After five decades under the oppressive Assad regime, the mood is still one of jubilation in Syria. It is now up to the opposition forces to design a better future for their citizens. No one really knows yet how the transition will turn out and what the state will look like. Syria, with its peaceful revolution will have to proof that it can stay peaceful for its people.

While the rebels are busy preparing for the transition, two foreign forces increased the presence in the country. Turkey and Israel are slowly but surely advancing further into Syrian territory. Officially this is due to security concerns, to prevent a threat coming from Syrian rebels towards them. But what will the US, the UN, and Nato have to offer to make sure it does not ultimately lead to a land grab?

While the world is looking at what is happening in Damascus, Turkish-backed SNA fighters, supported by Turkish Air Force jets and drones, have been attacking Kurdish strongholds. Recep Tayyip Erdogan is framing the operation as part of Turkey’s counter-terrorism. The Turkish proxies were pushing the Kurdish SDF forces out of the Manbij region, and are moving towards Kobane and Qamishli, with Turkish air strikes also recorded in Raqaa. Without the international community guaranteeing an autonomous region for the Kurds, there will be no peace in Syria. Will it be like in the past, when Turkey entered Syria to establish their zone of influence where Nato could do little to stop one of its own members?

Israel too, has expanded beyond the occupied Golan Heights and a new buffer zone into Syria. Israel’s military describes it a defensive move that is temporary. Benjamin Netanyahu, shortly after the fall of Assad, declared the 1974 agreement maintaining the buffer zone in the Golan Heights as null and void. Europe is watching with some unease what is happening there. France called for a retreat of the troops, Germany and Spain for restraint.

Israel also took the strategic Mount Hermon, straddling the borders between Syria and Lebanon. It is only 40km away from Damascus and as the highest mountain in Syria it offers oversight views. Is this one of the places where Israel creates facts with no intentions to leave from there? Benjamin Netanyahu said on Tuesday that something tectonic has happened here, an earthquake that hasn't happened in the 100 years since the Sykes-Picot Agreement. This agreement from 1916 between the colonial powers of the UK and France divided up the Ottoman Empire and created the states as they are today. Netanyahu’s reference implies that he thinks the Sykes-Picot Agreement, and with it the Levant's borders, is de facto dead. Netanyahu’s maximalist military strategy since 7 October has emboldened him to think that creating facts will not be met with much resistance by the West. Everyone is waiting for Donald Trump to come to power and put a new agreement into place. Where will Europe be in all this? What foreign policy position other than on Ukraine do we have to offer?

In German, the Middle East is called the Nahe Osten, or Near East. It is a reminder that those countries are nearer than we think. It is time to take a principled decision rather than to let ourselves been drawn by events, and follow up with a double standards foreign policy that focuses narrowly on those aspects that concerns us most, like the refugees. It is not only in the interests of Turkey and Israel as immediate neighbours, but in our interest too that a new Syria emerges with thriving trade and working opportunities for those who want to return home. If all stakeholders get obsessed with security concerns and counter-offensives, Syria may not even get there.

The Austrian assembly voted yesterday to lift the immunity of Herbert Kickl, the popular far-right leader. Prosecutors can now investigate a complaint, filed by an ÖVP lawmaker in July, that accuses Kickl of false testimony in a parliamentary committee inquiry into the misuse of public funds under the previous ÖVP-FPÖ government, which was in power between 2017 and 2019.

They also lifted immunity for three FPÖ MPs on the grounds of possible violations of the Nazi-prohibition law.

Unsurprisingly, the FPÖ did not vote in favour of lifting the immunity. Instead the far-right party describes the move as a political manoeuvre aimed at discrediting Kickl and the FPÖ itself.

The FPÖ won the national elections and the local one in Styria, the largest of the federal states in Austria. After the national elections, president Alexander van der Bellen decided not to give the mandate to the FPÖ, but to the second largest party, the ÖVP which is now in talks with the Socialists and the Greens to form a new government. Politically, the question is whether these judicial investigations could really harm the FPÖ or instead serve its popularity.

