Policy Pulse S2E3: Unpacking the 2026 State of the Union Address
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October 30, 2026
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Introduction
The annual State of the Union address to the European Parliament is a key moment in the EU political calendar, providing an opportunity to take stock of the past year, while setting out the European Commission’s priorities and direction for the year ahead. European Commission President Ursula von der Leyen’s 2026 State of the Union address to the European Parliament in Strasbourg covered a wide range of issues, from economic security and trade to artificial intelligence, defence and European security. In this episode of Policy Pulse (Season 2, Episode 3), Carolina Margherita Marelli is joined by FTI Consulting experts Hans Hack, Arne Koeppel and Beatriz Cózar Murillo, PhD. to unpack the key takeaways from the address. Rather than providing a full rundown of the speech, the conversation focuses on what stood out most, what it shows about the EU’s direction of travel and how the announcements could translate into action across key policy areas.
What Stood Out Most From the Speech, and What Does the Emphasis on Implementation and Collective Action Tell Us About the Commission’s Direction for the Year Ahead?
Hans: I thought the speech was a strong political speech. It was delivered with a lot of energy and included some emotional moments, with a slightly performative and even American-style approach. More importantly, compared with previous years, it was much more focused on the day-to-day issues that citizens across the EU are dealing with, from forest fires and droughts to concerns about the economy.
The speech tried to demonstrate how Europe, by acting collectively and forcefully, can address these challenges, protect EU citizens and be a force that helps rather than detracts.
There is currently a lot of political fragmentation in Europe, as well as doubts about the EU. What I found particularly interesting was the attempt to position the EU as an answer to some of the collective challenges facing Europe. There was criticism that the speech was light on policy and did not introduce many concrete new initiatives, while some of the more political initiatives lacked detail. But I think it is important to look at it as a political speech.
I liked the optimistic and hopeful message: There are many challenges, and Europe is not ahead of the game on everything, but if we put our collective minds to these issues, we can address them. The real challenge will be implementing those initiatives across Europe.
There were also two other points that stood out to me. The European Parliament was not full, with many Members of European Parliament (“MEP”)ther absent, which I found surprising. It may be indicative of how some MEPs feel about the EU and how they see its ability to address these issues.
The other point is that, from the perspective of those of us in the Brussels policy community, the speech has not received much attention at Member State level. It is very much an EU bubble speech. Nonetheless, for us as consultants helping companies navigate these issues, it is ultimately very relevant.
The Speech Proposed Moving the EU-Canada Relationship Beyond the Existing EU-Canada Comprehensive Economic and Trade Agreement Towards an “Alliance for the Future”. What Does This Tell Us About How the EU Is Thinking About Partnerships in an Increasingly Volatile Geopolitical Environment?
Hans: This was probably the most surprising message in the speech and has received significant attention since. The underlying idea appears to be a demonstration of the EU aligning with Mark Carney’s argument about middle powers working together to maintain a rules-based international order
For jurisdictions that are considered middle powers, greater collaboration could provide a counterforce to some of the other geopolitical blocs. I also found it interesting that the United States was not mentioned in the speech at all, while this was presented as a major new initiative.
We still do not know exactly what the proposal will mean in practice. Mark Carney’s speech to the European Parliament the following morning was somewhat more focused on the specific areas where collaboration could be strengthened, including critical raw materials, energy, industry, the defence industrial base and financial services.
The proposal was also apparently not something that had been fully discussed with Member States or the European Parliament beforehand. But that does not mean it is not a good idea. I would support stronger collaboration with Canada, as well as enhanced cooperation with other jurisdictions where there is potential for greater alignment.
There is an EU-Canada summit scheduled for 29–30 October in Montreal, which will likely be an important moment for the initiative. At this stage, however, it is very much a work in progress.
The concept of an “associate member” of the EU does not currently exist as a treaty-based legal structure. The details of what that could mean will need to be jointly defined by Canada and the EU, and potentially it could be open to other countries as well.
Rather than immediately focusing on the legal and technical details, I think it is useful to see this as a political concept and a direction towards closer cooperation with an allied country with which the EU shares many interests.
Arne: I also think it is, above all, an important political signal showing support for Carney’s initiative to encourage middle powers to work more closely together.
There had been some disappointment in recent months when Canada stood up to the United States and the EU did not really join or support that position. So I see this as a strong signal of support, although it will need to be followed up by a more assertive EU approach towards the United States in support of Canada.
