on time.
The background to this is that Poland is extremely important for German industry. The country has surpassed China to become the fourth-largest market for German companies. One of the most significant reasons for this is Poland’s position as a low-wage location for labor-intensive activities in German companies’ production chains.
German companies supply intermediate goods to the neighboring country and then re-import them for further processing. This situation also boosts exports to Germany, which constitute one-third of Poland’s total exports.
According to an analysis by German Foreign Policy, 8.2% of all employees in Poland were dependent on exports to Germany in 2020. Poland’s dependent position in German production chains has also been stabilized with the help of EU funds.
A low-wage haven for German industry
With the end of socialist systems in Central and Eastern Europe, Western and especially German capital rapidly entered the region.
Germany played a significant role in Poland, as it did in other countries in the region. In the first phase of German-Polish economic relations after 1989, German investors participated in the privatization of state companies and opened their own factories in Poland. At that time, the focus was primarily on low production costs.
The removal of investment barriers with the EU’s eastward expansion in 2004 initiated the second phase of German capital’s spread into Central and Eastern Europe. At the same time, investments in the low-wage countries of Central and Eastern Europe were used as a tool to pressure trade unions in Germany, forcing them to accept major social cuts and the restructuring of the labor market, namely the “Hartz reforms.”
The economic division of labor between Germany and Poland
Simultaneously, simple tasks in particular were moved from Germany to Central and Eastern Europe, which led to the restructuring of production and the creation of new skilled jobs in the Federal Republic of Germany.
During Poland’s integration into the German production process, this led to a division of labor between the two countries that continues to this day. This means that low-value-added activities are carried out in Poland, while high-value-added activities are performed in Germany.
While know-how, modern means of production, and consequently complex work processes developed in Germany, simple and labor-intensive activities for the supply chains of German corporate headquarters predominate in Poland, as is the case throughout Central and Eastern Europe.
Poland became a lifeline for Germany during the Eurozone crisis
The financial crisis of 2008 marked the beginning of the third phase in German-Polish economic relations.
Poland was the only EU country that did not experience a recession, and this led to a further increase in German investments in Poland. In the years after 2008, the German industry’s focus on Central and Eastern Europe helped Germany increasingly recover from the Eurozone crisis.
Due to the shift to the East, Germany’s already low willingness to “share the costs of economic stability in Southern Europe” further decreased during the Eurozone crisis.
At the same time, Poland’s deep integration into German production chains was further strengthened by German investors being much more active than those from other EU countries.
The core activities of Polish factories were focused on exporting products to German companies. In this context, the Central European countries—the “Visegrad Four”: Poland, the Czech Republic, Slovakia, and Hungary—have a similar export structure dominated by four sectors: the chemical industry, metal production, the electrical industry, and the automotive industry. A strong export increase has been recorded, especially in the latter two sectors.
Poland is of critical importance to the German export market
Poland’s role as a producer of intermediate goods for German industry enabled the country to surpass China last year to become Germany’s fourth-largest sales market.
The reason for this is that most of the products Germany exports to Poland are processed in Polish factories and then exported back to Germany. Poland is therefore an important intermediate stage in German production chains.
Looking at the other side of the equation, in 2024, more than 27% of Poland’s total exports went to Germany. This rate is far above that of the Czech Republic and France, which account for just over 6% of Poland’s total exports.
Poland’s economic dependence on Germany is also reflected in the fact that in 2018, almost 10% of Poland’s gross domestic product was tied to trade with Germany.
More than 7% of this figure stems from the demand of German end consumers, while 2.6% comes from deliveries to German factories.
In 2020, 8.2% of all employees in Poland, or about 1.2 million people, were dependent on exports to Germany.
Central and Eastern Europe compete for German investment
Another factor in favor of German industry is that the countries of Central and Eastern Europe compete regionally with each other to offer the most attractive investment conditions.
For example, in the mid-1990s, the Polish government established the first special economic zones, offering tax breaks for investments in structurally weak regions.
After joining the EU in 2004, the Polish Ministry of Economy launched a targeted aid program primarily for large companies. Until 2004, investment zones were determined by Warsaw. After Poland’s accession to the EU, foreign companies were able to choose their own locations.
Many companies followed their competitors or business partners, which led to a concentration of foreign companies in special economic zones that were already in a better economic position.
An example of how German companies benefit from regional competition in Central and Eastern Europe is Volkswagen’s (VW) plan to build six battery “giga-factories.”
Poland and Hungary have so far managed to outperform other candidate countries. Thanks to the competition between them, VW received the largest possible investment incentives through tax breaks, the construction of transport infrastructure, and the retraining of workers.
EU funds for Poland are actually flowing to Germany
Since joining the EU, Poland has had access to comprehensive EU funds. Most of these funds come from the EU Structural Funds, created to reduce regional disparities.
Between 2004 and 2018, Poland received just under 102 billion euros in funds. It used this money to expand road infrastructure, develop renewable energy sources, and finance environmental protection measures.
Poland is a recipient country in this context: it receives more funds than it contributes to the EU budget.