Judiciary court cases are increasingly been used politically and turned into narratives of unfair persecution that resonate with a public inundated with victim and conspiracy stories. Whether the accused keeps a low profile during the investigations as Donald Trump did, or more offensively like Marine Le Pen, in both cases it seem to have worked for them politically. Trump won the elections and Le Pen is rising in the polls. As long as it can be framed as a victim story, there are votes to win. Benjamin Netanyahu is a master in this, turning international law to his own political advantage. And so is Vladimir Putin. Calling on the courts to disable a candidate ahead of a crucial elections has been a familiar template in his repertoire.

All men may be equal in front of the law but not when it comes to what they can expect as a political dividend. That reality is very different from the times when investigations could suddenly end careers without even a verdict. It did so for Francois Fillon, when an assistant fraud affair came up during the presidential elections campaign when he was leading the polls. We should not jump to the conclusion that this will also be the case for Le Pen or Kickl.

When we heard Sir Keir Starmer talk about getting a better deal from Brussels when he was opposition leader, it felt like Groundhog Day. The better deal has always been characteristic of UK attitudes inside the EU. Margaret Thatcher wanted her money back. Her successor, Sir John Major, opted out of the monetary union and tons of other policies. We do not know of any member state with such a transactions-based definition of its relationship with the EU. It is, in our view, the deep cause of Brexit.

The transactional mindset continues to this day. The British government is still obsessed with the idea of a deal. The EU-UK trade and cooperation agreement, agreed in 2021, is clearly not the final word. There will be tweaks, as both sides are suffering from the fall in mutual trade. It is the EU that is suffering the most, as it runs a massive trade surplus with the UK – of €113bn in 2022. So the EU should have an interest in trade facilitation, and should probably seek to get a better deal from the UK.

The UK and the EU will clearly co-operate in some areas, like student exchanges, and possibly also on defence because the change in the geopolitical situation requires it. We are not holding our breath on some of the more ambitious proposal for a generalised debt-financed European defence union. For starters, defence should not be funded through debt. If countries were to agree to that, the only conceivable purpose would be to disguise cross-country transfer payments, like the recovery fund. We struggle to see a readiness by the EU’s three largest net contributors, Germany, France and the Netherlands to agree to such a deal. Or the UK for that matter. It would not be a good deal, would it? So we are probably looking at joint projects, like the Eurofighter, only more so.

How about financial services? Rachel Reeves attended a eurogroup meeting this week to discuss potential areas for co-operation, giving the City of London greater access to the EU. The EU is, and will remain, reliant on the UK for derivates clearing for example. But the reasons that keep the EU from creating a capital markets union are the same that block further access by the UK. Member states are not letting go of national banking fiefdoms.

Austria’s caretaker government said it is already preparing a repatriation and deportation programme for Syrian refugees. No clarification has been given on what status this is referring to. The statement also said that they aim to review also all positive Syrian asylum decisions. At this point this is more of a political statement than a legal one. For the ÖVP, which is under pressure from the FPÖ after they won recent national and regional elections, it looks like they want to score points on the migration topic with far-right voters. Other countries like the UK, Germany, Belgium, Sweden and Greece have just paused processing their Syrian asylum applications.

It is clearly too early to tell whether Syria will be a safe place for refugees to return. There are political as well as legal reasons for this.

Opposition forces may have been united in their aim to topple the Bashar al-Assad regime, but they have yet to agree on how to govern without the need for military force. Israel is also creating new facts on the grounds. Its tanks have been moving into Syrian territory, and it has launched airstrikes to make sure that the military facilities Syrian troops hastily abandoned are unusable. Its military launched hundreds of airstrikes to demolish Assad’s weapons depots, naval and air force assets as well as intelligence headquarters. Saudi Arabia, Qatar and Iraq already voiced concern over Israel’s violation of Syria’s sovereignty and international law. Germany said it is monitoring the situation closely. Stability in the country will thus also depend on how far Israel takes its operation and how rebels and the international community will react to this.

European countries also won’t be able to return refugees to Syria for as long as rebel groups that are about to take over power are legally recognised as terrorists. The US and the UK promised to look into lifting the ban for HTS rebels. But these are early days, and they may not be the only groups that will end up in a new government. Sir Keir Starmer already cautioned that it was too early to take such a decision. The EU said it won’t engage with HTS and only once they take greater responsibilities will the EU will assess their status based on their actions. This is a wait and see attitude.

