PARIS — The European Union should stop raging at Donald Trump and learn its lessons from the U.S. president’s saber-rattling on tariffs, France’s trade minister told POLITICO. “The European Union, the European countries, should not get angry at America’s positions, but should try to better understand America’s logic — which, by the way, began well before Donald Trump,” Nicolas Forissier said in an interview on Thursday.  Forissier, who said riding a Harley-Davidson motorbike down the iconic Chicago-to-California Route 66 highway had given him a feel for American culture, argued Trump’s approach should motivate the EU to fix its own shortcomings.  The U.S. president’s erratic trade policy, along with a glut of Chinese exports, has triggered deeper reflection within the 27-nation bloc about how to regain industrial competitiveness — including by diversifying trade partners, cutting red tape for businesses, and rewriting public procurement rules to include a “Made in Europe” preference.  “It’s also a way of asking us to take responsibility, to step out of our comfort zone. Before criticizing or getting angry at each other, we need to look at what we haven’t done well and where we can improve,” the 65-year-old minister added. The U.S. Supreme Court last week struck down the “reciprocal tariffs” that had underpinned the trade deal Trump struck with the EU at his Turnberry golf resort in Scotland last July. Despite the ruling, the European Commission wants to finalize ratification of the deal, which is now stuck in the European Parliament. Forissier convened G7 trade ministers for a virtual call on Monday, at which U.S. Trade Representative Jamieson Greer made it clear that Washington was aiming to reinstate the tariffs that were struck down via other legal tools. Greer has also said that the U.S. wants to stick to the terms of deals it has already struck. “The European Parliament’s wait-and-see approach and suspension of the vote is quite logical,” Forissier said. “It’s now up to the Americans to clarify things, to calm things down. I don’t think it’s in the United States’ interest to take a stance of high tariffs, toughening measures.” HOLDING THE (15 PERCENT) LINE Forissier, a veteran who hails from the conservative Les Républicains party, said the EU should focus on strengthening its own foundations, also by building a real capital markets union. “That may also enable us to provide concrete answers to the questions raised by Mario Draghi and Enrico Letta. Because we know full well that the European Union really needs to make a huge investment effort, particularly in innovation,” Forissier said, referring to landmark strategy recommendations from the two former Italian PMs.  “Basically, the Americans are doing us a favor by forcing us to take action, make decisions, and step outside our comfort zones or areas of uncertainty that suited us just fine.” Forissier’s comments were a departure from the usually more hawkish French position toward Washington. As recently as January, President Emmanuel Macron called for the EU to use its strongest trade weapon in response to Trump’s threats to annex Greenland.  France has been the fiercest supporter of making the EU economically less dependent on the rest of the world, with Macron for years pushing for more public investment in the EU economy and for more trade defense and “Made in Europe” measures to ensure European firms can compete with their Asian and U.S. rivals.  The trade minister stressed that the deal with Washington — which foresees an “all-inclusive” tariff of 15 percent on most EU exports and exempts aircraft and pharmaceuticals — should remain the baseline of the EU’s relationship to Washington.  He urged, however, that Brussels keep negotiating further exemptions — something the U.S. has so far been reluctant to do given the EU still hasn’t completed its side of the bargain on the deal struck last July at Trump’s Turnberry golf resort in Scotland. Legislation to scrap duties on imports of U.S. industrial goods remains stuck in the European Parliament. “I would like us not simply to revert to the Turnberry agreement. We must also continue the process, ensure that the conversation is constructive, and move forward,” he said.  “Frankly, is it in the interest of American consumers to have a 15 percent tariff on French spirits?”

European Central Bank President Christine Lagarde has urged EU governments to rely on “coalitions of the willing” to push through long-stalled economic reforms, arguing the bloc doesn’t need all 27 countries on board to move forward. In an interview with the Wall Street Journal published Saturday, Lagarde pointed to the 21-country eurozone as proof that deeper integration can work without full unanimity of the EU member states. “We do not have the 27 around the table, and yet it works,” she said. Lagarde’s remarks come as EU leaders debate how to complete the bloc’s long-stalled capital markets union. The project, now dubbed the “Savings and Investments Union,” is intended to deepen cross-border financial markets and mobilize private savings. Frustration over slow progress has led several large EU member states, including France, Germany, Italy and Spain, to back a two-speed approach that would allow smaller groups of countries to integrate more quickly. European Commission President Ursula von der Leyen has said the EU could consider “enhanced cooperation” if unanimity cannot be reached. Lagarde, whose term as ECB president runs until October 2027 and who has faced speculation about a possible early departure, said Europe should focus on delivering concrete reforms. In a sign of growing impatience, Lagarde earlier this month sent EU leaders a five-point checklist of “urgently needed” measures under the subject line “time for action,” outlining measures on capital markets integration, corporate harmonization and research coordination. Even partial implementation of those measures would significantly boost Europe’s growth potential, she told the Wall Street Journal.

