Archives: Election Hub

By José M. Arroyo

After more than 25 years of negotiations, the EU-Mercosur trade deal is finally in force – a timeline so long that when talks began, Bill Clinton was still US President, and the euro did not yet exist. The EU machinery is famous for its slow pace, but this agreement has broken all records.

Despite the length of the talks, the deal in fact reveals a much newer geopolitical reality: the EU is actively seeking new trade partners in the world. With the United States no longer seen in Brussels as the reliable ally it once was, the EU aims to diversify its trade relationships, and the Similar momentum can be seen elsewhere, with agreements with India, Australia, and Mexico also signed this year, a clear sign that the Union is pushing to diversify its economic partnerships in the world. Other countries have taken similar approaches, with Canadian Prime Minister Mark Carney calling on Western economies to reduce strategic dependencies and deepen ties with “trusted partners” – closely mirroring the EU’s own evolving trade strategy.

The new EU doctrine of looking for new trade partners in the age of Trump has not, however, been advanced without resistance. On the European side, protests from angry farmers have rocked the streets of Brussels, Paris, Warsaw and other major cities. The sector broadly argued that the deal with Mercosur risks increasing competition from South American producers operating under different cost structures and production conditions.

Nevertheless, the deal does provide safeguards that the EU has achieved over years of painful negotiations. These include import caps on products such as beef and poultry, and additional protections for products including rice, honey and ethanol. The safeguards have already been seen in action: on 12 May, merely two weeks after the deal started to apply, the EU decided to ban imports of Brazilian meat from September onwards, due to the use of antimicrobials to stimulate animal growth, a practice that has been banned in Europe since 2006. While concerns are legitimate, the EU has ensured that protections exist when issues arise.

In addition, the EU’s agricultural sector will benefit from the recognition of 344 European geographical indications (GIs).These are intellectual property rights used to prevent South American producers from marketing imitation versions of traditional European products such as champagne,  manchego cheese, or Modena balsamic vinegar. This recognition will give European producers a key advantage

Beyond agriculture, other sectors have been very supportive of the deal, with European car manufacturers expecting to increase their sales in South America while accessing much needed critical raw materials.

Regardless of assurances and the expected benefits to the wider EU economy, resistance to the EU’s new trade activism is likely to continue. Even in the case of Mercosur, the issue is not home and dry. Last January, the European Parliament agreed to send the deal to the European Court of Justice for it to assess whether it is in line with the EU Treaties. What’s more, for it to be fully applied it needs to be ratified by the 27 EU countries. This is unlikely to happen in the short term, with countries including France and Poland expressing strong opposition. Instead, the deal is almost certain to remain in provisional application for years. This is the case of the EU-Canada agreement (CETA) that has been stuck in the provisional application stage since 2017.

But this is unlikely to deter the EU: the broader picture is that Mercosur should not be read as a standalone agreement, but as evidence of a more assertive EU trade doctrine. Whether or not full ratification moves quickly, the direction of travel is clear: Brussels is using its trade policy to reduce strategic dependencies, diversify supply chains and keep European companies connected to growth markets in an increasingly unstable and unpredictable world. The EU wants more partners, more routes to market and more leverage in a less predictable global economy.

For businesses, that opens many commercial opportunities. Exporters should reassess where lower tariffs, stronger market access and procurement openings could improve their position. Importers should look at whether new sourcing options can reduce exposure to concentrated supply chains. Investors should track sectors where the EU’s trade agenda overlaps with infrastructure, clean energy, critical raw materials, food systems and industrial production. Regulated industries should also pay close attention, because the EU’s trade agreements increasingly carry European standards on traceability, sustainability and compliance into partner markets.

Mercosur is therefore best understood as part of a wider shift in Europe’s economic posture. From South America to India, Australia and Mexico, the EU is trying to build a broader network of trade relationships that can support resilience as much as growth. For businesses, the opportunity is to start using this new trade doctrine as a map of where the next commercial openings, regulatory pressures and political risks will emerge.

