Another year, another try. Once again, we dabble with an outlook on the major events likely to impact European and world affairs. Looking back at our 2022 forecast, we indeed had some good guesses. The U.S. Democrats lost one chamber of Congress, we witnessed initial progress towards developing a global climate club, and Xi Jinping increased his already alarming amount of power in the 2022 Communist Party Congress. (However, we didn’t foresee the remarkable anti-Zero-Covid protests which unfolded in November)

But as did many others, we failed to point to the one event which literally changed the world: the war in Ukraine. When we had a straw vote in a team debate in the first week of February, there was a clear majority for the assumption that Russia would not dare start a full-fledged war (some of us were arguing in that direction, though). How wrong we were!

This led us to take a more humble approach this year. Against the backdrop of so many unpredictable events making a difference in recent years (we also failed to predict COVID), we don’t dare make bold predictions for 2023.

Instead, we’ll just point to major issues to watch this year, explain why they matter, ask the decisive questions and outline possible outcomes. In many cases, the events we list to watch over the course of the year are not just important in and of themselves but because of the more general aspects related to them. But find out yourself!

January: The European Single Market turns 30 – unfinished business for 2023?

Our first event is actually a birthday party. The 1st of January, 2023, marks the 30th anniversary of the launch of the European Single Market. With its four freedoms – goods, services, capital and people that can move freely across borders – the Single Market boosts incomes for its 450 million inhabitants and is the foundation of the European Union as we know it today.

The creation of the Single Market as one seamless economic area is, however, an ongoing process. New technology and structural changes to the economy require updates to the rules and regulations that govern it, which will keep European decision-makers busy in 2023. The most recent addition is the Digital Markets Act (see also month of May) and the Digital Services Act, whose consequences must be dealt with in the year ahead.

Financial markets have also been slow to integrate. The plans to create a Capital Markets Union in which investments and savings flow across the EU, regardless of where they originate, have been riddled with delays over the past years. The most glaring gap in the Single Market is probably the market for energy that remains fragmented in the face of the challenges to address shorter-term energy security concerns and Europe’s long-term climate goals. These topics rank high on the EU’s agenda in 2023, and we should see more action in the months ahead.

February: One year of “epochal change” – Europe in transition to a confrontational security order

Our second “event” is also an anniversary, however, of a completely different nature than the first one. Since February 24, 2022, when Russia attacked Ukraine, a new era has been in effect in Europe. Although the fighting in eastern Ukraine had already claimed more than 14,000 lives and led to millions of displaced persons since 2014, it was the all-out assault by Russian troops on that February day a year ago that led to what the German chancellor called the “Zeitenwende.”

Democracies globally have mostly responded to the aggressor with sanctions and are supporting Ukraine with economic and humanitarian aid, as well as arms. For the past year, the Ukrainian people have been waging a fierce battle for freedom, impressively asserting themselves against a supposedly superior aggressor. Russia’s war of aggression, in violation of international law, has shattered the European security order.

The previous policy toward Moscow, which relied on “change through trade” as well as dialogue and cooperation, is in shambles. There is fundamental agreement in the European Union that deterrence must once again play an important role and that Europe’s divided security problem must be overcome.

As to the current war, an undefeated Russia will cost not only Ukraine but Europe dearly. Economic consequences will be profound and lasting. But a secure Ukraine has the potential for honest and profitable investment and could become “Europe’s emerging market.”

So 2023 will, in all likelihood, be another year of war in Europe and the first year of a new era induced by Russia’s war of aggression. Will Europe stay united and keep its solidarity with Ukraine? Will Ukraine, with the help of others, make decisive progress to win the war? Will Europe thereby defend its core values? Will Europe’s liberal democracies be able to lay the ground for a new security and peace order? Frankly, we cannot predict the answers. But considering what we have witnessed in recent months, we think there is a reliable reason for not losing hope that Ukraine will gain more of its territory back in 2023.

March: China’s National People’s Congress – what is predictable and what is not

In March 2023, China’s rubber-stamp parliament, the National People’s Congress (NPC), will convene and, with a probability of – let’s say 99.9 per cent – confirm Xi Jinping’s third term as the president of the People’s Republic of China. So the world will be stuck with “Uncle Xi” (Xi dada), which he’s not allowed to be called in China anymore, for quite a bit longer, especially as the harshest parts of his unpopular Zero Covid policy ended abruptly at the beginning of December.

At the NPC, moreover, Li Qiang, notorious for his management of the Shanghai lockdown earlier in 2022, is likely to step up as China’s new premier, who is traditionally in charge of economic policy. Let’s hope for the sake of the world economy and global supply chains that he will manage China’s economy differently than during the lockdown.

