This is an audio transcript of the Rachman Review podcast episode: ‘Europe’s response to the threat from Trump’
[MUSIC PLAYING]
Gideon Rachman
Hello and welcome to The Rachman Review. I’m Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week’s podcast is about Europe in the age of Trump. My guest is Arancha González, dean of Sciences Po, the Paris School of International Affairs, and she’s also a former foreign minister of Spain.
So with the transatlantic alliance in serious trouble, can Europe get its act together?
Emmanuel Macron voice clip
(Speaking in French)
Gideon Rachman
That was the French President Emmanuel Macron, addressing the nation in a televised speech last week. His message was that France and the world are now in a new era. I was at a dinner in Paris as Macron was speaking, and a lot of the guests broke off to see what he had to say. It felt like a historic moment. The following day, EU leaders met and agreed to establish a new fund worth €150bn to fund the European defence industry.
That same day, I sat down with Arancha González — the head of Sciences Po — to discuss the way forward for Europe. I first met her more than 20 years ago when she was a trade specialist at the European Commission in Brussels. That expertise in trade, combined with a stint as foreign minister for her native Spain, gives Arancha González an expert perspective on many of the issues that will shape the future of the EU and the UK. I began our conversation by asking her to define what’s now at stake for Europe.
Arancha González
This is one of the biggest tests for Europe since its founding after the second world war. The question we have to ask ourselves is do we still want to live in the shadows of the second world war or do we start a new phase of European integration and our own standing in the world?
We have what it takes. We’ve got talent, we’ve got finance, we’ve got markets, we’ve got relations with the rest of the world. And more importantly, today, we’ve got stability at a time when the world — and especially the world that we know best, which is the US — is extremely unstable. But the question is, will we sum up the political courage to, in a way, emancipate ourselves from this long shadow of the US and build a more autonomous world?
Gideon Rachman
Well, what do you think the early signs are? I mean, it seems to me that the new chancellor, incoming chancellor of Germany, Friedrich Merz, has emerged as a very important figure. How important is it that Germany shifts?
Arancha González
It’s very important that Germany shifts because — given the size of the economy, given the size of the population, given the economic importance, the business importance, the innovation importance — the beating heart of Europe is Germany. And when Germany is not well, Europe is not well. And now Germany’s saying that it wants to take its future, but also Europe’s future, in its hands. And it’s a remarkable turn of events that it’s Germany that is today leading. Together with other nations, together with France, that on the defence and military front, sees it very clearly. Together with Italy and Spain, that’s very clearly from the south, are shoring up together with Poland and Nordic countries. I do see Europe taking steps in the direction of a more autonomous Europe. And I think that is good.
Gideon Rachman
And the country you didn’t mention — the one I’m from — Britain. I mean, that does seem to me also a tangible warming in relations between the UK and the EU. What form that will take, I’m not sure. But it’s striking, isn’t it? That Starmer’s working closely with Emmanuel Macron, I imagine will work closely with other leaders like Merz.
Arancha González
History is catching up and reality is dawning also on the UK. The UK is Europe. It may not be in European Union, but it is Europe. And today Europe is under threat. It’s under threat on the one side by a revisionist power that is Russia, and on the other side by the country that used to be our ally, including our security and military alliance. Now it’s showing its desire to weaken Europe.
So there is a convergence of national interests of the UK and continental Europe. And it’s an interesting moment because this could give us a good reason to reconnect, starting from the most intimate thing we can reconnect with, which is our own security.
Gideon Rachman
Yeah. So let’s talk about defence because that does seem to be the first issue on the table. I mean, it’s where European integration began, I guess, with the proposal for a European defence community in mid-1950s, which was rejected in France. What signs do you see that Europe is gonna finally get its act together on defence?
Arancha González
Well, the biggest signs that I see is that we are clearly looking at how to finance the capability gaps that we have. There are areas like air, like space, like intel where we’ve got gaps.
