Europe Under Attack

Thoughts on next week's Battle of Brussels, Starmer's dangerous dithering, how Ireland's neutrality is costing it friends, can Europe break the Chinese siege, and why we are past peak human

Photo by UX Gun on Unsplash

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• European Summit: Battle of Brussels

• UK Defence: Starmer’s dangerous dithering

• Irish Neutrality: Toothless Tiger

• Economic War: Chinese Siege

• Peak Human: Past our prime

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1. Battle of Brussels

European Council summits are often described as make-or-break for the European Union but the one that will take place in Brussels next week really is shaping up to be a defining moment for the continent. It takes place at a time when, according to the secretary general of NATO, Europe is already effectively at war with Russia and when Ukraine is under intense pressure from the newly-aligned US and Russian governments to accept a deeply one-sided “peace deal” that will leave the country highly vulnerable to future Russian attack.

The summit will be dominated by the need to decide how to fund the Ukrainian government when it runs out of money next year - and in particular whether to use Russia’s frozen assets to provide Kyiv with a €90 billion reparation loan. As I noted in my latest column for Euractiv, the stakes could hardly be higher:

Failure to reach a deal at next week’s summit of EU leaders would not only make it much harder for Kyiv to resist US pressure to capitulate – it will ensure that Europeans have no leverage over what comes next. They will have shown that even in the midst of an existential crisis, they are incapable of collective action.

The good news is that EU member states have already taken one vital step towards making the reparations loan a reality when it agreed to invoke emergency powers to freeze those Russian assets indefinitely by qualified majority voting, thereby overcoming vetoes by the Kremlin-friendly Hungarian and Slovakian governments. That use of emergency powers in itself establishes an important precedent that will allow the EU to act decisively in future crises rather than being paralysed by the endless quest for consensus.

But there are still obstacles to be overcome if the loan is to go ahead. One is the need for a liquidity backstop to ensure that the Belgium could return the assets to Russia on demand in the unlikely event that a competent court ordered it do so. The refusal of the European Central Bank to provide such a funding line, citing the need to preserve its independence, has complicated this. A second challenge is to assemble the qualified majority necessary to authorise the loan scheme. That task has become harder following the decision of Italy, Bulgaria and Malta to side with Hungary, Slovakia and Belgium in opposing the reparation loan.

What’s more, EU leaders will make this decision against a backdrop of hybrid war. That goes well beyond the drone incursions, cyber attacks and warehouse fires that have been unsettling the continent for months. It extends to direct threats to countries and individuals. Belgian prime minister Bart de Wever has been open about his fear of Russian reprisals if the reparation loan goes ahead.

Even more ominous was a report last week that Valerie Urbain, the chief executive of Euroclear, and a second Euroclear executive received threats via a French banker with strong Kremlin links. As EUObserver notes, that raises questions as to whether intense lobbying by Euroclear executives against the loan reflects the fact they were under private duress.

Nor is it only Russian threats that European ministers and officials must contend with ahead of next week’s summit. The Trump administration has already shown the lengths to which it is prepared to go to pursue its diplomatic agenda:

• Judges and prosecutors at the International Criminal Court (ICC) have been cut off by banks, credit card companies and tech giants like Amazon as a result of sanctions brought by the Trump administration over war crimes investigations into Israeli and US officials, the Associated Press news agency reported on Friday. They are now living under the same U.S. financial and travel restrictions brought against Putin, Osama bin Laden and crime bosses.

• Trump administration officials succeeded in scuppering a global green shipping deal by making personal threats against negotiators from other countries. The US ripped up normal global diplomacy rules and used “bully-boy tactics”, the Financial Times reported. “The intimidation included approaching country officials during coffee breaks to warn them they might not be able to transit via the US, or that they and their families could face restrictions on entering the country if they acted against American interests”

• Francesca Albanese, the UN Special Rapporteur on Human Rights in the Palestinian territories, spoke last week of the “profound” and “personal” effects of US-imposed sanctions on her and her family, reports The National. The sanctions include a ban on travelling to the US where members of her immediate family who are US citizens live. “We cannot open a bank account, and not just in the US, because wherever we are, when it comes to banks, we are dominated, we are under US law,” she said.

