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.

BRUSSELS — As Europe prepares to enter a new technology race, the hurdles it faces to beat out the U.S. and China are all too familiar. After rapidly falling behind in the global rush to artificial intelligence, Brussels has a fresh chance at an economic success story in the emerging field of quantum technology. But in a new strategy to be released Wednesday, the EU will warn that promising homegrown quantum tech risks being snatched up to make money abroad as the bloc continues to lag in turning research into “real-market opportunities,” according to a draft seen by POLITICO. “Europe attracts only five percent of the global private quantum funding, compared to over 50 percent captured by the U.S. and 40 percent by China,” the undated draft read. Governments and technology companies — most notably in the U.S. — are plowing billions into the quantum wave, which would be revolutionary because quantum computers would surpass the problem-solving capacities of current computers by vast orders of magnitude, revolutionizing industries from communications to drug development. Europe is the global leader in the number of scientific publications on the technology. “Europe has been falling behind [when it] comes to the technology in many sectors. This sector is something where we are several years ahead of other countries,” said Juha Vartiainen, co-founder of the Finnish quantum computing company IQM. But in the race to commercialize that research, Europe risks falling behind quickly, ranking only third in patents filed, behind the U.S. and China. To many, it’s déjà vu. Europe is generally best in class in the research that precedes revolutionary technologies, as it was in artificial intelligence. But the U.S. and China leapfrogged the continent in building the companies to deploy mass-market applications. A major point of debate is whether Europe will give its quantum industry free rein. Quantum computers are considered sensitive technology since they are expected to break the digital encryption that protects data and communications from being surveilled and stolen — making the technology a matter of national security. Several European governments have already imposed export restrictions. CASH FLOW PROBLEMS U.S. tech giant IBM recently announced it expects to have the first workable quantum computer by 2029 — adding urgency to the timeline for Europe to get its house in order. For decades, Europe has failed to overcome its fragmented financial market and pool funding on the scale that the U.S. and China can provide. Efforts to overcome the barriers to investment through a bloc-wide capital markets union have yielded no significant outcomes. U.S. tech giant IBM recently announced it expects to have the first workable quantum computer by 2029 — adding urgency to the timeline for Europe to get its house in order. | Anna Szilagyi/EPA The strategy notes significantly more investment will be needed to roll out reliable technology that is widely adopted by several industries. “Raising a scale-up in Europe is super difficult, because we lack the European instruments, the European venture capital … large enough to support that,” said Enrique Lizaso, CEO of Spanish software company Multiverse Computing, which is crossing quantum-inspired software applications with artificial intelligence. Multiverse last month raised €189 million in a funding round that included both U.S.-based and European investors. Lizaso said that if Europe wants to help scale its companies it must be prepared to invest €100 million per company, “which is what you’re going to have from the U.S.” According to IQM’s Vartiainen, “we would need to have funding levels which are significantly larger than they have been so far.” In an interview Tuesday, the EU’s tech commissioner Henna Virkkunen said that Brussels and the capitals have jointly funded quantum technology with €11 billion. “Now it’s important, because we are quite fragmented, that we are putting different dots together,” she said. PICKING WINNERS Both Brussels and EU capitals have rolled out public funding plans to complement private funding, but the industry fears these are insufficient and lack focus. Europe’s approach has been to be “technology-neutral” and fund several strands of quantum technology, Vartiainen said, but spreading out funding can dilute its impact. Europe should follow the U.S. example of unlocking larger investments for focused “challenges,” he said. Under a program led by the U.S. government’s DARPA defense research agency, 18 companies have been selected as part of a larger bid to come up with an error-free quantum computer by 2033. Those companies could reportedly tap up to $300 million if they pass all the stages. The EU’s draft strategy promises to launch “two grand challenges” between 2025 and 2027, with one focused on quantum computing and another on quantum navigation systems in “critical environments.” Another way for governments to support companies to commercialize the technology would be if they are the primary buyers of technology, which then lowers the bar for the industry to follow suit. Some industry voices have warned that the EU’s approach to regulating AI offers a cautionary tale. | Etienne Laurent/EPA The draft strategy said the Commission would “support innovation-oriented procurement schemes,” but didn’t offer much detail on how it would do so. Companies are adamant on what they don’t want from Brussels: regulation and restrictions on quantum technology, like restrictions on the export of the technology. Some industry voices have warned that the EU’s approach to regulating AI offers a cautionary tale. Worried about the potential harms of the technology, the EU rolled out the world’s first AI rulebook, only to quickly backtrack to focus on AI innovation and commercial success. “We cannot afford to regulate what is not yet mature,” said Cecilia Bonefeld-Dahl, director general of DigitalEurope, one of Brussels’ leading tech lobbies. “Otherwise, Europe risks losing the quantum race.”

