Week Ahead (21 September)

W/C Monday, 21 September – Latest German state elections increase pressure on Merz as AfD wins Mecklenburg-Western Pomerania and Berlin shifts left

Germany is digesting another difficult set of state election results for Chancellor Friedrich Merz, with the AfD winning Mecklenburg-Western Pomerania only two weeks after its record victory in Saxony-Anhalt, while the Left emerged as the largest party in Berlin. The results reinforce the AfD's momentum in eastern Germany while also demonstrating broader weakness for Merz's CDU, which suffered losses in both states.

In Mecklenburg-Western Pomerania, provisional results put the AfD first on 38.2%, more than doubling its 16.7% share in 2021, followed closely by the SPD on 35.5%. However, the AfD is unlikely to enter government given the continued refusal of the other parties to cooperate with it. SPD state premier Manuela Schwesig performed considerably better than earlier polling had suggested, leaving her with potential coalition options after the Left secured 6.5% and the Greens 5.7%. 

The result was considerably worse for the CDU, which fell to 4.9% and is consequently set to lose its representation in the state parliament. This represents the party's worst result in any German state election since 1945 and comes despite Merz becoming increasingly involved in the closing stages of the campaign. Schwesig, by contrast, sought to distance herself from the federal government and focused particularly on living costs, employment and the distributional impact of Berlin's economic reform agenda.

Berlin produced a different political shift but yet again another poor outcome for the CDU. The Left finished first on 25.7%, more than doubling its 2023 result, followed by the CDU on 18.8%, AfD on 16.3%, Greens on 14.3% and SPD on 12.1%. The arithmetic would allow the Left, Greens and SPD to form a majority, potentially replacing the current CDU-led administration with a left wing coalition. The AfD therefore failed to replicate its eastern state victories in the capital, although its support still increased substantially compared with 2023.

The elections nevertheless come at a particularly difficult moment for Merz. His national approval has fallen as low as 14%, while a recent INSA survey found that 78% of respondents, including a majority of CDU supporters, no longer regard him as the right person to serve as chancellor. The latest results are likely to intensify existing internal discussion over his leadership, particularly after the CDU failed even to clear the 5% threshold in Mecklenburg-Western Pomerania. Merz convened senior CDU figures in Berlin on Sunday evening and acknowledged that the result was a “disaster”, but moved quickly to rule out stepping aside.

Instead, Merz sought to link his political survival directly to implementation of the government's economic reform programme, and the reforms he deemed as ''the antitode to the poison of authoritarianism'' adding that he intends to demonstrate those qualities both as CDU chairman and chancellor. Senior CDU figures have so far continued to support him, although two consecutive AfD state election victories are likely to make the effectiveness of his strategy an increasingly important source of internal debate. 

The broader implications therefore reinforce, rather than fundamentally change, our assessment following Saxony-Anhalt. It is now considerably harder to treat the AfD's earlier breakthrough as an isolated result, while the CDU's losses increase the domestic pressure on Merz to demonstrate that his economic reforms can improve growth and living standards. This could further constrain the government's room for manoeuvre on economic reform, Ukraine and politically sensitive elements of Germany's wider EU agenda, including the MFF and trade relations with China.

W/C Monday, 21 September – Senior DG TRADE delegation heads to China ahead of October deadline for progress on trade disputes

This week, a senior European Commission delegation led by DG TRADE Director-General Ditte Juul Jorgensen will travel to China, opening an intensive period of negotiations as Brussels presses Beijing for concrete steps to rebalance the bilateral trade relationship. The officials' visit will prepare the ground for Trade Commissioner Maros Sefcovic's meeting with Chinese Commerce Minister Wang Wentao in Beijing on 8–9 October, which Brussels increasingly views as a deadline for demonstrating material progress ahead of the 15–16 October European Council.

The visit comes after President von der Leyen’s State of the EU speech last Wednesday, when she described EU–China trade relations as having reached a “tipping point” and said the EU was prepared to “use all tools at our disposal to rebalance our relationship”. The EU's trade deficit with China reached almost €240 billion in the first seven months of the year, around 12% higher than during the same period in 2025, reinforcing concerns in Brussels over Chinese overcapacity, market access and Europe's exposure to critical Chinese inputs. Sefcovic and Wang subsequently held a more than hour long videocall last Thursday covering Chinese exports into Europe, EU market access and Beijing's rare earth export controls, with the Commission stressing afterwards that the October discussions need to produce “concrete outcomes”.

