The European Union Amid the New Global Geopolitical Context

Introduction

The Draghi report has sparked an intense debate about the challenges facing the European Union (EU) and the appropriate responses it must adopt. The report focuses on fundamental aspects for the EU, such as productivity, innovation, energy, defense, and regulations. However, to fully understand these challenges and formulate effective strategies, it is essential to consider the geoeconomic and historical context in which the Union has developed over the past three decades. Reflecting on the magnitude of the changes that have taken place invites us to reassess the EU’s future possibilities and adjust our expectations and approaches in line with this new reality.

The Context of European Success (1989-2008)

The creation and consolidation of the EU took place within a favorable historical and geoeconomic context. In its early stages, OECD countries represented around 70% of global GDP, which concentrated the world’s wealth in the Atlantic and limited competition from emerging economies. In this environment, European companies achieved a leading position in strategic sectors such as automotive, telecommunications, medical industry, and aerospace. Additionally, China's economic opening in the 1980s, particularly following its accession to the World Trade Organization in 2001, significantly reduced production costs and allowed for the absorption of large volumes of European exports, thus boosting the continent's economy.

Historical events such as the fall of the Berlin Wall (1989), German reunification (1990), and the dissolution of the USSR (1991) facilitated the creation of a German state with 80 million people and a solid manufacturing base, allowing it to expand its supply chains and markets into Eastern Europe. The integration of these countries enabled European companies to diversify their production sources, expand markets, and reduce costs, while the increase in Russian gas exports, especially to Germany, provided competitive prices for industrial development. It is also worth noting that the U.S.'s military superiority after the USSR's disintegration offered the EU a security guarantee, allowing it to allocate less than 2% of its GDP to military spending and prioritize social welfare.

The Context Begins to Change: Tremors in the European Union (2008-2024)

However, over the past two decades, the EU has faced a series of challenges that have begun to erode the foundations on which it was built. One of the most significant factors has been the growing instability in the Middle East, intensified by events such as the Arab Spring and the migration crisis. In the early 2000s, the EU was surrounded by authoritarian regimes in North Africa and the Middle East that gradually began to collapse, initially due to U.S. military interventions in Afghanistan and Iraq, and later with the advent of the Arab Spring. These conflicts facilitated the consolidation of extremist groups like ISIS, and the resulting instability caused a massive influx of refugees into Europe, testing the EU’s capacity for response and cohesion.

The 2008 financial crisis significantly affected the region, leading to a series of crises, including a debt crisis in several European countries, which fostered a climate of mistrust towards European institutions. The combination of economic and refugee crises fueled the rise of populism and Eurosceptic movements that began to challenge the EU's cohesion, as evidenced by events like Brexit. Adding to this context were changes in the technological landscape and the emergence of new sectors led by American companies like Apple and Google, which began to dominate the digital market. European companies, once prominent in sectors like telecommunications, saw their relevance fade as the digital world solidified.

Donald Trump's arrival in the U.S. presidency marked a radical shift in the country’s policy towards globalization and free trade, prompting the EU to reconsider its dependence on the U.S. for security and defense. Furthermore, the growing competition from China, which has consolidated itself as an economic superpower capable of leading innovation sectors, has introduced new challenges for European companies. These firms now find themselves vulnerable to Chinese control over strategic supply chains, while they remain highly dependent on the Chinese market for exports. Finally, the war in Ukraine has added a disruptive factor, severely affecting one of the pillars of the European competitiveness model, particularly the German one, by cutting off access to low-cost Russian gas.

Rethinking the EU: Adjusting Expectations

In this context, the EU has, in recent years, faced various crises that have tested its cohesion and resilience. As the foundations of the European project show signs of strain, the need to rethink its model becomes increasingly apparent. Recent reports, such as those by Enrico Letta and Mario Draghi, highlight the urgency of addressing the EU’s structural deficiencies, comparing it to the U.S. in key areas such as productivity, innovation, and access to venture capital.

While these observations are relevant and highlight the need for improvement in key areas, it is crucial to recognize that Europe cannot simply replicate the American model. The EU is made up of a complex diversity of nations, regions, cultures, and traditions, which complicates any attempt at deep unification, as Draghi points out. Furthermore, European geopolitics presents specific challenges: unlike the U.S., which is in a relatively stable environment, the EU is surrounded by zones marked by armed conflicts and humanitarian crises, exacerbated by a young and growing population in Africa. These realities place asymmetric pressures on the EU, making further integration even more difficult. Additionally, factors such as the structure of the European economy (see Kamp’s post), differences in values, an aging population, and the high social spending of member states limit its capacity to become an innovation powerhouse comparable to the U.S.

In this context, Europe must adjust its expectations and accept that it cannot simply replicate the U.S. model nor aspire to occupy the center of the world while representing only 7% of the global population. However, this reality should not be seen as a sign of resignation, but rather as an invitation to undertake a more ambitious and rigorous intellectual exercise that aligns European strategies with the continent's specific geopolitical, sociodemographic, and regulatory characteristics. Given the urgency of the moment and the magnitude of the changes, it is encouraging that the Draghi report lays the foundation to begin this crucial debate.