Long and heavy the summer of this 2026. In Spain, the level of political tension has continued to rise, reaching a paroxysm thanks to the Ceuta episode. An unexpected and adverse scenario for Pedro Sánchez and his latest major bet on the massive regularization of immigrants. The key points of what happened in the North African city are yet to be revealed. But the rising tension has not been an exclusively Spanish phenomenon.
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On the international stage, the most relevant thing has been that Donald Trump has not managed – six months in – to advance even a millimeter in the quagmire of the Iran war, prolonging and enlarging negative scenarios for the global economy. Supply restrictions of vital products, led by oil, over which there are dire predictions of shortages and exorbitant prices. Inflation, which raises the cost of living for the majority of the world’s citizens and is their primary concern in all surveys and cause of despair, no matter how much some insist on focusing on immigration perhaps to divert voters’ attention. Growing bad mood among the great powers and therefore more drumbeats of war. And for now, the U.S. has not announced a credible plan to restore normality to world trade. On the contrary, it has aggravated trade conflicts, such as the one it has created with Canada.
The accumulation of problems has ended up having its counterpart in the financial markets. Even the pawn that Trump placed in the Federal Reserve – the U.S. central bank – to lower interest rates at full speed, Governor Kevin Warsh, brought last Friday the probability of raising them as soon as the next September meeting closer. President Trump has thus ended up in the opposite position of the intended one. The second time this summer, as his Treasury Secretary, Scott Bessent, had to throw overboard his liberal ideas to intervene in the currency and debt markets. The U.S., which in practice has imposed a corralito on Japan to prevent it from selling its Treasury bonds, is one step away from imposing the so-called financial repression, punishing investors to avoid interest rate hikes.
The result is that states have to pay more interest on their debt, already very high after the financial crisis and the pandemic. A cost increase that implies another tightening for public budgets, always very dislocated, but even more so after the runaway growth of military spending. For citizens, it will mean more difficulties making ends meet, higher prices, additional interest to pay debts. For companies, increased costs and more expensive investments.
That is the context in which activity is resumed. The world can already start preparing for the bombardment of warnings about the unsustainability of public accounts and the obligation to apply adjustments; always leaving military spending covered. That will be the economic music of autumn and winter.
This autumn the pressure on pensions will be a focus of political and economic debate
And the first case will be retirement pensions. Their volume will become the center of the dispute over public spending. Most European countries have different models for their update, from the CPI of the year to the evolution of wages. And breaking that link between cost of living and pension increases will be the first episode.
First seismic epicenter, France, the country among the four big EU members most affected by the size of its debt. The government of Sébastien Lecornu has launched a trial balloon opening the door to freezing the revaluation of pensions over 3,000 euros per month, without ruling out those above 2,000.
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A suicidal approach considering that next spring France has presidential elections and that it is only explained because the prime minister does not aspire to be a candidate. But it will not help at all his center-right colleagues who do aspire to replace Emmanuel Macron in the Élysée.
The German government, led by Friedrich Merz, in which the SPD socialists participate, also has its pension reform underway. Although its final version is pending, one of the most controversial points is the elimination of retirement at 63 for those who have contributed 35 or more years. Its system indexes pensions to wages; last July they rose by 4.4%.
Politically, that leaden shadow of budget adjustment, focused on pensions, the high cost of living, and the unfathomable problem of housing prices, further feeds the far-right forces, which continue to gain ground in the polls.
The rise in the cost of money is already underway; a heavy additional burden for states
An inflamed electoral circuit also begins. It starts in the German state of Saxony-Anhalt, September, with the ultra AfD aiming for an absolute majority. And it would culminate in the French presidential elections in April, in which Marine Le Pen’s National Rally is the clear favorite. Although there is also the possibility that Giorgia Meloni, harassed by forces even more ultra than herself, brings forward the elections. In Spain, the cycle would culminate next July, if Sánchez manages to reach his goal of completing the legislature. Something that now seems difficult.
Consolation. Surprise in Germany not only because it has grown again; also for doing so more than expected in the second quarter, although the year’s balance will remain sad, barely 0.6% for the EU’s largest economy. And thanks to exports, which means that domestic demand, German citizens, still face difficulties. Spain and, to a much lesser extent, Italy will continue to be the leaders in growth among the EU’s big countries. A complicated start to the school year that may get even tougher.
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