The Banking Executive Magzine - July 2025 Issue

EU Budget 2026 IMPACT ON ARAB COUNTRIES The EU’s 2026 budget is expected to have indirect but significant effects on Arab countries, especially through trade, climate policy, and re- gional cooperation. The Carbon Border Adjustment Mechanism (CBAM), part of the EU’s climate strategy, will require ex- porters to the EU to pay for carbon emissions embedded in goods like cement, steel, and fertilizers starting January 2026. Countries like Egypt, which exported € 4.6 billion worth of CBAM-covered goods to the EU in 2022, could face substantial costs. Arab exporters may need to invest in greener production methods or ne- gotiate for technical and financial as- sistance to remain competitive. The budget allocates € 15.5 billion under the “Neighbourhood and the World” heading, which includes funding for migration management, security partnerships, and economic development programs in neighbour- ing regions, including North Africa and the Middle East. Arab countries may benefit from EU- funded initiatives aimed at stabilizing the region, but they will also need to adapt to new regulatory pressures. The EU’s push for green and digital transitions could open doors for col- laboration in renewable energy, tech innovation, and infrastructure devel- opment. GEOPOLITICAL IMPACT The EU’s 2026 budget is strategically crafted to reinforce the bloc’s geopo- litical influence amid rising global tensions and shifting alliances. Continued, unconditional financial and logistical aid to Ukraine signals the EU’s commitment to defending democratic values and deterring ag- gression in Eastern Europe. Increased funding for defence, cybersecurity, and dual-use infrastructure aims to reduce reliance on non-EU military systems and bolster the EU’s ability to act independently on the global stage. With over € 5 billion allocated to migration and border control, the EU is reinforcing its external borders and addressing root causes of migra- tion. The rollout of the Carbon Bor- der Adjustment Mechanism (CBAM) in 2026 will reshape trade dynamics, especially with countries exporting carbon-intensive goods to the EU. This could pressure global partners to adopt greener practices, but may also strain relations with developing economies. The budget earmarks significant funding for regional stability, includ- ing € 1.6 billion for Palestine and continued support for Syrian refugees in Turkey. These moves reflect the EU’s intent to remain a stabilizing force in the Mediterranean and Mid- dle East. By investing heavily in sustainability and innovation, the EU positions it- self as a model for climate action and tech governance, influencing global standards and partnerships. This budget is a statement of intent ISSUE 199 JULY 2025 the BANKING EXECUTIVE 37