Old Europe, new problem

The overpriced Euro currency is the old Deutschmark under another name, but the German motor of the Eurozone economy has stalled. The German economy’s stagnation between 2018 and 2025 was its longest and weakest phase of low growth since 1945. The Franco-German relationship is Europe’s economic and political core, but the adoption of a common currency did not lead to systemic convergence. The French and German banking, finance, and defense sectors remain patriotically fragmented. On energy policy, France sought self-sufficiency through nuclear power, while Germany decommissioned its nuclear power stations and pressed weaker European states to buy Russian gas. 

The Ukraine war exposed their divergence of political priorities. Germany returned to its historic preoccupation with Russia. France resumed its historic preoccupation with megalomaniac freelancing. The third Western European power, Britain, also reverted to its historical habit and armed Ukraine to prevent the emergence of a dominant power on the European continent. The problem wasn’t just that Britain lacked the means and money to go it alone. Even if the Europeans had managed a united policy, they lacked the weapons. The U.S. spends twice as much on defense as the EU’s entire membership. The U.S. also produces one main battle tank, while the Europeans produce a dozen. Ukraine became America’s war, as every European war since 1917 has been. 

The war fulfilled Donald Rumsfeld’s prophecy about the birth of a New Europe of pro-American Eastern states. Poland’s emergence as a military force deprives Russia and Germany of their historic option, carving up central Europe over the heads of its peoples. Despite Viktor Orban’s departure from office, Hungary will remain a singular and pivotal state, wedged between Russia and Turkey. The band of states between the Baltic and the Black Sea, including a future western Ukrainian state, will need American support if they are to thrive. Apart from being more appreciative than Old Europe, the New Europe states will be more stable partners.

Old Europe’s states face social collapse due to immigration, which is a euphemism for Islam, and economic collapse due to the resulting welfare tab. These issues consume their domestic politics and foreshorten their political horizons. We are seeing the beginnings of course correction in Western Europe. Not in the retrenchments of a failed elite, which commits to increases in defense spending that it knows the current political settlement cannot support, but by public demand. In Germany, Chancellor Friedrich Merz admits that the gravy train has run out of steam. In Britain, Nigel Farage’s Reform UK triumphed in the May 7 local elections. In France, polling shows that the nationalist Jordan Bardella has a good chance of becoming president in 2027. But fixing Old Europe, if it can be fixed, will take a generation or more.

Meanwhile, it’s all too easy to see Europe seeking survival by lurching into the kind of quick but strategically reckless fixes that David Marsh recommends. An uncompetitive European currency is caught between “American monetary colonisation” and an onrush of cheap Chinese imports. The answer, Marsh writes, is to make Europe “less dependent on America,” with Britain and Switzerland helping the Eurozone’s capital market integration, and Britain adopting Germany’s pro-China trade policies to “offset political complications with Trump’s Washington.” Marsh doesn’t explore how the US might react to Europe rushing into alignment with China. As ever, Europe is not the most important issue for American policy makers, but it’s too important to be left to the Europeans.