succeeding were: “Syrsky is experienced, knows the system much better than Misha, and will outfox him.” Mr Fedorov’s first big reform package only began to be implemented in June, after months of haranguing and waiting for signoffs. On paper, it tackled the most urgent manpower problems. There would be a new deal for front line infantry. Monthly pay would increase threefold to $7,000 and fixed-term contracts of six, ten, 14 and 24 months would be introduced. There would also be a limited demobilisation for the longest-serving soldiers by the end of 2026. In addition, he earmarked more money for recruiting foreigners. The estimated 300,000 Ukrainians listed as absent without leave would also be given a 100-day window in which to return without punishment. Previously, those caught were sent to the hottest spots on the front-line, where the chances of surviving were slim. Mr Fedorov’s critics in the army accept he has improved drone procurement and digitalisation. But they said his lack of military experience made him unqualified to plan a war. Some said his flagship reforms amounted to a “PR repackaging” of work that was already under way. The defence minister was the equivalent of a football “goalhanger” seizing credit for others’ ideas, said one senior general. Some likened him to a modern day Robert McNamara, the late American defence secretary who found that the managerial methods he had honed running Ford did not transfer well to the Pentagon. “To reform something you have to understand how it works,” said another Ukrainian general. “Would you really sit in an aeroplane if you saw that the pilot was a shopkeeper?” On July 12th Mr Zelensky asked him if he was tempted by the newly vacant prime minister’s post. In usual circumstances that would have counted as a promotion; here it was read as a defeat for his project. The defence minister turned the job down, and it has since been offered to Serhiy Koretskiy, a well-regarded manager with a background in the energy industry. Mr Koretskiy was “the most prepared candidate” to navigate the challenges of what would be a difficult winter, Mr Zelensky said. Reports suggest the interior minister, Ihor Klymenko, was poised to take over the defence ministry. At the time of writing, it was not clear if Mr Fedorov would be offered another job at all. It is likely he would turn down
a demotion if offered one. In the days leading up to his defenestration, the minister admitted that he was worried that the support of his political patron was coming to an end, but that he had only followed instructions. “When I began the job, the president told me to act according to my conscience,” he said. “What can I do? I don’t want to leave this post knowing that I ever bent to suit anyone.” ■ To stay on top of the biggest European stories, sign up to Café Europa, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//europe/2026/07/16/ukraines-reformist-defence-minister- is-ousted
Europe seems set to ease its carbon pricing Green goals are running into fears about competitiveness July 16th 2026 THE EUROPEAN UNION’s carbon price is an economist’s dream. The bloc’s emissions-trading scheme (ETS) distributes rights to emit greenhouse gases to firms in electricity generation, heavy industry and aviation. Then it lets the market do the rest. It was phased in gradually, with all kinds of cushioning such as free allowances (not all of them justified) to give emitters plenty of time to adjust. Now, however, the system is starting to bite, which makes it a perfect scapegoat for politicians struggling to contain soaring energy prices and to shield struggling industries from global competition. On July 17th the European Commission is expected to reveal a watering down of the ETS amid worries that, since it is essentially a tax, it is
hampering European competitiveness. Auctioning carbon allowances brought in around €40bn ($46bn) to the EU and its members in 2024. In March, ten EU member states, including Italy, Poland and Romania, urged the commission to conduct a thorough review of the scheme with an eye to helping electricity consumers and industry. Friedrich Merz, Germany’s chancellor, worried that his country’s manufacturing sector was wavering: “We should be very open to revise it, or at least to postpone it.” Since then, the commission has worked on a plan that tries to reconcile its contradictory goals of cutting greenhouse gas emissions while allowing the bloc’s industries to compete—all without breaching international trade rules. Industry’s gripe is that it now costs about €80 to emit a tonne of carbon, and that price is expected to climb. This adds roughly three cents to the price of a gas-powered kWh (or about 10% to the retail price of power) and €11 to the ticket price for a three-hour flight. Almost all allowances for electricity generation and airlines have to be bought in auctions. Some industries that are exposed to international markets and high emission costs still receive many free allowances, as long as they continue to produce. That has shielded them from the impact of the carbon price. In fact, some companies in industries like metals and paper receive allowances for more greenhouse gases than they emit, says Bruegel, a Brussels-based think-tank, resulting in a handsome profit. The EU has brought in a tax called the Carbon Border Adjustment Mechanism (CBAM). Importers of energy-intensive goods like steel or fertiliser must pay the EU’s emissions price on the carbon embedded in the imported good, unless the country of origin has its own carbon-pricing scheme. But the EU cannot go on giving its own producers free allowances without flouting international trade rules. As CBAM payments are phased in until 2034, free allowances will be phased out. The switch from free allowances to CBAM will leave one large gap: exports. Inside the European market, all producers, domestic or foreign, will have to pay a carbon price. But when competing in export markets, EU producers will be the only ones paying it, leaving them at a disadvantage. Worse still, exempting exports from the carbon price would be considered an export subsidy that breaches WTO rules.