An important principle for accessing EU funds is national co-financing: Poland must contribute its own state funds to the supported projects.
Research shows that the EU’s cohesion policy has further deepened the German-Polish division of labor: German companies supply machinery, chemical products, and construction materials for EU-funded projects.
In this way, EU subsidies to Poland and the Polish state funds required for co-financing increase the profits of German companies.
In contrast, Central and Eastern European countries receive only a small share of the EU’s research and development funds. For example, 95% of the funds from the Horizon 2020 program (2014-2020) went to the EU-15 countries before the EU’s eastward expansion, especially Germany, the United Kingdom (before Brexit), France, Spain, and Italy.
The Central and Eastern European EU countries, however, received only 4.7%.
EU funds, therefore, act as a decisive lever in reproducing the existing division of labor within the EU. These funds contribute to countries like Poland remaining in a kind of “extended workbench” status for Germany.
Europe
Vučić scrapped plan to hold power after phone warnings, report says
Former Serbian President Aleksandar Vučić was preparing to retain power by force following the country’s parliamentary elections, according to a report by the British newspaper The Times, citing politicians and a former commander of a specialised police unit.
However, he abandoned this scenario after receiving phone calls urging him to back down.
Spasoje Vulević, the former head of the Serbian police counter-terrorism unit, told the newspaper that 4,000 police officers and 3,000 people whom he described as “thugs” were deployed to central Belgrade on voting day, 25 October.
According to Vulević’s assessment, Vučić was preparing to reject the election results.
Vučić’s spokeswoman denied the claim. Speaking to The Times, she said the police presence in Belgrade was a response to threats of violence from protesters and was unrelated to any attempt to seize power.
Member of the European Parliament Sandro Gozi also said he received alarming messages from diplomatic sources on election day indicating that Vučić was preparing for a scenario involving the use of force.
According to the newspaper, Gozi’s political group issued a statement around 21:00 local time, as initial projections were being released, warning that supporters of Vučić’s party could be mobilized to provoke clashes.
Where did the calls forcing Vučić to back down come from?
Radomir Saičić, a leading candidate from the winning Student List, also argued that plans had been made to alter the results by force if the vote margin between the sides was narrow.
“If the results were close, there were plans to overturn the outcome of the vote by brute force,” Saičić said. “However, according to the information I obtained, numerous calls to him from the police and other figures prompted him to change his mind. They convinced him that executing this plan would end very badly for him.”
Former commander Vulević, on the other hand, was sceptical that police officers could have played a decisive role.
Noting that Vučić personally selected the unit commanders in Belgrade and that these figures were unlikely to oppose him, Vulević said: “I suspect that representatives of European governments called Vučić; these were talks conducted at the highest level.”
European Parliament member Gozi did not confirm the claim that the telephone calls had a decisive effect.
“I cannot rule out the possibility that phone calls took place, but in any case, the vote margin against him was far too large,” Gozi said. “Vučić was stunned.”
According to The Times, roads were closed in Belgrade during the evening, gendarmerie personnel appeared on the streets, and groups of men dressed in black headed toward the city’s Pioneers Park (Pionirski Park).
Vulević claimed these individuals arrived in groups of 20 to 30. However, the newspaper reported that at 21:30, an hour and a half after polls closed, Vučić backed down and his assembled supporters dispersed.
From the Novi Sad collapse to early election defeat
Early parliamentary elections were held in Serbia on 25 October.
According to Election Commission data, after processing results from 8,139 ballot boxes, the Student List secured 52.65% of the vote, while Vučić’s United Serbia coalition remained at 39.22%.
Vučić conceded defeat without waiting for the final results.
“It is obvious that we have lost these elections. The Student List has won,” the politician said, attributing the opposition’s success to support from European countries and the US “deep state”.
Prior to the election, the country was the scene of prolonged mass protests that began after the collapse of a railway station canopy in the city of Novi Sad in November 2024.
Protesters initially demanded accountability for those responsible and an investigation into corruption allegations, before subsequently calling for the government’s resignation.
Having dissolved parliament in September 2026 and announced his resignation from the presidency, Vučić was subsequently nominated as the candidate for prime minister by his party.
Europe
EU scrambles for takers for remaining €21B in SAFE defence loans
The European Commission has until the end of the year to convince EU member states to take up around €21 billion in unused defence loans and support Ukraine’s defence.
The worsening security situation in the Black Sea could encourage Romania to seek additional loans. Bucharest has already secured €16.7 billion under SAFE.
The remaining figure became final after Hungary and Italy significantly scaled back their requests under the EU’s €150 billion Security Action for Europe (SAFE) programme.
On Wednesday, after approving Hungary’s spending plan, the final pending application, the Commission announced that it would soon launch a second call for applications.
The situation is very different from August 2025, when Brussels was confident that demand would far exceed the available €150 billion.
Applications from 19 EU countries eventually exceeded that sum by around €40 billion.
Now, national elections and pressure on public finances may make governments reluctant to take on additional debt.
Some EU diplomats told Rapporteur that the conditions for the second round remain unclear, making it difficult to say whether their countries would apply.
