The Horizon: Policy Realignment

Signals: week ending 12 February 2026: EU brainstorms competitiveness, pushes resilience, and tilts procurement towards "Buy European", plus Japan's election supermajority.

Top Signal: EU Leaders Brainstorm in Belgium to Boost Competitiveness

This week, EU heads of state and government retreated to the moated Alden Biesen castle in the Belgian countryside to discuss how the union can boost its own competitiveness amid sluggish growth, high energy costs, economic dependencies, and geopolitical rivalry with the U.S. and China.

The meeting agenda signals a gradual shift towards economic governance as a form of geopolitical statecraft, where competitiveness is vital for strategic resilience at a time of economic and political volatility in the international system.

The meeting was convened by the European Council, which represents the member states. The focus of the discussion centred on what action can be taken to deepen the single market, cut red tape, simplify regulation, scale up European businesses, pursue a European preference in some strategic areas, conclude more free trade deals, and improve investment conditions. It was also addressed by Mario Draghi and Enrico Letta, two former Italian prime ministers, who had previously produced two agenda-setting reports on European competitiveness and the single market.

This was a significant convening of European leaders, setting the tone for the upcoming larger spring summits that could define the EU’s economic direction in the coming years. European Council Guardian Politico EUCO President Costa on X

Renewed EU Push for Economic Resilience

Staying with the EU, it was not only the European Council that was looking to move the needle this week, as other institutions such as the European Central Bank and the European Commission were also signalling the need for more urgency in structural reform and further integration. This week, the ECB President, Christine Lagarde, and the European Commission President, Ursula von der Leyen, reinforced calls for such an approach to strengthen productivity and resilience.

The ECB President is reported to have called on EU Leaders to take quick action across several key areas, which include deepening the single market, creating an EU savings and investment union, delivering the digital euro, and fostering innovation.

Meanwhile, in a speech to the European Parliament on Monday, the EU Commission President called for further progress on trade, the single market, and simplifying how business is done within the Union. President von der Leyen outlined the need to eliminate the bottlenecks in the most strategic value chains by stepping up production in Europe and expanding its network of reliable partners. She called for one large, deep, and liquid capital market rather than the existing fragmented infrastructure, the completion of the energy union, and, for certain strategic sectors, the need for the practice of European preference to strengthen Europe’s own production base.

This agenda signals an intention to move beyond defensive de-risking toward proactive capacity-building and dovetails directly with the competitiveness debates emerging from the European Council-organised meeting in Belgium, anchoring monetary and fiscal alignment to industrial and investment policy. However, finding agreement on a unified way forward is always a challenge, potentially opening up the need for a two-speed approach, which I have written about in a recent edition of this newsletter. Reuters EU Commission

The Buy-European Procurement Tilt

It has been a busy week in EU policy circles, particularly for the EU Commission President, Ursula von der Leyen, who was also at the Antwerp European Industry Summit in Belgium. In her keynote speech, she signalled that the European Commission plans to introduce new requirements in its public procurement processes that will give preference to low-carbon products produced within the EU, which is part of the forthcoming Industrial Accelerator Act (due later this month).

Public procurement is a powerful lever at the EU’s disposal, accounting for around 14% of EU GDP. Such an approach will allow the EU to pursue a European preference that explicitly requires EU content requirements for strategic sectors and to help steer public purchases away from subsidised foreign alternatives.

This approach complements the competitiveness and resilience agenda also signalled this week by the European Council, the ECB, and within the European Parliament, where public procurement is increasingly transformed into a strategic lever for building European supply-chain autonomy, industrial stability, and accelerating the green transition while directing more European money to European industries. It is a delicate balance to get right while navigating WTO rules and internal divisions on protectionism. EU Commission

Japan’s Supermajority Signals Policy Realignment

This week’s general election in Japan delivered a historic landslide win for Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) and its coalition partner, the Japan Innovation Party, after it secured a two-thirds supermajority in the lower house, one of the largest lower-house mandates in post-war Japanese history. Together they won 354 seats in the 465-seat lower house in Japan’s parliament.

The result of this snap election provides a clear political mandate to the new conservative Takaichi government that should help stabilise Asia’s second-largest economy and potentially strengthen its role as a regional counterweight to China’s economic statecraft. It signals that a significant policy realignment is about to be unveiled, with the promise of completely new economic and fiscal policies.

The LDP’s dominance in this election’s outcome (it alone secured 315 seats) grants unprecedented leverage over economic, fiscal, and security policy. The new government is expected to pursue tax cuts, pro-growth fiscal measures, and modest defence-industrial expansion (within fiscal limits), with the prospect of reinforcing Japan’s position as a stable anchor in Asian supply chains. In many respects, Takanomics should be expected to be an evolution of Abenomics.

This week, the markets reacted with enthusiasm, with Tokyo’s Nikkei surging to an all-time high, on optimism about expected fiscal stimulus and policy continuity. Japan is one of the world’s largest economies, but it also has very high levels of debt. Without raising revenue to pay for the expected new policies, the new government will have to hope they pay for themselves. This week, some investors were reported to remain wary of another market meltdown over the new PM’s expansive spending plans. Le Monde WSJ NYT Japan Times Reuters CNBC

Strategy & Systems Insight

This week’s key signals together are tied to several key emerging system trends. Firstly, Europe is reframing its competitiveness as a system in itself. It is increasingly merging industrial, fiscal, and financial policy into a coherent competitiveness architecture. This signals a long-term pivot from previous reactive crisis management to proactive geoeconomic strategy, with the intention of strengthening its place in the future international system. This policy realignment means that