One workaround could be to provide export credits for green goods, says George Riddell of Goyder, a trade consultancy. “Those would help competitive European players, but not those that are currently screaming the loudest.” There is also a plan to offer free allowances conditional on green investment. The biggest effect on the carbon price will come from how many allowances are issued. The EU will have to greatly reduce the number to meet its climate target. That would tend to drive up the carbon price. Yet allowing industry to emit more would put added pressure on domestic heating, farming and transport to reduce their emissions, which is politically even harder (see chart). It would also hurt firms that have invested in greener processes believing the rules would not be tweaked to suit polluters. “The jury is still out on whether Europe can be a winner of the megatrend of sustainability,” says Stefan Kvarfordt of the Confederation of Swedish Enterprise. ■ To stay on top of the biggest European stories, sign up to Café Europa, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//europe/2026/07/16/europe-seems-set-to-ease-its-carbon- pricing
Sweden squashed migration. The populist right wants to go further The Sweden Democrats could be heading for a bigger role in government July 16th 2026 NOT FAR from central Stockholm lies Stora Essingen, a sleepy island covered with lush trees and pretty houses. For years its residents voted overwhelmingly for the Moderate Party, Sweden’s mainstream conservatives. But since 2022, when the party entered a power-sharing pact with the hard-right anti-immigrant Sweden Democrats (SD), voters have signalled their displeasure at its alliance with the hitherto pariah. Instead voters have shifted towards the centre-left Social Democrats, whose activists are knocking on doors ahead of the general election on September 13th, in the hope that it can keep the SD out of the next government. Many voters in places like Stora Essingen view their country as a sensible, liberal
and cosmopolitan democracy. The election will test whether that idea of Sweden wins out—or whether, having had a taste of anti-immigrant populism, Swedes want more of it. The SD argues that it has tamed (or expelled) its most extreme elements. Its logo, once a blazing torch, is now a blue-and-yellow flower. In the election in 2022, amid anger over a surge in migration a few years earlier, it became the biggest right-wing party in parliament and backed a government headed by Ulf Kristersson, the leader of the Moderates; the SD got policy influence, but no ministerial jobs. Today Mr Kristersson promises the SD cabinet roles if the coalition is re-elected. The election will reveal whether the SD’s popularity can endure once migration slows to a trickle. Sweden’s hyper-restrictive policies—admired by much of the European right—have reduced annual net migration from 117,000 at its peak in 2016 to 12,000 last year (see chart). The Social Democrats tightened asylum rules and border checks while in power during Europe’s refugee crisis in the mid-2010s. “The first wave of changes tried to make Sweden less attractive to people trying to come here,” explains Louise Dane of the Swedish Refugee Law Centre, an NGO. But as the number of arrivals fell and Mr Kristersson’s government took over, the