As Europe deals with a series of ongoing crises – Russia’s invasion of Ukraine, the rise of populist nationalism and increasingly difficult economic challenges – along comes another: the re-election of Donald Trump. While not unexpected, it has come as a shock. For most European leaders, a second Trump term threatens to make the continent’s challenges even harder. The president-elect has said he will end the war in Ukraine ‘in a day’, impose significant trade tariffs and has praised populist leaders.
Trump’s clear mandate will allow swift policy changes almost certainly in line with his nationalist and transactional approach to politics, trade and international relations. This nationalist ethos is at odds with the very nature of the European integration process, which unites 27 member states that share aspects of their sovereignty at a supranational level. As such, Trump’s second administration has the potential to trigger a deep crisis in the transatlantic relationship.
Yet, as the European Union’s founding architect Jean Monnet predicted: ‘Europe will be forged in crises and will be the sum of the solutions adopted for those crises.’ Once again, these words ring true. I can attest to them from my own experience as a former president of the European Commission between 2004 and 2014.
For instance, I recall a brainstorm meeting that I convened with the chief economists of the major EU banks during the eurozone crisis in 2012 – almost all of them insisted that Greece would have to abandon the euro and half thought the common currency would not survive the year. More than a decade later, Greece remains in the eurozone and the European currency is second only to the US dollar. Since then, far from disintegrating, the EU has proved its resilience twice more, in the pandemic and in response to Russia’s full-scale invasion of Ukraine.
In that spirit, Trump’s new presidency could act as a trigger for Europe to deal with its most pressing issues. Indeed, if it responds strategically, the EU has a chance to cease being a geopolitical teenager and progressively assert itself on the world stage alongside America and China. Here is how it might do that.
Ukraine and the security of Europe
Of the crises facing Europe, security is the most urgent. By ‘Europe’, I refer not only to the EU but also to the UK and other European partners. One of Trump’s pledges has been to swiftly end the war between Russia and Ukraine. That is improbable. Were some sort of ceasefire, or ‘separation of forces’, to be achieved, it would be unlikely to represent a true reconciliation.
Trump seems to believe that ceding Ukrainian territory will achieve ‘peace’. Even if Ukraine accepted such a proposal, it would be unlikely to satisfy Vladimir Putin. This war is existential for the Russian leader. He is not in a position to tell his people that hundreds of thousands of casualties have been in vain. The deeper issue for Putin – whom I met more than any other non-EU leader in my time as president of the European Commission – is about the very existence of Ukraine as a country separated from the Russian sphere. He is far from committed to constructive peace efforts.
Europe must sustain its support for Ukraine. NATO membership is de facto now impossible and EU accession distant and problematic. If Trump fails to strike a deal and withdraws America’s support for Ukraine, Britain, France and Germany will not be able to offer credible security guarantees. Nevertheless, European allies should prepare to continue and reinforce their support to Ukraine. The alternative – some form of acceptance of Kyiv’s defeat – would affect not only the entire EU, but NATO and America.
From China to Africa, the world is watching to see if Europe and America will defend the post-war liberal order. What is at stake is much more than the existence of Ukraine, it is about the new global power relations. Positive, indeed striking, steps have been taken. NATO has strengthened its capabilities, and what was once unthinkable – Sweden and Finland joining the alliance – is now reality. Denmark voted overwhelmingly in a referendum to abolish its 30-year-old opt-out clause from EU security policy. Germany’s commitment to significantly increase its investment in defence is also notable, as is the open discussion of the country’s sacrosanct ‘debt brake’.
The EU has also increased its defence commitment, although this shift has not been fully recognized by the public. Since the bloc raised €800 billion in debt during the pandemic, the possibility of joint borrowing for defence is now on the table.
Taboos are being broken. There will be no return to the status quo ante. Beyond Ukraine, Europe should prepare for the long term, and that includes the likelihood of lasting confrontation with Russia. The old adage still applies: if you want peace, prepare for war. This means the EU must strengthen its defence capabilities. It was once thought – notably by Britain – that a European defence policy would threaten NATO. No longer. The conditions are building to develop a common defence policy that can become the European pillar of the transatlantic alliance.
The ongoing war on European soil is one obvious cause; another is the clear need for European countries to take more responsibility for their own defence, as Trump exhorted repeatedly during his first administration and since. Today, 22 European NATO members are spending at least 2 per cent of GDP on defence, up from five in 2021. Poland leads in this regard – its defence spending is now 4 per cent of GDP and it plans to increase its defence budget next year.
While an asymmetry of interest exists among EU member states on these issues, the reality is that there is a critical mass for progress towards a stronger European defence. We should not forget that the current Treaty on European Union allows, through the ‘enhanced cooperation mechanism’, to build coalitions for a common and more ambitious approach. The argument that unanimity is required in matters of European foreign policy or defence is simply false, and often used as an excuse for inaction.
Despite Trump’s doubts about NATO, it should remain in America’s strategic interest to preserve the treaty – not least because anything perceived by Russia as a victory in Europe would also be regarded as such by China, America’s strategic rival. European leaders should impress upon Trump’s team that NATO has long been to America’s economic benefit too.
With increased investment in defence, immediate steps should include the modernization of militaries and whenever possible the realization of joint capabilities and mechanisms for stronger cooperation. Additionally, the European Defence Industrial Strategy, proposed in March, rightly sets the goal of achieving EU defence industrial readiness. Momentum is building for a European defence policy and security identity that is compatible with NATO. I believe it will happen.
