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How Poland became Germany’s indispensable economic backyard

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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.

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Hungary’s new PM Magyar vows absolute ban on illegal migration, challenging Brussels over fines

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Hungary’s newly elected Prime Minister Péter Magyar has pledged to block all illegal migration, reject European Union quotas, and challenge Brussels’ punitive fines, signaling a highly restrictive border policy even as he vows to restore ties with European partners.

In his first interview with the German newspaper Frankfurter Allgemeine Zeitung since taking office, Magyar outlined his administration’s strategic roadmap. He addressed the smear campaigns directed against him by the former government of Viktor Orbán, relations with the EU, migration policy, and the economic necessity of maintaining energy ties with Russia.

Reflecting on his transition to power, Magyar noted that the Orbán administration targeted him, his family, and his colleagues during a highly polarized campaign.

“I have known Viktor Orbán for a long time. What happened during the election campaign was no surprise to me, even if it might be difficult to imagine in other countries,” Magyar said. “The mudslinging campaign was not just directed at me personally, but also against my family, my colleagues, and my friends. However, those who faced each other were not Hungarians against Hungarians; it was Viktor Orbán and his vassals standing against the Hungarian nation. One of our most important campaign promises is that we will do everything we can to reunite the Hungarian nation.”

Despite running a pro-European campaign to secure victory, Magyar acknowledged fundamental disagreements with Brussels, particularly on migration. He argued that former Prime Minister Orbán’s hardline stance during the 2015 European migrant crisis was correct.

“My government will pursue an extremely strict and decisive policy regarding illegal migration,” Magyar said. “You can be as angry with Viktor Orbán as you want—and no one has criticized him more than I have—but when the migration crisis began in 2015, he was right. Many member states have now admitted they made wrong decisions at the time. In any case, we will protect our homeland, our country’s borders, and the external borders of Europe.”

“Hungary will not accept any illegal migrants”

Responding to whether Hungary would comply with newly implemented EU asylum rules, which mandate member states to conduct processing procedures at external borders, Magyar delivered a firm refusal regarding quotas and penalties.

“I can only say this: Hungary will not accept any illegal migrants. We will not pay any penalties for this either,” Magyar said. “However, we will help protect Europe’s external borders, whether in Greece, Malta, or Italy. The 2015 migration crisis must be a lesson for Europe. The most important duty of European politicians is to protect the safety of the people. I believe there are many ways to stop illegal migration without violating European Union rules. It is simply a matter of being able to negotiate.”

Magyar also dismissed the current relevance of a European Court of Justice ruling imposing a daily fine of 1 million euros on Hungary for failing to implement EU asylum procedures, arguing the decision is outdated.

“The court’s decision was made at a very different time and under a different legal framework,” Magyar said. “Today, we are in a completely different situation. This decision no longer reflects today’s reality. Today, there are many countries acting just like Hungary, yet this European Court of Justice decision does not apply to them. I find this incredibly unfair. In order to protect our borders and avoid having to pay the daily fine of 1 million euros, we will hold talks with our European partners and find a common solution.”

While acknowledging that the judicial ruling is final and cannot be appealed, Magyar described the financial burden on Hungarian citizens as unjust.

“The decision cannot be appealed. We are looking for new rules and opportunities to avoid paying the fine,” he said. “It is unfair and disproportionate that the people of Hungary must pay a fine of 1 million euros every day. Similarly, it is a great injustice that while other member states receive these funds, Hungary has been provided with no financial resources for the wire fence it constructed to protect the external border of the European Union.”

“Exclusion only makes the far-right stronger”

Magyar strongly opposed pushback from member states—particularly pressure from Germany—to transition EU foreign policy decision-making from unanimity to qualified majority voting, defending the preservation of national sovereignty.

While rejecting the confrontational rhetoric favored by Orbán toward Brussels, Magyar emphasized the importance of compromise among sovereign states.

“I served as a diplomat within the European Union for a long time, and I know very well how difficult it is to reach a consensus among 27 countries. Yet, most of the time, this is achieved,” Magyar said. “Orbán always said, ‘We must defeat Brussels.’ I do not think that is the point. The point is to understand each other, to persuade, and not to try to defeat one another. People do not want a United States of Europe; they want a European Union based on strong member states. For this reason, I do not support transitioning to a majority voting system in many areas instead of the unanimity rule at this stage. We will negotiate and find a middle ground.”

Addressing the political rise of far-right parties across Europe, particularly in France and Germany, Magyar criticized traditional political elites for being disconnected from public anxieties and relying on political moralizing.

He warned that isolating these populist movements is counterproductive.

“I do not like labels like far-right or far-left. I do not like ideological wars,” Magyar said. “People deserve more than politically correct speeches where ideological labels are slapped on one another. I have no intention of interfering in the internal affairs of other member states, and I will not do so; on this point, I differ from Orbán. However, I observe that some countries make mistakes in combating extremist parties. In many countries, politicians do not act honestly. They do not understand people’s fears and expectations, and they do not dare to talk openly about problems and face them. They use the language of political correctness and, at the end of the day, fail to grasp reality itself. These are precisely the mistakes that certain groups exploit. Excluding these people and these parties, building a wall of isolation around them, is not a solution on its own. Exclusion only makes these forces stronger. In many countries, these mistakes have been recognized, but not yet everywhere.”