The EU needs to radically ramp up efforts to slash red tape and unify its single market if it wants to compete with China and the United States, France’s Europe minister told POLITICO. Benjamin Haddad applauded efforts by the European Commission to start streamlining rules in fields such as finance and sustainability as part of a so-called Omnibus Simplification Package, which was launched last month. But the European Union now needs to pick up the pace in revamping rules on corporate sustainability, due diligence, finance and defense, among other areas — taking much bolder steps than it has so far. “Now I think we need to accelerate. The Omnibus needs to become a TGV,” he said, referring to France’s Train à Grande Vitesse high-speed rail lines. “When the Commission wants to go fast, it can do so … There is a window to act now.” Asked whether the Omnibus package should be followed by further efforts to slash red tape he said: “Of course. We’ll need to address many other areas, including defense. It is almost one year since the European Parliament election. And now we are starting to talk about the first [simplification] bills. We have a window to act and we need to take it.” Haddad’s comments come in the wake of a joint push on Monday by the leaders of both France and Germany to abolish a law on ethical supply chains, amid a pro-business anti-green effort designed to bolster Europe’s competitiveness. The Europe minister said several EU countries, in addition to France and Germany, want to go beyond the Commission’s proposed streamlining and abolish the Corporate Sustainability Due Diligence Directive. “In trilogue, at the Council, there will be many states that want to go further than the Commission’s proposals, notably on due diligence,” he said. Haddad also took aim at the EU’s 2040 climate targets and said Basel III — an international banking regulation designed to improve bank capital and liquidity — should be further delayed after the EU postponed implementing components of the regulation until the start of 2026. “I hear about other projects from the Commission, like creating new environmental benchmarks for 2040,” he said. “This is not the time to add complexity, but to see how we can make sure our companies are competitive on the international stage.” “At a basic level, we can’t allow decarbonization to reinforce Chinese and American industry. So let’s have a pause on further norms and let’s accompany our companies, protect them.” While hacking away at regulation, the EU also needs to overcome decades of inertia and start to unify its fragmented single market so EU companies can draw on deeper stores of capital and grow large enough to compete with American and Chinese rivals, Haddad said. He emphasized the need to push ahead with the formation of a so-called capital markets union — an idea that has failed to gain critical mass among EU countries despite years of advocacy by Paris and Berlin. “There will be proposals in coming months which go in this direction on the capital markets union, whether it’s on securitization or on a European savings account or a single supervisory authority,” he said. “Now is the time to go ahead with these things.” Another item on Haddad’s wish list: a common legal regimen for companies across the bloc. Currently, companies wishing to expand beyond their national borders need to grapple with 27 different legal systems — a problem that former Italian Prime Minister Enrico Letta has vowed to solve by creating a 28th, European regime. “I’d go even further,” Haddad said. “I know the Commission is working on a 28th regime of corporate law. We’re not going to harmonize everything overnight. But let’s add a 28th regime for companies that can choose between a national or European regime if they want to develop on a European scale.”

Can the European Union offset the impact of trade tariffs, accelerate economic growth and compete with China and the United States to attract large businesses, all by fiddling with labeling requirements and online paperwork?  It’s damn well going to try.  On Wednesday, the Commission will publish its single market strategy, the latest in a long line of attempts to knock down all the little obstacles that make it impossible, or at the very least difficult, for businesses in one EU country to sell their wares in another. The bloc’s single market was launched in 1987 and in theory allows businesses to operate across the entire EU. In practice, however, a host of national regulations mean the union remains very much 27 separate markets. The economics of tearing down internal barriers to trade make sense: The Commission estimates that a 2.4 percent increase in trade among EU countries would cancel out a 20 percent tariff-induced drop in U.S. exports. The political winds are also blowing in the right direction: Two landmark reports in 2024 called for more integration to boost the bloc’s competitiveness; and EU countries — which are responsible for erecting the trade barriers in the first place — specifically tasked the Commission with drawing up this strategy. The plan, at least the draft POLITICO got its hands on, is dry, boring and full of seeming trivialities. But could it actually make a difference? Here’s what to expect. WHAT’S THE PLAN?  Every time a country implements individual sets of, say, nutritional labeling on packaging, or forms to fill out to display items on grocery shelves, it makes it much harder for businesses from another EU country to enter that market. The Commission wants to hack away at these obstacles bit by bit, reducing friction everywhere it can. There’s a planned regulation on packaging that seeks to make labeling more uniform. Current divergences “are forcing producers to develop different versions of the product for different markets or to relabel or even repackage products when moving them across borders,” the draft reads.   There’s a push to digitize paperwork so companies can easily submit the checks required to place their products on a European market. The Commission wants to expand the Digital Product Passport, a kind of digital product leaflet that contains all the necessary information required by EU rules to prove compliance. Can the European Union offset the impact of trade tariffs, accelerate economic growth and compete with China and the United States to attract large businesses? | Erik Lesser/EPA There are also plans to make it easier to set up a new business across the EU, something that in many countries remains slow and expensive. The draft strategy proposed the creation of a “28th regime” that would allow entrepreneurs to opt into a common digitalized procedure to start a company. The first step will be a pilot program that aims to get companies up and running in 48 hours, with a legislative proposal planned for the first quarter of next year.  WHAT WON’T BE INCLUDED?  