Europe
Why Rishi Sunak?
Rishi Sunak of the Conservative Party has become the new leader of the UK after the end of Liz Truss’s brief 49-day prime ministerial term. Sunak has become the new prime minister without even needing British citizens’ votes; following the resignation of Boris Johnson, together with Liz Truss, he was one of the new candidates for prime minister but had lost the race to his predecessor.
Brought down by Truss and Sunak, Boris Johnson’s understanding of the economy during and after the Covid crisis was somewhat “heterodox” and “populist”: Contrary to the general downsizing trend in western countries, Johnson had prioritized economic growth and low taxes and declared that he favored measures to pump demand. In fact, Johnson had signaled that he could implement state-led fiscal policies that were not well received by the mainstream.
Boris Johnson took office after the Brexit process, when Britain left the EU, and acted to bring his country back on the world stage as a strong player. When Covid was added to the great recession that plagued capitalist economies, Johnson’s “unstable” actions lead to his downfall. Johnson, who wanted to pursue a looser monetary policy, was thought not to have a coherent and comprehensive economic policy towards the Bank of England’s and the finance’s “orthodox” understanding.
And that’s when Liz Truss became Johnson’s successor. In her debate with Sunak, she also talked about economic growth and the reduction of taxes. She also tried to implement this plan: a $50 billion tax deduction package came into effect to be compensated by borrowing, but the response of the “markets” was harsh. Sterling has declined to unprecedented levels, panicked investors have sold $500 million in assets, and the real estate industry is on the brink. The Bank of England launched an emergency bond-buying program to prevent pension funds from going bankrupt, and the IMF criticized Truss and urged her to reconsider the program.
Perhaps the sign of the resignation came from her ally on the other side of the Atlantic: on October 16, US President Joe Biden called Liz Truss’s tax package a “mistake”. Liz Truss had already begun her U-turn and fired finance minister Kwasi Kwarteng, but it was too late.
Britain’s stalemate
We must accept that Sunak “warned” Truss in a way. During the debate, he said that Truss’s promises of tax cuts, borrowing and economic growth were unrealistic and argued that these policies would not work in an inflationary environment: Raising borrowing to historic and dangerous levels would mean pouring gasoline over the fire.
Speaking to the Financial Times before Truss’s resignation, he said the new prime minister and the new government’s overriding priority was to control inflation. He explains that Truss’ unfunded debts will exacerbate the situation and fuel inflation, and calls out directly to her, “Liz, we have to be honest. Borrowing your way out of inflation isn’t a plan, it’s a fairytale.”
Thus, ex-Goldman Sachs executive and parliament’s richest deputy, Rishi Sunak, emerged as a heartfelt supporter of monetary policies in developed capitalist countries: focusing on fighting inflation, cutting spending, raising interest rates, tight monetary policy. The new prime minister says he supports the Bank of England’s “independence” but promises tax cuts only after inflation is controlled.
But the dilemma persists. Britain went into recession as of October, according to polls published by Financial Times. Interest rate increases and monetary tightening have not been able to reduce inflation fueled by rising energy costs due to the Ukraine-Russia war and sanctions imposed on Russia. Sunak’s plan to cut expenditures seems to trigger the social crisis even more, given the increasing number of people in need of help in society. Besides, when he was the Ministry of Finance between 2020 and 2022, Sunak brought in the highest taxes Britain had seen since the 1950s. Again, even though he preaches “discipline”, Sunak promises higher public expenditures.
There is no jolt in the foreign policy line
Sunak was a supporter of Brexit policy, but there are those in his party who think he has too much sympathy for Brussels. The debate on the Northern Ireland Protocol (NIP) will also be a test for Sunak in this sense. NIP kept Northern Ireland within the EU’s integrated market for goods; it left it loose on its border with the Republic of Ireland and subjected it to additional controls in trade with the rest of Britain. NIP, signed by Boris Johnson in 2020, is criticized by Sunak, but Sunak believes a more conciliatory language is needed, unlike the hardcore Brexiters in his party.
Rishi Sunak, on the other hand, wants to tighten border controls, especially on the issue of immigrants, and to get rid of the European Court of Human Rights (ECHR) “obstacle.” Arguing that the ECHR was exploited by “lefty ” lawyers and its designation was gradually expanding, he said that the option to leave the ECHR was also on the table. Sunak also supported the plan to send asylum seekers to Rwanda.