BRUSSELS — U.S. President Donald Trump’s threats to annex Greenland were the “epiphany moment” for Europe’s six largest economies to club together and speed up financial market reform, Spanish Economy Minister Carlos Cuerpo told POLITICO. The new group, dubbed “E6” in Brussels, is an exclusive club among the EU’s six largest economies — France, Germany, Italy, the Netherlands, Spain and Poland — designed to break political deadlocks that have hamstrung efforts to create a U.S.-style financial market over the last decade. Without action, the six countries fear that Europe’s economy will fail to keep pace with the U.S. and China, and be further squeezed in a geopolitical world that has become increasingly transactional. The goal is to put “politically difficult discussions on the table to be able to unlock files that have been locked so far,” said Cuerpo, who has long campaigned to make EU bodies better at delivering concrete policy decisions. “Building those bridges can then be a good first step towards an overall solution.” The club will also help the six countries coordinate ahead of G7 meetings with Canada, Japan, and the U.S. on strategic issues, such as securing access to critical rare materials, following China’s threat to restrict exports. The E6 club has only convened twice and is already aiming to present EU leaders with specific proposals at the next European Council summit in March. Critics, such as Ireland and Portugal, fear the six-country club could trigger a two-speed Europe, in which the biggest nations will sideline smaller countries that disagree with E6’s agenda — especially when it comes to creating a watchdog to supervise the bloc’s biggest financiers. European Commission President Ursula von der Leyen has suggested that EU countries should break off into smaller groups and pursue financial integration through “enhanced cooperation,” if the so-called Savings and Investments Union doesn’t progress by June. To focus minds, von der Leyen will produce a roadmap that the E6 hopes to contribute toward, complete with a list of reforms and deadlines for leaders to discuss. The Commission’s first significant policy will be a “28th regime,” an EU-wide legal framework due March 18 that’ll offer companies certain uniform rules to operate easily across the bloc. A SUPERGROUP IS BORN The spark that triggered E6’s emergence came during a ministerial breakfast of coffee and croissants in Brussels on a cold January morning, when Cuerpo’s frustration over EU inaction boiled over. Trump had thrown the NATO alliance into disarray with his renewed demands to “own” Greenland, right after removing the Venezuelan leader Nicolás Maduro from power. None of these topics had made it onto the ministers’ monthly Ecofin agenda, triggering an outburst from Cuerpo, who lamented the lack of political debate over Europe’s relationship with the U.S. His outburst couldn’t have come at a better time for the finance ministers of France and Germany. The two men, Roland Lescure and Lars Klingbeil, had met just 24 hours earlier to discuss how best to revive EU economic initiatives that had grown stagnant. Invitations for a virtual meeting among E6 countries arrived within a week. Roland Lescure (right) and Lars Klingbeil met to discuss how best to revive EU economic initiatives that had grown stagnant. | Bernd von Jutrczenka/picture alliance via Getty Images “Lars and Roland pushed to convene all six of us and that’s how it got started,” Cuerpo said.  Monday’s discussion focused on strengthening supply chains to critical rare materials and how to quickly progress on deepening the bloc’s financial markets. These included cutting red tape and introducing the so-called 28th regime. The next E6 meeting on March 9 will home in on promoting investment in defense and how to promote the euro on the international stage. MIXED RECEPTION The reception from outside the exclusive group has been mixed. Some believe the E6 could lead to meaningful change, while others fear their voices will be drowned out in the pursuit of swift progress. There’s a third group that believes the six countries will struggle to find common ground at all. Portugal’s finance minister, Joaquim Miranda Sarmento, urged the six countries to respect the EU’s treaties during the Eurogroup on Monday after Germany’s Klingbeil briefed his peers on E6 discussions — a transparency pledge that failed to appease all skeptical ministers and their aides. “EU supervision was the elephant in the room,” one diplomat who attended the Eurogroup said. “I’m surprised more people didn’t speak up.” Legally speaking, the E6 needs at least nine countries to pursue enhanced cooperation. Even then, the legal workaround is only possible once an initiative fails to muster enough support at EU level. Meanwhile, securing a qualified majority to push legislation through requires the backing of 15 countries that represent at least 65 percent of the total EU population. So, the E6 will need allies to advance its goals in any case. To assuage concerns over E6, Cuerpo is encouraging outside countries to join other discussion forums, such as the “Competitiveness Lab,” an open format launched a year ago, to develop common initiatives among governments seeking to deepen their capital markets. In the meantime, Cuerpo is urging skeptical countries to put their faith in something new, beyond Brussels’ creaking legislative machine. “There are no red lines in the discussions within this group,” Cuerpo said. “I think that should be for the benefit of everyone.” Bjarke Smith-Meyer contributed to this report from Brussels.

