A war mindset will suppress not boost Europe’s competitiveness and strategic autonomy!

Yesterday, the tariffs threatened by the Tump administration on certain EU goods entered into force. President Trump is calling the imposition of the tariffs ‘Liberation Day’, reason being, that the US has a trade deficit with the EU. The narrative being pushed is that the EU was created to screw the United States. President Trump even said that the EU managed to do a great job, while calling it nasty for imposing fines on American-tech companies. Certainly, I do not know where to start. But let’s analyse the statements step by step.

After the second world war, the United Sates pushed for the idea of having a European Community. Indeed, the European Coal and Steel Community was formed. Technically, the concept was to create an organisation to integrate Europe’s coal and steel industries into a single market. The economic and political ideology was for countries to work together, cooperate and minimise the possibility of future conflicts on mainland Europe. Hadn’t such an approach been applied economically and politically, probably, European countries would have ended up into another conflict. Peace lasted for almost a century. It was not an illusion. It was cooperation and prudence between European states and other major powers, including allies, and non-allies, that cemented peace, even during the Cold War. What the EU achieved in terms of soft diplomacy was credibility, long lasting peace, as well as serious enrichment of its economies. In a matter of a few decades after the second world war, the western European economies prospered. They got richer, even going to the length of accepting the integration of additional member states in 2004 and thereafter. The success of the EU came due to its market economy, freedom of goods and services, as well as the promotion of enterprise and the rule of law, securing a safe territory for private investors to thrive.

Notwithstanding that as an economist I align with Keynesian economics, still, I always advocated for the free market and the promotion of enterprise, allowing ample space for innovation. What I mean is that there can never be liberty without the freedom of capital, land, enterprise and the rule of law. It is enterprise that knows best how to deal with innovation not Eurocrats. It is here where the EU missed the point of advancing in the past 25 years. I always mention this point because it is pertinent to take note of it. It is the European Commission that is stifling the EU’s economic enrichment. During the past quarter of a century, especially the past 15 years, the European Commission’s right of initiative was at times abused. Eurocrats come up with multiple proposals exerting disproportionate super-regulatory powers. Rule of law does not mean exerting disproportionate super-regulatory powers, which indirectly suppresses enterprise and innovation. This is not rule of law. Au contraire, it is abuse of regulatory powers. Overregulation through disjointed regulations and directives, with one regulation overlapping on another directive, to the point of even having the ECB exercising their prudential powers, indirectly, creates complexities, adding further barriers to promote competitiveness and innovation. It is simply not working. For the past 25 years, the EU left its backdoor exposed without proper planning. The deficiencies were further exposed during the pandemic and compounded by the war in Ukraine. Now with the threatening of tariffs by the Trump administration it got even worse.

Alas, the European Commission was more focused on regulating tech-companies and issuing multiple regulations that stifled innovation. With strict regulations, tech-companies will not innovate. Certainly, the way the European Commission is functioning is the same way bureaucrats in a centralised economy operated in the Soviet Union. More authority for Eurocrats and less power in the hands of the electors and enterprise. The European Commission must change its approach to accelerate competitiveness and innovation. The EU stopped investing in its own technology, defence capabilities and innovation not because of EU member states’ apathy but because of the strict regulatory frameworks, that must be followed by the same member states, including those who are governed by the Euro.

In fact, some of the EU’s regulations must be harmonised to promote innovation, enterprise and competitiveness. Certainly, I’m not suggesting a laissez-faire approach with market failures left unaddressed. However, deregulation is needed to innovate, to mobilise capital, to advance space and quantum technology. The market and the invisible hand know what’s best. The EU needs to achieve its strategic autonomy, as swiftly as possible. To mobilise capital, and crowd in private investment, investors’ confidence must be at an all-time high, irrespective of the EU budget guarantees. By the looks of it, the private investment confidence is at all-time low, including that of consumers. With Donald Trump threating everyone in his way to Make America Great Again, what certainly we do not need, is the stupid narrative being pushed by the sitting High Representative.

Last, week I started receiving multiple messages on my social media asking me if we are at war. To be honest I was not getting the message, as I was quite busy at work. However, after office hours, I dedicated some time to read the news. Foreign media was reporting that the new communications on preparedness issued by the EEAS, along with the European Commission, stated that EU citizens must prepare for the eventuality of a natural disaster, a war or a chemical attack. This included the preparedness of stockpiling 72 hours of food, and energy supplies, as well as placing the identification documents into a sealed plastic folder. At the same time, secretary general Mark Rutte was in Poland delivering a press conference with Donald Tusk, saying that if Russia attacks an EU state, the alliance will respond. Well, I thought it is too obvious; NATO’s Article 4, Consultation, then Article 5 Collective Defence.

With such an approach, the EU will not attract private investment. They are just crowding out private investment and killing consumer and producer confidence. If investors sense that the EU is at an imminent war, well we must forget private investments. There will be no innovation, and no private investment with such a mindset. And certainly no private investors, which are currently desperately needed to mobilise capital. Kaja Kallas is not Estonia’s Prime Minister anymore. The High Representative is representing the EU and is holding prominent EU public office. HRVP Kallas must do the quantum leap required to live up to her diplomatic post. The narrative, especially when appointed as the penholder of a preparedness report, must be diplomatic. In 2022, President von der Leyen did the same mistake, albeit with a triad rolerepresenting the EU powers in the form of President of the European Commission, High Representative and Germany’s Defence Minister. It was awful.

If the EU wants to lose additional business, as well as additionally eroding consumer and producer confidence, all they need is to carry on with the war narrative. Good luck in crowding in private investment.