No matter how fast the situation clears up, the return of Syrian migrants will play a role in European politics in the foreseeable future. Political pressures to return migrants will come from far-right parties throughout Europe. Governments will have to resist narrowing the whole Syria chapter to the refugee question only.

Ideally, the decision to return is for the Syrians themselves to take and for European countries to do what they can to support the emergence of a new democratic state in Syria. It will be a test case for European governments and their capacity to familiarise themselves with the complicated political landscape in Syria in a very short period of time. To reduce it simply to the question of refugees underestimates the significance of Syria’s role in the reshaping of the Middle East, in close proximity to Europe.

For many of Syria’s neighbours and nearby countries, the most consequential impact of the war was the major refugee crisis it caused. There are more than 6m Syrian refugees according to UNHCR estimates, more than a quarter of the country’s pre-war population. Some of these refugees will probably never return to Syria, having established deeper roots in communities where they may have been living for more than a decade. But others could. Facilitating this process will certainly be a major aspect of how many countries in the Middle East and Europe deal with whatever comes after Bashar al-Assad’s regime.  

Turkey has received the most Syrian refugees of any country. About 3.6m live there, thanks in part to a deal with the EU to host refugees. For Recep Tayyip Erdogan’s government, their presence in Turkey has caused domestic political difficulties. Ensuring that they are able to return to Syria will be one of Turkey’s priorities in how it manages the conflict and its proxies in the country. Stabilising Syria may take precedence over dealing with Turkey’s various opponents in the country if Erdogan views making sure the refugees can go back as more important.

Refugees returning may also have an impact on the political situation in neighbouring Lebanon. The Lebanese government believes that around 1.5m Syrian refugees are living there. This is a very high proportion of Lebanon’s total population of 5.4m. Receiving such a large number of people has created even more strain in a country on the verge of economic collapse, with severe political instability. If at least some of those people are able to return to Syria, it could ease the path towards economic recovery and a more enduring political settlement there.

Over in Europe, it’s hard to see facilitating returns not being our number one priority. We think, then, that it’s likely we will swallow any misgivings we might have with the HTS, in the interests of a settlement that allows us to do this. The revealed preference of our foreign policy in the Middle East and North Africa has been to cut deals wherever we can to limit migration into Europe, above all else.

What we are less sure about, however, is how much of a change this would make on the politics of migration in Europe. It is an issue where perceptions and reality can easily become unmoored from each other. Now that this particular Pandora’s box has been opened, it may not close again.

It may also be the case that future developments do not end up being favourable for Syrians to return home. If there is infighting between rebel groups, or a serious escalation with the Kurdish SDF in the country’s northeast, that could produce even more instability. Then any hopes these people have of going back to their homes, or ours of making returns, could vanish.

The photo-op with Volodymyr Zelensky is what symbolises the modern EU. It presides over an economy that loses ground to the US and China due to excess regulation and the lack of a capital markets union, but it pretends to be a geopolitical actor.

If Donald Trump manages to cut a deal between Russia and Ukraine, it will come as a massive relief since the EU is absolutely not in a position to fund the war. There are discussions going on in Brussels for a €500bn fund for defence and weapons production. Germany is vetoing any attempts to fund this through debt. We don’t say this often, but Germany is right not to treat what is likely to be a permanent increase in defence expenditures as an one-off investment. It is different in wartime, but proxy wars don't count.

Low growth and excessive deficits have left little fiscal leeway at national level. France and Italy have none. Germany has more leeway, but not even as much as it needs to fulfil its own domestic spending commitments. If anyone desperately needs a deal to end the war, it is the EU.

Ukraine’s western supporters have so far committed €241bn but paid only €125bn. That gap is measuring the difference of what gets said at the photo opportunities and the reality. US aid is also running out. The House of Representatives this week rejected a proposal by the US administration for another €24bn. Germany has cut all unallocated spending to Ukraine. Right now, the Europeans are deluding themselves into thinking that they can raise the money from Russia’s reserve assets. But will Trump allow this? It would kill any chances of a peace deal. So far, the Europeans have creamed off the interest paid on matured frozen assets – but they have not touched the assets themselves. This would be a big deal, with consequences that will deeply affect the euro’s standing as a global reserve currency. That pot of money is the EU’s last hope, the pot to fund the war and the subsequent reconstruction of Ukraine. It is hopping mad to fund an open-ended war out of a fixed budget. They have reached the end of a line.