Bulgaria’s prolonged period of conservative governance, dominating much of the political landscape between 2009 and early 2026, has fostered deep-seated social tensions, rooted primarily in perceptions of endemic corruption and the concentration of power among a narrow circle of political and economic elites. These pressures were evident in public opinion data well before they culminated in the mass protests of late 2025, which brought latent discontent forcefully into the open. The ensuing political crisis precipitated the resignation of the government and triggered yet another cycle of early elections – the latest in a series of repeated early elections in recent years.

Reading the shape of Radev’s government

Against this backdrop, President Rumen Radev made the decision to resign from office and establish his own political entity. In the parliamentary elections held on 19 April, his newly formed “Progressive Bulgaria” coalition secured a decisive victory, achieving an absolute majority in the National Assembly marking the first single-party majority in decades. The new parliament is expected to convene within days, with the formation of a single-party government anticipated after the vote. Progressive Bulgaria will hold 131 MPs. The liberal We Continue the Change–Democratic Bulgaria (PP–DB) coalition has 37 representatives, while the conservative GERB party has 39 seats, with their partners from the MRF holding 21. The nationalist Revival party has also crossed the 4% threshold, securing 12 MPs.

Attention now turns to the orientation and governing style of this incoming administration. Yet, despite Radev’s high public profile, relatively little is known about the inner workings of his political circle or the policy instincts of his closest advisers. Some insight, however, may be gleaned from his tenure as president.

During nearly two full terms in office, Radev appointed eight caretaker governments. While the earliest of these were shaped by political necessity and compromise with incumbent forces, some administrations bore a more distinct presidential imprint, often staffed by figures drawn from his own advisory apparatus. It is therefore reasonable to expect that several of these individuals will assume ministerial roles in the forthcoming cabinet. Notably, these interim governments were characterized by administrative stability rather than reformist zeal, leaving little legacy in terms of policy innovation though they played a stabilising role during repeated electoral cycles.

A pragmatic foreign policy with European continuity

In foreign policy, despite persistent allegations of alignment with Moscow, Radev has generally maintained a measured and pragmatic stance. His administrations consistently adhered to the common positions of the European Union, suggesting a degree of continuity in Bulgaria’s external orientation. Nevertheless, Radev has been an outspoken advocate for diplomatic engagement in the context of the war in Ukraine, reflecting his conviction that a durable resolution cannot be achieved through military means alone.

Domestically, Radev is expected to maintain a cautious distance from established party structures, with the possible exception of cooperation with the liberal bloc We continue the change – Democratic Bulgaria, whose parliamentary support may prove essential for advancing comprehensive judicial reform although a formal majority reduces immediate reliance on coalition partners. As is customary in Bulgarian politics, significant personnel changes within law enforcement agencies are likely.

Economically, Bulgaria continues to register modest growth despite a challenging external environment. The incoming government is likely to preserve the broad contours of existing policy, including targeted energy subsidies and limited protectionist measures within the framework permitted by EU regulations. The question of whether to overhaul leadership within key independent regulatory bodies, spanning energy, telecommunications, competition, and consumer protection, remains open. While personnel changes are conceivable, a shift in regulatory philosophy appears unlikely, particularly given that many past decisions by these bodies have withstood judicial scrutiny.

A cautious approach to the green transition

Radev has consistently positioned himself as a proponent of European re-industrialisation and has signalled openness to foreign investment aligned with this objective. However, his record in the energy sector suggests a more interventionist inclination. During his presidency, he exercised veto powers to impede aspects of market liberalisation and certain legislative initiatives related to renewable energy investment, particularly in solar power.

His scepticism towards elements of the EU’s environmental agenda is well documented, and is reinforced by the economic interests of segments of his support base in coal mining and conventional electricity generation. Taken together with the structural characteristics of Bulgaria’s energy market, these factors point towards a policy trajectory marked more by continuity than by transformation. Radev’s administration is likely to advocate at the European level for a postponement or recalibration of regulatory burdens on the industry – an approach consistent with his broader economic and strategic outlook.

