Whenever there is a crisis in Europe, and the EU has to evolve, the rejoinder goes up that Jean Monnet, one of its founding fathers said ‘Europe needs a crisis to move forward’, and Europe then muddles through. It is, however, worth noting a different point of view. Monnet’s father, a merchant from Cognac is on record as saying, “Every new idea is a bad idea.”

Monnet senior’s views would not find as much favour in Brussels as before, largely because the world is changing rapidly, and Europe’s leaders are waking up to the new to realities of the end of the globalized world system and the arrival of a multipolar world, thanks in large part to the actions of three ‘strong’ men- Donald Trump, Vladimir Putin and Xi Jinping.

Trump has sowed doubt in European minds that the US may be in political decline and that it could be a less reliable partner, Xi has awoken them to the realization that trade with China involves a double-edged compromise, whilst Putin reminds them that Europe is again challenged by uncompromising evil, and needs to combat this.

I have written many times about the gathering momentum towards the notion of Europe as a geopolitical power. What is new is the speed at which this is happening. Europe took some five years to bring order to its fiscal and economic policy, and this is still half-formed. In contrast, European foreign, security, energy and political policies have been transformed in six months. The import of this transformation is not yet appreciated in Beijing, Washington, and London.

These capitals may feel that they are better off dealing with individual governments in Europe than the EU itself. Brexit, where the EU Commissioner was the trusted negotiator for the 27 countries, showed that this is increasingly less the case, and the response to the energy crisis also shows that EU countries are better together.

In the next few years, the idea of Europe as a power is likely to take hold. Practically what this means is that it will seek a more distinctive and powerful voice (at EU level) on foreign policy and that this will be informed by the EU’s social democratic values.

Correspondingly, Europe will have a more coherent, broader defense and security policy that will spill over to the idea of industrial sovereignty – effectively Europe will be ‘self-sufficient’ or have autonomy in key defense, industrial and technological areas. To a certain degree, Europe is simply catching up with the US and China here. From an investment point of view, we should expect to see deep secular trends in green energy, environmental technologies, defense and cyber security, and consolidation across fintech and healthtech in Europe.

Sceptics may feel that they have seen it all before.

There are clear hurdles. The first is the game-theoretic aspect of shaping ‘common’ policies, and then ensuring that the implementation of these does not fall foul of political developments in individual member states (e.g. Italy). Additionally, with Germany still in a state of geopolitical confusion, much depends on France getting on with the likes of Lithuania and Poland.

The second is the implementation – for instance fostering innovation in new technologies and building a tangible sense of what ‘European values’ mean to people, are best done bottom up (a very good example is the recent launch of Democracy Next, than top-down as is the way in Brussels.

In that respect, there are a few proving points ahead. One is whether the EC will appoint a high profile foreign affairs commissioner and give him/her additional power and institutional capacity over policy, so that they do not play second fiddle to the French and German foreign ministers. Another test relates to the nature of defense spending and, apart from all the tanks and helicopters that individual armies like Germany need, whether more is spent on ‘common’ defense infrastructure such as heavy lifting aircraft. Related to this, a further test is whether the EU is prepared to take aggressive, as opposed to defensive, action against another state. An EU coordinated cyber-attack on one of a number of ‘Internet Research Agencies’ would be a significant development.

One ‘test’ that is looming is in the realm of democracy. Europe’s leaders have talked a lot about its democratic values, and the invasion of Ukraine has brought this into stark focus. What is new is that this debate was the focus of Ursula von der Leyen’s annual address last Wednesday where she criticized ‘Trojan horses that attack our democracy from within’ and notably stated that ‘many of us have taken democracy for granted for too long. Especially those, like me, who have never experienced what it means to live under the fist of an authoritarian regime’.

In that context, Hungary is the test case. It is likely to be deprived of billions in EU funding (up to Eur 40bn), and there is growing talk of finding legal means to exclude it from the European Council, and potentially the EU. The current mood in Brussels is, given Viktor Orban’s closeness to Russia, to push Hungary very hard. 

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