Navigating the Tensions: Investment Risks and Opportunities in Eastern Europe's Creative Economy Amid Political Instability

Political instability in Eastern Europe has long been a double-edged sword for investors, particularly in the creative economy. While the region's cultural sectors-encompassing film, design, performing arts, and heritage preservation-offer untapped potential, they also face headwinds from shifting governance, geopolitical volatility, and fragmented policy frameworks. As the European Union (EU) ramps up support for creative industries in the region, the challenge lies in balancing the risks of instability with the promise of innovation and cross-border collaboration.

The Fragile Foundation: Political Stability and Its Consequences

According to the World Bank political stability rankings, Czechia, with a 2023 stability score of 0.97, stands in stark contrast to Ukraine's -1.43, a reflection of ongoing war and internal governance challenges. This divergence has tangible economic implications. For instance, Poland and Bulgaria, which scored moderate to low stability indices, face difficulties in securing long-term investments for creative projects due to policy unpredictability and corruption risks, as reflected in those rankings.

The ripple effects of instability extend beyond governance. Geopolitical tensions, such as the U.S.-China trade war and the war in Ukraine, have disrupted supply chains and energy markets, indirectly affecting creative industries reliant on cross-border partnerships, according to Statista's Europe economic outlook. A 2025 analysis by Coface highlights that nationalism and protectionist policies are further complicating the landscape, as tariffs and regulatory barriers stifle the free flow of cultural goods and services.

EU Funding: A Lifeline for Resilience

Amid these challenges, the EU has emerged as a critical stabilizer. The Creative Europe program, with a 2021–2027 budget of €2.44 billion, has become a cornerstone for supporting creative sectors in Eastern Europe. For Ukraine, the program's 2023–2025 expansion-from €5 million to €7 million-has funded projects like ZMINA Resilience and Culture Helps Solidarity, which focus on heritage preservation and post-war recovery, according to a Eureporter report. These initiatives not only provide immediate relief but also signal the EU's commitment to long-term cultural investment, even in conflict zones.

Similarly, Georgia and Armenia have benefited from EU4Culture, a program that aligns regional cities with the European Capitals of Culture model. Implemented by the Goethe-Institut, this initiative has supported 14 cities in the Eastern Partnership region, fostering cultural strategies and artist mobility. Such programs mitigate some risks of instability by creating structured frameworks for collaboration and funding.

Calculated Risks: Where to Invest

For investors, the key lies in identifying opportunities within the instability. The EU's emphasis on cross-border projects-such as the Creative Europe European Cooperation Projects 2025, which allocates up to €2 million for large-scale collaborations-offers a blueprint. These grants prioritize partnerships between at least three countries, reducing the exposure of individual investors to local political risks.

Case studies like Ukraine's UAxEU project illustrate this model. By linking Ukrainian cultural organizations with European counterparts, the initiative not only preserves cultural identity but also opens new markets for creative exports, as described in the earlier Eureporter report. For investors, such projects represent a hedge against volatility, as they diversify geographic and political risk.

However, caution is warranted. A 2025 report by MCC Brussels warns that EU cultural funding may inadvertently serve ideological agendas, potentially alienating local communities. Investors must conduct due diligence to ensure alignment with both financial and ethical goals.

The Path Forward: Diversification and Adaptability

The creative economy in Eastern Europe is at a crossroads. Political instability will likely persist, but the EU's funding mechanisms and the region's cultural richness present a compelling case for investment. Success will depend on adaptability-leveraging EU grants to offset local risks, prioritizing cross-border collaborations, and staying attuned to geopolitical shifts.

As the war in Ukraine enters its fourth year and populist movements gain traction across the region, one thing is clear: the creative economy's resilience will be tested. Yet, for those willing to navigate the turbulence, the rewards could be transformative.