The first 180-degree turn concerns military spending.

Following the re-election of Donald Trump, Europe has suddenly found itself up against the wall. It can no longer rely on the United States for its defence. We Europeans depend too much on the Americans for the defence of our continent. To date, some 90,000 American troops remain stationed in Europe and their future presence is highly uncertain.

We are also too dependent on American technology in the defence sector. For example, during the military operation in Mali in 2013, the French had to call on American aircraft to refuel their fighter jets in mid-air. A month after the start of the air operation in Libya in 2012, the European coalition ran out of shells and had to call on American stocks. These facts bear witness to past under-investment in defence.

This is reflected in the share of gross domestic product dedicated to military spending, which has remained below Nato recommendations for many years for most European countries. Hence the through a plan to rearm Europe. Significant changes are also evident at national level, with Germany’s remarkable decision to relax the budgetary brake enshrined in the country’s constitution in order to finance defence investment. Other countries (such as the UK, Belgium and Denmark) have also already committed to increasing their military spending.

Industrial awareness

From an industrial point of view, there has also recently been a surge of awareness in Europe. Brussels is planning to extend its merger powers to put a stop to “hostile takeovers” of successful European companies by foreign competitors trying to eliminate all forms of competition. In addition, we are now protecting our automotive industry from fierce Chinese competition. At the end of October, the European Union imposed customs duties on Chinese-made electric vehicles imported to the continent following an anti-subsidy investigation. This followed the decision by the Americans and Canadians to impose 100% tariffs on Chinese electric vehicles. In Europe, this means that some Chinese models are now taxed at up to 45% of their value when they enter the European single market.

The sinews of war

Third, there is renewed talk of mobilising Europeans’ savings. Almost a third of the wealth of European households is in bank accounts. The European Commission’s idea is to to invest these savings in European projects, including defence.

As is often the case in Europe, crises drive us forward. The current geopolitical uncertainty emanating from the new US administration has led to an overhaul of German fiscal orthodoxy, which was one of the sources of weakness in the eurozone economy in recent years. Today, there is a common desire amongst the various European countries to reduce our defence dependence and protect our industry from predators.

In my next article, I will raise the budgetary issues associated with these new defence investments, which will undeniably increase public debts.

Alexandre Gauthy is a macroeconomist at Degroof Petercam Luxembourg.

This article was originally published in .