Banks and other providers of financial services remain highly national industries. Cross-border takeovers are rare and politically fraught. Just look at the attempt by Italy’s UniCredit to buy out German rival Commerzbank.  A more cohesive financial sector could help get badly needed capital to young, tech-savvy startups. It would also mean better deals for investors and savers. But the financial sector is for the most part excluded from the single market strategy, as the Commission has shunted standardization and simplification of finance regulation onto a separate track, known as the savings and investments union. IS IT JUST ABOUT STUFF?  It’s services, not goods, that account for about three-quarters of Europe’s gross domestic product. A lot of these services will realistically never go beyond their national borders, or even their neighborhoods. No one is traveling internationally to get a haircut, after all.  But for plenty, there is scope for cross-border selling. Think of things like supermarket chains, or consulting. The strategy does include measures to smooth access to services among member countries. Construction makes up more than 10 percent of the bloc’s economy, but only a fraction of that, 1 percent of GDP, is conducted across borders. It’s a similar story with postal deliveries, a booming sector with the rise of e-commerce, as well as retail and telecoms. The Berlaymont is planning measures in all of these areas to deepen market access and allow for more cross-border competition.  WILL IT WORK?  In theory, everyone is a fan of the single market. At the macro level it really is win-win: Consumers get more choice, businesses get more buyers, and governments benefit from greater tax revenues. But at the micro level there are losers: Firms face more competitors and people get laid off. Those losers will lobby hard not to face the brunt of competition. In the end it’s up to member countries — who asked for the single market strategy but who are also responsible for many of the barriers it aims to remove — to play ball. The Commission has included a set of measures to ensure that the strategy has teeth. The draft calls for capitals “to appoint a high level Sherpa for the Single Market in their prime minister’s or president’s office with authority towards all parts of the government.” In effect, this would be the Berlaymont’s inside person, tasked with ensuring skittish governments don’t go back on their word. The Commission is also proposing to take stock of the situation at the end of 2026, and if necessary propose a new Single Market Barriers Prevention Act in 2027.  The single market has other issues that extend beyond mere politics. The world’s mega single markets, the U.S. and China, benefit from relatively uniform language and culture. Europe, meanwhile, contains 27 different member countries, with tastes, language, culture and weather all varying dramatically from place to place. The Commission can ensure the most frictionless trade rules in the world, but it will still be a challenge to get Italians to buy Birkenstocks, or for Poles to choose bacalao over sausages. 

BRUSSELS — The EU has long promised to tear down the barriers splintering its capital markets — but behind every delay lies a web of national interests and industry players profiting from the patchwork. But now, Brussels’ top financial official is signaling that the era of diplomatic restraint regarding such forces may be coming to an end. “We have been complacent, we have been settling for less,” the EU’s financial services commissioner, Maria Luís Albuquerque, told a room full of lobbyists and top officials in Warsaw last week, according to the text of a speech released by her office. The stakes have arguably never been higher. There’s broad consensus among policymakers that mobilizing private investment will be key to shaking off economic stagnation in Europe and delivering on the Commission’s defense agenda. Yet despite more than a decade of lofty ambitions and repeated political pledges, efforts to advance the capital markets union have consistently stalled. Albuquerque isn’t just reciting the party line on the bloc’s broken markets. Since taking office in December, the former Portuguese finance minister — and ex-Morgan Stanley insider — has publicly called out the vested interests holding EU markets back.  “We have endured — and even reinforced — persisting barriers that hurt us all, even if some have an immediate gain. Not anymore,” Albuquerque said, at the Eurofi conference. The object of her frustration are market players who are happy to preserve the status quo to fill their own coffers. In Warsaw, Albuquerque called out players in the bloc’s financial plumbing, including trading infrastructure, post-trading and asset management. As well as firms, she’s targeting protectionist behavior by national governments who keep markets fragmented to retain decision-making power, so that their own economies can benefit more in the short term.  BROKEN PARTS European equity markets, stock exchanges and financial plumbing known as post-trade infrastructure are a “complex patchwork,” which creates “a huge obstacle to building bigger and better capital markets,” the think tank New Financial wrote in a 2021 report on markets fragmentation. For as long as so many players remain in the market, the report said the EU “can tinker at the edges with the detail of regulation,” but “not much will change.” European equity markets, stock exchanges and financial plumbing are a “complex patchwork,” which creates “a huge obstacle to building bigger and better capital markets,” according to a New Financial report. | Kirill Kudryavstev/AFP via Getty Images To compare, U.S. equity markets are more than double the size of the EU’s, while having a small fraction of the exchanges for listings and trading that Europe has. The report found, for example, that the EU has 20 times as many post-trade venues as the U.S. American markets also benefit from just one non-profit company, the DTCC, being responsible for all the clearing and settlement of equity trades. In the EU, on the other hand, there are 295 trading venues, 14 clearinghouses and 32 central securities depositories. Most equity trading takes place in domestic exchanges. And while there are bigger exchange groups in the EU now, like Euronext and Nasdaq, the national exchanges within those groups are still separate, meaning the market is still fragmented.  IMF research often cited by the Commission calculates the damage of single market barriers to the EU as equivalent to a tariff of over 100 percent. In short, the barriers are real, self-imposed, and sacrifice long-term overall gains for the EU’s economy in favor of short-term gains for smaller players within the single market.  