Listen on * Spotify * Apple Music * Amazon Music Nach der Münchner Sicherheitskonferenz geht die zentrale Debatte in Berlin weiter: Wie souverän muss Europa werden, wenn das Vertrauen in die USA brüchiger wird. US-Außenminister Marco Rubio wählt versöhnliche Worte, doch die strategischen Zweifel bleiben. Eine Analyse von Gordon Repinski. Im 200-Sekunde-Interview ordnet Unions-Fraktionschef Jens Spahn die Konsequenzen aus München ein. Er plädiert für eine stärkere europäische Säule innerhalb des transatlantischen Bündnisses und dafür, auch über nukleare Teilhabe offen zu sprechen. Parallel wird in Brüssel über wirtschaftliche Souveränität verhandelt. Finanzminister Lars Klingbeil wirbt für Fortschritte bei der Kapitalmarktunion. Ziel ist es, Europas Start-ups besseren Zugang zu Kapital zu verschaffen..Rasmus Buchsteiner berichtet, wie Klingbeil internationale Foren auch nutzt, um wirtschaftspolitisches Profil zu gewinnen. Die Ausgabe der Talkshow von Caren Miosga mit Gordon seht ihr hier und unseren neuen POLITICO-Podcast „Power & Policy” gibt es hier zu hören! Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. Jetzt kostenlos abonnieren. Mehr von Host und POLITICO Executive Editor Gordon Repinski: Instagram: @gordon.repinski | X: @GordonRepinski. POLITICO Deutschland – ein Angebot der Axel Springer Deutschland GmbH Axel-Springer-Straße 65, 10888 Berlin Tel: +49 (30) 2591 0 information@axelspringer.de Sitz: Amtsgericht Berlin-Charlottenburg, HRB 196159 B USt-IdNr: DE 214 852 390 Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna **(Anzeige) Eine Nachricht von Amazon: Unabhängige Verkaufspartner stehen heute für über 60 % aller bei Amazon verkauften Produkte. Ein Beispiel ist 3Bears aus München: Caroline und ihr Team haben ihre Leidenschaft in ein erfolgreich wachsendes Unternehmen verwandelt. Über Amazon bringt 3Bears hochwertigen Porridge auf Frühstückstische in ganz Europa. Sie sind eines von rund 47.000 deutschen kleinen und mittleren Unternehmen, die bei Amazon erfolgreich verkaufen. Jetzt mehr erfahren auf: AboutAmazon.de.**

EUROPE’S AUTONOMY PUSH EXPOSES OLD FAULT LINES The renewed drive to reduce reliance on Washington is bringing up familiar disagreements ahead of an EU leaders’ summit on Thursday. By NICHOLAS VINOCUR and GABRIEL GAVIN in Brussels While the meeting is not expected to produce binding commitments, it will set a broad political direction for the European Commission. | Sebastien Bozon/AFP via Getty Images EU leaders are gearing up for major fights over issues ranging from joint defense projects to economic reforms as a drive to loosen Europe’s dependence on Donald Trump’s America lays bare deep divisions among the bloc’s 27 countries. Ahead of an informal leaders’ retreat on Thursday focused on competitiveness, capitals had pledged to show unity and plot a path toward greater European autonomy after the U.S. president’s threats against Greenland set off the worst transatlantic crisis in decades. But as leaders prepare for their summit, that united front is already cracking — and long-standing disagreements are resurfacing over how to turn lofty ambitions for “strategic independence” into concrete action. While the meeting is not expected to produce binding commitments, it will set a broad political direction for the European Commission, which is due to draw up proposals ahead of a formal summit in late March. “Everyone around the table must … face a moment of truth,” said Manfred Weber, leader of the European People’s Party, whose members include German Chancellor Friedrich Merz and Commission President Ursula von der Leyen. Leaders should “not complain about each other” but do their “homework” to ensure reforms can be completed, he added. Estonian Foreign Minister Margus Tsahkna told POLITICO ahead of the summit that “Europe has lots of leverage. We just need to stick together and make decisions … instead of whining and complaining, we need to understand that through strength Europe will actually have [a firm] position.” A glaring example is the recent disagreement between EU powerhouses France and Germany, whose leaders clashed over Emmanuel Macron’s refusal to endorse the EU-Mercosur trade deal. In an interview published Tuesday by several European newspapers, the French president trumpeted the need for joint European borrowing to finance ambitious industrial and defense projects — a call that was promptly rebuffed by Germany.  “You will have seen the interview with the French president published today,” said a senior German government official, granted anonymity to discuss sensitive summit preparations. “We think that … this distracts a little from what it’s actually all about, namely that we have a productivity problem.” Other capitals were quick to chime in. “[It’s] good that Macron sees the need to invest in Europe’s future economy,” said an EU diplomat from a mid-sized country. But, the diplomat added, such a push amounts to “daydreaming” given the possibility to spend via the EU’s long-term budget. In his interview, Macron also threatened to suspend a Franco-German program to jointly develop a battle tank, after a blame game over the lack of progress on a joint fighter jet program. “You can imagine that, if the German partner questioned the future of the joint plane, we would have to question the joint tank.” Pool photo by Sebastien Bozon/AFP via Getty Images It’s one of dozens of fault lines being exposed ahead of Thursday’s retreat in a flurry of position papers from EU capitals. While France is advocating “Buy European” policies that would prioritize EU industries for subsidies and public procurement contracts, Nordic and Baltic countries have pushed back against the idea in a joint position paper, saying it would add unwanted complexity just as Europe is trying to deregulate. At the same time, Germany has joined forces with Italy to push back against French initiatives, instead promoting an agenda heavily focused on deregulation. In a joint discussion paper backed by Merz and Italian Prime Minister Giorgia Meloni, they call for an “emergency brake” on new EU legislation, granting capitals the right to stop Brussels from coming up with laws they don’t like. But diplomats from other countries argue that the Berlin-Rome push misses the larger point, which is that Europe needs to wean itself off foreign dependencies. “Simplification (deregulation) is important,” said a second EU diplomat. “But it cannot be the alpha and the omega of our European policy. Bureaucracy isn’t everything. We urgently need to think about supply chains and how to reduce our dependencies.” A third EU diplomat put the situation bluntly: “We have the diagnosis, we have the prescription, we haven’t gone to the pharmacy.” TRUMP IN THE ROOM If these disagreements are now emerging into the cold light of day, it’s because leaders who have long avoided difficult conversations about internal reforms can now no longer afford to do so. Trump’s threats against Greenland triggered a reckoning among leaders during an extraordinary Council gathering in January, at which von der Leyen said Europe must now take the path of independence. Several diplomats briefed on the leaders’ discussions described the summit as a Rubicon moment from which there was no turning back. “Without GDP growth we will be really vulnerable for external shocks,” said Polish Finance Minister Andrzej Domański. The Commission and other EU policymakers, he said, will have to “focus on growth, focus on deregulation and being more ambitious,” something that critics say has been too little, too slow. The problem is that translating that rhetoric into reality comes at huge political cost for leaders. Indeed, reforms to finalize the bloc’s fragmented single market or build up a true European deterrent capacity have been on the table for years, in some cases decades. Leaders have long opted to politely ignore them because following through on reforms would threaten national industries. Take the proposal to form a European capital markets union.  The idea of joining up the EU’s fragmented capital markets to create a far vaster pool of investable capital was first pitched more than a decade ago, and has won endorsement from former European Central Bank President Mario Draghi as a crucial step toward independence. But it has gone nowhere for years due to opposition from Berlin and Rome, among other capitals, which have blocked the initiative due to the threat it poses to regional banks. “Look at the Capital Markets Union,” said the EPP’s Weber. “The concept, the initiatives are on our table for years now.” The elephant in the room when leaders gather Thursday will be Europe’s relationship with the Trump administration. Despite consensus around the need for Europe to plot its own path, several countries are unwilling to risk alienating Washington — or seeing their companies prevented from selling into U.S. markets — due to protective EU policies. Relations between Brussels and Washington may well snap back to normal after the Greenland crisis, some diplomats suggest. But for some leaders, there is no turning back to the way things were before. “As we left the worst of the [Greenland] crisis, there was a cowardly form of relief,” Macron said. “There are threats and intimidation, then all of a sudden Washington retreats, and we think it’s over. But don’t think that for one single second … every day, there are new threats.” Max Griera and Nette Nöstlinger contributed reporting.