The threat of populist nationalism
Trump’s remarkable victory encourages the rise of populism in Europe but also holds important lessons for countering it. He has reshaped the political landscape, often making bold, unconventional statements that break with established norms.
Yet this impressive electoral success was largely due to Trump’s ability to speak to the genuine concerns of US citizens, particularly on issues related to the purchasing power of middle- and low-income households and matters of public security, rising crime and illegal immigration. In Europe, these last issues have often been avoided by mainstream parties for reasons of ‘political correctness’, even though they reflect legitimate public concerns.
Subjects such as identity politics and other topics of the ‘culture wars’ have taken on a disproportionate role in politics, leading some to argue that the Democratic Party in America has lost touch with the concerns of the working class. To a certain extent, the same is happening with some parties in Europe, where we can see direct transfers of votes from the left to the ‘far right’. A recalibration by centrist leaders, whether on the left or the right, is essential. If they fail to address the issues that matter most to the majority of citizens they risk losing voters to more extreme forces.
In some ways, this recalibration is already taking place in Europe. Visible in several European capitals is a trend in centrist politics to focus greater attention on internal security, including on issues such as immigration. And provided these centrist forces do not give up on the democratic values they say they are truly attached to, this is the most effective way of defeating the extreme right’s electoral ambitions.
The EU must strive to be a broad church, accommodating different perspectives. All member states need to respect the rule of law and EU core values, as outlined in Article 2 of the Treaty of Lisbon. But this should not be seen as limiting political parties that are not in the centre of the political spectrum.
At the same time, parties on the fringes are attempting to appear more mainstream. For instance, the Brothers of Italy party of Giorgia Meloni, Italy’s prime minister, once presented as ‘neo-fascist’, is now positioning itself as centro-destra (centre-right). A similar shift occurred with the extreme left-wing Syriza in Greece during the eurozone crisis.
For those member countries engaging in consistent democratic backsliding, the EU has the ability to resort to infringement procedures, and to adopt measures such as withholding funds. But it is highly unlikely that the ultimate sanction, the suspension of membership rights under Article 7, will be applied. For that, unanimity of the remaining 26 member states is required. In any case, these are sovereign countries: persuasion, diplomacy and other creative means are far more preferable.
Reversing economic decline
It is no exaggeration to say that Europe has been in economic decline for at least a decade. The bloc has been losing the economic competition with the US, China and others. Internally, the prioritization of vested national interests by EU member states has inhibited further integration – for instance, opposition to cross-border consolidation in the banking sector comes from national resistance, not from European competition policy.
But the economic decline of Europe has been a slow-motion crisis, which partly explains why EU leaders, operating in a system that favours procrastination, have not been taking the bold decisions necessary.
Against this background, Trump 2.0 serves as a wake-up call, especially if he makes good on his threats to pursue tariffs on EU goods. The EU has clear vulnerabilities, from its demographics to energy dependence, and without determination it will struggle to maintain its position in the hierarchy of global power and effectively pursue its strategic interests. For example, high-profile EU policies such as the Carbon Border Adjustment Mechanism, designed to protect Europe’s environmental standards, are likely to face strong opposition from Trump’s agenda.
Regarding the short-term threat of tariffs, the EU should first seek to use its leadership position to engage strategically with the US, demonstrating that both blocs stand to lose significantly from a trade conflict. By emphasizing mutual economic interdependence, the EU can work to dissuade unilateral actions. At the same time, the EU must remain ready to retaliate if necessary, ensuring that its response is measured, coordinated and aligned with its long-term economic interests.
In addition, as a report this year from Mario Draghi, former president of the European Central Bank, points out, the EU is losing ground in terms of competitiveness. There is also a funding gap that requires the EU to mobilize an additional €750-€800 billion a year, as much as 5 per cent of the EU’s GDP, to keep pace with its main competitors. For instance, the EU is dramatically lagging behind America and others in the ongoing scientific and technological revolution.
There is a real danger that Europe loses any possibility of being relevant in the technologies that are shaping the future of the economy. Most worryingly, this is happening in artificial intelligence, quantum computing and biotechnologies, which are dual-use technologies with important defence implications.
Given the scale of current challenges, such as support for Ukraine, migration, the green transition and the need for investment in new technologies, it is clear that a common approach is needed. To do that, instead of complaining about the actions of others, Europe must do its homework – in particular completing the single market, especially in services, and advancing the capital markets union.
The absence of action in this field remains one of Europe’s major disadvantages compared with the US, preventing the necessary mobilization of private funds. The banking union, previously designed and proposed by my Commission, is another key area where lack of progress, namely on the European Deposit Insurance Scheme, has raised some doubts about the determination of countries to integrate further.
A new industrial policy
To address growth and competitiveness concerns joint borrowing will be necessary, especially given the constraints on individual national budgets. Europe must act as a single entity and Germany’s position will be crucial in that regard. I have no doubt that there is an understanding in Germany that it cannot be strong without a strong EU. Thus, Germany must be prepared to do what is necessary in terms of political leadership and financial commitment.
Ultimately, the EU needs scale to remain competitive on the global stage, from the single market to a capital markets union, from European defence to foreign policy. Now is the time for the EU to seize the momentum to develop an external economic policy, which is absent.
While the EU is usually proud of its trade policy, the reality is that its current policy is not aligned with its policies for competition, energy and climate transition, science and technology, to name just a few. Above all, it is now clear that the EU needs, just like its rivals, a true industrial policy. Without it, what remains of industry in Europe will be at risk.
The EU’s main competitors have been supporting their industrial sectors through massive subsidies and other measures which distort competition. As the realignment of global and regional supply chains is showing, this trend will only increase in the foreseeable future.