The United States has fundamentally altered the global economic landscape, leaving European economies without the insurance they previously relied upon for governance, business, and investment stability. For the last 80 years, the US served as the insurance provider for almost every actor in the world economy, but its withdrawal has created a void that Europe must now fill. This shift has forced the EU into a new economic geography where it possesses more agency to shape its environment and more opportunities for gains than is commonly realized.
Pursuing US-style or Chinese-style industrial and trade policies will fail, as these approaches are incompatible with Europe's core values and economic structure. The EU is uniquely positioned to be itself, reaching out through 'principled plurilateralism' to make deals in a multilateral spirit that is rules-based, open, and transparent. This strategy allows Europe to capitalize on its relative advantages: being more open and rules-based than both the US and China, while maintaining a degree of financial stability that the US is no longer providing.
The global role of the euro is set to rise rapidly in this new environment, particularly if the euro area remains a region of relative financial stability and open to foreign capital inflows. As the US induces financial instability at home, the euro can become a stabilizing factor for the international system, offering a reliable alternative to the dollar. This shift is not merely symbolic but represents a fundamental realignment of global financial power.
Europe's way forward is to embrace its identity and forge new alliances based on shared principles rather than forced dependency. The EU must make deals with partners like India and countries within the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, without waiting for every veto player at the WTO or elsewhere. By doing so, Europe can build a robust, independent economic future that is resilient to the whims of external powers.