The European Central Bank is hatching a plan to boost the use of the euro around the world, hoping to turn the world’s faltering confidence in U.S. political and financial leadership to Europe’s advantage. Liquidity lines — agreements to lend at short notice to other central banks — have long been a standard part of the crisis-fighting toolkits of central banks, but the ECB is now thinking of repurposing them to further Europe’s political aims, four central bank officials told POLITICO. One aim of the plan is to absorb any shocks if the U.S. — which has backstopped the global financial system with dollars for decades — suddenly decides not to, or attaches unacceptable conditions to its support. The other goal is to underpin its foreign trade more actively and, ultimately, grab some of the benefits that the U.S. has historically enjoyed from controlling the world’s reserve currency. Officials were granted anonymity because the discussions are private. Bruegel fellow Francesco Papadia, who was previously director-general for the ECB’s market operations, told POLITICO that such efforts are sensible and reflect an increasing willingness among European authorities to see the euro used more widely around the world. WHAT’S A LIQUIDITY LINE? Central banks typically use two types of facilities to lend to each other: either by swapping one currency for another (swap lines) or by providing funds against collateral denominated in the lender’s currency (repo lines). The ECB currently maintains standing, unlimited swap lines with the U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Swiss National Bank, and the Bank of Japan, as well as standing but capped lines with the Danish and Swedish central banks. It also operates a facility with the People’s Bank of China, capped in both volume and duration. Other central banks seeking euro liquidity must rely on repo lines known as EUREP, under which they can borrow limited amounts of euros for a limited period against high-quality euro-denominated collateral. At present, only Hungary, Romania, Albania, Andorra, San Marino, North Macedonia, Montenegro and Kosovo have such lines in place. But these active lines have sat untouched since Jan. 2, 2024 — and even at the height of the Covid crisis, their use peaked at a mere €3.6 billion. For the eurozone’s international partners, the knowledge that they can access the euro in times of stress is valuable in itself, helping to pre-empt self-fulfilling fears of financial instability. But some say that if structured generously enough, the facilities can also reduce concerns about exchange rate fluctuations or liquidity shortages. Such details may sound academic, but the availability of liquidity lines has real impacts on business: A Romanian carmaker whose bank has trouble securing euros may fail to make payments to a supplier in Germany, disrupting its production and raising its costs.  “The knowledge that foreign commercial banks can borrow in euros while being assured that they have access to euro liquidity [as a backstop] encourages the use of the euro,” one ECB rate-setter explained.  French central bank chief François Villeroy de Galhau suggested that Europe could at least take a leaf out of China’s book, noting that the Eurosystem “can make euro invoicing more attractive” by expanding the provision of euro liquidity lines. | Kirill Kudryavtsev/Getty Images “Liquidity lines, in particular EUREP, should be flexible, simple and easy to activate,” he argued. One option, he said, would be to extend them to more countries. Another could be to make EUREP a standing facility — removing any doubts about whether, and under what conditions, euro access would be granted. Papadia added that the ECB could also ease access to EUREP by cutting its cost, boosting available volumes or extending the timeframe for use. NOT JUST AN ACADEMIC QUESTION French central bank chief François Villeroy de Galhau suggested in a recent speech that Europe could at least take a leaf out of China’s book, noting that the Eurosystem “can make euro invoicing more attractive” by expanding the provision of euro liquidity lines. China has established around 40 swap lines with trading partners worldwide to underpin its burgeoning foreign trade, especially with poorer and less stable countries. By contrast, the ECB — a historically cautious animal — “is not marketing the euro to the same extent that the Chinese market the renminbi,” according to Papadia.  Another policymaker told POLITICO that while there is a broad consensus that liquidity lines should be made more widely available, the Governing Council had not yet hashed out the details. Austrian National Bank Governor Martin Kocher told POLITICO in a recent interview that there has been “no deeper discussion” on the Council, adding that he sees no reason to promote euro liquidity lines actively. “I’m not arguing that you should incentivize or create a demand. Rather, if there is demand, we should be prepared for it,” he said, acknowledging that “preparation is very important.” He noted that erratic U.S. policies could force the euro “to take on a stronger role in the international sphere” — both as a reserve currency and in transactions. According to a Reuters report earlier this month, similar concerns among central banks worldwide have sparked a debate over creating an alternative to Federal Reserve funding backstops by pooling their own dollar reserves. The ECB declined to comment for this article. RISK AVERSION AND OTHER OBSTACLES  However, swap lines in particular don’t come without risks. “The main risk is that the country would use a swap and then would not be able to return the drawn euros,” said Papadia. “And then you will be left with foreign currency you don’t really know what to do with.” That is exactly the kind of trap some economists warn the U.S. is stumbling into with its $20 billion swap line to Argentina. “The United States doesn’t really want Argentina’s currency,” the Council on Foreign Relations’ Brad Setser wrote in a blog post. “It expects to be repaid in dollars, so it would be a massive failure if the swap was never unwound and the U.S. Treasury was left holding a slug of pesos.” Austrian National Bank Governor Martin Kocher said there has been “no deeper discussion” on the Council, adding that he sees no reason to promote euro liquidity lines actively. | Heinz-Peter Bader/Getty Images Such thinking, another central bank official said, will incline the ECB to focus first on reforming the EUREP lines, which have always been its preferred tool. The trouble with that, however, is that EUREP use may be limited by a lack of safe assets denominated in euros to serve as collateral. Papadia noted that the Fed’s network of liquidity lines works because “the Fed has the U.S.  Treasury as a kind of partner in granting these swaps.” So long as Europe fails to create a joint debt instrument, this may put a natural cap on such lines.  Even with a safe asset, focusing on liquidity lines first could be putting the cart before the horse, said Gianluca Benigno, professor of economics at the University of Lausanne and former head of the New York Fed’s international research department. Europe’s diminishing geopolitical relevance means that the ECB is unlikely to see much demand — deliberately engineered or not — for its liquidity outside Europe without much broader changes, Benigno told POLITICO. Liquidity lines can be used to advance your goals if you already have power — but they can’t create it. For that, he argued, Europe first needs a clear political vision for its role in the global economy, alongside a Capital Markets Union and the creation of a common European safe asset — issues that only politicians can address.

