{"id":471641,"date":"2025-10-03T17:41:18","date_gmt":"2025-10-03T17:41:18","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/471641\/"},"modified":"2025-10-03T17:41:18","modified_gmt":"2025-10-03T17:41:18","slug":"european-countries-need-trust-to-rebuild-links-after-us-separation","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/471641\/","title":{"rendered":"European countries \u2018need trust\u2019 to rebuild links after US separation"},"content":{"rendered":"

European countries including the UK need to reinforce mutual trust and adopt a \u2018bottom-up\u2019 stance to strengthen co-operation, starting with defence, to overcome the problem of increasing separation from the US. That was a principal message from wide-ranging OMFIF seminars in London marking the publication of David Marsh\u2019s new book<\/a>, Can Europe Survive? The Story of a Continent in a Fractured World. <\/p>\n

A presentation at the German embassy by Joachim Nagel, Deutsche Bundesbank president, emphasised the increasingly political nature of central banking activities, extending beyond traditional areas of monetary and financial stability. He made a strong plea for greater European independence and reduced reliance on the US in digital payments and cloud technology.<\/p>\n

He sharply attacked US President Donald Trump\u2019s attempts to rein in the Federal Reserve\u2019s independence<\/a>, which he termed \u2018not acceptable\u2019. Nagel called upon European leaders to loosen their normal reticence over central bank independence, saying, \u2018We have to speak up here.\u2019<\/p>\n

Nagel\u2019s statements rounded off a series of gatherings on 29-30 September spanning the international geoeconomic landscape. These encompassed discussions on the role of Europe, China and the US, capital market integration, the future of public finance, digital currencies and payments and the position of gold and currencies challenging the dollar\u2019s worldwide role.<\/p>\n

\u2018Coalition of the willing\u2019<\/strong><\/p>\n

The discussion centred on Europe\u2019s opposing hopes and fears in a new age of uncertainty dominated by Trump and Chinese and Russian leaders Xi Jinping and Vladimir Putin.\u00a0There were contrasting views on some issues, such as Britain\u2019s newfound move to common ground with the European Union, but general agreement on some key themes prevailed, such as the need for a \u2018coalition of the willing\u2019 across Europe on central policy issues.<\/p>\n

\"\"<\/p>\n

L-R: Dimitar Radev, Lord Mervyn King, Mark Sobel, Yves Mersch<\/p>\n

Nations involved could include non-EU countries such as the UK, Norway, Switzerland and extend \u2013 particularly in military and intelligence areas \u2013 to Canada, Australia and New Zealand. This approach echoes the \u2018variable geometry\u2019 thinking favoured by some European leaders such as Jacques Delors, former European Commission president, in past years \u2013 a theme that forms a centrepiece of Marsh\u2019s book.<\/p>\n

Regarding the dollar\u2019s dominance<\/a>, despite the soul-searching over Trump\u2019s policies, there was little support for the contention that the euro or the renminbi would upset the US currency\u2019s status in the foreseeable future.<\/p>\n

\u2018Gradual fragmentation\u2019<\/strong><\/p>\n

The European economy was seen as insufficiently strong to shoulder a significantly enhanced role for the euro. \u2018Strong currencies need strong economies, not vice versa,\u2019 said one experienced euro area participant. \u2018The weaker the economy is, the less able it is to bear up under heavy regulation and the more likely you are to be circumvented globally\u2026 More European integration is unlikely this decade \u2013 and Europe doesn\u2019t have a safe asset.\u2019<\/p>\n

A seasoned central banker saw no likelihood that the euro would replace the dollar. \u2018More likely is gradual fragmentation, with countries using alternative payment routes and local currency pairs where convenient.\u2019<\/p>\n

\"\"<\/p>\n

L-R: Ignazio Visco, Anne Simpson, Mario Monti<\/p>\n

Another central banking veteran said: \u2018The euro cannot be made a world currency by decree. It evolves with growth, markets and security capability.\u2019<\/p>\n

On the independence of the US central bank, a well-regarded US speaker decried \u2018sustained political pressure\u2019, which was eroding US institutions. \u2018The risk isn\u2019t tomorrow\u2019s bond vigilantes, it\u2019s long-run fiscal dominance and a gradual move towards financial repression if left unchecked.\u2019 He pointed to the threat to international crisis mechanisms such as swap lines, should political appointees unduly interfere with co-operation during times of stress.<\/p>\n

Geoeconomics and demographics<\/strong><\/p>\n

According to one speaker, Europe was at the mercy of political actors who were using geoeconomics as a political tool and were finding it very difficult to come to terms with the new multipolar world. This speaker believed that Trump would succeed in bringing the Fed under political control. \u2018What Trump is doing to trade\u2019, the speaker said, \u2018is disturbing but nevertheless it will continue. Globalisation will not end completely \u2013 we are too far entrenched for that \u2013 but it will be eroded.\u2019<\/p>\n

The speaker added that Europe will be \u2018resilient\u2019 \u2013 but it would have to adapt to its low annual gross domestic product growth potential of 1%. \u2018Europe is more dependent on the US than ever, especially militarily, but has a lot of economic and soft power.\u2019<\/p>\n

