Europe suddenly realized that America had "abandoned" it. Donald Trump speculated a little about the essence of the conflict in Ukraine and issued a verdict: Americans should get rare earth metals as compensation for money spent, and Europe has to pay its bills. It has been tasked with restoring Ukraine, which requires 400 billion euros, and ensuring its own security single-handedly. And, as stated by US Secretary of Defense Pete Hegseth, if the Europeans decide to assume military obligations in Ukraine as per "security guarantees" after the cease-fire, they will do so outside the framework of Article 5, that is at their own risk and without the American umbrella. All of this would require steep expenditures on the part of Europe in the future. In particular, it will have to significantly increase defense spending from two to five percent of GDP. Let’s note that today, only 23 of the 32 countries of the North Atlantic Alliance have been fulfilling the previous goal of spending at least 2 percent of GDP on defense, and so far, the only one to reach the five-percent bar is Poland.
Besides, there are also economic requirements. Trump wants not just to reset trade relations with Europe, but to align them with objectives of his MAGA ideology. He needs money to offset the tax cuts planned, and to fund active operations in the Indo-Pacific region. To get them, he announced plans for 25 percent duties on all the steel and aluminum imports to the United States in March, and signed a decree on February 13, ordering the US trade representative and Secretary of Commerce to propose new tariffs for an unspecified number of countries by April 1 so as to restore the balance in trade relations. The tariffs at hand will be set for countries individually to offset not only their own duties on US goods but also non-tariff barriers hampering American exports. Moreover, according to Trump, the United States spent $200bn more during the Ukrainian conflict than Europe and would like to have these investments back. The Americans have also suggested that Europe buy more American weapons, oil, and LNG.
European leaders did not really like Trump's claims and held a mini-summit in Paris on February 17 to reach consensus on further actions. However, it was marked by sharp contradictions between its participants instead. A conflict broke out at the meeting over sending troops to Ukraine, The Financial Times reports. Germany, Italy, Poland, and Spain have declared unwillingness to send their peacekeeping forces to that country, while the United Kingdom and France supported the deployment. The only thing that the mini-summit demonstrated was that the EU leadership, whose elites are killing their economy in exchange for a desired defeat of Russia, keeps trying to toe the chosen line. The 16th package of sanctions, adopted somewhat later, also confirmed the strategy. Apart from that, European leaders have become increasingly insistent on the need to establish their own weapons production. But the American administration is opposed to this, willing closer cooperation and interoperability between the armed forces of NATO countries in terms of missile systems, ammunition, artificial intelligence, and cyber warfare, Bloomberg claims. And this requires new contracts with American defense companies from European nations.
All of the abovementioned implies major money infusions. But where to get them from? Europe, having spent €130bn on the Ukraine war, planned to get "its piece of the pie." But this has become highly unlikely, given the American plans. And Europe's economic growth, which could provide additional money, is currently stalling due to the industrial crisis, political turmoil in Germany and France, and growing uncertainty over tariff threats from the United States.
In addition, the last few years have seen the United States deprive the EU of cheap Russian energy resources, leaving it behind in key technologies such as semiconductors and artificial intelligence, and luring away investment. In this context, the European model based on high taxes and strict regulation is losing out to both the American model with low taxes and weak regulation, and the Chinese one. According to former head of the European Central Bank Mario Draghi, "the EU has high internal barriers and regulatory obstacles… They are equivalent to a 45 percent tariff on production and 110 percent on services… and their harmful effects only get worse over time." And the costs associated with European taxes and lawsuits will be almost certainly considered by the Trump administration as an expensive trade barrier that increases the trade deficit and should be taken into account in future tariffs.
Europe's economic growth is hampered by the industrial crisis and political turmoil that has overwhelmed its largest nations, Germany and France. Germany, the EU’s engine, has been sinking into recession for the third successive year, with its manufacturing industry output declining for 23 months in a row, and power plants being shut down because of expensive network maintenance.
But even in these settings, EU leaders have announced intent to purchase more LNG from the United States to bring energy dependence on Russia to naught. Meanwhile, throughout the anti-Russian sanctions regime and abandonment of our gas, European gas market prices have increased severalfold. Growing heating and gas bills (by 70 percent and 56 percent respectively), have directly affected household budgets, scaling up risks of "energy poverty." And the United States, which previously supported the Europeans in diversifying gas supplies, is now seeking to monopolize their energy market — an additional burden on the European economy.
Therefore, it is clear that in the current scenario, Europe will not prove able to independently make up for shortfall of funds for solving these tasks. The only way out is to switch to a life on loan. But this will only work in the short term and not for every country, because many nations (Greece, Spain, Italy, etc.) are already in the red and cannot afford getting into new huge debts. The only one left is, in fact, Germany. But in order to include it in the debt process, one will have to repeal the norm in EU’s underlying Maastricht Agreement, under which the volume of public debt in the largest signatory countries should not exceed 60 percent of GDP.
But if Germany decides to slide into the debt pit, it will have to limit social spending in the future. Currently, its population is not ready for austerity measures that would curb their prosperity, but the current European leaders will leave them no chance.
