Europe needs more military capabilities. Yet European defence budgets are static, and the cost of new military technologies is soaring. It is clear that governments need to extract more value out of each euro they spend. Therefore European governments need to co-operate more closely on armaments. Daniel Keohane describes how flat defence budgets and the rising costs of equipment have led to transnational mergers of defence companies. A European defence industry is taking shape. But the European defence market remains fragmented into many national pieces and it needs liberalisation.

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After more than a decade of preparation, 10 new members are set to join the EU on May 1st, 2004. However, in the final phase of negotiations, both the candidates and the EU have lost sight of the historic importance of this unprecedented expansion. While they bicker about milk quotas and farm aid, public support for enlargement is declining in several countries. Enlargement will have implications for Europe that go well beyond the budget. The key to making it a success is good preparation. If the candidates cannot cope with the demands of membership, they will disrupt the smooth functioning of the Union and hamper further integration.

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With war looming against Iraq, seven new members set to join the Alliance and a growing transatlantic gap in military power, NATO's role as the world's most effective military alliance is at stake. The Prague Summit on 21-22 November must provide a clear answer. But American and European views on NATO's future are diverging sharply. Americans stress that NATO can only survive if it accepts the 'new missions' of tackling international terrorism and the spread of weapons of mass destruction. Europe must improve its military capabilities and prepare to operate 'out of area' – or America will simply not take it seriously.

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The logic of the single market should be applied to the Balkans so that the region can achieve peace and economic growth. Yet this requires co-operation among people that in some cases have recently been at war. Political leaders are reluctant to start building bridges, for fear that the public is not ready. But business-people, spurred on by the promise of profits and opportunities, are overcoming prejudices fast. This paper argues that business is already driving the process of building a single market in the Balkans, and that national governments and international organisations should focus on supporting their initiatives.

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'Learning from Europe' is a significant contribution to the debate on how our public services can be improved, drawing on lessons from other European countries. The report is based on original research undertaken on visits to Denmark, the Netherlands and Sweden, as well as an examination of education systems in France, Germany and Spain. The authors recommend a radical shake-up of the English education system. The paper concludes that England has the most socially divided and centralised secondary education system of all the countries examined.

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Only a new 'High Representative for Economic Policy' can ensure the EU meets its 2010 target of becoming "the most dynamic and competitive knowledge-based economy in the world". European leaders should appoint a 'Mr Euroland' to drive forward the Lisbon process of economic reform over the coming years. The success of Javier Solana in foreign policy offers a promising precedent. This is one of the conclusions of The Barcelona Scorecard, the CER's second assessment of the EU's progress on economic reform. Two years on from the Lisbon summit, this paper takes stock of what it has achieved and, equally importantly, what remains to be done.

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In 'Constructive duplication', Kori Schake asserts that the Bush administration has taken a positive approach to the European Union's attempts to develop a military capability. And the Europeans have worked to reassure the US that the EU's defence policy will not undercut NATO. Nevertheless, two serious problems remain: the differences in the ways European and American militaries are developing; and the dubious premise of 'assured access' for the EU to NATO and US military assets.

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