A LOBBYING STORY “Behind every barrier and behind every source of fragmentation, there is someone who is making money from the fragmentation,” the Commission’s top financial services official, John Berrigan, said at a conference in Brussels in March. He said the reasons for defending the entrenched interests are linked to the EU’s overall integration. The benefits of removing blockages are “diffuse” across the EU, making them harder to see and therefore fight for, whereas the loss of revenue to players benefiting from a source of fragmentation can be “quite concentrated.” “So those people speak out and they speak loud,” Berrigan said. One of the most heavily lobbied proposals in recent history sought to break down market barriers. The Commission’s Retail Investment Strategy, put forward in 2023, aimed for two major strides to boost the number of citizens investing — introducing accessible value-for-money benchmarks so investors across the EU could see how much bang they were getting for their buck, and banning kickbacks paid by asset managers to investment advisors in return for directing investors towards their products.  The kickbacks “generate conflicts of interest and can lead to the mis-selling of financial products, suboptimal asset allocation, and poorly performing investment products,” according to the NGO Better Finance. The trouble is, the finance industry makes money from the practice. Governments, heavily lobbied by asset managers, insurers, and others who benefit from the kickbacks, pressured the Commission into removing the ban before the text was even officially proposed back in 2023. A final agreement on the proposal still hasn’t happened.  Another proposal, for an EU ticker tape which would publish data on the prices and volume of traded securities in the EU, improving overall price transparency and competition, was hollowed out after — again — pressure from governments lobbied by their stock exchanges, whose business model of distributing that data for a premium price would be threatened by the tape. Under the political deal on that legislation, a weaker version of the ticker tape with less valuable information will still be set up, but stock exchanges are already forming consortia to bid to run the tape, meaning competition may be diluted. IMF research often cited by the Commission calculates the damage of single market barriers to the EU as equivalent to a tariff of over 100 percent. | Florian Wiegand/Getty Images Those are just two examples of many, but the pattern is clear — new EU initiatives which would deepen capital markets are hollowed out or ditched after governments, in thrall to their national finance industry champions, say no.  THE RULES Then there’s the stubborn issue of the rules and who enforces them. Although most agree that having a single rulebook and a single supervisor for EU capital markets actors would make the market more integrated, governments won’t give up their ownership of the rules and their supervision, with high-level summits on the issue ending in stalemate.  They also engage in “gold-plating” — when countries roll out EU rules differently at the national level. This is often to protect national investors or domestic economic interests, a fact that creates barriers for foreign entrants, damaging competition, according to a 2024 report by the Polish capital markets lobby group CFA Poland. The report singles out Germany, Spain, and Italy as high gold-plating countries, while it said investment hotspot Luxembourg gold-plates the least. The Commission wants to change this, planning to convert directives — EU laws which can be interpreted nationally in different ways — to regulations. The latter, unlike the former, have to be rolled out the same way across the EU, something that should help to centralize more supervision at the EU level. But governments are already pouring cold water on that idea. Polish finance minister Andrzej Domański, who is currently chairing EU-level talks as the head of the six-monthly rotating presidency, said there is “absolutely no room” for centralizing supervision, and that EU countries would only “accept” better “coordination” between existing national supervisors. Ultimately, the Commission can talk tough on breaking down vested interests that are keeping the EU’s capital market undersized and fragmented — but national governments will still need to be the ones who move to break down any barriers.

In times of urgency, national promotional bank institutions (NPBIs) are the optimal solution to complement the role of the European Investment Bank (EIB) and other alternatives. NPBIs are best suited to set up European or regional financial vehicles with strong control from member states and the best access to capital markets. Europe is on the path to implementing the Polish presidency’s slogan, ‘Security, Europe!’ Recent geopolitical shifts have not disrupted the prevailing trends in European capital markets or shaken confidence in our own capabilities. The president of the European Commission announced the creation of a new defense financial instrument with an allocation of €150 billion in the form of loans for member states. The Commission is proposing amendments to the Stability and Growth Pact, allowing military expenditure to be excluded from the excessive deficit clause and enabling transfers within existing EU financial programs — e.g. cohesion policy. EIB is also exploring ways to further increase its support for so-called dual-use expenditure. External pressure for swift economies of scale in financing European defense spending strengthens the argument for utilizing financial institutions trusted by governments that are capable of both the EU’s and national defense initiatives. In Poland, Bank Gospodarstwa Krajowego (BGK) has been implementing EU financial instruments since the country joined the EU. With its experience in financing the ever-growing number of EU policies, BGK has reinforced its flexibility and efficiency alongside the ability to swiftly adapt to new challenges. The agility of BGK and NPBI to absorb ‘special assignments’ — even on short notice — derives from the status of a public financial institution and a long-term investment horizon. Poland’s defense financing model BGK has notable experience in securing funds for defense expenditure. Poland leads NATO in defense spending relative to GDP, with projections for 2025 indicating that this share will stand at 4.7 percent of GDP — higher than the United States, at 3.4 percent, and the United Kingdom’s planned increase to 2.5 percent by 2027. In nominal terms, Poland ranks fourth in Europe, following Germany, the United Kingdom and France. Poland’s efforts are financed through the state budget and the Armed Forces Support Fund (AFSF). This fund, established under the relevant act, is managed by BGK and is de facto anchored in the state budget. In 2025, 66 percent of defense expenditure is expected to come from the state budget, with 34 percent allocated from the AFSF. BGK is responsible for managing the fund’s financial liquidity, securing debt financing — primarily via loans and borrowings, supplemented by bond issuance — and