In Europe’s capital cities and among its elites a great but undeclared battle is being fought for the future of the European Union. One side is heavily outgunned, but events are trending in its direction. The other side is dominant, but does not yet realise that it is racing against time.

This internecine struggle is seldom discussed publicly by politicians, bureaucrats or their think tank outriders. Insofar as it is covered by the legacy media, it is never presented as a contest. There is thus scant realisation that a battle is being fought at all. Yet its outcome will decide the future of the EU, heavily influence the internal politics of EU member nations, and could even play a decisive role in the great power competition between the United States and China.

This is the battle between the Atlanticists, who believe the EU and its member nations are best served by closely aligning with US strategic interests, and the Autonomists, who want the EU to pursue a strategy in its own interests, independent of the US.

Who are the Atlanticists and Autonomists? Why is this battle being joined now? And what are the likely consequences of its outcome? To answer these questions, we must start almost 80 years ago.

After the Second World War, the US sought to create an order that would bind together its allies militarily and economically. To this end, it founded Nato and signed bi-lateral defence treaties with nations like Japan and the Philippines. It also championed the General Agreement on Tariffs and Trade (GATT, which later evolved into the WTO) and the Bretton Woods system that ultimately included the World Bank, the IMF, the Marshall Plan and pegging currencies to the dollar, which was in turn pegged to gold. Later, Washington would also be heavily involved in the creation of the European Coal and Steel Community, which went onto become the European Community, and ultimately the European Union.

Washington essentially offered a deal to the countries that had been defeated, destroyed or bankrupt by the Second World War, but did not fall within the Soviet sphere of influence. We will give you the trade access to our market (and the financial liquidity) you need to reindustrialise and get rich again, and our military will shoulder the main burden of defending your nations and maintaining the peace. In return, our corporations and capital will enjoy full access to your markets (including those that had formerly been behind imperial preference walls), and you will forego full strategic independence.

Americans have long chafed at the cost of defending Europe even as European nations provide for their citizens far more comprehensive social care than their US counterparts enjoy. This sentiment, however, underrates just how good a deal it was for the US.

First, it did indeed bind America’s major allies to the American strategic cause. It created a bulwark against the only power with the capacity to control all of Europe, the Soviet Union, and ultimately deterred it from attempting to do so. Europe thus became Washington’s bridgehead onto the Eurasian landmass, and prevented the emergence of a power that could possibly surpass the United States.

Secondly, it succeeded in reflating the Japanese and Western European economies, creating rich and prosperous markets for American capital, goods and services. This was especially pertinent to the cases of Japan and Germany, in relation to which Washington’s postwar offer avoided the errors of 1919.

Thirdly, it fulfilled the longstanding desire for a global version of the ‘Open Door’ policy formulated in 1899. In The Deluge, Adam Tooze, professor of history at Colombia University, wrote that President Woodrow Wilson had realised as far back as 1917 that the United States of America’s geographical position and great natural and human resource endowments meant its security had no need for territorial conquest; however, “its goods and capital had to be free to move around the world and across the boundaries of any empire.” Finally, it placed the US in command of the economic, diplomatic, financial and military affairs of by far the most powerful bloc in the world.

This also, however, represented a good deal for Europe. The Old World was able to rapidly rebuild, regain much its former living standards, and protect itself from Bolshevist expansionism while diverting to infrastructure and social programmes money that would ordinarily have been needed for defence. At the very least, Washington treated the vanquished with far greater kindness than other victorious powers have done through history.

The end of the Cold War changed the dynamics of this compact. First, the main threat to European security disappeared as hundreds of Warsaw Pact divisions retreated a thousand kilometres eastward or simply evaporated.

Secondly, the world order became unipolar. Absent any opposing force to constrain the scope of their ambition, Washington elites decided they should use America’s awesome and newly unfettered power to do with the world what they had done with Europe: make it liberal, democratic, free trading and open to American corporations, capital and strategic interests. The end of the Cold War had bequeathed to America what Barry Posen, the Ford International Professor of Political Science at MIT, called in a 2003 International Security paper, “Command of the Global Commons.” But now it was going to go farther, eschewing “selective engagement” in the “disputed zone” in favour of “primacy” over the Commons — a hegemonic supremacy.

With hindsight, this project seems to have been foolish and monstrously hubristic. (To be fair, a number of leading American political figures and scholars, including Professor Posen, said so at the time.) More importantly, though, it has led to the ultimate unravelling of the original, tightly bound economic order that served the US so well for sixty years, and has given rise to a peer challenge to America’s ‘Command of the Commons’.