Several sectoral negotiations will be important to watch. Autos remain a particular focus, with discussions including a possible Chinese commitment to limit hybrid and plug-in hybrid exports, following their rapid expansion after the EU imposed duties on Chinese battery-electric vehicles. Recent discussions have included the possibility of China limiting hybrids to around 15% of its EU vehicle exports, compared with more than 1/3 currently. The significance of any arrangement, however, will depend heavily on its precise scope, monitoring and enforcement. Chemicals are another emerging pressure point, as Brussels considers how to respond to Chinese overcapacity across a broader range of industrial products.

At the same time, the Commission is preparing for the possibility that negotiations fail to deliver sufficient concessions. Following a meeting with European CEOs last Friday, Sefcovic outlined three broad strands of the EU's emerging response: a potential new diversification instrument, adapting existing trade tools to respond more effectively to Chinese competition, and expanding the EU's network of trade agreements with fast growing economies. Industry representatives broadly agreed on the need to reduce vulnerabilities to China, but also cautioned against triggering further retaliation given Europe's continued dependence on Chinese critical raw materials, particularly rare earths. The Commission subsequently confirmed that it is preparing a dedicated Diversification Package, with a public call for evidence expected shortly.

The timetable is consequently becoming important. This week's DG TRADE mission is the technical negotiating stage, with Sefcovic's 8–9 October visit representing the political deadline, whereas the 15–16 October European Council will provide a potential decision point if Brussels concludes that Chinese concessions remain insufficient. In that scenario, the Commission could use the summit to build member state support for a more assertive package of trade and economic security measures. A subsequent European Parliament INTA delegation will travel to China on 26–29 October, continuing the broader reopening of institutional contacts following Beijing's removal of sanctions against MEPs last year.

Tuesday, 22 September – Burnham to meet Trump for first time as UK prime minister

UK Prime Minister Andy Burnham is expected to meet US President Donald Trump in New York tomorrow on the sidelines of the UN General Assembly, their first face-to-face meeting since Burnham entered Downing Street in July. The two leaders have already spoken twice by phone, with discussions covering Ukraine, trade, defence and energy.

The meeting is not expected to focus on a significant package of new bilateral agreements. This differs from the early Starmer-Trump relationship, when the UK was seeking to establish arrangements with the new US administration across trade, technology and pharmaceuticals. Burnham instead inherits an established framework alongside several unresolved disagreements, while his government has also indicated that it intends to continue strengthening relations with the EU.

Ukraine is likely to be the main substantive priority. Burnham is expected to seek continued US military support and could raise the availability of Patriot air defence systems ahead of the winter. Overall, the discussion comes as the UK and other European governments continue to increase their own defence commitments while managing uncertainty around the longer term US role in European security. The UK's extensive reliance on US capabilities through NATO, intelligence cooperation and the nuclear relationship nevertheless limits the extent to which London can distance itself from Washington.

There are also several areas where UK and US positions remain different. The Middle East could feature following the UK's coordination with France and Canada on sanctions targeting Israeli settlements in the West Bank, while the UK is seeking further international coordination on the humanitarian situation in Gaza. Other outstanding issues include Trump's pressure for greater UK defence spending and additional North Sea oil and gas production, as well as uncertainty surrounding the UK's Chagos Islands agreement.

The meeting should therefore provide an early indication of how Burnham intends to manage the US relationship. His government appears likely to preserve close cooperation in areas where US involvement remains particularly important, notably Ukraine and defence, while allowing greater distance on individual foreign policy and economic issues. This will also be relevant to the UK's parallel effort to deepen cooperation with the EU, as London increasingly seeks to balance its longstanding US security relationship with closer European alignment, with an EU-UK summit expected to take place by the end of the year.

Wednesday, 23 September – IAA negotiations to test scope for UK inclusion in ''Made in Europe'' 

In the upcoming working party on competitiveness, scheduled for Wednesday, discussions among member states on the Industrial Accelerator Act (IAA) will provide a further indication of whether the EU can accommodate the UK within its proposed “Made in Europe” requirements. However, expectations for a breakthrough remain limited: the Irish Presidency’s earlier ambition to secure a Council political agreement at the Competitiveness Council the following day has been reduced to a state-of-play update, reflecting unresolved differences among governments.