Stressing the “special relationship” between the United States and Britain in a phone call with Joe Biden, Sunak reiterated his support for Ukraine and said they would stand up to China. In Ukraine, the prospect of Boris Johnson’s return was welcomed, and after Truss’s resignation, the government’s official Twitter account even tweeted about Boris and quickly deleted it, but Sunak’s appointment of the ministries of defense and foreign affairs to Ben Wallace and James Cleverly, who also served in the previous cabinet, was recorded as a gesture that Ukrainian politics would remain unchanged. It was also meaningful that Sunak’s first telephone conversation as prime minister was with Ukrainian leader Volodymyr Zelenskyy. However, Sunak does not support Liz Truss’s and Ben Wallace’s promise to raise defence spending to 3% of GDP. In addition, allies of Johnson’s pushed rumors that during his polemic with Sunak, the new prime minister was less committed to the war than Johnson, and a deal would one day have to be done with Putin.
Internal tensions of the Conservatives and The Talented Mr. Sunak
On the other hand, Sunak is not settled on a solid ground within the party. Boris Johnson’s leadership was the result of contradictions within the Conservative Party (Tories). Most of the Tory MPs in parliament depend on the politics of low taxation and free market sovereignty. But on the other hand, especially representatives from the northern regions of the party demand more government spending, a larger and more interventionist state, and they are very influential within the party.
The Northern Research Group (NRG), an influential team within the party, called on Liz Truss to continue the Tories’ levelling-up policy in the 2019 election manifesto. The NRG is composed of Tories selected from regions traditionally held by the Labour Party and wants more investment in the north.
Johnson chose to manage these contradictions rather than solve them. He was both conservative and pro-free market; he had promised to increase government spending and cut taxes. His speeches in the Brexit campaign included “more prosperity, less Europe”, “more freedom, less regulation”, “more dynamism, less migration.”
Apparently, Rishi Sunak is the answer given in Britain to these contradictions and the current trends of world capitalism. The economy needs to be reorganized under titles such as “green transition” and large investments are required, and the public power needs to increase at a time when private sector investments are in the bottom due to the crisis. The distance between capital groups and the state should be shorter. In addition, the ongoing war in Europe means that the regulatory authority of the state over the society is also extended to wider areas.
All this highlights a figure like Rishi Sunak. He is the member of an Indian family, who were cooperative during the colonial period, ex-Goldman Sachs manager; wealthy; professional and self-educated child of cooperative families of former colonial countries who had migrated to the West in the 1960s and had the opportunity to get into good universities…
Europe
Fico accuses Merz of blackmail over threat to veto EU budget
Slovak Prime Minister Robert Fico has hit back after German Chancellor Friedrich Merz threatened to veto the EU budget unless funding for Ukraine is secured.
Merz said he would block the EU’s seven-year budget if no agreement is reached on financial assistance for Ukraine.
The chancellor’s intervention has angered Central European leaders who are net beneficiaries of EU funds but do not want to take part in the next round of funding to support Ukraine’s war effort.
“What the chancellor is doing is typical blackmail, and I will not bow to it,” Fico told reporters in Bratislava.
Fico spoke alongside his Czech counterpart, Andrej Babiš, whose government has refused to participate in a future loan to Ukraine.
“I do not know why he said this,” Babiš said, referring to Merz’s stance.
Merz wants EU leaders to discuss Ukraine’s financing needs at a summit in Dublin on Friday.
In a letter to European Council President António Costa, who will chair the meeting, obtained by The Guardian, Merz wrote:
“We must maintain our support for Ukraine in its struggle to defend itself. This is our shared vital interest. Yet bilateral aid provided to Ukraine is distributed unevenly, with the burden shouldered mostly by only a few member states.”
The EU agreed last year to provide a €90 billion loan to Ukraine, intended to cover two-thirds of its military and civilian spending for 2026 and 2027.
Since then, however, Russia’s relentless bombardment has placed a heavier financial burden on Kyiv, prompting President Volodymyr Zelenskyy to ask for €70 billion to plug the budget deficit.
The EU has endorsed Zelenskyy’s figures and pledged to find €45 billion. Ukraine’s other allies, such as Britain and Canada, are expected to cover the rest.
Last year, Merz launched an initiative to tap €210 billion in frozen Russian state assets held in the EU, but the plan fell through due to opposition led by Belgium, which holds most of the funds in Brussels.
The €90 billion loan was the backup plan. Having opted out of that loan, Hungary, Slovakia, and Czechia indicated that they would not take part in the next round either.