The Commission must publish the second call by the end of December. Unlike the first round, where countries could use the loans for national procurement contracts until May 2026, the remaining money must be spent on joint procurement.
Poland benefited from the previous flexibility, securing €43.7 billion, the largest national allocation, and moved quickly to sign contracts.
Warsaw announced that 90% of the money would go to Polish companies.
Brussels also hopes the remaining money will be used to bolster Ukraine’s defence.
In July, during an official visit to the country, Commission President Ursula von der Leyen suggested that around €10 billion in unused SAFE loans could be directed to Kyiv.
Defence Commissioner Andrius Kubilius mentioned the Freyja anti-ballistic missile project among the initiatives under consideration while discussing the second SAFE call at an E5 meeting in Paris this week.
Military sources told Rapporteur that participation in the second round had been considered under Romania’s previous government, but the proposal would now require a fresh political assessment.
Diplomatic sources in Athens told Rapporteur that Greece has also shown interest. The country had previously made an unsuccessful push to increase its allocation by several billion euros.
Polish Deputy Defence Minister Magdalena Sobkowiak-Czarnecka told Polish media this week that Poland was also discussing the conditions for another possible application, while Ireland has shown interest in the remaining funds.
Italy, having already reduced its initial request, is considered unlikely to participate in the second round.
Europe
EU prepares Ukraine peace mission to Abu Dhabi led by Björn Seibert
The European Union is preparing to take a direct role in the diplomatic negotiations surrounding the war in Ukraine.
According to a report by Euronews television, the European Commission and the European Council are establishing a joint delegation of high-ranking officials to attend an upcoming round of talks between the parties. Björn Seibert, the head of cabinet to European Commission President Ursula von der Leyen, will lead the delegation.
The German diplomat, described in the report as an influential bureaucrat, is expected to head the team attending the talks scheduled to take place in Abu Dhabi in early November.
“We are strongly committed not only to ending the war, but also to achieving a just and lasting peace. This is our goal, and this is precisely the position we defend in the current talks,” a European Commission representative said in a statement on the matter.
Brussels’s key figure behind the scenes
A European bureaucrat of German descent, Björn Seibert has long been recognized as von der Leyen’s closest aide.
Seibert first joined von der Leyen’s team in 2013 during her tenure as Germany’s defence minister, later moving with her to the European Commission.
According to reporting by Politico magazine, Seibert gradually developed into one of the most powerful figures behind the scenes of European politics.
The magazine noted that Seibert has been directly involved in clearing senior appointments and has played an influential role in managing relations with both the European Parliament and the US.
This setup has also sparked controversy within the institution. Critics claim that concentrating power in the hands of the cabinet chief and von der Leyen leads to excessive centralization in administration, whereas supporters argue the model ensures rapid, efficient decision-making.
If these multilateral contacts materialize to bring together delegates from Europe, Ukraine, the US, and Russia under one roof, they will mark the first talks held in this specific format during the peace process.
Diplomatic engagements so far have been conducted either bilaterally between Russia and the US or as trilateral meetings that included Ukraine.
However, the EU delegation’s participation at the negotiating table is not yet finalized, as the issue remains under consultation.
European capitals have actually spent months searching for a similar diplomatic channel. Politico reported in January that EU member states had discussed appointing a special envoy to lead talks with Moscow over Ukraine, an effort backed by French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni.
The Telegraph newspaper reported in October that, alongside Meloni, Finnish President Alexander Stubb, Czech President Petr Pavel, Norwegian Prime Minister Jonas Gahr Støre, and Danish Prime Minister Mette Frederiksen were being mentioned for the European representative role.
The newspaper noted that officials were also weighing the option of creating a joint delegation of representatives instead of choosing a single figure.
Reservations from Moscow over European intentions
Moscow, for its part, views Europe’s position as potentially decisive in resolving the conflict. “It is not enough to talk only with Kyiv; it is necessary to talk with the whole of Europe, which fully backs Kyiv in its desire to prolong the conflict. Perhaps Europe’s stance is of key importance here,” Russian Presidential Aide Yuriy Ushakov said.
Kremlin spokesman Dmitriy Peskov also stated that Moscow would support the emergence of an EU negotiator. “Having a negotiator is good. If that negotiator genuinely seeks to contribute to a peaceful settlement, it would be much better,” Peskov said.
Conversely, Russian Foreign Minister Sergey Lavrov struck a cautious tone on 27 October regarding European countries’ interest in joining the talks. Lavrov stated that Europe wants a seat at the table without altering its outlook toward Moscow.
Arguing that Europe disregards Russia’s position on the root causes of the conflict, Lavrov emphasized that European nations do nothing beyond levelling accusations and demanding a halt to hostilities.
“This merely demonstrates the Europeans’ desire to join the negotiation process. However, the positions with which they would enter the process remain a major question mark,” the Russian minister said.
Despite these conflicting signals, Russian President Vladimir Putin previously noted that Moscow has not closed the door to dialogue with European nations.
As a preferred European negotiator, Putin previously named former German Chancellor Gerhard Schröder.
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