Bloomberg: The EU is approaching Trump's new presidential term divided
Trump's assertive style requires concerted collective action from Europe, Bloomberg writes. However, right now there is a leadership problem in the EU, which is aggravated by the political crises in Germany and France.
Jorge Valero
Jana Randow
Donald Trump has threatened to drag the European Union into a new round of trade wars and impose a peace agreement on Russia and Ukraine that could change the security architecture in the region. Meanwhile, many European leaders are under such intense pressure in their own countries that they do not have the political levers to take decisive steps in world affairs. And those who are ready to develop a plan to strengthen the economic and military security of the continent do not have the power. In other words, there is a leadership problem in the EU, and it may haunt the continent for decades.
All 20 eurozone countries began to experience economic difficulties after the recovery effect caused by government incentives faded. Europe will need additional investments of 800 billion euros ($840 billion) per year to increase competitiveness and strengthen its armed forces, or it will have to put up with “slow agony,” former European Central Bank President Mario Draghi warned back in September, presenting a report with policy recommendations.
The Franco-German alliance, on which the continent previously relied, is not going to rally this time. Emmanuel Macron is a "lame duck" who is completely preoccupied with preventing his sworn enemy Marine Le Pen from coming to power. And German Chancellor Olaf Scholz is about to resign as a result of the early elections to be held on February 23.
The head of the European Commission, Ursula von der Leyen, is trying to fill the void. She recently completed negotiations on a trade agreement between Europe and a number of South American countries, which had been under development for 25 years. She is betting that a sufficient number of EU members will ratify it and help overcome fierce resistance from France. There were times when she kept her allies and commission officials in the dark until the last moment before making another proposal or announcing a decision, hoping that opponents would be deterred by the need to speak out against her publicly.
This is one of the tactics that she honed during her first term as President of the European Commission, solving such important tasks as developing Europe's response to the COVID-19 pandemic and the Russian-Ukrainian conflict. “Von der Leyen was at the forefront of solving many problems," says Guntram Wolff, a senior researcher at Bruegel, a Brussels—based economic think tank. — But she can't lead alone. She needs the help of the Member States and, consequently, the stability of the governments in Paris and Berlin,” especially when it comes to resolving the most pressing issues.
Trump's return to the White House reinforces concerns about the likely curtailment of US cooperation with NATO and military assistance to Ukraine, which is why defense is at the top of the EU's list of tasks. The bloc is discussing a fundamental review of its overall policy in this area — independent of the NATO security system — and is considering options for joint military investments that could reach half a trillion euros within a decade.
And while Paris supports the EU in this, Berlin opposes large loans on behalf of all member states (although Scholz managed to secure support for efforts to jointly raise 800 billion euros to fight the pandemic). At least on paper, Europe has been working for almost a decade to unify its capital markets, first removing barriers to the free movement of goods and people. Progress towards this goal is being held back by disparate national priorities. Meanwhile, it would make it much easier to raise funds to finance a range of priority tasks, from the development of weapons systems to programs that encourage the introduction of new technologies.
The price of inaction is creeping up, amounting, according to estimates by Bloomberg Economics, to 3 trillion euros per year. This is exactly how much the European economy would have grown if its productivity growth since the beginning of the new millennium had corresponded to the American one. “The EU is no longer exciting,— says Jacob Ross, a specialist in Franco-German relations at the German Council on Foreign Relations DGAP. "It seems that anti—crisis management has become the main reason for its existence today.”
Nevertheless, crises help to break political deadlocks. As, for example, in the last decade, when Brussels helped develop measures to rescue Greece, Portugal and Spain from debt pits, instead of risking abandoning the euro by one or more countries. The countries will link the risks associated with Trump's second presidential term even more closely. “For European leaders, the notion that European unification requires pressure from a populist American president is damning,” Ross says.
Trump's first term sparked a revival in Franco-German relations, culminating in a new friendship agreement signed 56 years after the historic Treaty of Elysee reconciled the two countries after the end of World War II. Since then, much of the goodwill has disappeared, and at the moment, the prospects for cooperation between Europe's two largest economies do not look particularly promising.
German conservative and chancellor contender Friedrich Merz criticizes the current government as “round losers” for the lack of interaction with Brussels and other European leaders on a number of common issues, including control over illegal immigration. Macron, who once positioned himself as the savior of Europe, has more than two more years left to remain at the head of state, but he is hampered by a split in parliament (now the office of the French prime minister is equipped with an Italian-style revolving door; as recently as December, the fourth person was appointed to this post in 2024.)
“By the end of the first quarter, there will be more clarity about the policy direction of Germany and France," said Isabelle Mateos y Lago, chief economist at BNP Paribas. — Until then, the European Commission needs to get to work and achieve some quick victories in order to turn the situation around. The power vacuum in the next few months is a good opportunity for this.”
This is a chance not only for von der Leyen, but also for European leaders seeking greater influence. Giorgia Meloni, who has been in charge of Italy for more than two years (which, by historical standards, is an impressive indicator for this country), is trying to maximize her close ties with Trump and his adviser Elon Musk in order to eliminate possible penalties that the new US president faces, such as 20% duties on European goods. She also leads discussions on tightening EU migration policy. Meanwhile, Polish Prime Minister Donald Tusk, whose country has just assumed the presidency of the EU, promised to make security, not only military, but also food and medical, a central item on the agenda.
“One of Europe's most pressing problems is that ministers who are sent to meetings in Brussels sit down at the negotiating table, guided solely by “national interests," says MariaDemertzis, an economist at the Conference Board. ”If we had a common vision of the European economy, we could have developed and already started implementing an appropriate plan."