Bulgaria joined these three member states following the election of Prime Minister Rumen Radev last April.
The question of funding for Ukraine is now spilling over into the fraught negotiations on the 2028-34 EU budget.
Germany, the largest net contributor, wants substantial cuts to the proposed budget and opposes the EU providing generous funding to member states that refuse to contribute to Ukraine’s financial needs.
Merz states in his letter that a “collective commitment without exceptions” is a “fundamental prerequisite” for closing Ukraine’s financing gap and for “discussing other matters, particularly those with financial implications.”
He also notes that, in the context of the EU’s next seven-year budget, known as the Multiannual Financial Framework, all member states must contribute to a “robust” financial perspective for Ukraine from 2028 onwards.
A German government official said:
“For the Multiannual Financial Framework (MFF) to be successfully concluded, it is vital that all EU member states provide financial support to Ukraine.”
Berlin is also aiming to shift decision-making on funding for Ukraine from unanimity to qualified majority voting, in an effort to prevent a single government from blocking EU decisions.
The letter reflects mounting frustration among the EU’s northern member states, Ukraine’s most generous backers, over lower contributions from other EU countries in Central and Southern Europe.
The task of brokering an agreement on the budget falls to Costa, the former Portuguese prime minister.
Costa wants a deal by the end of the year, ahead of elections in France, Poland, and Italy in 2027 that could complicate the process.
A spokesperson for Costa confirmed receipt of the letter without elaborating on details. “President Costa will dedicate time to the Ukraine issue at the informal European Council meeting in Dublin this week,” the spokesperson said, adding that funding for Ukraine would be addressed at a dedicated summit on the EU budget scheduled for 26-27 November.
Europe
EU expects next Israeli government to adopt less aggressive posture
The EU expects the next Israeli government to mend its “difficult relationship” with Brussels and adopt a more constructive approach toward Gaza and illegal settlements.
Israeli President Isaac Herzog tasked Gadi Eisenkot, the leader of the anti-Netanyahu bloc, on Sunday with forming a government.
Eisenkot stated that the country faces a “catastrophic diplomatic crisis” as traditional allies begin to reassess their relations with Israel.
Speaking to Rapporteur, several European diplomats stationed in Tel Aviv said they expect ties to get back on track.
“Whatever government comes in, we can try to revitalize relations because Israel is clearly a very important partner,” one European diplomat said, adding that Brussels expects the next administration to be “less aggressive”.
The diplomat noted that relations with Europe are currently “not very good”.
Israel cut off communication with Kaja Kallas, the EU high representative for foreign affairs and security policy, after Rapporteur revealed in June that she had compared Israel to apartheid-era South Africa during a visit to Mexico.
The diplomat stated that this decision, taken ahead of elections, was political in nature. A second European diplomat based in Brussels explained that the announcement came only a few days before an official visit by Dubravka Šuica, the European commissioner for the Mediterranean.
“This could have been interpreted as a tactic to divide Europe, but Israel had asked Kallas to deny the report; she did not do so,” the second diplomat said.
Brussels has repeatedly voiced its frustration with Israel over the humanitarian crisis in Gaza and the expansion of West Bank settlements.
However, EU governments blocked almost all sanctions proposed by the European Commission.
A third diplomat said opposition parties would “almost certainly take the issue more seriously” when it comes to tackling violence by West Bank settlers:
“We see Palestinians being expelled from their homes and new illegal settlements being built in the West Bank. There is a reluctance on the part of the current government to address this issue, which causes problems in our relations.”
The new government is expected to ease pressure on Palestinians and halt construction of the E1 settlement project, a controversial plan to build settler housing in the West Bank east of Jerusalem.
“They will probably try to deal with the problem of extremist settlers in the West Bank,” the diplomat added.
On Gaza, the diplomat described the situation as “a complete nightmare”, with two million Palestinians crowded into an area that accounts for roughly 35% of the territory.
“There are not enough tents for the winter, and not enough vaccines are reaching the area despite an increase in diseases,” the diplomat said.
The European official argued that Donald Trump’s peace plan met all the conditions for Europe. Although the EU had much to offer, neither the US nor Israel appeared interested in EU involvement in the process.
“We are currently training Palestinian police in the West Bank, and if permitted, we could do the same in Gaza,” the diplomat said.