First, by expanding its free trade order to China, the US set its own industry (and labour) against a competitor with huge advantages in unit labour costs. Secondly, China saw its entrance into this order as an opportunity to enrich itself, not a signal that it would accept Washington’s economic, strategic and moral leadership. Thirdly, as China, with its driving energy and billion-person population, grew richer and more technologically advanced, it became, with the inevitability of a river reaching the sea, a strategic rival to the US.

Fourthly, even if the misguided theory that making China rich would push it toward liberal democracy had been true, it would still have developed into a rival unless it had been willing to accept being the sort of timorous adjunct of America’s post-modern liberal empire that Japan, Germany and the UK had become — and clearly it didn’t.

Finally, Washington’s efforts to expand its sphere of influence and its hyperactive interventionism in the “disputed zone” of the Commons tacitly (and sometimes explicitly) threatened those nations that wished to follow independent foreign policies (as basic international relations theory said it would do). This prompted those countries with the ability to do so to switch to a strategy of balancing between access to the US economic order and protecting their own strategic interests — up to and including pushing back against the US in certain instances.

Here we arrive back at the present day’s strategic environment. The US finds itself challenged by China, the first true peer competitor it has ever faced. Worse, China has significantly greater manufacturing capacity than the United States, is supported by Russia, a natural resources superpower that Washington has driven into Beijing’s arms, and has received clearly the message that the US seeks to hobble its economic development and restrict its strategic room for manoeuvre.

Understandably, this is causing great consternation among Washington’s elites — many of whom have spent the majority of their professional lives in a unipolar world order in which there was no power capable of punishing strategic missteps — and they are responding by lunging into a policy that, as collateral damage, is negatively affecting Europe.

First, Washington is directing vast subsidies toward an effort to re-industrialise and close some of the manufacturing gap between itself and China. Secondly, it is attempting to cut off China (and Russia) from the US-led economic order and especially the technological sources of economic growth.

Irrespective of the whether this strategy is likely to succeed, it is clear that it will have serious implications for the European Union. In a concise and clear-eyed Substack essay, Rian C. Whitton of Bismarck Analysis, argues that the US shift to great power competition with China is already leading to negative consequences for Europe.

Presidents Trump and (especially) Biden have engaged in massive fiscal stimulus. In the first three years of the Biden Administration, federal debt increased $6.25 trillion. $1 trillion of new debt was issued in the first three months of this year alone. A portion of this has been pushed in great trainloads toward American industry: the 2022 Inflation Reduction Act spent an enormous $891bn on supporting US industries; the CHIPS Act of 2022 authorised $280bn for research and manufacturing of semiconductors.

The EU is simply not keeping up with this. Mr Whitton contends that the current trend started with the divergent fiscal responses to the 2008 Global Financial Crisis. It was then supercharged “by the fracking boom,” which caused US electricity prices to deviate “greatly from those of Europe, leading to asymmetries in growth.” The latest avalanche of US fiscal largesse and industrial subsidy “is accelerating a long-term trend of US industrial power eclipsing that of Europe,” Mr Whitton argues.

 

 

At the same time as the US is outcompeting Europe’s indigenous industries, it is also, en passant, cutting off Europe from external sources of growth. As an example of this, Mr Whitton draws attention to the Netherlands hi-tech lithography company ASML. The semiconductor industry requires impossibly precise and difficult-to-manufacture lithography machines to transfer highly complex circuit patterns onto silicon wafers. ASML is the world’s leading manufacturer of such lithography machines, and indeed represents one of the key bottlenecks in the entire global semiconductor industry. Without ASML, it is difficult, and potentially impossible, to make advanced chips. Mr Whitton argues that this makes ASML “Europe’s most valuable technology company.”   

The problem, however, is that it has been caught up in Washington’s efforts to strangle the technological sources of China’s growth. As Mr Whitton points out, “ASML is effectively banned from selling its most advanced ultraviolet lithography equipment to China.”

It won’t stop with ASML: “The US government is hoping it can convince European actors to restrict technology exports to China… But taking China out of the potential export market, no matter how you size it, is reducing potential export growth for Europeans.” Meanwhile, the US efforts to check the expansion of the Chinese and Russian national champions abroad is also negatively affecting Europe.

“As an example,” Mr Whitton writes, “the US has become increasingly worried about the Russian and Chinese export of nuclear reactors. It has stepped up efforts to help its primary reactor supplier Westinghouse sell reactors to Eastern Europe. This has included funding from the export-import bank and state agencies to Romania to help build nuclear plants with US suppliers.”