Thus, there currently are no surprise outcomes expected from the NPC, but Omicron might produce some in the end. And let’s not forget: the Taiwan issue. The situation here will remain volatile, but a Chinese attack next year appears low probability.

April: 25 years of Good Friday Agreement – Will gaps be fixed between UK and the EU?

Another 2023 jubilee: April will see the 25th anniversary of the Good Friday Agreement between the Republic of Ireland and the United Kingdom, which ended much of the violence of a long-standing political conflict in Europe. While the role of the US in brokering the deal is widely recognized, the EU’s hand has been less acknowledged.

During the Brexit negotiations, however, the UK felt the full force of the bloc’s role as guarantor of the Treaty. With its anniversary in sight, the US has re-emerged as an arbiter in European affairs, pressurizing the UK to settle open matters of dispute with the EU relating to trading across the Irish land border by April.

And indeed, reports point to a softening of tone, with controversial UK legislation slowed down to give negotiators time to thrash out a deal. A breakthrough early in the year would set the scene for additional step-by-step, pragmatic fixing of some of the gaps in the Trade and Association Agreement that underpins EU-UK economic relations.

As for the politics, the thing to watch will be Labour’s positioning in the early build-up to an election that is theirs to lose. With post-Brexit promises failing to materialize and public opinion gradually shifting, its leadership will walk a tightrope between avoiding the traumas of the past whilst pushing for much-needed growth in a shrinking economy.

May: The DMA comes to life – will the EU manage its implementation well?

Back to the Single Market (see January.) One of its most meaningful new regulations, the Digital Markets Act (DMA), will enter into application on May 2. On that day, a process starts that determines the potential gatekeepers. Gatekeepers are those companies that have an outstanding role in the EU market due to their significance as gateways for other companies aiming at reaching their customers digitally.

After the designation of those gatekeepers, the respective companies have six months to comply with the requirements set by the DMA. Those requirements address dysfunctionalities in digital markets and seek to establish these corresponding approaches:

  • Increase contestability and competition in platform markets.
  • Enhance fairness for business practices vis-à-vis business users in platform markets.
  • Unify fragmented regulation and oversight of players in platform markets.

All this might sound technical. But the DMA has enormous potential to make a difference. For the EU, its successful implementation is of high relevance – also for proving its own global significance, meaning: Implementing the DMA will show if the Brussels effect can be transferred to the digital world, i.e. if the EU has digital soft power to offer which influences digital regulations in other places of the world; or if the EU is not a recognizable standard setter digitally.

While this is a known unknown from today’s perspective, it will become a known known eventually. The EU hopefully does not solely breed confusion by the novelty of its ambitious Act but can also manage to successfully enforce the DMA. So 2023 marks a double test case for the EU. Will the DMA work technically? And will it help the EU strengthen its role as a setter of global standards?

June: Elections in Turkey – the end of Erdogan?

Parliamentary and presidential elections will be held in Turkey until June 18. Recep Tayyip Erdogan is running as the joint candidate and is desperate to be re-elected. He wants to go down in the history books as a great Turkish figure on an equal footing with Turkey’s founder Mustafa Kemal Ataturk. And in addition, the election year 2023 is for Erdogan and Turkey of high symbolic value – in 1923, Turkey was founded by Atatürk, the “father of the Turks.”

Under these circumstances, Erdogan will pull out all the stops to get the majority of voters on his side because polls do not see him ahead. The conviction and political ban of Istanbul Mayor Ekrem İmamoğlu, a promising opposing candidate, has even backfired on Erdogan and damaged his reputation.

His risky game with Russian President Putin also serves the purpose of attracting voters and fighting the domestic economic crisis. NATO member and EU candidate Turkey is doubling its trade with Russia, benefiting from cheaper Russian oil imports and capital injections – while the rest of his Western allies are tightening the sanctions screw against the Kremlin.

For now, the West is letting Erdogan have his way, as Turkey’s vote is needed for NATO expansion to include Sweden and Finland, for the Ukrainian-Russian grain export agreement, and for the extension of the migration deal with Brussels to keep Middle Eastern refugees in the country. If Erdogan does not win in the first round of elections, a runoff will be held on July 2, 2023.

End of November 2022 polls see the social-democratic CHP just ahead of Erdogan. So, a victory for the CHP is not out of the question. And that would truly be a game changer not only for the relations between Turkey and the EU but also for dynamics within NATO.

July: The NATO Summit in Vilnius – A capable Alliance needed more than ever

…And “NATO” is also the buzzword for our July event. The NATO Summit takes place July 11-12 in Vilnius, Lithuania – just 30 kilometers from the Belarusian border. The fact that there will be a highest-level NATO Summit in 2023 is not surprising news as those summits are part of the regular protocol. But 2023 indeed marks a year heavily depending on the Alliance’s functionality and its capabilities.