The diplomat disclosed that Israel had agreed with Šuica that Europe would finance two projects aimed at improving sewage and water infrastructure in Gaza, continuing:
“However, none of these projects has started yet because there is a serious problem with dual-use goods. Getting materials into Gaza is very difficult because the Israelis say they could be misused if they fall into the wrong hands of Hamas.”
Israel insists that Hamas must be disarmed before subsequent phases of Trump’s plan can proceed.
With disarmament unlikely to happen in the near term, the EU argues that certain measures can be carried out in parallel.
“We can begin rebuilding sanitation systems in Gaza. We can start building desalination plants. We can begin providing energy and water to Gaza,” one diplomat said.
While Brussels hopes for progress on Gaza and the West Bank, it maintains that expectations regarding the establishment of a Palestinian state need to be “managed”.
The EU continues to advocate a two-state solution, yet most leading Jewish parties oppose the creation of a Palestinian state.
The diplomat noted that the next Israeli government will likely have “a very slim majority and not much room for manoeuvre”.
There is also a “major misunderstanding” between the EU and Israel that must be addressed. According to the diplomat, Europeans fail to recognize the “psychological impact” of 7 October on Israelis.
“This event changed the country and made the two-state solution even more distant than before,” the diplomat said.
In return, some Israeli politicians believe Europe has betrayed Israel despite what they view as a fight against “Islamist terrorism”.
“Their argument is that European politicians are somewhat afraid of the Muslim population in Europe,” the European diplomat said.
Europe strongly opposes Iran and the possibility of Tehran acquiring nuclear weapons, imposing sanctions in response.
However, the diplomat argued that the EU would not participate in a war because it lacks a common army:
“We are a diplomatic and economic power, which is why we resort to sanctions and diplomacy. The expectation that we would take part in a military operation is unrealistic.”
Europe
Germany threatens EU budget veto over long-term Ukraine aid
Germany has threatened to veto the European Union’s joint budget for the 2028-2034 period, which is currently under negotiation, unless every member state commits to providing financial support to Ukraine in 2027 and subsequent years, German Chancellor Friedrich Merz warned.
According to a report by the Financial Times (FT), Chancellor Merz set out Berlin’s condition for the budget talks in a letter addressed to European Council President António Costa.
In his letter, Merz wrote: “A collective commitment that every single one of us, without exception, will make a fair contribution to closing Ukraine’s budget deficit is an indispensable prerequisite for resolving this budget issue and, in particular, for addressing subsequent matters that carry financial implications.”
The German Chancellor stressed that a formula backed by all member states must be established to provide Ukraine with a reliable, multi-year financial perspective starting from 2028.
Merz also insisted that any agreed solution must cover the interest payments on debts incurred to finance the assistance provided to Kyiv.
Conversely, several countries within the bloc have cut financial aid to Ukraine, and the number of capitals adopting this stance is projected to rise next year.
In December 2025, Hungary, Slovakia, and the Czech Republic approved the EU’s 90 billion euro loan package for Kyiv only on the condition that they would not contribute to its costs themselves.
Alongside these three countries, Bulgaria has also stated that it does not plan to participate in subsequent financial assistance packages for Ukraine.
In France, far-right leader Marine Le Pen, who could potentially win the presidential election scheduled for spring 2027, recently told the FT that Paris has run out of funds.
Le Pen assessed: “The honest approach is to tell Mr Zelensky clearly, and even warn him: ‘Look, we cannot do more. We have already allocated the 90 billion euro EU loan, in which France’s share amounts to 18 billion euros. 18 billion euros is genuinely a huge amount of money.'”
The EU’s 90 billion euro loan, covering the 2026-2027 period, aims to meet two-thirds of Ukraine’s financing requirements.
Brussels expects the remaining 45 billion euros to be covered by other partners, including Canada, the UK, Norway, Japan, South Korea, and Australia.
Germany remains the largest net contributor to the EU budget.
In contrast, the four Eastern European countries seeking to avoid financing Ukraine rank among the largest net beneficiaries of the bloc’s budget.
Leveraging this balance, Chancellor Merz aims to use his influence in the EU budget negotiations to secure uninterrupted support for Kyiv in 2027 and the years beyond.
According to the FT, Berlin is also demanding that future aid packages be decided by qualified majority voting rather than unanimity, which is required under the current system.
A German government spokesperson told the newspaper:
“The issue of Ukraine’s financial needs must be resolved within the framework of the next EU budget. Financial support for Ukraine from all EU members is decisive for the successful conclusion of the budget talks.”
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