In Western capitals, shifting attitudes on China
Washington and Europe’s major capitals are taking a more critical view of China, and concern about the implications of Chinese investment is on the rise. The question is whether these governments can align their policies to formulate a coordinated response to the challenges posed by China’s rise. The international rules-based order is at stake.
Is the North Atlantic partnership in danger?
Over the past couple of decades, Europe has been quick to criticize the United States – especially when the man in the White House was not someone to European leaders’ liking. Nevertheless, Europe has not shied away from accepting U.S. protection. This hypocrisy is taking a toll on the Western alliance and undermining European and American interests around the globe.
The fragile German-French axis heads toward isolation
Germany and France want to lead the European Union, but their leaders, Chancellor Angela Merkel and President Emmanuel Macron, have adopted policies that endanger the bloc. Calls for greater centralization will alienate other member states, while hypocritical criticism of the U.S. and Russia will leave the Union isolated.
New narratives emerging on EU finances
The European Union’s inflexible budget process – constrained by seven-year Multiannual Financial Frameworks (MFFs) – has left the bloc almost incapable of handling major crises. The resort to ad hoc solutions over the past decade has only made the situation worse. Now, reformers are considering new revenue sources, and even more revolutionary steps such as EU taxes or a separate eurozone budget.
Western leadership leaves much to be desired
Huge economic imbalances are weighing on Western economies, while global power shifts threaten the world order. But those are not the problems that leaders in Europe and many politicians in the U.S. have chosen to focus on. Instead, they continue deficit spending to pay for handouts to their supporters and marginalize outsiders who think outside the box. This lack of visionary leadership is a major source of weakness.
Emmanuel Macron’s shrinking revolution
French President Emmanuel Macron vowed to abolish France’s left/right political divide and shake up the country’s bloated bureaucracy. Yet his promised spending and tax cuts have been underwhelming, while his timid attempts to downsize the “layer-cake” administration have only stirred up fierce opposition. Time is running out for Mr. Macron to create a “shock of confidence” to get the economy moving.
2018 Global Outlook: The Euro-Atlantic relationship
The transatlantic relationship can be described as a family matter – with the United States as the mostly benevolent patriarch and Europe as the dependent relatives. Relations had been cooling for at least a decade, but this process is being expedited by the presidency of Donald Trump. Both sides seem to agree that Europe needs to grow up and take charge of its own destiny. If so, we could be headed for a stormy late adolescence.
2018 Global Outlook: Another challenging year for Europe
The European Union is facing internal and external challenges that will continue to test its leadership in 2018. Politicians will struggle to agree on a reform agenda for the union against a background of tepid economic growth, Brexit, the migrant drama, geopolitical realignments, a rethinking of the international role of the United States, technology-driven economic dislocations, secessionist movements, and many other problems. Europe’s outlook is not entirely gloomy, however.
The EU’s tilt toward centralization
The European Commission has proposed creating a European Ministry of Economy and Finance, and transforming the European Stabilization Mechanism into the European Monetary Fund, controlled by Brussels. These steps toward economic centralization are dangerous for Europe’s competitiveness. What it needs is diversity and regional competition.