I see signals that we are clear that we have to finance that with different mechanisms — more spending at the national level, common spending, collectively, maybe with a new round of mutual debt, which, by the way, would be very interesting because it would also give us the financial stability and power that we so need at a time when US markets are very unstable, and with a third component, which is unlocking also more private financing of the defence sector. We’re looking at ESG rules that maybe in the past have prevented financial institutions from investing in the defence sector, as they should, given the circumstances.
The third area where we need to think a little bit more is what kind of organisational structure will we need. And there we’ve got to look at what the options are — whether we take more responsibilities within Nato, knowing that right now the US has a big say in how Nato works, and the US is showing to be quite unreliable for Europe’s security and defence. Or do we imagine other set-ups?
Gideon Rachman
Outside of Nato.
Arancha González
Outside of Nato. We just have to think what until very recently was unimaginable. But we have to do that because it’s the security and defence of the continent that is at stake. When there is a conflict, you can’t wobble. You can’t doubt. You’ve got to have a very clear chain of command, and you have to be very clear that you’ve got the capacity to project power that your enemies will see and will respect and therefore will not dare attacking you. This has to be very clear.
Gideon Rachman
But there are many potential problems with European defence. One of them is that because of the existence of Nato and the fact that so many European countries have bought weaponry from the United States, dependence on America is very deep. Do you think that can be changed? Clearly, not overnight. But even over many years, it’s gonna be really difficult.
Arancha González
Yeah, and I think our attempt should be to remain in good relations with the United States. That should be our guiding star, right? But since we cannot guarantee that, we also have to make sure that we take control as far as we can, as fast as we can of our own security and our own defence. Now, none of this is going to happen overnight.
Gideon Rachman
Does that mean not buying American weaponry in future?
Arancha González
No, I don’t think it means not buying American weaponry, but it means de-risking our defence and security. Something that we’ve started to do on our civil economy, so to speak. We’ve been de-risking our economy. We’ve been looking at where we had excessive dependencies, where we had specific dependencies that made us very weak. And this is what we also have to look at in the defence sector. Again, we wish this was not the case. But given what we’re hearing, given the pronouncements that we’re hearing from this US administration, I don’t think we have a choice.
Gideon Rachman
One of the other problems is that every country in Europe wants to have its own defence industry. And so although Europe actually does spend quite a lot on defence, it’s spent very inefficiently. I mean, you’ve sat around European Council tables as Spanish foreign minister and so on, how confident are you that these sets of crises will actually persuade people to buy on a pan-European level?
Arancha González
Well, this is what’s happening. This is where big efforts are also being put. We now have a commissioner for defence. That’s not a commissioner to direct armies, it’s a commissioner to construct the European defence single market — which we don’t have. We don’t have interoperability. We don’t have the same standards. We have a proliferation of technologies for the same product. We’ve got more than 20 tanks in the European continent, we don’t need that.
So we have to do a big consolidation effort. We have to do a big integration effort. What we’ve done for the civil economy, we now have to do this for the defence economy. But this work hasn’t started and I am confident because we are under pressure and because budgets will be under pressure and because a lot can be achieved without spending more, but spending better. And that has to be also a central part of the conversations in Europe. Build the European common market, single market, one day, for defence.
Gideon Rachman
Yeah. You know domestic politics. You were Spanish foreign minister for the Socialists. And Spain doesn’t spend that much on defence compared to other European countries. So imagine yourself back in Spanish politics, do you really think you could make the case when there’s so many other financial pressures to spend more on defence in Spain?
Arancha González
Well, first, Spain has done a huge effort in the last five years to increase this defence spending and move the needle. And it has done that because it has realised that protecting the Spanish citizens, contributing to the protection of the European citizens, is not something that we can put last on our list. Our citizens have understood that we’ve got a problem with Russia. And this is why Spanish citizens have been supporting that we continue to provide military and financial support to Ukraine. And they’ve understood that because we’ve been discussing with them that defending Ukraine is defending Europe. And this means defending Spain, too.