Syria’s long civil war, which was frozen for four years, is unravelling again as HTS rebels started to take over cities, towns and villages in the north. The situation is bound to become more complex once more rebels groups take back to their arms. It is unlikely to remain a local affair. The US, Russia, Turkey and Iran have military forces still on the ground. They all have their different local alliances and geopolitical interests. The uprise against the Assad regime and ensuing chaos will benefit the regional standing of Turkey and Israel. The biggest loser will be Iran.

The political future of the whole region will be up for discussion between the big powers once Donald Trump is in office. Israel gets its say. Russia will want to keep a foot in. Turkey aims for a seat at the high table of world diplomacy. Syria is the place where all geopolitical interests intersect. It is the only country where both the US and Russia have stakes in the form of troops on the ground. Whatever solution emerges, the two conflicts in the Middle East and in Ukraine are on the table of negotiations there.

Syria’s troubles will allow Israel and Turkey to play a bigger role there and in the Middle East at large. There are calls for protection already. Wherever the rebels show up and a minority gets threatened, they have two big regional powers to turn to: Israel and Turkey.

Syria is another showcase in weakening Iran’s influence in the region. With the exception of Russia, which is currently engaged in Ukraine, all other forces want Iran to retreat back to its own borders and its militias cut off. Russia could potentially support Iran, but it has limited resources and cannot stretch itself too thin if it wants to secure its territory in Ukraine before an eventual peace deal.

Iran already lost its threat potential through various attacks since 7 October. Its military prowess has been dwarfed by Israel’s defence forces. Its militias in Lebanon, Syria, Yemen, and Iraq did not manage to launch a successfully coordinated attack on Israel. The regime’s conviction that Iran and its militias could be a threat to Israel has been proven to be complete fiction. Hezbollah has been decimated and its military assets destroyed by Israel’s military in Lebanon and Syria.

Iran’s weakness is also evident in Syria’s emerging conflict. The Sunni rebels took over two Shiite towns in northern Syria that had long been defended by Afghan and Pakistani Shiite fighters recruited by Iran. Another setback for Iran.

Turkey is in a unique position between all stakeholders. It has some leverage over the HTS rebels, the most disciplined of all Sunni militias in Syria, and will use its influence in any deal brokered with Damascus. But this conflict is not only about local factions and finding a deal for Syria. Due to its timing and interlinked interests, it plays out at the highest geopolitical level. In this arena, Turkey has carved a go-between role out for itself due to its unique positioning between Nato and Russia, as a Sunni Muslim state, and a major power in the Mediterranean. Erdogan talks to Vladimir Putin, his foreign minister to Iran. Erdogan also wants to pick up where he left with Donald Trump when he offered to take charge of the military effort in Syria against what remained of the Islamic State. Back then, Trump was ready to withdraw US troops, but got held back by his security advisers.

Turkey has stakes not in a potential peace deal for Syria but also in the wave of refugees if the conflict spreads. This will be another card Erdogan is likely to play with the Europeans. Brace for a bolder Turkey with an assertive role to play in this conflict.

Virtually all of the German coalition’s big strategic industrial subsidies have gone up in smoke because of misjudgements. Intel postponed its semiconductor factory in Magdeburg, eastern Germany. Wolfspeed did the same for its highly subsidised factory in the Saarland. ThyssenKrupp almost pulled out of the large Green steel project. But the biggest disaster of all is the Northvolt insolvency. On this project, the damage is even worse because of an unbelievably stupid way the German government funded the project.

Handelsblatt writes that the insolvency will cost the German state a cool $620m. Right now, this is a lot of money for Germany. It is also testimony to the failure of an industrial policy that was geared solely to the preservation of the car industry. They badly wanted the chips and the batteries to secure the car industry's supply chains. It was always and only about cars. 

It was only in March that Olaf Scholz, Robert Habeck, the state premier of Schlewig-Holstein, the Swedish ambassador, and the Northvolt CEO were pictured together in a PR stunt where they pretended to play a German version of Petanque on a north German beech, but this picture was as fake as the entire, now defunct project after Northvolt filed for bankruptcy in the US.

