Peace through strength or war through weakness?

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Yesterday’s European Council conclusions were so full of chest-thumping bluster that you could be forgiven for thinking EU leaders had just come from the gym.

The final texts reaffirm the commitment of (almost) all member states to a “peace through strength” approach to the war in Ukraine. A “robust” Ukrainian military, leaders proclaimed, will ensure Kyiv is in the “strongest possible position” to negotiate a peace deal with Russia.

Similarly, member states vowed to “weaken” the Kremlin’s ability to wage war by “strengthening the enforcement” of sanctions against Moscow. They also reaffirmed their “strong commitment” to prosecuting Russian leaders for war crimes.

The muscular rhetoric extended to economic issues. Leaders pledged to “strengthen Europe’s competitiveness”, “strengthen the single market”, and stressed the importance of “strengthening financial stability”.

Even the environment wasn’t spared the Council’s verbal machismo. In a particularly awkward paragraph, leaders stressed the role of “water resilience” (a nebulous term at best) in “strengthening the EU’s competitiveness and resilience” – implying that resilience, at least of the aquatic variety, is somehow self-reinforcing.

For all the EU’s repeated assertions of its military, economic and environmental virility, the summit itself made it abundantly clear that Europe remains riddled with weakness, ineptitude and division.

No significant progress was made, for example, on integrating Europe’s fragmented capital markets. Differences of opinion on centralised supervision were so deep-rooted that the topic itself was only tentatively broached.

For similar reasons, the potential issuance of eurobonds to boost defence and other investments wasn’t even mentioned.

Kaja Kallas’ “plan” to send €40 billion in military aid to Ukraine has meanwhile been eviscerated by member states, many of whom complained that the EU’s top diplomat had not consulted them before tabling her half-baked proposal.

Moreover, growing support among member states for the confiscation of hundreds of billions of euros’ worth of Russian central bank assets held in the EU was denounced as a potential “act of war” by Belgian Prime Minister Bart De Wever, whose country holds most of the frozen funds.

Underscoring the division, Hungary’s unwillingness to support Ukraine resulted in the Council conclusions being split in two for the second time this month: a pattern that is likely to become permanent and could have cataclysmic consequences when sanctions against Russia – which require unanimity among the bloc’s 27 member states – come up for renewal later this year.

Trade wars

But perhaps the event that most clearly underlined the EU’s fundamental weakness occurred at the same time as the Council summit.

Yesterday morning, EU Trade Commissioner Maroš Šefčovič told the European Parliament’s Trade Committee that the bloc would delay the first of two rounds of retaliatory duties aimed at countering US steel and aluminium duties until mid-April: two weeks later than previously scheduled.

The reasons for the hold-up, Šefčovič explained, were twofold. First, to allow the Commission to “consult with Member States on both lists simultaneously”. And second, to give the EU executive “extra time” to reach a “mutually agreeable” deal with Washington.

Neither justification stands up to serious scrutiny.

First, the Commission’s ability to “simultaneously” discuss the two sets of countermeasures with EU capitals has existed for months – indeed, this has been the case ever since Trump first floated the idea of imposing steel and aluminium levies earlier this year.

Second, and as Šefčovič noted just last week, the US “does not seem to be engaging [on] how to make a deal”. So why the EU’s newfound optimism that a deal can be reached?

The real reason for the delay, however, is easy to discern.

The EU, it seems, simply caved in to pressure from the French wine and spirits industry, which was spooked by Trump’s threat to impose 200% tariffs on all EU alcoholic beverages if, as originally planned, Brussels imposed duties on American bourbon (and other US goods) on 1 April.

Unfortunately, it is highly likely that the “Tariff Man” will interpret the EU’s move as a sign of weakness – and that Trump’s “reciprocal tariffs”, which aim to match other countries’ taxes on US goods and are due to take effect next month, could thus be even more severe.

This, in turn, points to an even more fundamental problem with the EU’s trade strategy. It consists essentially of three prongs: first, repeatedly emphasising that its response will be “firm”; second, doing nothing; and third, seeking an alliance with Washington to combat China’s “overcapacities”, or mass production of cheap manufactured goods.

“The real problem is overcapacity,” Šefčovič, who will travel to Beijing next week, said yesterday. “This means the way forward should be EU-US cooperation to tackle the root causes of overcapacity,” he added.

There is a serious risk that such a strategy could push Europe into a corner. By effectively blaming China for US protectionism, Brussels risks losing out on the opportunity to play Beijing and Washington off against each other – and could end up angering both.

As any military strategist will tell you, opening a two-front war is usually a recipe for disaster. Let’s hope the Commission realises that the same applies to trade conflicts before it’s too late.

Economic News Roundup

EU delays imposing tariffs on US products – including bourbon whiskey and motorcycles – until mid-April. The European Commission had initially planned to reactivate 2018 tariffs on US goods from 1 April, alongside a new package of countermeasures scheduled for mid-April, in response to Washington’s blanket 25% tariffs on steel and aluminium imports introduced last month. The Commission’s move will give the EU “extra time” for negotiations with Washington, EU Trade Commissioner Maroš Šefčovič said on Thursday. Read more.

European Commission doubles down on controversial proposal to centralise oversight of EU capital markets. The EU executive’s Communication on a “Savings and Investment Union”, released on Wednesday, said a proposal to transfer “certain [supervisory] tasks to the EU level” will now be made in the last three months of this year. An earlier leaked draft of the Communication had said this proposal would only be made in the third quarter of 2026. “We don’t have the luxury of time anymore,” said EU Finance Commissioner Maria Albuquerque. “We need to accelerate, we need to push, to bring everything forward.” Read more.

EU sanctions can’t inflict significant pain on Russia. High oil prices and steep increases in military spending have largely cushioned the impact of the EU sanctions imposed since Russia’s full-scale invasion of Ukraine in 2022, analysts said. This means Moscow will likely be able to resist financial pressure from the US and EU to agree to a 30-day ceasefire with Kyiv. “The Russian economy can continue to support this war, and it won’t be a major issue for Putin in his thinking about negotiations or ceasefires,” said Janis Kluge, senior associate at the German Institute for International and Security Affairs (SWP). Read more.

Germany’s economic growth forecast halved despite massive fiscal stimulus package. The Munich-based Ifo Institute reported on Monday that it expects Germany’s GDP, the largest in the EU, to expand by just 0.2% this year – down from the 0.4% growth previously forecast in January. The downgrade came despite the recent joint proposal by the opposition Christian Democrats and incumbent Social Democrats to loosen the country’s deficit rules to boost infrastructure and defence spending by around €1 trillion over the next decade. The package was approved on Friday by the country’s Bundesrat, or Federal Council. Read more.

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