We have to explain why it matters today that we pay more attention, that we put higher on our list, defence and security, and that we need to finance that. And that we need to articulate how we also cover the rest of the needs. Because we also need to hear about things that our citizens care about — whether it’s education, whether it’s healthcare, whether it’s housing. So we just have to find a better way to invest our resources. And we’ve got to be better at investing individually as member states and collectively as European Union. Because there are economies of scale we can achieve if we do this also at the European level.
Gideon Rachman
And talking of collective efforts, you mentioned the idea of raising European debt. A little bit of that was done during the Covid crisis. So in a way the taboo has been broken. That potentially surely is a huge source of strength for the European Union, because I would imagine there’s a lot of demand on the financial markets for another safe asset that isn’t the dollar, given the capriciousness of the Trump administration. So do you think that’s gonna happen? And if it does, is it a game-changer?
Arancha González
Well, if, when I started my career in the European Commission, somebody would have told me that I was going to see the issuance of common debt in 2020, I would have laughed. We are at the time to think and do what until recently was unthinkable. So my bet is that there will be another issuance of common debt to finance our defence, not to finance all of our defence needs. Partly it will be done at the national level. Shoring up national armies is also a national effort, but investing in military capacities that are designed to protect all of our citizens should be done at the pan-European level.
So my bet is on that. And that will have also a positive effect of creating a safe asset and shoring up the euro and building the capacity of Europe to be that much more stable and predictable economic and financial space at a time when lots of things we thought were solid, like the dollar, is starting to look a little bit wobbly.
Gideon Rachman
And yet the traditional objections, particularly in countries like Germany and the Netherlands, which have relatively low debt, is, hang on, who stands behind this debt? Is it the German taxpayer, the Dutch taxpayer? And even the people buying their debt would want to know where is the underlying revenue coming from to back it? So does that imply a European tax to back the European debt?
Arancha González
So what’s behind European debt is European GDP, European growth. And because Europe has also a clear view of what to do to improve its economic performance, I think it is perfectly fitting that we put the two together. We are already working in Europe to make our economy more competitive. To marry better sustainability, competitiveness and security.
The plans are on the table. It makes sense to combine these two, this vision of more solid growth in the European Union, with the capacity also to invest together by borrowing together. Ideally, we could also expand the fiscal tools at the European level, and there are good ideas and good proposals on the table.
Gideon Rachman
And yet the European Union historically, I mean, one of its strengths but also its weaknesses is it’s a very democratic organisation. You have, you know, 27 countries sitting around the table. They all have to agree and it follows the rule of law and there’s the parliament. And so I think if you’re Putin or Trump, you think these guys will never get their act together. They just won’t be able to move fast enough.
Arancha González
Ha. But democracy is not a weakness, I’m sorry. Democracy is what gives us the solidity of the decision. Because it’s democratic, because it’s debated, because it’s discussed, because you have to reach compromises, the result is more solid. So no, I don’t buy that democracy weakens the European Union. It’s the European Union because it is democratic and it’s democratic because it cares about the views of the citizens. So those who want to disregard the views of the citizens, up to them.
I don’t see much stability at the moment in places where views of citizens are disregarded, or where decisions are taken in the morning that are changed in the afternoon. Take the tariffs on the auto sector, I don’t consider this to be very solid. So we in Europe, in our old European way, yes, it takes longer, yes, it’s the result of compromises. But yes, when there is an answer, we just walk the talk.
Gideon Rachman
You mentioned the tariffs and at the moment it’s . . . as we’re speaking, who knows, whether in weeks’ time when this goes out what will happen? But it’s Canada and Mexico. But I think April the 2nd, they’re talking about hitting Europe with tariffs. How should Europe respond?
Arancha González
Europe should first of all remain calm, united and determined. We all know that tariffs and counter-tariffs are a loser’s game. But we didn’t start this game. And we would like this game to frankly stop as soon as we can. And the best means we have to do that is to make sure there is sufficient pain, not only on our economy but also on the US economy. Maybe this will bring a bit of rationale.