Who knows what pressure the governments of Italy, Bulgaria and Malta may have come under from Russia or America when deciding to break ranks last week. What is certain is that the pressure on member state in the coming days from Washington and Moscow will be intense. There are no good options or easy answers, just the balance of risks. But failure to secure a funding deal for Ukraine would send a powerful signal to the world of Europe’s geopolitical impotence.

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2. Starmer’s Dangerous Dithering

Credit at least to Friederich Merz, who almost alone among European leaders has not only recognised the gravity of the moment but has also said so publicly. In a powerful speech at the weekend, the German chancellor likened the moment facing the continent to 1938 and warned that Putin will not stop at Ukraine:

“Just as the Sudetenland was not enough in 1938, Putin will not stop… If Ukraine falls, he won’t stop there… This is a Russian aggressive war against Ukraine — and against Europe.”

One can only wish that Sir Keir Starmer - or indeed any of the growing cast of Labour panjandrums who are more or less openly jockeying to replace him - would speaking similarly forcefully about the crisis facing the continent and the consequences for Britain of Trump’s pivot away from Europe to side with Russia. But that would mean confronting the deeply ingrained default position of the British establishment of near-total deference to the US. It would also mean confronting the very urgent need to substantially increase defence spending.

Instead, warnings by defence experts that Europeans may face a war with Russia within five years without US support plays almost no part in political debate. That is clearly starting to alarm the military, as the FT reported last week:

General Sir Gwyn Jenkins, the First Sea Lord and head of the Royal Navy, told a conference that the UK and Nato’s “opponents are investing billions” and warned that the western alliance’s dominance of the Atlantic was under threat from Russia and other rivals.

“The advantage that we have enjoyed in the Atlantic since the end of the second world war is at risk. We are holding on, but not by much. There is no room for complacency,” Jenkins told the International Sea Power Conference.

Officially, the UK government is committed, alongside other Nato states, to raising defence spending to 3 percent of GDP by 2030 and 3.5 percent by 2035. Yet it was striking that in last month’s budget, Rachel Reeves set out plans to raise defence spending to 2.5 percent of GDP by 2027 but no details on how it would rise thereafter. The FT again:

The Office for Budget Responsibility said that increasing defence spending to 3.5 per cent of GDP by 2035 would cost an additional £32bn a year, well above the extra taxes Reeves already raised in her Budget.

Meanwhile the UK armed forces face a more immediate problem in the form of the glacial pace of delivery on defence programmes, largely caused by a lack of money, noted Andrew Dorman, Professor of International Security, King’s College London, in a post for the UK in a Changing Europe think-tank:

For example, construction of six new munitions and energetics factories to allow the UK to produce enough munitions in wartime has yet to start and orders for the replacement for the AS90 self-propelled guns given to Ukraine have yet to be made leaving the British Army desperately short of artillery. The promised Defence Investment Plan is rumoured to be unaffordable with a basic choice boiling down to whether the UK has an army or navy based on current planned funding levels. Moreover, within the SDR [Strategic Defence Review, published earlier this year] there is no sign of any prioritisation amongst the 60+ recommendations

It is hard to disagree with Dorman’s conclusion:

Britain’s European allies in Scandinavia, the Baltic States, Poland, Germany and France have all responded to the threat posed by Russia with significant increases in defence spending. The question for Starmer is whether to do likewise, fully fund rearmament and maintain Britain’s position as Europe’s leading military power and supporter of Ukraine or to dither, obfuscate and leave the UK dependent on a disdainful US ally who will decide on the day whether to help.

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3. Toothless Tiger

If Europe is to become a new battleground for great power competition, then it is obvious that it is the smaller countries that will be most vulnerable to coercion. No wonder, then, that a deeply hostile op-ed in the WSJ last week has provoked serious consternation in Ireland (“Ireland is a Wounded Tiger”).

Never mind that the diatribe by an English hard right provocateur was riddled with inaccuracies (many of which were addressed in a subsequent letter by former Irish ambassador to the US Dan Mulhall). It contained enough kernels of truth to be deeply unsettling to an Irish political class that has long taken for granted the depth of its bipartisan relationship with the US. What’s more, it came hard on the heels of a similarly hard-hitting WSJ oped by Robert O’Brien, Trump’s national security adviser in his first administration (“When Irish Eyes are Glaring”).