Enrico Letta is president of the Jacques Delors Institute and a former prime minister of Italy. Pascal Lamy is vice-president of the Paris Peace Forum and a former European commissioner for Trade. Kolinda Grabar-Kitarović is co-chair of the Global Preparedness Monitoring Board and a former president of Croatia. They are all members of the Governing Board of the new Jacques Delors Friends of Europe Foundation. For too long, the European project has been treated like an à la carte menu. Leaders cherry-pick advantages, blame Brussels for the compromises they’ve accepted, and leave citizens to bear the consequences of watered-down decisions and years-long delays. This habit of the political dodge, of agreeing in public and unraveling at home, has dented public trust, and it must stop. By 2028, Europe must complete the single market — not in slogans but in the concrete areas that shape everyday life, like energy, telecommunications, savings and investments, and the free circulation of knowledge and innovation. A real single market in these fields will deliver tangible benefits for citizens: Harmonized energy markets mean cross-border trade of electricity and gas, stabilized supplies and lower bills when markets work properly. Unified telecoms will reduce roaming and domestic price monopolies, improve service and widen access. Integrated capital markets will give savers better returns, channel funds to growing firms and make loans cheaper for small businesses. And removing barriers to research and data flows will allow students, scientists and entrepreneurs to collaborate and scale up without coming up against national borders. In short: more choice, lower costs, better opportunities and faster innovation. Alongside these priorities, Europe must also adopt what Enrico Letta and others call the “28th regime” — a mechanism that allows individuals and businesses to operate under uniform EU standards when national rules obstruct progress. Voluntary pioneers shouldn’t be hostage to vetoes from lone capitals. Where national foot-dragging denies benefits to citizens elsewhere, European law should offer an alternate path to deliver those benefits. This is about fairness and security. The fragmented status quo leaves households overpaying for energy, students facing unequal digital access and entrepreneurs boxed into tiny domestic markets. It also weakens Europe geopolitically: Fragmented energy systems increase vulnerability to hostile suppliers; disjointed capital markets amplify financial shocks; and splintered telecoms and digital rules hamper our ability to control critical infrastructure and data flows. Deadlines force choices and sharpen political will — without them, the default remains delay. Europe’s leaders thus need to set a clear, nonnegotiable deadline to complete the single market in energy, telecoms, capital and knowledge by 2028. And here are the concrete steps they must take: First, they must institutionalize the fifth freedom — the free circulation of knowledge and innovation — by removing regulatory barriers to research collaboration, data exchange, university partnerships and mobility for knowledge workers. Next, they need to adopt EU-wide rules where national governments block progress. Activating the 28th-regime concept will allow willing member countries and their citizens to benefit, even if one or two vetoers refuse to move. Then, break energy silos by fast-tracking cross-border interconnectors, harmonizing grid and wholesale market rules, and prioritizing joint procurement to prevent costly duplication. Also, unify telecoms by eliminating burdensome national licensing, promoting Pan-European operators, and creating a regulatory environment that rewards competition and coverage. Europe’s leaders thus need to set a clear, nonnegotiable deadline to complete the single market in energy, telecoms, capital and knowledge by 2028. | Thierry Monasse/Getty Images Finally, complete the capital markets union through the Savings and Investments Union, linking finance to the real economy and fostering investments in the common goods that Europe needs, such as innovation and digital, security, and the fight against climate change. Completing the single market must also go hand in hand with security and resilience. If Europe is to spend billions on defense, those investments must translate to more than trophies for national procurement agencies. We need a single market for defense, with interoperable equipment, joint procurement, shared standards and industrial cooperation. Defense purchases need to build common capabilities — not 27 bespoke systems that can’t communicate with each other. Societal resilience matters too. Authoritarian and malign actors weaponize disinformation, exploit social divisions and erode trust in institutions. Fighting disinformation is as much about strengthening communities as it is about policing platforms, and Europe must invest in civic resilience. We must also be clear-eyed about enlargement. Ukraine’s and Moldova’s resilience have shown democratic determination in the face of Russian aggression, and their efforts should inspire concrete progress. Former European Commission President Jacques Delors called enlargement “our duty” — and he was right. Widening the single market to include the Western Balkans, Ukraine and Moldova, while rigorously enforcing rule of law and democratic standards, is not charity. It’s a strategic investment in Europe’s security and prosperity. Europe now faces a stark choice: Inertia on the one hand, meaning fragmented markets, stranded talent, fragile societies and rising illiberalism; or integration on the other — a single market that lowers costs, boosts competitiveness, enhances security and renews citizens’ trust. The 2028 deadline shouldn’t be seen as a slogan. It’s a contract with Europeans who want results, not reassurances. And leaders must treat it as such. Delors said Europe needs a soul. Today, it needs delivery. Let’s strengthen our defenses and societies, meet our duty to our neighbors and finish the job. Let’s do it by 2028.