Handelsblatt writes that the German project is theoretically not affected, but the Chapter 11 proceedings in the US automatically triggered a convertible bond through which the government funded the subsidy – via KfW, the state-owned bank, through which German governments fund projects like these. The bond was insufficiently secured, since the German government attached a near-zero default risk to the venture. The risk is now shared equally by the federal government and the government of Schleswig-Holstein.

Donald Trump is on to something in his rejection of unfettered free global trade. The balance in which the US absorbs the trade surpluses of neo-Mercantilists like China and Germany is unstable and unsustainable. We noted an interesting argument by Richard Koo, who is best known for his idea of balance sheet recessions, who made the point that core supporters of the Democratic Party have been mostly shielded from the effects of an overvalued dollar.

We are therefore not surprised to see a political backlash against global free trade in countries with traditionally strong trade deficits – like the US and France. A decline in the value of the dollar would, from a US perspective, make political sense. If you want the industrial jobs back on a large scale, this is what will need to happen. But there is also a political price to be paid. And this is where Trump’s thinking is muddled.

It was one of the revealing parts of Angela Merkel’s memoirs in which she characterised Trump in terms of his zero-sum game mentality. This is something she had not encountered before, because politics, in Germany at least, is usually devoid of transactional characteristics. One reason why Trump focuses so much on trade is because trade is the ultimate zero-sum game from a political perspective. The economic theories of absolute and relative competitive advantage characterises free trade as a positive sum game. But the theory is silent on the distributional effects. What politicians know better than economists is that the median voter, not the average voter, determines the outcome of elections. This is why we should take Trump’s trade policy seriously. It wins elections. Where Trump is confused is about the international role of the US dollar. His recent warning to Brics countries not to set up a competing currency makes no sense for a number of reasons. For starters, the Brics have given up on this idea already, no doubt influenced by the experience of Europeans, who committed the folly of setting up a monetary union and then muddling through without a fiscal union and a single capital market. If Trump’s goal is to reduce the exchange rate of the dollar, then surely this will imply reduced capital inflows. You can’t have it both ways. In other words, if your political goal is to eliminate the trade deficit and to increase manufacturing at home, then you can’t simultaneously have a dollar policy.

This will have many consequences. One of them will be reduced scope to use the dollar in foreign policy. If others are becoming less reliant on you absorbing their savings surpluses, then they are also less vulnerable to your sanctions. Rather than creating a currency of their own, the Brics are doing something more clever by creating a separate payment infrastructure that allows them to transact amongst each other without recourse to the US dollar markets. This is the problem with the use of the dollar in foreign policy. You can’t have it, and use it at the same time, because others will find ways to reduce their dependency.

A world in which the US will absorb global savings surpluses to a lesser extent than today, and where the rest of the world is becoming less dependent on the US dollar, is a more stable equilibrium.

Josep Borrell left his office as the EU’s High Representative for foreign and security policy over the weekend. We will miss his frank talk, be it on the war in Ukraine or Gaza. He exposed the double standards of EU foreign policy in its dealings with Russia and Israel, and the EU’s inconsistent and ineffective actions. He added a voice of urgency to Europe’s foreign policy, and did his best to encourage member states to forge coherence on the most divisive foreign policy positions. But the divide runs deep over Europe’s role in the Middle East and how to finance support for Ukraine.

He also left behind a stark warning for the European Commission’s president to stay out of issues that are not EU competences. Art. 17 (1) of the Lisbon Treaty clearly delineates what the EU can and cannot do. It says that the EU's executive has external representation, except for the union's foreign and security policy. Ursula von der Leyen never accepted these limitations since the beginning when real problems of foreign and security policy emerged, said Borrell in his last interview as the European Commision's top diplomat with Euractiv. When von der Leyen was pledging action on the Taiwan straits, military support for Ukraine, or full support for Israel, there was no common EU position. This problem is likely to get worse in von der Leyen’s second term. Some already accuse her of applying divide and rule tactics by intentionally designing an overlap in competences in the new Commission. The EU as a whole, not the Commission, needs to become a geopolitical actor, according to Borrell.

The moment of truth will come eventually when EU states will have to reveal how much money they are willing to spend on foreign policy priorities if there is not much left in the pot for domestic projects. And it will be the job of Kaja Kallas to forge a coherent EU strategy out of this.