Europe

Where things stand. The EU's fertility rate fell to 1.34 births per woman in 2024, the lowest since EU-wide records began in 2001, with births down 3.3% year over year; Malta (1.01) and Spain (1.10) sit at the bottom. Eurostat's own 2026 projection has the EU's population peaking at 453 million in 2029, then declining nearly 12% by 2100, as the share aged 80+ triples from 6% to 16%. The paradox: the EU's total population still grew slightly through 2024-25 — but almost entirely through immigration into Spain, France, and Germany, not births, so this is a fertility and aging story more than a shrinking-headcount one, at least for now.

The decision point

Whether the EU closes its own documented competitiveness gap before demographic aging compounds it. A January 2026 progress check on the Draghi competitiveness report found only 15% of its recommendations fully implemented and 24% partially implemented — with internal EU market fragmentation still acting, by the report's own estimate, like a 44% tariff on goods and 110% on services trade between member states. The report itself warns its credibility erodes by 2027 without faster implementation, against a backdrop it names explicitly: "demographic aging, low productivity, geopolitical pressures."

Who holds the leverage — the "one exception" tested

Poland is a genuine economic outperformer: 3.6% GDP growth in 2025, the EU's fourth-highest, and GDP per capita (PPP) hit a record 81% of the EU average. But the data complicates rather than confirms a clean "one exception" story. Poland's fertility rate hit a record low of 1.068 in 2025 — among the lowest in the world, below Japan, Germany, the UK, and France — and Poland posted the EU's largest absolute population loss two years running, with roughly 168,000 more deaths than births in 2025 alone. Ireland (12.3% growth, though widely flagged as distorted by multinational tax accounting), Malta, and Cyprus all posted higher headline growth than Poland in 2025. So Poland isn't uniquely exceptional on growth, and on demographics specifically it is arguably worse-positioned than the EU average, not better.

What to watch

European defense spending rose 14% in 2025 to €864 billion — the sharpest annual increase since the Cold War's end — with 22 of 29 European NATO members now meeting the 2% GDP threshold. That's a real and fast response to the security environment, but it runs in parallel with the demographic and competitiveness pressures above, not a solution to them. Whether the spending surge translates into the institutional and market reform the Draghi report calls for, or simply adds another fiscal load onto a shrinking, aging tax base, is the harder question underneath the headline numbers.