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End of an era: TISZA’s mandate for systemic change

By Samu Märcz (COO, PA Director), Áron Szászi (Senior PA Consultant), István Jákó (Junior PA Consiltant)

Hungary has entered a definitive new chapter. The 2026 parliamentary elections delivered a historic political shift, ending Viktor Orbán’s 16-year rule and ushering in a new governing force with an unprecedented mandate.

The opposition TISZA Party, led by Péter Magyar, secured a decisive victory with around 52% of the vote and 137 out of 199 parliamentary seats (as of 15 April, 14:00), enough for a constitutional supermajority. This not only marks a change in government, but a fundamental reshaping of Hungary’s political landscape. Recounts and legal challenges are pending until 20 April at the latest, but TISZA’s supermajority is highly unlikely to be reversed.

A consolidated political system

The election signals a dramatic realignment: as voters consolidated overwhelmingly behind a single opposition force, the long-dominant Fidesz–KDNP alliance suffered a historic defeat, dropping to around 39.5% and just 56 seats (as of 15 April, 14:00).

Parliament is now more streamlined than at any point since the democratic transition: aside from centre-right TISZA and right-wing Fidesz, only the far-right Our Homeland (Mi Hazánk) entered the legislature. Notably, no traditional left-wing party crossed the threshold – a first in modern Hungarian politics.

Voter turnout approached 80%, the highest on record, reflecting both the stakes of the election and an unusually high level of political mobilisation.

A mandate for accountability and investigating corruption

TISZA’s victory is widely interpreted as a mandate for systemic change. The party successfully positioned itself as a credible alternative, attracting disillusioned government voters, uniting fragmented opposition groups, and mobilising previously inactive citizens.

With a constitutional majority, Péter Magyar now has the tools to pursue sweeping institutional reforms. His campaign and victory statements emphasise restoring democratic checks and balances, strengthening independent institutions, and tackling corruption.

This includes commitments to join the European Public Prosecutor’s Office and establish a new institution to recover the allegedly illicitly acquired assets of government-linked figures.

TISZA pledges comprehensive institutional reforms

Despite its strong mandate, the incoming government faces a complex governing environment. Entrenched institutional structures built over the past decade and a half may limit the pace and scope of reform to some extent, even with a supermajority.

Magyar has already signalled his intention to replace key figures in oversight institutions and has called on senior officeholders, including President of Hungary, Tamás Sulyok, to step down. However, legal and constitutional constraints, particularly a Fidesz-appointed Constitutional Court, could complicate these efforts. The broader challenge will be balancing rapid reform with democratic legitimacy, ensuring that institutional change is seen as restoration rather than political replacement.

At his post-election press conference, Péter Magyar outlined TISZA’s agenda focused on institutional reform, anti-corruption, media freedom, and a pro-European shift. He pledged a two-term limit for prime ministers (retroactively applied to bar PM Orbán), a less centralized governing style, and sweeping changes to restore checks and balances, including new anti-corruption bodies and reforms to public institutions.

Magyar also promised to dismantle the Fidesz-affiliated media landscape, ensure civil liberties, maintain strict migration policies, and pursue pragmatic but more Western-aligned foreign relations. He strongly criticized the outgoing government for economic mismanagement, state capture, and propaganda, framing the election as both a political turning point and a reaffirmation of Hungary’s place in Europe.

A foreign policy reset

The election outcome also marks a significant shift in Hungary’s international orientation. Magyar has clearly signalled a return to the European mainstream, pledging that Hungary will once again be a “strong ally” within the EU and NATO.

This implies a departure from the previous government’s more Russia- and China-friendly stance and a renewed focus on rebuilding ties with Western partners. Re-engagement with EU institutions will be particularly critical, not least to unlock frozen EU funds and support economic recovery. Magyar, however, also emphasizes that he will maintain a pragmatic relationship with all countries, including Russia and China.

Transition and what comes next

Given the major electoral gap, transition of power is expected to be orderly, with the new government likely taking office by mid-May. While Orbán has conceded defeat, political tensions are unlikely to disappear. Fidesz is expected to challenge the legitimacy and direction of the new leadership, setting the stage for a contentious political environment.