distributing funds. To date, BGK has secured approximately €40 billion for AFSF from international markets, benefiting from guarantees from the Polish State Treasury and export credit agencies, resulting in favorable financial conditions. BGK’s track record as a borrower demonstrates that concerns about the impact of military spending on ESG ratings are not an obstacle to obtaining financing. This is particularly relevant in light of ongoing EU negotiations for the Capital Markets Union, a matter yet to be settled. Toward a European defense financing architecture EU institutions already have a variety of advanced financing tools at their disposal. The EIB’s role in financing dual-use projects, including support for small and medium-sized enterprises in the defense sector, will be crucial for various activities, including financing new technologies, or so-called defense tech. BGK’s experience in managing the AFSF could be leveraged to finance strictly military expenditure, which the EIB is currently unable to support. This could serve as a foundation for creating a European Defense Fund, which could be set up and co-managed with other banks. Creating a new fund through NPBIs offers several advantages. NPBIs possess in-depth knowledge of regional industrial ecosystems, enabling more tailored funding solutions for local companies and research institutions. They also facilitate faster and more efficient allocation of funds. Leveraging their experience with EU funding programs, such as InvestEU, NPBIs are well positioned to implement defense projects efficiently. NPBIs can combine EU, national and private funds, creating significant financial leverage, and integrating various instruments like defense bonds, preferential loans or investment guarantees. Their regional perspective also makes them adept at identifying and supporting strategic companies in the defense supply chain, including research and development initiatives. Creation of armaments fund(s) Given the urgency of addressing the armaments gap, we propose that the first step toward implementing the ReArm Europe Plan should involve creating regional or task-based armaments funds , such as one dedicated to the eastern flank of NATO. Such a vehicle could quickly meet the funding needs of countries looking to accelerate defense procurement spending and increase financing for their manufacturing capacity. A regional defense fund would provide new funding opportunities to member states where military modernization efforts are constrained by limited access to financing. Projects agreed upon at the EU, NATO and member states levels could be financed by a fund, similar to the structure of Poland’s AFSF. The selected NPBI would manage the fund, securing financing with a guarantee from the European Commission and, in some cases, member states too. Such a fund could be anchored in the EU budget, mirroring the setup of the AFSF within the Polish budget, with the Commission providing grants or other resources, including the issuance of defense bonds if necessary. In terms of financing the expansion of production capacities, the private sector could play a key role, with appropriate incentives such as financing guarantees. In conclusion, we believe that the European discussion on financing its defense capabilities has now shifted from ‘whether’ to ‘how?’ And NPBIs are the answer, emphasizing the crucial role in managing and raising funds for European financial programs. The advantage of NPBIs, such as BGK, is their ability to quickly absorb new tasks. To us, the EU defense policy represents another assignment, and leveraging such trusted partners offers the fastest route to building an effective and open financing architecture. This approach complements the role of other financial institutions, EIB or potentially a new armament bank modeled on the European Bank for Reconstruction and Development. Modifying a public bank’s mandate is a much simpler process, and given the time-sensitive nature of the current defense investments, regional procurement funds managed by NPBIs offer the most efficient solution.

The European Commission’s Competitiveness Compass plots a course — or a “growth strategy,” according to Commission President Ursula von der Leyen — for policymakers to follow over the next five years It’s a dense 27-page document crammed with recommendations to get the European Union’s economy going. We’ve boiled down the main points and explained where they’re heading. CUTTING RED TAPE Von der Leyen told reporters she’d had a “very clear signal from the European business sector that there is too much complexity” in EU regulation, much of it stemming from new climate-related laws. A move to simplify legislation for sustainable finance, due diligence and taxonomy rules — the “omnibus package” — will be the first of several, she said, promising these will ultimately save companies €37 billion a year by 2029.  The plans have alarmed climate campaigners and others that Brussels’ new deregulation agenda might prioritize innovation and growth over the environment and echo conservative demands, including a mention of allowing e-fuels to keep combustion engine cars alive, and the “simplification” of a carbon border tax. STAYING THE CLIMATE COURSE Von der Leyen insisted that the European Union was “staying the course on the objectives of the European Green Deal” and that climate targets wouldn’t change. The Commission even rearranged some paragraphs while drafting the Compass to emphasize innovation and decarbonization. The green transition of traditional industry and the expansion of new, climate-friendly technologies are at the heart of the Competitiveness Compass. More detailed measures on how to achieve that are expected in next month’s Clean Industrial Deal, due Feb. 26. The Commission will, as expected, also focus on “resource efficiency and boosting circular use of materials” — signaling that niche sustainability topics like recycling and eco-design are highly strategic. We knew the Circular Economy Act would not land before 2026, and the Compass confirms the Commission’s plans for the last quarter of that year. CARS VS. CLIMATE TARGETS Bowing to carmakers’ pleas for leniency over looming fines for failing to hit new emissions targets, the document promises “immediate solutions to safeguard the industry’s capacity to invest, by looking at possible flexibilities.” What that means will be negotiated during a strategic dialogue with the automotive industry that kicks off Thursday. Car lobby ACEA estimates that the industry will pay €15 billion in fines if the Commission doesn’t act. Industry Commissioner Stéphane Séjourné pushed for the language to be included over the objections of Climate Commissioner Wopke Hoekstra, said an EU official privy to the discussions and granted anonymity because they are not authorized to comment. ENERGY PRICES European companies pay significantly more for electricity and gas than do their U.S. and Chinese counterparts. That’s a problem, and von der Leyen is keen to fix it.  