EINDHOVEN, The Netherlands — The European Union’s rules on artificial intelligence are driving tech workers and companies to Silicon Valley, a top executive from the Dutch chipmaking giant ASML has said. “Why is it so difficult to get AI done in Europe? Simply because we started with regulating, to keep AI under the thumb,” ASML’s Chief Financial Officer Roger Dassen told an event in Eindhoven on Monday evening. “Someone who has a talent for artificial intelligence, the first thing they do with their hard-earned money … is buying a ticket to Silicon Valley,” Dassen said. The comments — made during a campaign event for Dutch center-right party Christian Democratic Appeal ahead of national elections Oct. 29 — are another shot across the bow of the EU’s embattled artificial intelligence law. ASML, Europe’s leading tech company by market cap, has been campaigning to pause the parts of the law that are not yet implemented. In July, the company’s executives signed onto a letter from 46 companies calling for a two-year pause. The company in September became the largest shareholder of French AI company Mistral with a €1.3 billion investment, strengthening the influence of ASML when it comes to the EU’s handling of AI companies. Dassen also complained about the lack of protection that Europe’s most prominent companies are receiving amid ongoing geopolitical turbulence. “You should ask the Airbuses, the Nokias, the ASMLs … whether they feel protected by Europe at all times in this huge struggle of power that takes place between the United States and China. “The answer won’t always be yes,” he said. In recent years the Netherlands has faced sustained pressure from the U.S. to block some of ASML’s sales of the most advanced chip-making machines to China. Last week, ASML’s top lobbyist, Frank Heemskerk, told POLITICO’s Competitive Europe summit in Brussels that “it’s not always easy” to meet EU politicians. “It’s easier to get a meeting in the White House with a senior official than to get a meeting with a commissioner,” he added, quoting a previous company executive. Dassen also urged Europe to finish work on a capital markets union — the economic policy effort to create a single market for capital across the EU — to improve startups’ access to funding. “We are very good at startups, we’re worthless at scale-ups,” he said.

HOW DONALD TRUMP BECAME PRESIDENT OF EUROPE The U.S. president describes himself as the European Union’s de facto leader. Is he wrong? By NICHOLAS VINOCUR Illustration by Justin Metz for POLITICO European federalists, rejoice! The European Union finally has a bona fide president. The only problem: He lives at 1600 Pennsylvania Avenue in Washington, D.C., aka the White House. U.S. President Donald Trump claimed the title during one of his recent off-the-cuff Oval Office banter sessions, asserting that EU leaders refer to him as “the president of Europe.”  The comment provoked knowing snickers in Brussels, where officials assured POLITICO that nobody they knew ever referred to Trump that way. But it also captured an embarrassing reality: EU leaders have effectively offered POTUS a seat at the head of their table. From the NATO summit in June, when Trump revealed a text message in which NATO Secretary General Mark Rutte called him “daddy,” to the EU-U.S. trade accord signed in Scotland where EU leaders consented to a deal so lopsided in Washington’s favor it resembled a surrender, it looks like Trump has a point. Never since the creation of the EU has a U.S. president wielded such direct influence over European affairs. And never have the leaders of the EU’s 27 countries appeared so willing — desperate even — to hold up a U.S. president as a figure of authority to be praised, cajoled, lobbied, courted, but never openly contradicted. In off-the-record briefings, EU officials frame their deference to Trump as a necessary ploy to keep him engaged in European security and Ukraine’s future. But there’s no indication that, having supposedly done what it takes to keep the U.S. on side, Europe’s leaders are now trying to reassert their authority. On the contrary, EU leaders now appear to be offering Trump a role in their affairs even when he hasn’t asked for it. A case in point: When a group of leaders traveled to Washington this summer to urge Trump to apply pressure to Russian President Vladimir Putin (he ignored them), they also asked him to prevail on his “friend,” Hungarian Prime Minister Viktor Orbán, to lift his block on Ukraine’s eventual membership to the EU, per a Bloomberg report. Trump duly picked up the phone. And while there’s no suggestion Orbán changed his tune on Ukraine, the fact that EU leaders felt compelled to ask the U.S. president to unstick one of their internal conflicts only further secured his status as a de facto European powerbroker. “He may never be Europe’s president, but he can be its godfather,” said one EU diplomat who, like others in this piece, was granted anonymity to speak candidly. “The appropriate analogy is more criminal. We’re dealing with a mafia boss exerting extortionate influence over the businesses he purports to protect.” “BRUSSELS EFFECT” It was not long ago that the EU could describe itself credibly as a trade behemoth and a “regulatory superpower” able to command respect thanks to its vast consumer market and legal reach. EU leaders boasted of a “Brussels effect” that bent the behavior of corporations or foreign governments to European legal standards, even if they weren’t members of the bloc. Anthony Gardner, a former U.S. ambassador to the EU, recalls that when Washington was negotiating a trade deal with the EU known as the Transatlantic Trade and Investment Partnership in the 2010s, the U.S. considered Europe to be an equal peer. “Since the founding of the EEC [European Economic Community], America’s position was that we want a strong Europe,” said Gardner. “And we had lots of disagreements with the EU, particularly on trade. But the way to deal with those is not through bullying.” One sign of the EU’s confidence was its willingness to take on the U.S.’s biggest companies, as it did in 2001 when the European Commission blocked a planned $42 billion acquisition of Honeywell by General Electric. That was the beginning of more than a decade of assertive competition policy, with the bloc’s heavyweight officials like former antitrust czar Margrethe Vestager grandstanding in front of the world’s press and threatening to break up Google on antitrust grounds, or forcing