Looking ahead, the real test lies in how TISZA uses its supermajority. The party has the capacity to amend or even replace Hungary’s constitutional framework, but its political mandate is rooted in promises of democratisation, transparency, and accountability.

The key question is not whether the new government can act, but whether it can do so in a way that is legally sound, politically credible, and visibly democratic.

What this means for businesses?

For the coming months, companies should focus on monitoring the political and sectoral policy environment. Businesses could expect volatility as TISZA uses its supermajority to replace key officeholders, carry out major constitutional changes, redesign institutions, and review decisions linked to the previous system.

In the long-term, a strategic recalculation of industrial policy, FDI incentive structures, and the overall fiscal framework is expected. Prior to the elections, TISZA signalled its intention to pursue a less interventionist economic policy. This could include a willingness to phase out Orbán-era, sector-specific windfall taxes, as well as a shift away from offering generous subsidies to foreign investors, particularly in the manufacturing sector. However, existing subsidy agreements are expected to be honoured, and windfall taxes will likely remain in place in the short term due to significant budgetary pressures.

From a market perspective, the most favourable development would be the swift unlocking of suspended EU funds, contingent on the implementation of substantial institutional reforms. With regard to the Recovery and Resilience Facility (RRF), a critical deadline looms in August and is unlikely to be extended. As such, much will depend on the rapid formation of a Magyar-led government and the clarity and credibility of its plans for fund absorption and allocation.

Another key commitment of Magyar with significant business implications is joining the Eurozone. While this may be achievable within 4–5 years, it would require substantial fiscal consolidation.

By Áron Szászi, Senior Public Affairs Consultant, Grayling Hungary

While geopolitics continues to dominate headlines, from the war in Ukraine to renewed instability and conflict in the Gulf, 2026 will also be defined by a quieter but equally significant shift across Central and Eastern Europe: the restructuring of economic priorities.

Across the region, governments are recalibrating public finances under mounting fiscal pressure. Elevated deficits, slower growth and persistent inflation in several markets are forcing administrations to tighten spending, adjust tax frameworks and seek new revenue sources. The era of expansive fiscal flexibility is giving way to discipline. Yet despite these overlapping challenges, most CEE economies maintain a comparatively solid macroeconomic outlook, supported by gradually recovering growth prospects.

Across much of the region, governments allocate a comparatively lower share of GDP to social protection than the EU average, while directing greater resources toward economic affairs – infrastructure, energy, transport and industrial policy. The result is a relatively leaner welfare model paired with a more interventionist industrial strategy.

At the same time, a structural transformation is underway. Several governments are signalling a gradual reprioritisation toward human infrastructure – education, skills, healthcare and demographic resilience – while industrial policy is being recalibrated in response to shifting global conditions. Slower demand in the automotive sector, particularly in electric vehicles, volatility in energy markets, US pressure to further decouple from Russian energy supplies, and the continued acceleration of the green transition are all reshaping policy incentives.

Notably, defence expenditure has moved from a peripheral budget line to a central strategic priority. All CEE countries now meet or exceed NATO’s 2% benchmark, with several committing to significantly higher targets in the coming years. Importantly, this is not merely an increase in personnel costs – it reflects accelerated procurement, industrial modernisation and the development of domestic defence ecosystems. This shift is reshaping public spending patterns.

Competitiveness remains a defining challenge

Many CEE economies continue to outperform the EU average in growth terms, yet they remain highly exposed to external demand fluctuations, energy prices and global trade conditions. Structural constraints persist: labour shortages, skills gaps, slow digital adoption, regulatory inefficiencies and limited fiscal space to stimulate growth.

Not all countries perform equally on these structural dimensions. In terms of government efficiency as a driver of competitiveness, Czechia stands out as a regional leader, reflecting comparatively strong institutional capacity, policy consistency and regulatory predictability. Regarding business efficiency, Czechia also stands out as the regional frontrunner, supported by comparatively strong productivity fundamentals. Across the rest of the region, however, performance is considerably more uneven, reflecting disparities in labour market effectiveness, financial sector development, management practices and broader societal attitudes toward competitiveness.