Barely three years after French President Emmanuel Macon famously diagnosed the “brain-death” of the organization, NATO is as relevant as ever, and the transatlantic partners stand unified in their response to Russia’s war in Ukraine. At a time when Europe is facing the most complex and fluid security situation since the end of the Cold War, allies will concentrate on further strengthening NATO’s military posture on its Eastern border to provide a credible deterrence against Russia and discuss significant increases in defense spending by members. The trajectory of Germany’s defense spending will face particular scrutiny by allies, and if – as is likely now – the German government again fails to fulfill the 2% commitment, it will face some vocal and harsh criticism, especially by its Eastern and Baltic neighbors.

However, even the Biden administration, which so far has been determined to keep a close and, at times, even cordial relationship with Germany, will be prompted to ask Chancellor Scholz some questions about the seriousness of his proclaimed “Zeitenwende.” Nothing less than the credibility of Germany as a partner and ally could be at stake. Finally, it is quite likely that – after elections in Turkey –the Turkish parliament will ratify Sweden and Finland’s accession to NATO so that two new members could be welcomed in Vilnius.

August: Harvest season – Another year of hunger?

For August, we won’t refer to a specific event but rather to a general concern. The month of August is a crucial one for a successful harvest season – an important one for nourishing the world population. As early as 2000, the global community set itself the goal of creating a world without hunger. However, experts believe it is unlikely that this goal can be achieved by 2030, as planned at the time. This is especially true as, in addition to regional violent conflicts and crises, Covid and the increasing effects of climate change (drought, heat, extreme weather events) have exacerbated the dramatic hunger situation worldwide.

Russia’s war against Ukraine, an important agricultural exporting country, is also having a significant impact, such as further increases in food, energy and transport prices. With a global population of around eight billion, more than 800 million people are chronically undernourished, according to the UN. The number of hungry people has been rising steadily again since 2015. In the Horn of Africa, people are experiencing the worst drought in four decades. More than half of the people affected by hunger live in fragile states with fundamental governance deficits.

The UN-mediated agreement to maintain agricultural exports from Ukraine is only a small ray of hope. Needed are long-term strategies that focus on increasing the sustainability of production (i.e., reduction of soil loss and water overuse), drastically reducing harvest and food losses, changing eating habits, distributing food fairly and strengthening locally adapted cultivation methods. These are big changes that are needed and it is high time we do so. Otherwise, 2023 will turn out as another year in which global hunger will increase.

September: The G20 Summit in New Delhi – Will India be the mediator multilateralism needs?

After NATO, this is the second summit we list. The G20 heads of state and government Summit will convene on September 9 and 10, 2023 in New Delhi under the theme “One Earth · One Family · One Future.” Outlining the approach of the Indian G20 Presidency, Prime Minister Narendra Modi said that the challenges of “climate change, terrorism, and pandemic can be solved not by fighting each other, but only by acting together.”

The New Delhi Summit will be the culmination of all G20 processes held throughout the year among ministers, senior officials, and civil society focusing on the promotion of a resilient, stable, sustainable, and inclusive global economy. The question is how these ambitious goals can be translated into concrete and actionable policies in times of geopolitical turmoil and uncertainty.

The 2022 G20 Summit in Bali was overshadowed by Russia’s war against Ukraine. The Indian G20 Presidency faces the challenge of maintaining a common forum for dialogue between the West on the one hand and Russia and China on the other, as well as the countries of the global South.

However, India is well-placed to play such a mediating role. Prime Minister Modi is being heard in the West as well as in Russia and China. India also wants to use its G20 presidency to position itself as a strong voice for emerging and developing countries by pushing for solutions to the debt crisis in the global South and more support for poorer countries in the fight against climate change.

October: Winter is coming – Will we have enough energy?

Starting the 2023/24 winter with adequate energy storage capacities will be of utmost importance to the EU, as storage facilities are expected to be at near-zero levels by early 2023. Thus filling up the tanks with affordable, secure and sustainable energy by October 2023 is a demanding task. Especially as two contributing factors of 2022 – Russian pipeline supply and lower Chinese LNG competition – are unlikely in 2023. Consequently, EU efforts focus on producing clean energy and diversifying energy supplies.

While scaling up renewable energies is ultimately the way to lower energy prices and import dependencies, they cannot replace Russian energy imports in such a short time. Hence to meet the short-term energy demand, the EU must continue to secure reliable energy partnerships in global energy markets. But global energy markets are tight, one can only speculate about the (shady) forces that might govern the market in the future and EU energy imports are systemically constrained by the necessary (lacking) infrastructure.