What I’m seeing is a mess. Tariffs on automobiles, on the auto sector in the northern American market one day and removal of tariffs on another day because tariffs hurt. Tariffs are hurting the American businesses. If you take the tariffs that are being imposed, it’s a tax that is being imposed on businesses and consumers in the US. The sooner this madness ends, the better it would be. If it’s not gonna end fast, then we have to make sure that we help do that by responding as forcefully as we can.
Gideon Rachman
And when you talk about forceful responses, I mean, it seems to me a lot of the things that people talk about in terms of counter-tariffs are slightly on the symbolic end, you know, Bourbon whiskey, Levi jeans, these kinds of things that are super American. But the thing that the Americans are very sensitive about is their tech industry. And they’re pre-emptively threatening Europe about don’t regulate tech. So there are already issues around tech and data and so on. How in that most sensitive issue should Europe proceed?
Arancha González
Well, first, Europe has its own view of how to regulate in general and the tech sector specifically. Europe doesn’t regulate the tech sector against a particular country or against particular companies. Europe regulates the tech sector because it thinks it is important to make sure that our economy is not a monopolistic economy, that our democracy is not subject to foreign interference, that our public debates are fair and sound. We don’t regulate technology to bully others. We do that because we want to protect our own market and our own citizens, and we should be free to do that.
Now, I find it extraordinary that we be told how to do that by other countries. Let the European lawmakers, let the European parliament and European governments decide what’s good or bad for the European citizens. And once this has been decided — and there is a bit that has been decided already — let’s make sure that we implement this. But we would do a big disservice to the European citizens by weakening our tech regulations just to please other companies, whether they are in the US, whether they are in China, whether they are in Japan or in India.
Gideon Rachman
Yeah, you mentioned China. One of the things that happened over the last four years was European Union policy became, I think, rather closer to America on this whole question of de-risking China — a much more wary attitude to China. But now that the US has switched, do you think Europe is going to, partly as its result, warm up to China?
Arancha González
Well, first the de-risking game wasn’t started by the European Union, it’s started by China. They took the first decisions to de-risk their own economy with this idea of a dual circulation. You know, shoring up the domestic market as a means to build resilience in the Chinese economy. And we have understood that excessive dependencies are not good for our economy. So we also have followed, in a way, the route of de-risking.
Now, in my view, Europe needs a functional relationship with China. And it doesn’t need a functional relationship with China as a result of its relationship with the US. The relations with the US are the relations with the US. But when China represents close to 15 per cent of international trade, around the same amount of global GDP, 32 per cent of global emissions of CO₂, it’s an important country to preserve the stability of the financial system worldwide. And Europe is what it is, Europe needs to have a functional relationship with China. Because Gideon, the worst that could happen to Europe is that the US and China organise themselves and get to their own arrangements, and we be a function of that relationship, as opposed to we shaping our own relationship with the US and with China.
Gideon Rachman
And in terms of practical decisions, there’s been a big debate in Europe about Chinese EVs, electric vehicles, and the threat they pose to the car industry in Europe, how should that be resolved? Is that best resolved through keeping them out, protectionism? Or working with them, opening up Chinese EV plants in Europe? How does that go?
Arancha González
Well, I would say first, the European Union has not shut the Chinese EV out of the European market — Americans have, Europeans have not. If you look at the share of Chinese in the European market, it’s growing. And I don’t think Europe has said we don’t want Chinese into the European market. What Europe has said is we want the Chinese presence in the European market to be on fair terms.
So part of the functional relationship that Europe needs with China, at a time when markets are opening and closing with the speed of thunder, is maybe to agree that they will keep each other’s markets open. But that this openness will come with the respect for fairness, that we will not be weaponising each other’s markets. And maybe that we will have a framework for Chinese foreign direct investment in Europe, with conditions that maybe will mirror the conditions that China imposes to the European companies wanting to invest in the Chinese market.