Beatriz: I completely agree. From a defence perspective, this is not entirely new. Canada is already participating in the EU’s SAFE instrument. So, the question is how these existing forms of cooperation fit into the broader concept of associate membership and how the proposed measures will be made concrete.
What Should We Expect From the EU’s Trade Agenda Over the Coming Year or Two, Particularly When It Comes to Balancing Openness With Economic Security?
Arne: Trade was probably one of the areas where we expected more from the speech, particularly in terms of concrete announcements. There had been a lot of speculation, but ultimately the main message was that the EU’s trade deficit with China has reached a tipping point and that action is needed.
In the very short term, that means action towards China will be a priority. There will soon be negotiations, with the Commission engaging with China’s leadership. At the same time, the so-called diversification instrument is being developed, with discussions taking place with industry leaders around how such a toolbox could work.
The urgency is clear, and we are already seeing and can expect to continue seeing a more assertive use of trade defence instruments. On average, there used to be around 50 new anti-dumping and anti-subsidy investigations each year. Over the past two years, that number has roughly doubled, demonstrating how active the EU has become in this area.
There is also ongoing work around European preference through initiatives such as the Industrial Accelerator Act and the public procurement regulation, as well as sector-specific measures such as the Critical Medicines Act. These initiatives will strongly influence the EU’s trade agenda and its partnerships with other countries across entire value chains.
At the same time, the EU will continue to use its extensive network of trade agreements and partnerships as a strategic tool. The EU has positioned itself as the strongest trading power in the world, and this network can provide a counterbalance to both the United States and China.
Canada is an important part of that approach, but there are also other significant negotiations and partnerships, including with Japan and South Korea. This work is likely to continue.
Finally, there is the multilateral trading system. While the EU continues to support and seek to reform the World Trade Organisation (“WTO”), some of the actions discussed including European preference and closer partnerships with selected countries could ultimately place additional pressure on the multilateral trading system. We should therefore expect continued efforts to reform the WTO alongside an increasing number of actions outside that system.
How Does the EU See Its Ambition To Become a Leader in AI Adoption Balancing With Its Approach to Regulation and Managing Emerging Risks?
Hans: The digital technology element of the speech was smaller than in previous State of the Union addresses and was focused more on competitiveness than on digital policy as an individual pillar. Some key pieces of legislation, such as the Digital Services Act and Digital Markets Act, were not mentioned.
The focus was very much on AI and on the concerns citizens have around it. The Commission President acknowledged that AI presents risks but also argued that Europe can play a role in managing those risks by testing models and working with international partners.
At the same time, she acknowledged that if those risks can be managed effectively, AI can bring significant benefits. What I found particularly realistic was the focus on where Europe can actually make a difference.
Europe is behind in the development of some of the leading AI models. But where Europe already has a strong position and where there is significant potential for further progress is in the adoption of AI in practical applications, particularly across manufacturing processes.
There is a huge opportunity there, and Europe is already relatively advanced in this area. That was, in my view, an important strategic point.
There is, however, a question around how realistic it is for Europe to try to influence the pace and risk management of AI when many of the leading models are not being developed in the EU. Europe does have companies that could become champions in this space, but there is still a significant gap compared with the United States and China.
For me, the more realistic strategic opportunity is therefore to focus on how Europe can adopt AI more quickly and productively, rather than simply trying to compete in developing the underlying models.
What Do the Announcements on Defence and Security Tell Us About How the EU Sees Its Role in European Security Evolving, Particularly Alongside NATO?
Beatriz: I think the key point is that the EU is trying to build a strong European layer of security around NATO. The idea is to strengthen the European pillar within NATO rather than create an alternative to the alliance.
This builds on the broader discussion around European defence financing and initiatives such as Defence Readiness 2030. The starting point of the speech was that Europe is operating in a more hostile environment, with existing assumptions and relationships becoming increasingly uncertain.
The response is therefore not only about spending more on defence, but also about developing European mechanisms for consultation, crisis response and capability development.
There are three main areas to consider. First, the President highlighted a new European security strategy. She also proposed the creation of a European Security Council, which could provide a more structured political forum bringing together EU leaders and close partners such as the UK, Norway, Ukraine and Canada.
The concept itself is not entirely new. Similar ideas have previously been advocated by EU figures and were also discussed by Emmanuel Macron and Angela Merkel. However, giving the proposal greater political weight at this stage could make a difference.