For this reason, reducing energy demand in 2023 becomes crucial. Otherwise, refilling EU storage sites becomes nearly impossible.

November: COP28 – Another disappointment?

COP27 in Egypt, COP28 in the United Arab Emirates (UAE, starting November 30), once again, an Arab country is hosting a world climate conference. After gas exporter Egypt, now oil exporter UAE. In order to become less dependent on oil and gas exports from Russia, the EU is focusing its diversification strategy on gas from Egypt and more oil and gas from the rich Gulf region, i.e., the Emirates, Qatar and Saudi Arabia (see month October…).

After the disappointing COP27 in 2022, COP28 is the last chance to forge a resilient global alliance to make the phase-out of fossil fuels mandatory. Europe, as a major importer, must push this issue and can only win its Arab neighbors, whose revenues depend largely on oil and gas exports, as phase-out partners if their revenue losses can be compensated in parallel by joint investment in and joint production of alternative energy sources.

To this end, the EU must dynamize its Gulf strategy and push the COP28 host UAE to a greater energy transition commitment in its solar farm flagship projects. The EU will also remain the driving force to transform the framework agreement endorsed in COP27 in Egypt to compensate the Global South for climate-related damages into a practical mechanism that truly helps the poorest societies on our planet quickly when affected by environmental disasters.

December: Spanish General Elections – Will Spain stay a model European when it holds the Council Presidency?

From the global arena, finally back to European turf. Spain will hold general elections on December 10 to vote for the “Cortes Generales”, the two legislative chambers comprising the senate and the congress. The centrist People’s Party, leading in early polls, will seek to exploit increasing political tensions between the governing left-wing coalition of the Spanish Socialist Workers’ Party and the Unidas Podemos.

The elections come at a time when Spain is holding the rotating council presidency of the European Union. Current head of government, Pedro Sánchez, will certainly aspire for a strong council presidency to gain momentum for the Spanish elections, similar to French president Macron in 2022 when France was holding the EU presidency during its own presidential elections.

In contrast to the recent French elections, however, the EU will probably not have to fear the emergence of a Eurosceptic party, as there is broad pro-European consensus across the Spanish party landscape. Nevertheless, political leadership in Spain will be a matter of high significance for the EU, given the economic and political weight of the country.

Spain – the fifth largest economy in the EU – also plays a major role in the EU’s path toward energy independence. Under Pedro Sánchez, it has committed to one of Europe’s most ambitious energy reduction plans and is pushing to become a major European hub for gas and renewables.

Still, it remains to be seen if ongoing inflation and energy insecurity will take their toll on the Spanish stance, as some rifts in the governing coalition have already come to light. Unidas Podemos, for instance, has been voicing its opposition to weaponry support for Ukraine and generally opposes Spain’s NATO membership. In this sense, the outcome of the elections could be a touchstone for Spanish solidarity with Ukraine.

Nothing on the U.S.?

So we had China, Russia, Ukraine, Turkey, India and Spain included in our 2023 major events edition. Nothing on the U.S., you might wonder – the most important European ally, after all? Well, here we go. Fortunately, we do not have to predict transatlantic developments on our own but have a special tool in our transatlantic crowd forecasting platform RANGE. RANGE provides three questions of indeed quite some significance for the course of the global economy in 2023:

  1. Will US & EU trade with China increase between 2022 and 2023? Currently, the crowd says “yes”.
  2. Will the EU and the US create a Transatlantic Green Alliance by 2023? Well, at the moment, a clear majority is pessimistic.
  3. Will the EU and India be able to conclude talks for a Free Trade Agreement by 31 December 2023? Two-thirds think that is not likely to happen. Visit RANGE and find out why this is the case. Or even better: become a forecaster yourself.

Summing up 2023 – Another heavy year

Looking at our 12 major events, 2023 will be another year full of crises, challenges and uncertainties. Will the EU manage to deal with them? Will there be tangible progress in Ukraine? In the fight against hunger and climate change? Will there be enough energy when the temperatures drop? Well, we cannot say for sure. But one thing we certainly know: the key for the EU to prosper in 2023 is staying united in a spirit of European solidarity. Looking back at 2022, we have reason to be optimistic Europe will do its job. It was indeed one of Putin’s biggest miscalculations – he could not drive a wedge between EU member states. In fact, Europe reacted in exemplary unity to his war of aggression. More of such unity is needed for the heavy year of 2023!

Read our previous predictions:

13 Major Events in 2022 That Could Change Europe’s Economy in the World
12 Major Events in 2021 That Could Change the World Economy
11 Major Events that Could Change the Global Economy in 2020