Her plan, in short, is to invest in more grids and connect them up, and also change how contacts are made and fees are charged. That costs money — and so far there isn’t much of that. The EU also can’t wave a wand and make some of its other preferred reforms happen overnight. Still, the ambition is there, which has encouraged energy and industrial lobby groups. But the vital details are still to come: For starters, an Affordable Energy Action Plan is due at the end of February. MAKING BREAKTHROUGHS Von der Leyen said improving competitiveness means “that we really have to focus more on breakthrough innovation and breakthrough technologies.” She promises a startup and scaleup strategy as well as a “broad AI strategy for our continent.” U.S. President Donald Trump’s $500 billion artificial intelligence infrastructure plan and the emergence of a cut-price AI model, China’s DeepSeek, show that the global AI race is on. The EU wants to get in the game and needs computing power, cloud infrastructure and access to data, the document said. The Commission has already doled out funding for AI factories and AI-optimized supercomputers. It plans to follow that up with a cloud and AI development plan to enable the training of very large AI models, a plan expected late this year or early next. It will separately try to address the feeble adoption of AI by companies (only 13 percent of businesses are using the tech so far). An Apply AI strategy due later this year aims to fix that. Taking action means lots of tech action plans, with von der Leyen promising strategies for advanced materials, quantum, biotech, robotics and space technologies, all “components of the markets of the future.” WHERE’S THE MONEY? The EU plans to make it easier for businesses to access private funding by making progress on the long-discussed but never-completed capital markets union, now rebranded as the Savings and Investment Union. In concrete terms, that means the EU investment programs will be wider and the European Investment Bank will be asked to offer more public guarantees, loans and even investments in equities, starting with a new fund to help companies buy growing businesses or to support their going public. The EU’s executive is also working on a 28th business code that offers an alternative to fragmented national systems and will cover “aspects of corporate law, insolvency, labor, and tax law.” While the Compass promotes better coordination of national government investments, it lacks a clear plan on other common sources of money. It does, however, pave a way for countries to repurpose regional funds — often used to build schools and bridges — for critical technologies. This is only a taster of what’s to come. Von der Leyen supported linking public funding under the next budget from 2028-2034 to implement key economic reforms that will make countries more competitive. BUY EUROPEAN Governments could favor Made-in-Europe goods via planned public procurement reforms, potentially a powerful boost for local companies and an irritant for trading partners since such tenders account for 14 percent of the EU’s gross domestic product. Like the carbon border tax or deforestation regulation, it may amount to protectionism in all but name. The EU executive also plans to set up an industry platform for buying strategic raw materials. The bloc is dependent on imports of scarce minerals such as the lithium used in electric vehicle batteries — where industry leader China dominates both supply and processing. GETTING STRATEGIC ABOUT INDUSTRY Competition policy is “an important lever,” the compass said, pitching a review of merger guidelines to take account of innovation and “investment intensity” in strategic sectors.  The steel and metal industry will get an action plan this spring that will cover investment, inputs and the use of trade defense measures against cheap imports. The chemicals industry will get a similar plan near the end of the year. A Competitiveness Coordination Tool aims to knock some EU government heads together and funnel money to joint industrial goals, building on the Important Projects of Common European Interest that have funded hydrogen, battery and semiconductor projects. TRAINS AND SHIPS A High-Speed Rail Plan will arrive this year to “strengthen EU cross-border rail connectivity,” the final document said. It also plans a European Port Strategy this year along with an Industrial Maritime Strategy. Aviation doesn’t get a mention, but attention will likely focus on a Sustainable Transport Investment Plan, due in the third quarter, which is expected to stimulate investment in sustainable aviation fuels along with other low-carbon transport fuels. HEALTH The European Biotech Act will provide a forward-looking framework “conducive to innovation” in clinical trials, the document said, ditching a suggestion in earlier drafts of a more radical reworking of clinical trial regulations. The Life Sciences strategy has been penciled in for the second quarter and a Critical Medicines Act will drop by mid-March. The new draft also mentions short-term measures to simplify rules on medical devices. RAMPING UP DEFENSE Since the war in Ukraine started, Brussels and EU capitals have urged defense contractors to ramp up production, but companies have complained that the current rules and regulations are too burdensome and that finding financing is too difficult. The broader simplification push may help them. One of their key asks of Brussels is to “defense-optimize horizontal instruments,” as the  Aerospace, Security and Defence Industries Association of Europe put it last year. Defense companies are now likely to start lobbying the EU executive to ensure their sector is at least taken into account, if not prioritized in future proposals. NO GAME CHANGE FOR FARMING Tucked into the fine print of the Compass are a few modest nods to farming — because it’s hardly Europe’s next economic rocket. The strategy gestures at fostering agricultural entrepreneurship and linking farming to the bioeconomy. But let’s be real — no one expects farmers to start churning out unicorn startups. Still, the Commission wants to squeeze out more efficiency and ease the administrative burden on both farmers and regulators. A Vision for Agriculture and Food lands on Feb. 19, promising sustainability and resilience. The EU also aims to cut red tape and push circular economy principles. But will it bring real change? Expect consultations, strategies, and tweaks — but not so much game-changing shifts. Marianne Gros, Zia Weise, Gabriel Gavin, Pieter Haeck, Giovanna Faggionato, Gregorio Sorgi, Kathryn Carlson, Douglas Busvine, Jordyn Dahl, Tommaso Lecca, Aoife White, Rory O’Neill, Laura Kayali, Bartosz Brzeziński, Aude van den Hove, Francesca Micheletti, Giovanna Coi and Hanne Cokelaere contributed to this report.