For businesses, CEE countries’ evolving economic models present both pressure and opportunity.

Fiscal consolidation may bring tax adjustments, stricter enforcement and reduced public subsidies. Labour market reforms — including the implementation of EU directives — will affect workforce structures and compliance frameworks. At the same time, defence modernisation, infrastructure development, digitalisation and energy diversification create new investment channels and procurement opportunities.

CEE’s growth story is shifting from convergence to resilience

Economic policy is increasingly shaped by security considerations, industrial strategy and long-term sustainability rather than short-term expansion. Public finance choices, regulatory adjustments and sectoral priorities are being filtered through this new strategic lens.

Grayling’s CEE Outlook 2026 examines these economic and fiscal shifts across ten markets, providing insight into how public spending, competitiveness pressures and defence priorities are redefining the region’s business environment.

In 2026, understanding Central and Eastern Europe means understanding how economics and security have become inseparable.

👉 Download the full report to explore what this transformation means for your business.

In our latest CEE Outlook 2026, our Public Affairs teams explore the political, regulatory and geopolitical developments that will define the business environment in the year ahead. What binds these markets together in 2026 is not uniformity, but simultaneity – a shared moment of recalibration unfolding across the region.

Across Central and Eastern Europe, domestic political developments are unfolding against a backdrop of prolonged geopolitical uncertainty. Russia’s continued war against Ukraine remains the central organising force of Europe’s security architecture, while the European Union faces visible internal strain and growing pressure to redefine its strategic priorities.

What unites the CEE region in 2026 is not uniformity, but simultaneity: nearly every country is navigating political pressure, fiscal constraint and economic adjustment at the same time. Hungary’s parliamentary election in April stands out as a potential inflection point. Its outcome may shape not only Hungary’s domestic trajectory, but also wider debates within the European Union, from enlargement and sanctions policy to fiscal governance and the balance between integration and national sovereignty.

Elsewhere, political and economic dynamics remain equally consequential. Poland is managing institutional tensions between government and president while maintaining defence spending close to 5% of GDP. Romania faces coalition fragility and renewed fiscal pressure following sweeping tax measures. Slovakia is entering a polarised pre-election cycle alongside continued consolidation efforts, while Slovenia heads into tightly contested elections amid major pension and labour cost reforms. Bulgaria is grappling with renewed instability following euro adoption and rising inflation, and Croatia is balancing OECD accession ambitions with slowing growth and domestic political polarisation. In Serbia, political uncertainty and preparations for EXPO 2027 are shaping the investment climate, while Ukraine’s trajectory remains closely tied to developments on the battlefield and the pace of EU-aligned reforms.

Economic trends reflect this varied but simultaneous adjustment. Czechia, Bulgaria and Poland remain on a relatively stable path of non-inflationary expansion. Serbia and Croatia continue to post solid growth, albeit with comparatively elevated inflation. Hungary, Slovakia and Romania are closer to stagflation in 2025, although Hungary is projected to return to more balanced growth in 2026, alongside Slovenia, which is gradually emerging from a period of slow expansion. War-affected Ukraine faces a more fragile outlook, with persistently high inflation and subdued economic activity weighing on performance.

Source: European Economic Forecast – Autumn 2025 
Note: The displayed inflation and GDP growth values are forecasts and show y-o-y increase (%).

This year’s edition of Grayling’s CEE Outlook examines what these structural shifts mean for businesses, from fiscal consolidation and tax and labour reforms to industrial transformation, defence-driven spending, energy security and digitalisation pressures.

With 10 offices across the region, our CEE Public Affairs team is uniquely positioned to deliver political advocacy, strategic campaign support, stakeholder engagement and policy influence across sectors including energy, infrastructure and technology. In addition, our network in the US, Brussels and London enables us to support clients with cross-border market intelligence, coordinated public affairs strategies and high-level stakeholder engagement at both EU and transatlantic level.

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