With Donald Trump’s America looming on one side, Vladimir Putin’s Russia on the other, and China growing increasingly authoritarian, Europeans can no longer afford the passivity of their leaders. And democrats around the world are also waiting for the only “good guy” left in the world to make money.
By Andres VELASCO
With the United States in shambles, China increasingly authoritarian, and Russia in full Dr. Evil mode, the world desperately needs a “good guy” it can trust. There is only one candidate for that role: Europe. No other country or Region is simultaneously free, prosperous, endowed with the right values, and big enough to be an example to the world. But it is not enough for the “good guys” to be good. They must also be strong and determined. And that is where, unfortunately, Europe fails. At present, Europe appears to be anything but strong. It appears weak.
First came the so-called trade deal with the US. As my colleague at the London School of Economics, Luis Garicano, wrote, it was “not a deal, but a capitulation.” Europe made a series of concessions, including accepting 15% tariffs on its main exports, in exchange for nothing.
Then came the August 18 meeting of European leaders at the White House. If there is one art that President Donald Trump masters to perfection, it is that of setting the stage. He sat in his big chair, behind his big table, while the leaders of Germany, France, Italy, Finland, Ukraine and the United Kingdom, plus the president of the European Commission and the secretary general of NATO, stood on the other side like beggars hoping to land a job on his former television show The Apprentice. No photograph could more clearly convey the profound disparity in courage – and in real power.
But there is no reason why Europe is doomed to kneel before a rebellious American president. Europe has a much larger population than the US, and the combined GDP of the European Union, the UK and other wealthy countries outside the EU, such as Norway and Switzerland, approaches that of the US.
The truth is that Europe’s weakness reflects its faults. Let’s start with the biggest: security. Garicano puts it well: “You can’t win a trade war against the army that protects you.” Sixty years ago, French President Charles de Gaulle’s obsession with an independent European defense capacity seemed like Gallic stubbornness. Today, it seems visionary. Russia’s aggression has shown that Europe is naked without American security guarantees – which it cannot rely on as long as Trump is president. Europe is not doing enough to address its security deficit. It is true that defense spending has been rising. Of NATO’s 28 European members, 20 spent more than 2% of GDP on defense in 2024 – an increase of 0.6 percentage points in just two years. But that is still far from the 3.4% that the United States spends and the 4.7% that Poland is expected to reach in 2025.
Defense purchases in Europe are also fragmented, with each country trying to create jobs by buying weapons domestically. The result is inefficiency and delays. The proposed European Defense Mechanism, which would include Britain and serve as a joint procurement agency, is a much better way forward, as is the idea (at least in the short term) of the US buying the weapons that Ukraine and Eastern Europe need to be secure.
All of this raises the question of how Europe can finance its rearmament. The EU has yet to complete either a capital markets union (which would allow companies to borrow more cheaply across the continent) or a banking union (which would break the “vicious circle” between banks and their national governments). Nor has it yet permanently created a class of bonds issued jointly by the EU on behalf of all its members. A raft of EU debt was issued under emergency powers during the COVID-19 pandemic, but it is not clear whether this debt will be rolled over when it matures, let alone serve as the foundation for something larger and more sustainable.
This is unfortunate, because a common Eurobond would bring great benefits to Europe. Eurobonds would also help the euro become a global safe haven asset, and the time is right for this change.
After all, thanks to Trump’s behavior, the dollar is increasingly looking like an emerging market currency, and investors everywhere are looking for an alternative. From an investor’s perspective, EU-backed bonds, unencumbered by the political and economic fluctuations of individual countries, would be safer. As a result, they would have lower interest rates, saving Europe a lot of money.
But a global euro would probably also be a stronger euro, and that makes politicians from export-oriented economies like Germany and the Netherlands hesitant. But perhaps a stronger euro would be the perfect excuse to complete another giant unfinished business: the single market. The EU is supposed to be a fully unified market for trade in all goods and services, but the truth is that many obstacles remain. For every 100 euros of value added in EU countries, only 20 euros of goods circulate between them. For the US, the equivalent figure is 45 out of every 100 dollars. This costly fragmentation was one of the main themes of Draghi’s voluminous report on EU competitiveness, published in September 2024 – and now gathering dust on a shelf in Brussels.
Europe’s external weakness is the result of its internal weakness. The continent’s politics remain as petty and short-sighted as that of any local municipal council. When former German Chancellor Angela Merkel promised in 2012 that there would be no eurobonds “as long as I live,” she was not exercising visionary leadership, but simply trying to appease local beer hall nationalists.
And when, most recently, the liberal-internationalist French President Emmanuel Macron did everything in his power to block the EU-Mercosur trade deal, he was simply making fun of local farmers. If this is the kind of leadership Europe gets from its most prominent figures, what can Europeans expect from the continent’s lesser politicians? With Trump looming on one side and Putin on the other, Europeans can no longer afford the passivity of their leaders. The “only good guy” left in the world must make money. Democrats everywhere are waiting.
