Monthly Report No. 12/2025

Chart of the Month Russia’s military spending is not as high as you might think by Vasily Astrov The war as the new Russian business model by Vladislav Inozemtsev The largely mercenary army deployed in the war against Ukraine represents a radical break with 300 years of Russian history, when soldiers were very cheap. For the time being, this strategy has allowed the ruling regime not only to avoid a deeply unpopular mass mobilisation, but also to utilise a labour force that would have been of little value to the rest of the economy. However, the longer-term economic and social costs associated with this strategy are likely to be profoundly negative. Opinion Corner A geoeconomic mistake by the EU in Kosovo by Birgit Niessner The EU’s measures taken against Kosovo, which were triggered by disputed municipal elections in 2023, have suspended key agreements and frozen EUR 600m in development funds, leaving the country isolated. These measures are widely seen as unjust and counterproductive, especially given Kosovo’s progress toward European standards and integration. The EU’s stance runs counter to its stated goal of deeper engagement with the Western Balkans, undermines its credibility and opens the way to rival powers like Russia and China. Economic growth and income convergence in the EU by Roman Römisch Why have the EU member states of Central and Eastern Europe caught up so rapidly with Western Europe, and what does this progress truly imply for living standards? This article looks beyond headline GDP figures to explain how economic growth, demographic change and rising price levels have together shaped income convergence in the region over the past two and a half decades.