Part of this hostility reflects Ireland’s embrace of the Palestinian cause, which has spilled over into antagonism towards Israel and fulled accusations of anti-semitism. A proposal by Dublin’s City Council to change the name of Herzog Park, named after Chaim Herzog, who was raised in Dublin and became president of Israel, rightly attracted global condemnation and was swiftly withdrawn.

A potential new flashpoint in US-Irish relations looms in the form of a proposed Occupied Territories bill which will ban on trade with illegal Israeli Settlements. That has prompted some Congressional Republicans to warn that the Irish bill might trigger the 1986 law penalising American corporations and individuals who operate in a state running an “unsanctioned international boycott.”

A second potential flashpoint concerns tax. Ireland has reaped the benefits of hosting the European headquarters of major American companies, particularly in the pharmaceutical and tech sectors, that have been attracted by its low corporate tax rate. Just 10 international corporations account for over half of all corporate tax receipts — and they make up more than a third of total government revenue.

Despite Trump having previously called Ireland’s tax arrangements a “scam” and having ordered the U.S. Treasury in January to prepare “protective measures” against countries whose tax policies “disproportionately affect American companies,” these revenues have so far survived unscathed by Trump’s protectionism. But they remain a source of potential tension.

But perhaps the most serious charge against Ireland - not least because it is one that is shared by many of its European allies too - is that it is hidden behind its historic neutrality to woefully underinvest in defence. As O’Brien noted, it spends roughly 0.2% of gross domestic product—which is among the lowest in the EU.

Ireland lacks key technical defenses, like radar systems and efficient cyber and human intelligence networks, leaving the country vulnerable to espionage and cyberattacks from Russia, China and extremist nonstate actors—which creates an opening to target American tech firms with significant Irish infrastructure.

Ireland’s defensive inadequacies were brutally exposed in a recent piece in the FT, which highlighted the country’s impotence as suspicious vessels have started appearing in its waters where vital underwater infrastructure that carries more than a quarter of transatlantic data every day lies:

Ireland is an island nation that did not have a navy until 1946, had run out of ships by 1969 and is now so under-resourced that only four of its eight vessels are in service. Lacking security infrastructure, it is also cut off from those who might seek to help: friendly Nato nations are unable to communicate a potential hazard, such as an incoming Russian vessel, because Ireland lacks the intelligence systems to receive classified information, three European naval officers have told the FT.

Ireland has for many decades prospered by positioning itself as a bridge between the US and EU. At the same time, it has benefitted hugely from European solidarity, not least over Brexit. But the reality is that its modern fetishisation of neutrality, which is at odds with the more nuanced way that it was interpreted in the past, risks becoming a serious point of tension with its allies. Next year, it will hold the rotating chair of the Council of the European Union when defence and security will be top of the agenda. It can expect its own contribution to come under an increasingly harsh spotlight - and not just from MAGA commentators.

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4. Chinese Siege

Europe is not just in the midst of a hybrid war with Russia and America. It is also in the midst of an economic war with China. Last week it emerged that China’s annual goods trade surplus has hit a record $1 trillion despite the trade war with the US, as it compensated for reduced exports to America with a huge increase in exports to the rest of the world. On a trip to Beijing this month, Emmanuel Macron warned of mounting fear in European capitals that China’s export-driven economic model poses an existential threat to their own industries:

“These imbalances are becoming unbearable,” Macron said at a joint appearance with Xi Jinping Beijing.

Indeed, China’s latest push for an export-led recovery has led Goldman Sachs to slash its European growth forecasts. The investment bank now expects stronger Chinese export competition to lower euro area GDP by around 0.5% by end-2029, with German GDP likely to be 0.9 percent lower, Italy down 0.6 percent and France and Spain down about 0.4 percent each.

Astonishingly, Germany now imports more capital goods from China than it exports. What makes this shift particularly uncomfortable for Europe is the scale of substitution between Chinese and European goods in global markets. According to Euronews:

Goldman Sachs estimates that, over the past five years, eurozone exports have lost up to four percentage points of market share to Chinese exporters in major global markets. For every one-dollar increase in Chinese exports, European exports have typically declined by between twenty and thirty cents.