BRUSSELS— The United States just fired the starting gun on an artificial intelligence race where Europe won’t be able to keep up.  U.S. President Donald Trump on Tuesday unveiled a half-trillion-dollar project to build the infrastructure needed to cement U.S. AI dominance in the years to come, starting with a data center in Texas. The level of ambition has jaws dropping in Europe where political leaders have pinned hopes on AI helping to restore the continent’s global leadership.  “This is more than a wake-up call; this is a slap in our face,” said Christian Miele, general partner at venture capital firm Headline, which invests in French AI firm Mistral. European Commission President Ursula von der Leyen has talked big about the EU becoming a leader in AI innovation as part of a larger bid to help the region catch up with the U.S. and China. French President Emmanuel Macron is aiming for a similar pitch at a global AI summit he’ll host next month. The size of the U.S. plan blows the EU pitch out of the water, and reveals the U.S. focus on keeping up with China. Europe – which has already lost out on social media, cloud and chips – looks already set to fall behind on AI. In just a week, the U.S. has taken a radically more aggressive stance on AI, restricting the export of its AI chips to the rest of the world, ditching an AI regulation push and now rolling out an investment program that one investor likened to the Manhattan Project — the U.S. scheme to produce a nuclear weapon in the 1940s.  MAGNITUDE The EU does have plans to foster the rollout of the hardware needed to train artificial intelligence models, such as European rivals to OpenAI’s chatbot ChatGPT.  In December, the Commission selected seven sites across the bloc that would receive funding to build AI-optimized supercomputers, open for startups and researchers to train their AI models.  The total amount of that investment was €1.5 billion, of which half comes from the EU budget. The EU’s investment “is several orders of magnitude below what has just been announced in the U.S.,” said Holger Hoos, AI professor at RWTH Aachen University and chair of CAIRNE, a network of AI research labs.  This shows that the EU doesn’t have enough ambition, he said. Donald Trump’s Stargate Project plans to deploy $100 billion immediately, leaning on private funding and equity partners including Japan’s SoftBank. | Kazuhiro Nogi/AFP via Getty Images Venture capitalist Miele echoes this: “The strategic relevance of AI has not yet been understood at the political level.” Trump’s Stargate Project plans to deploy $100 billion immediately, leaning on private funding and equity partners including Japan’s SoftBank, AI pioneer OpenAI, software giant Oracle and the investor MGX. U.K. chips firm Arm and U.S. AI chips designer Nvidia are technology partners, along with Microsoft which works with OpenAI, including by providing its Azure cloud services. The EU also has no leading AI companies that can drum up private capital to the same extent. “We don’t have these Big Tech champions that the U.S. has; we don’t have this luxury of being able to work with them in order to mobilize private capital,” said Giorgos Verdi, policy fellow at the European Council for Foreign Relations. “I cannot think of, let’s say, Mistral being able to mobilize this kind of investment capacity and building these huge AI data centers,” he said. Europe’s fragmented financial markets have always been a barrier for European startups and there’s so far been little real progress on plans to improve the region’s capital markets. Energy is another roadblock for Europe’s ability to match the U.S. AI push.  Data centers, especially those powering AI, are energy-intensive operations. President Trump has embraced the “drill baby drill” slogan and declared a “national energy emergency” to boost gas and oil production.  In Europe, energy prices have skyrocketed in the wake of the war in Ukraine, with many companies saying high costs make it hard for them to compete with global rivals. “The kind of energy that is going to be needed in order to operate infrastructure on that scale is going to be insane,” said Miele.  POLICY PIPELINE The U.S. move could yet shock the EU into some sort of action. In a Wednesday debate at the European Parliament, von der Leyen singled out AI as a “strategic area” where her Commission needs to coordinate with national governments on investment. Investors, startup and tech lobby groups, and European lawmakers urged Brussels to go further and seize the moment with a comprehensive AI hardware plan. France Digitale, France’s leading tech and startup lobby group, said it seemed “inevitable” to propose “structural reforms” in funding innovation. Aura Salla, a Finnish member of the European Parliament, called for urgent attention to capital markets. “We cannot fix the investment gap with public financing, we must attract more private investment,” she said. The Commission has a pipeline of policy initiatives to try and fix some of its ills. None of them involve big investment. Next week, von der Leyen unveils a competitiveness compass to show how she’ll try to get the economy going. There are also plans for a single corporate code for startups, the 28th regime, to end a current regulatory patchwork. But beyond that, experts warn that the EU could quickly face a reality check about its ability to develop ambitious OpenAI rivals and should opt for smaller projects and models instead. “At which point do we want to accept that we might not be able to compete with the U.S.?” Verdi asked.