Apple to pay back an eye-watering €13 billion over its tax arrangements in Ireland. Compare that to last week, when the Commission was expected to fine Google for its search advertising practices. The decision was at first delayed at the request of EU Trade Commissioner Maroš Šefčovič, then quietly publicized via a press release and an explanatory video on Friday afternoon that did not feature the commissioner in charge, Teresa Ribera. (Neither move prevented Trump from announcing in a Truth Social post that his “Administration will NOT allow these discriminatory actions to stand.”) “I’ve never seen anything like this in my entire career at the Commission,” said a senior Commission official. “Trump is inside the machine at this point.” Since Trump’s reelection, EU leaders have been exceptionally careful in how they speak about the U.S. president, with two options seemingly available: Silence, or praise. “At this moment, Estonia and many European countries support what Trump is doing,” Estonian President Alar Karis said in a recent POLITICO interview, referring to the U.S. president’s efforts to push Putin toward a peace with Ukraine. Never mind the fact that the Pentagon recently axed security funding for countries like his and is expected to follow up by reducing U.S. troop numbers there too. It became fashionable among the cognoscenti ahead of the NATO summit in June to claim that the U.S. president had done Europe a favor by casting doubt on his commitment to the military alliance. Only by Trump’s cold kiss, the thinking went, would this Sleeping Beauty of a continent ever “wake up.” As for Mark Rutte’s “Daddy” comment — humiliatingly leaked from a private text message exchange by Trump himself — it was a clever ploy to appeal to the U.S. president’s ego. Unfortunately for EU leaders, the pretense that Trump somehow has Europe’s interests in mind and was merely doling out “tough love” was dispelled just a few months later when European Commission President Ursula von der Leyen signed the EU-U.S. trade deal in Turnberry, Scotland. This time, there was no disguising the true nature of what had transpired between Europe and the U.S.  The wolfish grins of Trump White House bigwigs Stephen Miller and Howard Lutnick on the official signing photograph told the whole story: Trump had laid down brutal, humiliating terms. Europe had effectively surrendered. Many in Brussels interpreted the deal in the same way.  “You won’t hear me use that word [negotiation]” to describe what transpired between Europe and the U.S., veteran EU trade negotiator Sabine Weyand told a recent panel. BLAME GAME As EU officials settle in for la rentrée, the shock of these past few months has led to finger-pointing: Does the blame for this double whammy of subjugation lie with the European Commission, or with the EU’s 27 heads of state and government? It’s tempting to point to the Commission, which, after all, has an exclusive mandate to negotiate trade deals on behalf of all EU countries. In the days leading up to Turnberry, von der Leyen and her top trade official, Šefčovič, could theoretically have taken a page from China’s playbook and struck back at the U.S. threat of 15 percent tariffs with tariffs of their own. Indeed, the EU’s trade arsenal is fully stocked with the means to do so, not least via the Anti-Coercion Instrument designed for precisely such situations. But to heap all the blame on the doorstep of the Berlaymont isn’t fair, argues Gardner, the former U.S. ambassador to the EU. The real architects of Europe’s summer of humiliation are the leaders who prevailed on the Commission to go along with Trump’s demands, whatever the cost. “What I am saying is that the member states have shown a lack of solidarity at a crucial moment,” said Gardner. The consequences of this collective failure, he warns, may reverberate for years, if not decades: “The first message here is that the most effective way for big trading blocs to win over Europe is to ruthlessly use leverage to divide the European Union. The second message, which maybe wasn’t fully taken into account: Member states may be asking themselves: What is the EU good for if it can’t provide a shield on trade?” The same goes for regulation: Trump’s repeated threates of tariffs if the bloc dares to test his patience reveal the limits of EU sovereignty when it comes to the so-called “Brussels effect.” And that leaves the bloc in desperate need of a new narrative about its role on the world stage. The reasons why EU leaders decided to fold, rather than fight, are plain to see. They were laid bare in a recent speech by António Costa, who as president of the European Council convenes the EU leaders in their summits. “Escalating tensions with a key ally over tariffs, while our eastern border is under threat, would have been an imprudent risk,” Costa said. But none of this answers the question: What now?  If Europe has already ceded so much to Trump, is the entire bloc condemned to vassalhood or, as some commentators have prophesied, a “century of humiliation” on par with the fate of the Qing dynasty following China’s Opium Wars with Britain? Possibly — though a century seems like a long time.  Among the steaming heaps of garbage, there are a few green shoots. To wit: The fact that polls indicate that the average European wants a tougher, more sovereign Europe and blames leaders rather than “the EU” for failing to deliver faster on benchmarks like a “European Defense Union.” Europe’s current leaders (with a few exceptions, such as Denmark’s Mette Frederiksen) may be united in their embrace of Trump as Europe’s Godfather. But there is one Cassandra-like figure who refuses to let them off the hook for failing to deliver a more sovereign EU — former Italian prime minister and European Central Bank chief Mario Draghi. Author of the “Draghi Report,” a tome of recommendations on how Europe can pull itself back up by the bootstraps, the 78-year-old is refusing to go quietly into retirement. On the contrary, in one speech after another, he’s reminding EU leaders that they were the ones to ask for the report they are now ignoring. Speaking in Rimini, Italy, last month, Europe’s Cassandra summed up the challenge facing the Old World: In the past, he said, “the EU could act primarily as a regulator and arbiter, avoiding the harder question of political integration.” “To face today’s challenges, the European Union must transform itself from a spectator — or at best a supporting actor — into a protagonist.”

Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe. In January, the European Commission unveiled a sweeping new strategy to help the EU remain competitive. It was a move that underscored growing worries over the widening innovation and productivity gaps between Europe and its global rivals, and was in direct response to intensifying global competition, stagnant growth, weak demographics and new headwinds from high energy costs, security risks and trade policies. But while political progress to date suggests the EU is still falling far short in closing its competitiveness gap with the U.S. and China, it’s also wrong to conclude that the entire “Draghi” agenda is blocked. Indeed, there are bright spots to be found, including the EU’s efforts to cut red tape, the improving outlook for European defense funding and the consolidation of the bloc’s defense-industrial base. In other areas of the agenda, however — such as deepening banking and capital markets integration or improving the continent’s tech ecosystem — progress remains lackluster. So, let’s take a closer look. First, the biggest advances made so far are in the area of defense. Brussels has now relaxed its fiscal rules to allow countries to spend 6 percent of GDP over 4 years on defense, and for this not to count against their deficits. EU leaders have also agreed to a €150 billion loan facility that will enable member countries with less fiscal space to benefit from cheaper Commission borrowing from capital markets, which will then be passed onto them as loans. The EU has taken formal steps to encourage joint procurement of defense equipment and to prioritize local suppliers as well. And there was, of course, a big fiscal move from Germany, which ditched its debt brake, allowing for unlimited borrowing outside the regular budget beyond 1 percent of GDP, as well as the €500 billion special vehicle meant for infrastructure. The problem, however, is that a very large number of member countries don’t have the fiscal room to ramp up defense spending — certainly not to reach the 5 percent target — unless the EU agrees to more common financing, as it did with Covid-19 and the NextGenerationEU facility. And this depends on Germany leveraging its economy to the benefit of Europe. If Europe really is going to deliver Pan-European defense public goods — such as integrated air defense; a European satellite, intelligence and drone program; and other so-called “European strategic enablers” — it’s going to need common borrowing to do it. Meanwhile, another key priority in Brussels has been reducing administrative barriers for businesses, and EU governments are likely to make significant gains in this area. The Commission has already presented two draft “omnibus” packages to cut red tape, focusing on sustainability, corporate due diligence and investment. The aim? Reducing the regulatory burden without altering the overall direction of sustainability policies. More such bills are now expected on defense, digital, mid-caps and sustainable finance. And the Commission has also adopted a “one in, one out” principle for new administrative requirements, aiming to help further reduce the regulatory burden. This imperative is as political as it is economic, as this agenda is essential to keeping center-right parties on board in both the European Parliament and the European Council. The EU has taken formal steps to encourage joint procurement of defense equipment and to prioritize local suppliers as well. | Oliver Hoslet/EPA Unfortunately, however, this is where much of the good news ends. When it comes to efforts on integrating capital markets, for example — which is a big agenda item — the political obstacles remain formidable. Even though the Commission has presented its latest strategy for greater integration of the EU’s banking sector and capital markets, member countries continue to resist the harmonization of corporate and foreclosure laws, tax regimes, pension systems, and market supervision and infrastructure. And when it comes to the EU’s tech and digital ecosystem — another big ticket item — the bloc still continues to face structural barriers in closing the gap with Silicon Valley, which retains its advantage with European startups hungry for funding and talent. This situation is unlikely to be addressed without the closer integration of EU capital markets. And while the Commission unveiled an ambitious “AI continent” strategy in April, substantive legislative initiatives will take time. Overall, tech is essential to the wider strategy’s success, yet it still accounts for most of Europe’s productivity gap with the U.S., and progress has been too slow. There are other things EU leaders can do in the meantime, however. For example, with the U.S. and the EU now striking a deal on tariffs, Washington’s haphazard approach should revitalize the bloc’s wider trade agenda. The EU-Canada trade deal is a great start in this direction. But the agreement is still in what’s known as “provisional implementation,” which 10 EU member countries have to ratify. And without full ratification, the investment parts of the deal can’t take effect. If successful, the EU-Latin America trade deal, Mercosur, would be an even bigger prize here. Currently, France remains the deal’s biggest antagonist since the country has concerns over agricultural “dumping.” However, Brussels is now trying to negotiate safeguards to satisfy the political concern in Paris that a deal done over French President Emmanuel Macron’s head would invite the far right to power in 2027. Finally, another test on trade will be Brussels’s ability to finalize deals with countries in the Gulf and Asia-Pacific — including India and Australia. The hope with these deals isn’t just to unlock greater market access but also to secure supply chains, while looking to revamp Europe’s industries. U.S. President Donald Trump’s return to the White House has created the potential for a real economic revival in the EU — and the answers are all in Draghi’s report. But even though some progress is being made, EU leaders still need to do more to grasp the nettle and really bolster the continent’s growth prospects.