Is the European Union Deepening or Widening?

The Draghi report is expected to refocus attention on EU reforms, although the items listed are largely familiar and previously discussed. EU policymakers express concerns about political unanimity and the influence of far-right parties hindering reform efforts amid a focus on fiscal consolidation.

Despite challenges, there is potential progress in areas like capital markets and telecommunications. Additionally, ties with neighboring countries are strengthening, with security agreements being developed with nations like the U.K. and engagement with Eastern European accession candidates increasing.

Candidates can now participate in several sectors of the common market, potentially easing their path towards membership. Montenegro is positioned to potentially join by 2028, followed by Ukraine, Moldova, and Albania by 2030, while other candidates may accelerate their efforts due to competitive pressures.

Overall, while comprehensive reforms within the EU may be limited, the eastward expansion could contribute to reduced risk premia for accession candidates benefiting from closer EU ties.