The Horizon: Structural Power Realignment
Signals: week of 10 January 2026 - EU-Mercosur trade deal, transatlantic strains, future jobs scenarios in the AI economy, eurozone economic stability but structural constraints.
Top Signal: EU Provisional Approval of the Mercosur Trade Deal Despite Political Polarisation
This week, the European Union’s long-negotiated trade agreement with the South American Mercosur bloc (Brazil, Argentina, Paraguay, Uruguay) was given the green light by EU ambassadors after decades of negotiation, even as member states, including France, Ireland, Austria, Hungary, and Poland, reportedly voted against it, and widespread farmer protests erupted on EU roads. It was approved by member states with a qualified majority and now moves for signing and then approval by MEPs in the European Parliament.
The deal is set to create the world’s largest free trade area, covering some 700 million people. It will help reduce EU dependence on China and the U.S. for key inputs such as critical raw materials, which are much needed by EU manufacturers in industries such as electric automobiles, aerospace, and defence. However, despite moves by Brussels to address their concerns, European farmers fear cheap agricultural imports from South America will depress rural incomes and accelerate structural decline in local food systems. They have also raised questions about different food standards and have demanded that imports meet the same standards as EU produce. On the other hand, it should be expected that cheaper food imports translate into lower prices for EU consumers. Meanwhile, EU firms will face no discrimination in investing in Mercosur’s industries. On the political level, the internal EU divisions on display this week signal deeper tensions between globalisation strategies and the protection of local stakeholders on the continent. However, while these divisions clearly exist, if the deal is approved by the European Parliament, it will be a significant geoeconomic win for the EU on the global stage. Politico RFI RTE Reuters The Pigsite Euroactiv EU Commission EU Council
Key Signals
Transatlantic Strains
In recent days, the French and German presidents publicly criticised the U.S. under President Trump, accusing Washington of distancing itself from its allies, warning that Washington is “breaking free from international rules” and that the world risks becoming a “den of robbers”, where global democracy is being attacked as never before. Their comments have been widely interpreted as reactions to both the US raid in Caracas that captured Nicolás Maduro and Trump’s renewed, more aggressive push to assert control over Greenland, which European leaders view as undermining allied sovereignty and international norms. EU leaders have publicly warned against any unilateral US move regarding Greenland and stressed that “Greenland belongs to its people” and decisions are for Denmark and Greenland alone.
This is a signal of allied cohesion under stress. European capitals still depend on the US for security guarantees in Europe, but are also beginning to recalibrate their strategic alignment with the U.S., opening space for deeper EU strategic autonomy. It’s a difficult balancing act. In such an environment, geopolitical risk from fractures in NATO and Western diplomatic unity can ripple through to investment confidence and the security of supply chains. France 24 Independent CNBC NPR IFRI
Future Jobs Scenarios in the AI Economy
This week, the World Economic Forum (WEF) released a major white paper outlining four AI-driven futures for jobs by 2030, but only one (“Co-Pilot Economy”) suggests pragmatic integration, which balances productivity with job resilience, while the others point toward displacement, inequality, or concentrated gains.
Economies worldwide must prepare for a profound transformation of labour markets, skills needs, and employment contracts. AI adoption strategies, from re-skilling to regulation, will determine whether nations will be able to capture productivity gains or, on the other hand, exacerbate levels of inequality and political polarisation within the next few years. WEF
Eurozone Economic Stability But Structural Constraints
New data released this week from Eurostat, the statistical office of the European Union, showed that the Eurozone ended 2025 with inflation easing to about 2%, supporting stability. However, growth forecasts are modest, and structural headwinds persist.
With inflation near target, the European Central Bank should be expected to keep rates steady, helping to stabilise borrowing costs. However, sub-1.5% growth forecasts by analysts and structural rigidities could slow job creation, wage growth, and investment. Eurostat Conference Board KPMG Goldman Sachs
Systems & Strategic Insight
These signals are not isolated events; rather, they reveal interlocking structural shifts in how Europe, in particular, confronts global markets, technology, and power.
The Mercosur deal is a case study in how economic openness can also generate political backlash domestically. But the resistance from European farmers isn’t just political noise; it is also the feedback loop where gains in capital-intensive sectors such as EV inputs come at the expense of traditional labour markets in agriculture. Without targeted support mechanisms, trade liberalisation runs the risk of fueling political polarisation.
Meanwhile,