Europe’s Coming Out Party: Can the EU Fill the Void Left by the US?

The US Retreats, Europe Steps Forward on the Global Stage

Nature hates a vacuum, the saying goes. As the US retreats from the world stage, eschewing its leadership in geopolitics, and abandoning decades-old treaties, advanced research, humanitarian aid and peace-keeping, it’s leaving a large hole.

Europe fits that hole rather well. While the US runs away, Europe is busily entering into new trade and protection treaties, particularly in Latin America and Asia. Examples include deals with Mercosur, Mexico, and India, as well as renewals of agreements with countries like Chile and Switzerland.

EU Invests in Research to Attract Global Talent

While the US Government wages war on universities — gutting federal research funding and reducing or eliminating visas for foreign researchers — EU President Ursula von der Leyen unveiled a half-billion-euro plan to attract foreign researchers (read “US”). This would be a mirror image of when European scientists fled Europe in the late 1930s to escape authoritarian and antisemitic governments. The result was a US intellectual powerhouse.

Europe’s Defense Renaissance: €800 Billion ReArm Europe Initiative

Near-abandonment of NATO by the US has spurned Europe into action on another front, announcing a new €800 billion ($843 billion) package to “rearm” the continent, dubbed ‘ReArm Europe.’ Adding insult to injury, the EU is going to avoid buying US-made systems and favor European ones. Decreasing dependencies on the unreliable US and increased spending in the EU is a win-win.

SAFE Plan: €150 Billion to Strengthen European Defense Procurement

Increased spending will come largely in the form of a new loan plan, called "Security Action for Europe (SAFE)," which will provide up to €150 billion in loans to member states for defense investments. This will encourage collective procurement in critical areas like air defense and cybersecurity.

Eurozone Debt as a Safe Haven: A New Alternative to US Treasuries

That leads me to the last point, which is that US Treasuries are taking a beating. Investors worldwide are selling off USTs. Unfortunately, up till now, there were no good safe haven alternatives.

With Europe now issuing more common debt, backed by more reliable governance, investors have an alternative. If it gets competitive, Euro zone debt may become as cheap as USTs were for the US.

Challenges Remain: Can Europe Unite to Lead Globally?

This is not to say that all is unicorns and rainbows. The European reality remains the same. It cannot speak with one voice because it does not speak in one language or share a similar culture. This gulf is especially deep between eastern and western Europe.

When push comes to shove, will its common interests trump (sorry, had to) inter-country tensions and distrust? If it does, then Europe is ready to fill the America-sized hole in the world and prosper.

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