Second, there was the proposal for an Emergency Security Protocol. This is particularly interesting because it addresses the increasingly blurred space below the threshold of armed conflict, including sabotage, cyberattacks, arson, drone incursions and other forms of hybrid activity.
The President explicitly described it as a mechanism to flank NATO’s Article 4, which provides an important indication of how the Commission views the relationship between the EU and NATO.
There are still many unanswered questions about how such a mechanism would operate alongside existing provisions, including NATO’s Article 5 and Article 42.7 of the EU treaties. But it could complement the existing alliance framework, particularly alongside a counter-hybrid playbook and the EU’s existing hybrid toolbox.
Third, there is the capability dimension. The new European Instrument for Strategic Enablers would focus on areas including air and missile defence, strategic transport, air-to-air refuelling, space and cyber capabilities.
The capabilities themselves are not new areas of focus. What is interesting is how the proposal connects them to the need to reduce Europe’s external dependencies. The open questions are whether this will involve additional funding under existing instruments or create a new line of funding.
We also cannot forget Ukraine as a backdrop to the speech. Some of these initiatives are linked to the broader question of increasing support for Ukraine, particularly for air defence.
Hans: I agree with everything Beatriz said, but I would also highlight the proposed European Security Council. There are still a lot of questions around what exactly it would mean and how it would operate.
We already have the European Council, which comes together when significant crises occur. It is chaired by the President of the European Council and brings the Member States together. So, one question is why a new structure would be necessary when something that effectively operates as a security council already exists.
Perhaps the idea is to give the Commission a more central role in crisis situations. The Commission is already important in the European Council, but the proposal raises interesting questions about how the EU’s institutional structures should operate during security crises.
How Much of This Agenda Can Actually Be Delivered in a Europe That Remains Fragmented on Some of These Issues?
Hans: The speech was a political speech, and it should be viewed as such. It is trying to provide direction of travel for the EU and establish shared objectives between the Parliament, the Council and the Commission.
How much it actually changes will depend on the details of the initiatives that were announced. Political divisions are already visible in several areas, and the biggest challenge over the coming year will be the political landscape within the Member States.
There are important elections coming up in several countries, including France, Italy and Spain, as well as elections in Germany. These could create further political disruption. Ultimately, the Member States, Commission and Parliament all need to agree in order to get things done.
The real test will therefore be how these proposals work in practice.
One final point that I think is important is the European budget. The seven-year Multiannual Financial Framework (“MFF”) is currently being negotiated, and the next few months are likely to be heavily focused on that process.
The budget is where all of these policy priorities ultimately come together, because they require funding. There is a significant tension here: Member States want the EU to do a great deal, but they also need to agree on how to finance those ambitions.
So while people will take note of the State of the Union speech and wait for details on the policy initiatives announced, attention will now increasingly turn towards the budget negotiations. The European Council’s October meeting will be an important moment in that process.
Arne: For me, what was particularly interesting was how little competitiveness featured in the speech. It was a dominant theme in the State of the Union two years ago and remained very important last year.
The President said that kickstarting the economy is the EU’s number one priority, but there were relatively few new announcements. There was a call for Member States to stop “gold-plating”, which would support the internal market as a tool for improving competitiveness.
Perhaps the absence of new announcements is not necessarily a bad thing. There are already many major initiatives underway, and businesses, Member States and authorities will have to deal with those initiatives over the coming years.
So perhaps this gives some breathing space, including for our work here in Brussels.
Beatriz: From my perspective, the EU now has many of the ingredients for a much more ambitious defence and security framework.
Over the past few years, we have seen a proliferation of initiatives at the institutional, financial and industrial levels, not to mention Defence Readiness 2030, which is still being implemented.
We are also waiting for major developments around European Defence Projects of Common Interest and other initiatives that still need to be approved.
The real question now is whether Europe can bring all of these pieces together coherently, including its partners, against a much tougher geopolitical backdrop, while avoiding duplication, fragmentation and inefficiency.
There are also important initiatives that were not mentioned in the speech, including the Defence Union and the single market for defence. We are still waiting for the relevant communication on those areas.
For me, the year ahead will therefore be about whether the EU can turn all these ingredients into the right recipe creating a solid and coherent European security architecture that responds to the current reality while remaining closely aligned with NATO.
Carolina: Thank you, Beatriz, Hans and Arne. This brings us to the end of today’s Policy Pulse discussion on the State of the Union address.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
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October 30, 2026
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