The EU is in no mood to beg for favorable treatment in the face of U.S. President Donald Trump’s “America First” agenda. Instead, European Commission President Ursula von der Leyen on Tuesday mapped out an upbeat vision of the EU as an economic heavyweight that was beating the U.S. in many key respects and was open for business with countries such as Mexico and China — while Trump sets himself on a collision course with those nations. Speaking at the World Economic Forum in Davos in her first major policy address since Trump’s Nov. 20 inauguration for a second term, von der Leyen avoided direct criticism of the president but drew clear and stark contrasts with America, especially by underlining the EU’s commitment to the Paris climate pact that Washington is ditching. Europe, she said, still has the “biggest trading sector in the world” as well as “longer life expectancy, higher social and environmental standards, and lower inequalities than all our global competitors.” In contrast to the maverick strongarm tactics of Trump, Europe’s “large and attractive market” was a predictable partner, von der Leyen said. “With Europe, what you see is what you get. We play by the rules. Our deals have no hidden strings attached.” All in all, von der Leyen sought alliances rather than showdowns, particularly with those in Trump’s crosshairs. “Europe will keep seeking co-operation — not only with our long-time like-minded friends, but with any country we share interests with,” she stressed. As for Europe’s many problems — which range from war on its doorstep to industrial decline and a far-right surge — von der Leyen chose not to dwell on them. Instead, the German politician tried to inspire confidence in the bloc’s ability to change, laying out plans for reforms to be presented in February that aim to unify the bloc’s fragmented capital markets, slash red tape and foster world-beating companies. How she intends to enact those reforms at a time of increasing divisions among the bloc’s leaders is anyone’s guess. Overall, her Davos stump speech was as remarkable for what it didn’t say as for what it did. There was no mention of the far-right’s recent electoral successes in Europe, for example, nor even of Trump. The traditional encomium to the once-sacrosanct transatlantic relationship was another notable omission, while the war in Ukraine received only a passing reference. Instead, von der Leyen’s address was all about Europe as a global economic player, with prominent mentions of South America, Africa, China and India, where she intends to make her first major trip since being re-elected, and placed far less emphasis on the United States. Here’s how it went down in real-time: 1. THINGS ARE A LITTLE CRAZY, RIGHT NOW, OK? With a war raging in Ukraine and Trump in the White House, von der Leyen faced a challenge describing “the situation” without sending her audience into a clinical depression. She did this by staying aloof, describing a “new era of harsh geostrategic competition” in which Europe would have to get tougher. In classic EU form, von der Leyen pleaded with her audience to “avoid a race to the bottom” and not flout global rules to gain an economic edge over rivals. In almost the same breath, however, she recognized that the “cooperative world order” that Europe anticipated had never materialized, and that now was the time to get real. 2. BUT EUROPE HAS A LOT GOING FOR IT. PROMISE! Then came the pep talk. With Elon Musk’s X platform flooded with content attacking the EU as a declining museum resort, von der Leyen did her best to tout the bloc’s qualities. “We have a huge single market … unique social infrastructure … credible and independent institutions … [and] an unshakeable commitment to the rule of law.” Even the bloc’s ability to innovate was “under-appreciated,” she said, noting that Europe registers nearly as many patent applications as China and the U.S. Even so, she allowed, “the world is changing. So must we.” 3. DON’T WORRY. WE HAVE A PLAN. While everything is great in Europe, the place still needs a total overhaul — which von der Leyen pledged to kick off in February when she presents a big reform plan. This big leap will aim to unleash Europe’s economic might by unifying its fractured capital markets and channeling billions of euros in savings accounts toward investment. It will also aim to ease the bureaucratic burden on companies by giving them “one single set of rules” applicable across the union. Not mentioned: The fact that Europe’s leaders remain hopelessly divided on how to move forward, with multiple countries opposed to a capital markets union (an attempt to get the conversation started last year died miserably). 4. BTW, WE ARE STILL INTO THIS GLOBALIZATION THING. At a time when Trump is touting trade tariffs and “America First,” von der Leyen’s speech seemed designed to send the opposite signal: We’re open to doing business with anyone. Von der Leyen addressed potential trading partners directly, saying: “If there are mutual benefits in sight, we are ready to engage with you.” Indeed, a key message from the speech was that Europe wants to diversify its trading relationships away from America.  While Trump is declaring an emergency on America’s southern border and gearing up for tariffs against Mexico, von der Leyen gave special mention to EU trade relations with Latin America. At a time when Trump is touting trade tariffs and “America First,” von der Leyen’s speech seemed designed to send the opposite signal. | Morry Gash/AFP via Getty Images While acknowledging the economic threat from unfair Chinese trading practices, she also said Europe had to “engage constructively” with Beijing. 5. AMERICA? WHO? Tellingly, von der Leyen spoke about Africa, the Asia-Pacific region, China and India before her first mention of the United States. Even then, von der Leyen signaled the EU will be ready to stand its ground in any impending stand-off. “We will be pragmatic, but we will always stand by our principles. We will protect our interests and uphold our values — because that is the European way.” At the final reckoning, she hinted the EU might move out of its old diplomatic comfort zones and find new friends: “We must look for new opportunities wherever they arise. This is the moment to engage beyond blocs and taboos. And Europe is ready for change.”