What is to be done? According to the FT:

Paris is demanding Beijing recalibrate its trade and investment relationship with the EU. “We are at the last stop before a crisis,” a French official warned. “If we don’t change course, we will worsen global fragmentation,” they added, suggesting Paris would have to consider “protective measures”.

There seems fat chance of Beijing adjusting its economic strategy, which it has just thrashed out in a new five-year plan, to address European concerns. There has been some speculation that it might allow some appreciation of the renminbi, which has fallen to its lowest level against the euro in a decade and which Goldman Sachs reckons is 25 percent undervalued. But that is unlikely to make much difference to the overall picture. Nor would a commitment by Beijing to increase overseas investment or stimulate more domestic consumption.

As The Economist notes:

The real problem is that European manufacturers now struggle to compete with Chinese carmakers and electronics firms. That would be the case even if China spent much more on commodities and other imports and its trade surplus fell to zero.

One option is for the EU to take action to limit Chinese imports, notes the FT:

The EU is considering setting “made in Europe” targets of up to 70 per cent for certain products such as cars as it pushes to prioritise domestic goods and cut reliance on China. Brussels is also planning to tighten foreign investment rules to ensure Chinese companies do not gain advantage from the bloc’s open market without generating benefits for local workers and sharing technology.

At the same time, Europe is escalating scrutiny of Chinese firms over concerns they are receiving unfair state subsidies, notes Semafor:

EU regulators reportedly raided e-commerce giant Temu’s Irish offices, and opened an in-depth probe into airport scanner maker Nuctech. Both are suspected of receiving support from Beijing that makes it hard for European companies to compete. Brussels has also probed China’s EV sector over the same issue; the two sides resumed negotiations over a minimum price plan for the Chinese vehicles, officials said Thursday.

Yet such action needs to be balanced against Europe’s reliance on China for critical raw materials. Indeed, China’s dominance of so many categories of manufacturing gives it formidable leverage. When the Netherlands took control of Dutch chip maker Nexperia from its Chinese owner for national security reasons, China barred the company from exporting chips from its Chinese operations, crippling auto-assembly customers.

The best option would be for western countries to form a united front and impose common restrictions on Chinese imports while lowering restrictions on each other. But as Greg Ip noted in the WSJ, Trump has shown no interest in such a united front. Instead, he has hit allies with high tariffs while backing away from a trade confrontation with China when Beijing retaliated. Last week, he even agreed to reverse a ban on the export of Nvidia’s powerful H200 AI chips without asking for - or getting - anything in return.

Indeed the new US National Security Strategy on the one hand makes clear that the Trump administration expects the rest of the world to reduce their dependencies on China while at the same time holding out the prospect of a comprehensive US-Chinese trade deal. The danger for Europeans when trying to engage with such a transactional president is that even if they did forge a united front with America, Trump can’t be trusted not to hang them out to dry.

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5. Peak Human

A new addition to my occasional series on things that may have past their peak (See Peak Everything, for speculations on Peak Trump, Peak Stocks, Peak Populism and Peak Farage and also Peak China): this time are we past Peak Human? Without wishing to add to the gloom, I have to report that, according to a fascinating podcast series that I listened to last week, the answer is yes.

I stumbled upon these episodes by accident, having originally turned to David Runciman’s consistently brilliant Past, Present, Future podcast to listen to him and Professor Chris Clark discuss the similarities between Kaiser Wilhelm II and Donald Trump (which was every bit as interesting and illuminating as you would expect. But if you’re looking for a riveting story to listen to when driving home for Christmas or peeling the sprouts, I highly recommend Runciman’s discussion with paleontologist Henry Gee on the rise and fall of homo sapiens.

I learned so much from it, including that our evolutionary superpower was long distance running, that the species nearly became extinct several times, that having sex in private is a survival strategy, that there is more genetic variation in a single tribe of chimpanzees than among all 8.2 billion humans alive today.

The point of the podcast is that the human species has already passed their peak and that its decline is inevitable. When that peak occurred and how quickly the decline will play out, I will leave it to you to find out. I should warn you that you have to pay for the second episode, which I considered money well spent. Alternatively you could buy Gee’s book, The Rise and Fall of the Human Empire, published earlier this year, as I shall be doing for various members of my family.