Europe\u2019s demographic challenges raised the need for a switch to more capital-based pension schemes throughout Europe. US\/UK pension systems were seen as much more flexible than European systems and able to finance intangible assets with equity. However, some expressed that demographics can be viewed as glass half-full: \u2018There is a huge opportunity to attract global talent that is starting to turn away from the US.\u2019<\/p>\n

Structural reform<\/strong><\/p>\n

Considerable time was spent on examining Germany\u2019s more activist fiscal stance. The relaxation of the German debt brake specifically in relation to defence, and Berlin\u2019s setting up of a new \u20ac500bn infrastructure fund, would take time to work through to the economy. But it would eventually yield results.<\/p>\n

\"\"<\/p>\n

L-R: Pier Carlo Padoan, Sofia Melis<\/p>\n

There was a need for parallel steps on structural reform \u2013 \u2018two sides of the same coin\u2019, as one delegate said. He stressed the importance of the Berlin government\u2019s efforts to speed up planning policies to override the normal \u2018public interest constraints\u2019 on building infrastructure \u2013 similar to the measures taken after 2022 to accelerate construction of liquified natural gas terminals in north Germany. \u2018It\u2019s not a question of capability but of politics. Will Europe be brave enough to expand its fiscal stance and tackle structural problems?\u2019<\/p>\n

Some speakers voiced doubts about the dictum that \u2018Europe requires crises to move forward\u2019. One experienced delegate said: \u2018This is not an economic crisis, it\u2019s a governance crisis. Europe historically integrates through crises. This time, it may not. Political incentives stall banking union, capital markets union and deeper integration.\u2019<\/p>\n

Another delegate stressed the depth of underlying tensions. \u2018This is beyond demand and supply shocks. The stress test is whether democracies can still deliver. Markets currently price a dominant positive artificial intelligence supply shock. If that falters, the shift to the negative shock narrative could be abrupt.\u2019<\/p>\n

He added that an \u2018accident\u2019 in financial markets might be a catalyst for action. It was better to have an earlier, smaller shock than a later, larger one \u2013 which might be a \u2018catastrophe\u2019.<\/p>\n

In discussion of sustainability, the audience heard a robust view that the Trump administration\u2019s negative line on combatting climate change would eventually be overridden as a result of market forces. \u2018The fiduciary duty of investors isn\u2019t something that Trump can mess with. What level of negative impact on that question is his support base willing to tolerate?\u2019 asked one sustainability expert. \u00a0This delegate added: \u2018Rollbacks on climate and diversity are more like a game of chess than a full-on retreat. Physics beats politics on climate risk. Capital will price physical risks regardless of rhetoric.\u2019<\/p>\n

\"\"<\/p>\n

L-R: Alexej Jordanov, John Nug\u00e9e and Pavel Kowalewski<\/p>\n

A lively discussion on gold brought two contrasting yet complementary views. One speaker underlined that there was no economic justification for price of gold: \u2018It\u2019s driven by emotional and sentimental factors.\u2019\u00a0 Central banks in their actions building up reserves were following worldwide trends. Another speaker saw the issue in era-defining terms. \u2018We are reaching the end of the Bretton Woods era. Smart money started buying gold 20 years ago, central banks started buying around 2008\u2019 \u2013 which partly reflect central banks\u2019 own credibility problem.<\/p>\n

A core European country central banker said central banks\u2019 demand for gold did not reflect de-dollarisation, which he termed as \u2018very difficult because of a lack of alternatives\u2019. \u00a0What was happening was further reserves diversification. \u2018When we buy gold, we\u2019re paying for it in the dollar, so it\u2019s not a de-dollarisation.\u2019<\/p>\n

As well as Nagel, speakers included Mario Monti, former Italian prime minister; J\u00f6rg Kukies, former German finance minister; Dimitar Radev, governor, Bulgarian National Bank; Mervyn King, former Bank of England governor; V\u00edtor Const\u00e2ncio, former European Central Bank vice president; Anne Simpson, global head of sustainability, Franklin Templeton; Kalin Anev Janse, finance director, European Stability Mechanism; Jessica Pulay, chief executive officer, UK Debt Management Office; Niels Thygesen, emeritus professor of economics, University of Copenhagen; Pier Carlo Padoan, chairman, UniCredit; Tom Scholar, chair, Santander UK; Simon McDonald, former permanent under-secretary, Foreign, Commonwealth and Development Office; Ignazio Visco, former Banca d\u2019Italia governor; Peter Praet and Yves Mersch, former ECB board members.<\/p>\n

Buy Can Europe Survive? The Story of a Continent in a Fractured World<\/a>\u00a0now.<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Interested in this topic? Subscribe to OMFIF\u2019s newsletter for more.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"European countries including the UK need to reinforce mutual trust and adopt a \u2018bottom-up\u2019 stance to strengthen co-operation,…\n","protected":false},"author":2,"featured_media":471642,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[49,978,659],"class_list":{"0":"post-471641","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-united-states","9":"tag-us","10":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115311469426588497","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/471641","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=471641"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/471641\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/471642"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=471641"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=471641"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=471641"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}