Gideon Rachman
So it’s something like the kind of Chinese joint venture model that they used to apply, that you had to work with a local partner.
Arancha González
Well, this is to be discussed and decided. I mean, I’m not here to put the conditions on the table, but it would make sense in my view. The EV sector is an interesting sector, and Chinese investors have shown their interest in investing in Europe. But we would have an interest in making sure this investment is productive in Europe, is also benefiting Europe.
There are spillovers of technology in Europe, just like China asked Europe to do when the European companies went to China. So there is a space to discuss this functional relationship. Again, given the size of the Chinese economy and the importance to global economic and financial stability, it would make sense to think a little bit how that relationship could work a bit better.
Gideon Rachman
You’ve spent a lot of your life as a trade specialist, and you were chief of staff to the head of the WTO. Do you think the World Trade Organization can survive? I mean, maybe they’ll survive as a nameplate. But the thing that it represents, is that gonna survive the Trump tariff wars and everything else around it?
Arancha González
You know, Gideon, as a result of the changes in the US trade policies, I’ve been looking a little bit at history. And when I look at the history of the international rules-based trading system, the architect of the system was to a large extent, the US. 1947, end of the second world war, the UK wants to keep imperial preferences, and the US does not want the UK to keep the preferences. And they fight each other like dogs. And at some point, it almost looks like this attempt to negotiate some form of rules-based order for trade kind of collapses until Truman decides.
Two years after Yalta, when the Soviet Union is engaging in carving a sphere of influence in Europe when the cold war is just starting, it decides that it’s better to find the UK halfway. And for geopolitical reasons, it agrees a set of rules that is basically the trading system that we have had up until today. This is the product of president Truman’s vision — to make sure that economics and trade would be put also at the service of security. And it is, in a way, very sad to see that it’s an American president, with the stroke of a pen, with an executive order, renouncing this incredible building, this edifice that the former US president built.
So I’m saying this because I do think it’s important to look at history. This may be a good moment to invest in shoring up the multilateral trading systems. There are options. I’ve just written a little paper with options that those countries that care about having a rules-based international order or trade could work on. But the thing to keep in mind is that there are options for those who want to invest in keeping a system alive.
Gideon Rachman
What are those options, briefly?
Arancha González
So one is we could agree to have more flexibilities within the existing system, except that there’s going to be a little bit more unfairness, maybe a bit more asymmetry. But do this within the confines of an agreed framework. So controlled environment.
Second is obviously variable geometry. Those countries that are ready to move on, they move on. And those countries that are not ready to move on, they wait or they remain outside. Given the fact that 80 per cent of world trade today takes place under WTO terms, under the most favoured nation principle, it would be a huge cost for the US also to remain outside the system if all others decide to move forward.
The third option is the one that I would not want to contemplate because it would be some form of big bang coming out of a new 1947 moment. But for that, probably a big clash would have to take globally for countries to gather the political energy to re-engineer the system. And I wish we don’t have to go through that.
Gideon Rachman
Indeed. Last question, you are now running a major academic institution, and you have some of, you know, the brightest people in Europe studying here, young people. Are you worried by their prospects essentially in this new world? And how do you think they see some of the questions we’re talking about?
Arancha González
The young generation, especially those that are studying international affairs, are concerned because all the things that they are looking at in theory are being messed up in practice. And the most important message, in my view, that we have to give these young people, them and many others around the world, is that they have options, that they are empowered, that they have the possibility to influence their future. That the future’s not written, the future’s not given. Their future will not be confiscated by others.
I tell them that in this moment of people and confusion and conflict and maybe deconstruction, there is an opportunity to reconstruct, to recreate, to reinvent. And it’s up to them that they have the power to do it. Because if we take away this power from these young people, the only avenue left is violence. And I don’t wish this for our world.
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Gideon Rachman
That was Arancha González, dean of Sciences Po in Paris, ending this edition of The Rachman Review. Thanks for listening and please join me again next week.