Notably, the Council talks this week will come shortly after UK Chancellor John Healey’s participation in last Friday's meeting of EU finance ministers in Dublin, where the UK is seeking assurances that British industry will be accommodated within the proposed “Made in Europe” rules. A key watchpoint therefore will be the Presidency’s proposed Article 7a on content originating in “partner countries”, presented to the previous working party on 10 September. The UK is seeking a route through this mechanism for British industrial inputs to qualify, particularly in integrated automotive supply chains. Possible conditions include reciprocal access to procurement and support schemes, alongside safeguards against circumvention through UK supply chains. However, requests for similar treatment from Japan, South Korea and Turkey complicate any UK-specific accommodation.

For London, a political assurance remains more achievable in the near term than guaranteed inclusion. Such an understanding could recognise the importance of UK–EU supply chains and identify conditions for future eligibility, while leaving the legal arrangements subject to the final IAA negotiations. The UK’s exposure to exclusion could give it an incentive to accept any interim commitment. 

The discussions will therefore matter for the wider UK–EU reset, including whether progress on Made in Europe can help unlock a summit package containing ETS linkage. With Parliament still developing its position and a joint committee vote expected in December, a final IAA agreement remains more likely to extend into early 2027 than to be completed by year-end.

Thursday, 24 September – Friday, 25 September – EU ministers to debate revised Merger Guidelines and Chips Act 2.0

EU competitiveness ministers will meet on Thursday and Friday for policy debates on the Commission's proposed Chips Act 2.0 and its ongoing revision of the Merger Guidelines, while also taking stock of other major competitiveness initiatives including the Industrial Accelerator Act, 28th Regime and European Competitiveness Fund under the proposed Multiannual Financial Framework for 2028-2034. The meeting will therefore bring together several strands of the EU's wider attempt to translate the competitiveness agenda into changes to competition, investment and industrial policy.

On merger control, ministers will discuss the Commission's draft revised Guidelines ahead of their planned finalisation by the end of the year. As previously highlighted, DG COMP's emerging framework seeks to give more structured consideration to dynamic effects including investment and innovation, potential efficiencies from greater scale, and resilience and security of supply. Director General Anthony Whelan has also indicated that these concepts can already inform individual cases because the Guidelines interpret the existing EU Merger Regulation rather than changing the underlying legal test.

This week's exchange will be particularly relevant for assessing how member states position themselves on the central tension running through the review. Germany's government has argued that competition policy should facilitate consolidation in strategic sectors where scale can strengthen resilience or international competitiveness, including defence, innovative technologies and markets characterised by substantial economies of scale. However, the German competition watchdog, the Bundeskartellamt, has taken a more cautious position, arguing that rivalry and diversity of supply can themselves strengthen resilience and innovation. A similar distinction is visible in France, where the government has supported greater recognition of investment, innovation and resilience, while the Autorité de la concurrence has warned against allowing wider policy objectives to politicise merger assessment. Sweden and other Nordic authorities have generally been more sceptical of relaxing merger control, warning that a more permissive approach could undermine competition within the Single Market. The ministerial discussion should therefore provide another indication of how these competing views are feeding into the Commission's final text.

The second major debate will concern Chips Act 2.0, proposed by the Commission in June. The original 2023 Chips Act was introduced following the pandemic-era semiconductor shortages and aimed to strengthen European research and manufacturing capacity, improve supply security and double the EU's share of global semiconductor production to 20% by 2030. However, Europe remains heavily dependent on third countries in areas including advanced manufacturing and semiconductor design, while the rapid expansion of AI is changing the composition of global chip demand. 

Chips Act 2.0 consequently shifts the emphasis somewhat from the original headline production target towards competitiveness, technological leadership and reducing strategic dependencies across specific parts of the value chain. The proposal seeks to accelerate permitting for semiconductor investments, strengthen research and skills, support the development of strategically important technologies including AI chips, encourage greater industrial uptake of European chips and deepen semiconductor partnerships with third countries. 

The wider significance of the upcoming meeting lies in the central policy question running across these different files, in particular how the EU can enable greater industrial scale and reduce external dependencies without undermining competition within the Single Market.