Asked if this critique applied to Germany, Magyar maintained his criticism of governing establishments.

“In many countries, the political, media, and economic elites protect their own positions and do not always address the real fears and problems of the people. But the public does not forget this. That is why what we need is honesty, honesty, and once again, honesty,” he said.

On the debate over whether conservative factions in the European Parliament should cooperate with the Alternative for Germany (AfD) party, Magyar shared his perspective on the future strategy of the European People’s Party (EPP), which includes his own party, Tisza.

“In the European Parliament, political forces must always seek a majority, and grand coalitions between the center-left and center-right can function. Germany and Austria are good examples of this,” Magyar said. “However, this does not always work, and that is why the CDU/CSU and the European People’s Party, which includes my party Tisza, may have to make a decision one day. In my view, the European Conservatives and Reformists (ECR) are the natural allies of the European People’s Party. Whether they want to cooperate with the AfD is not my decision to make. However, I believe that talking to one another and listening to the other’s arguments never causes harm. What we accept from each other’s proposals is an entirely separate matter.”

“Europe will partially return to Russian energy after the war”

Defending Hungary’s decision to continue importing crude oil and natural gas from Russia despite the war in Ukraine, Magyar emphasized the country’s landlocked geography and economic constraints.

“The Hungarian people elected me as the Prime Minister of Hungary. My government’s duties include ensuring energy security, security of supply, and the lowest possible energy prices,” Magyar said. “In recent years, Hungary has become one of the poorest and most corrupt countries in the European Union. Three million people live below the poverty line. Our neighbors in the European Union must understand that Hungary is a landlocked country. We are still dependent on Russian oil, and we cannot change this overnight. We have not seen economic growth for years, and we need cheap energy to grow. Of course, we are doing everything we can to diversify our energy resources, but we cannot afford to see our companies’ competitiveness decrease further and Hungarian families’ energy poverty increase. I think Europe will partially turn back to Russian energy resources and lift sanctions when the war ends, because the competitiveness of all of Europe is at stake here. In a future state of peace, no one has an interest in maintaining a new economic and political Cold War. For this, of course, the war must first end.”

While Orbán maintained close ties with American conservative movements and received explicit support from Donald Trump, Magyar indicated that the change in leadership in Budapest would not damage relations with Washington.

“The US is Hungary’s natural ally in NATO and a highly important economic partner. What happened during the election campaign will not change this. We will maintain good relations with every American administration,” Magyar said.

Magyar criticized Orbán’s personal relationship with Russian President Vladimir Putin, arguing instead for a pragmatic, non-ideological approach to Moscow in the post-war era.

“I know the role of Russia in Hungarian history very well. I have not forgotten the years 1849 and 1956. In both periods, Russian troops bloodily suppressed the Hungarian freedom movement,” Magyar said. “But on the other hand, the reality is that geography does not change. We must accept this as it is. Therefore, we must develop pragmatic relations with Russia once the war against Ukraine ends. Nonetheless, it is extremely clear that Russia currently poses a security risk to all of Europe. It is unacceptable that people in Europe must live in fear of Russian sabotage or a Russian attack. That is why this war must end, and we must provide international security guarantees to Ukraine. However, Europe can only develop when normalcy returns, and Russia cannot have an interest in a new Cold War becoming permanent on the continent.”

“We can turn a new page with Ukraine”

Magyar pledged to end the hostile state-sponsored propaganda directed at Ukraine by the previous administration, emphasizing his respect for Ukraine’s territorial integrity and his personal involvement in humanitarian efforts.

“We want to build good relations with all our neighbors, not least because a Hungarian minority lives in each of them. This also applies to Ukraine,” Magyar said. “We have always stated that Ukraine is the victim in the Russia-Ukraine war and that Ukraine has the right to its territorial integrity. When the Russians bombed the largest children’s hospital in Kyiv in the summer of 2024, I immediately went to Kyiv with our volunteers and personally delivered the humanitarian aid of the Hungarian people. Right after the attack, we set off in a 30-year-old Ford Transit and reached Kyiv within 20 hours under air raids and missile bombardments. I did not see any other European politician at that bombed hospital. We are currently holding talks with Ukraine at a technical level, and we are working to reach an agreement within a few days to restore and guarantee the language, education, and cultural rights of the 100,000 Hungarians living in Ukraine. Today, we need to clarify certain matters with Ukraine regarding our minority in that country, and I hope we will achieve this in the coming days. Ethnic Hungarians there currently do not have the opportunity to use their mother tongue in their relations with official authorities. However, if we resolve these issues on the basis of mutual interest, we can turn a new page.”

Magyar cautioned that future security guarantees for Ukraine must be concrete and enforceable, unlike previous international agreements.

“In 1994, the famous Budapest Memorandum was signed, in which the US and other major powers guaranteed Ukraine’s independence and integrity. However, these promises were not kept, because empty slogans are of little use,” Magyar said. “Right now, everything is at stake in Ukraine. A large number of people are dying, and it is possible that this country will lose part of its territory. Therefore, Ukraine needs real, enforceable international guarantees.”

However, the Prime Minister reiterated that Hungary would remain militarily uninvolved in the conflict, stating that arms shipments do not constitute a genuine security guarantee.

“I do not believe that weapons are a security guarantee. Security guarantees can only be provided by the international community,” the Hungarian leader concluded. “Hungary cannot play a decisive role here; this is the work of the major powers. We can provide diplomatic and humanitarian aid, and Hungary can also provide a suitable ground for negotiations.”

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EU agrees new deportation rules allowing migrant return centers outside the bloc

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European Union lawmakers and member states have reached agreement on new legislation overhauling rules governing the deportation of asylum seekers.

According to Politico, the agreed text allows asylum applicants whose claims have been rejected to be sent to dedicated return centers established outside the EU.

As a key condition of the deal, measures to establish the return centers are set to be implemented immediately.

The move is said to be of particular importance to the Netherlands and Germany. Other provisions of the legislation are expected to take effect one year later.

The agreement must still receive final approval from both the EU Council and the European Parliament before it can formally enter into force.

European Commissioner for Migration Magnus Brunner said the agreement would help the EU regain control over both those arriving in the bloc and those required to leave it.

According to data from Eurostat, the proportion of migrants denied asylum in the European Union who ultimately leave the bloc remains at around 27%.

“We must give people the feeling again that we have everything under control,” Brunner said.

The new framework grants member states the authority to transfer individuals ordered to leave EU territory to return centers located outside the bloc.

Several member states are already examining the option, while human rights organizations have warned of risks of rights violations and abuse during the process.

The legislation also introduces stricter measures, including home searches, extended detention periods, entry bans, and penalties for individuals deemed security threats or those who refuse to cooperate.

French Member of the European Parliament François-Xavier Bellamy told the publication: “For years, Europe sent the worst possible message: even if you had no right to stay, there was a high likelihood that nothing would happen. That era is ending. If you do not have the right to remain in Europe, you must leave.”

The initiative, however, has faced opposition from lawmakers affiliated with liberal and left-wing groups.

Melissa Camara, a representative of the Greens group, described the agreement as “a legal arsenal serving a xenophobic ideology” and criticized both offshore centers and the detention of minors.

Marta Welander, head of the International Refugee Committee, said the new measures signaled “a troubling new era.”

Welander argued that the rules would normalize migrant raids and increase the risk of people being deported to countries where they could face persecution or torture.

According to available data, the number of migrants living within the European Union reached 64.2 million in 2025. During the same period, the foreign-born population arriving from outside the bloc increased by 2.1 million people annually.

In 2010, the European Union was home to approximately 40 million migrants.

As a result, the migrant population has increased by more than 60% over the past 15 years, while migrants’ share of the EU population has risen to 14.2%.

In December last year, US President Donald Trump said Europe faced the risk of destruction because of the migration policies pursued by European countries.

Trump had previously argued that the continent was facing a wave of migration and that, as a result, Europe was “no longer the Europe it once was.”

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Anthropic invites EU cybersecurity agency to access Mythos AI hacking model

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Anthropic has invited the European Union to access Mythos, its powerful AI-powered hacking tool, by sending an invitation to the bloc’s cybersecurity agency.

A European Commission official said the AI company issued the formal invitation following a meeting with the Commission in San Francisco last Thursday, adding that the EU must now establish a mechanism that would allow access to the model under appropriate security safeguards.

Bloomberg reported on Monday that ENISA, the EU’s cybersecurity agency based in Athens, would be granted access to Mythos.

European Commission spokesperson Thomas Regnier said the Commission had held “several productive meetings with Anthropic” and “welcomes the latest developments regarding potential future access.”

Anthropic unveiled Mythos in early April and warned that the model outperformed most humans in identifying and exploiting cybersecurity vulnerabilities.

The disclosure raised concerns that the model could be used to carry out large-scale attacks against critical and sensitive systems if it fell into the hands of cyber adversaries.

European officials were unable to access the cutting-edge cybersecurity AI technology for weeks, prompting urgent calls from European lawmakers and government officials to secure access.

Cybersecurity officials also urged Europe to develop its own version of the technology.

“This latest development is extremely important in helping us gain a clear understanding of the potential risks. We should not forget that Mythos is not an isolated case and that a new wave of powerful models is entering the market,” Regnier said.

An ENISA official said the agency does not currently have active access to the model but is working to make it operational.

The Commission is developing a formal action plan to respond to powerful AI hacking tools.

According to an industry official, the Commission has indicated that it wants to publish the plan before the summer break.

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