The problem for Westinghouse’s prospects in Europe is that South Korean nuclear supplier Kepco “has built plants for under a third of the cost the US has managed and is also courting potential clients in Eastern Europe. They are as a result being sued on technicalities by Westinghouse with the backing of the US government.”

In other words, “In trying to reassert its own technical leadership, American authorities are hampering allies, not opponents.” We could also draw attention to how Washington’s great power contest with Moscow means that Europe can no longer access the most economically rational source of energy, or American unease with Chinese companies (like BYD) building factories in European countries (like Hungary).

In effect, Washington’s return to great power competition is acting like a giant pincer that is squeezing Europe’s economic future, cutting it off from key export markets from one side, while outmuscling Europe’s indigenous industries and companies from the other. The higher energy costs and lower fiscal support might be tolerable if Europe had the advantage of being able to trade with the rapidly growing and increasingly rich China market. But if the US is going to strangle that, too? For this reason, some European politicians are wondering whether strategic subordination to Washington is any longer worth the candle. If, to paraphrase Henry Kissinger, being America’s friend is going to be fatal for Europe, would it not be better to move away from strategic alignment toward a more transactional relationship? Such politicians are re-examining the Gaullist critique of Atlanticism and justification for European integration: that by forming a rich and large economic bloc, Europe would jointly have the might to resist the efforts of either the Soviet Union or United States to impose on the EU’s individual nations sub-optimal trade arrangements; and that by having a large integrated market, European champions would have the chance to flourish and be globally competitive.

These are the Autonomists in the great battle for the future of the European Union. Why, they wonder, does the EU, with its combined economy of $27 trillion (PPP; $19 trillion nominal), and hugely attractive market for potential trade partners, have to sacrifice itself at the altar of America’s struggle with China for mastery of the Western Pacific? After all, despite Russia’s actions in Ukraine, it poses an infinitely lesser threat to core Europe than did the Group of Soviet Forces in Germany. Could the EU not therefore afford to pursue an autonomous trade and diplomatic policy? Can it afford not to? Unfortunately for the Autonomists, the EU is dominated, on the national and supranational levels, by Atlanticists, who believe Europe would be best served by remaining strategically aligned with US strategic aims. They argue that the 20th Century demonstrated that Europe is more successful in an alliance with the US. Furthermore, they tend to see the world not as optimal trade deals and balances of power, but as being divided between liberal states that follow ‘rules’, like the EU and the US, and illiberal actors who don’t, such as China, Russia — and even some populists within the EU. It is of crucial importance, they think, for the western nations to stick together, and especially for the EU to cleave to the US, given the latter’s vastly greater military power and diplomatic weight.

Part of the reason this group dominates is institutional inertia: as we have seen, Europe was suborned to the US for the better part of half a century during the Cold War. Yet there is another, more important, reason.

Last year, Viktor Orban, the Prime Minister of Hungary, made an extraordinary speech in Zurich that provided a theory of Atlanticist dominance of European political architecture. He said that during the Cold War, Europe lost its independence. The Eastern half of Europe was occupied by the USSR, and the Western half came under the influence of the Untied States. He said that it is obvious which half was preferrable, given the “dictatorship, inhumanity, cruelty, economic backwardness, intellectual hopelessness and impoverishment” of Soviet rule.

But then a funny thing happened on the way to liberation. While the Soviets and their means of control disappeared entirely after 1990, the American systems of hegemonic influence, more civilised and subtle as they were, not only remained but expanded. Such means of influence included not only bricks and mortar institutions, such as Nato and the IMF, but also less concrete ones, like global financial architecture, the vast network of civil society NGOs, and soon the internet and social media.

Thus, Mr Orban argues, as the US has become more progressive domestically and interventionist abroad, Europe has been pulled in the same direction. Furthermore, he contends that one of the USA’s greatest strengths is its “ability to present what is really an American interest as a universal value.” These two observations suggest a deeply embedded mechanism for the entrenched position of Atlanticism among European political elites and within their institutions. Indeed, a close reading of many national and EU senior political figures reveals no significant difference between their social, economic and international relations preferences and those of their US counterparts. It is easy to subjugate your interests to an outside power if you believe that power’s elites will help you get what you want.

Furthermore, as journalist and author Thomas Fazi is chronicling, Atlanticists are able to protect their position against populist usurpers through the ruthless and adept use of EU monetary, fiscal transfer and legal instruments to block or inflict pain on national governments that do not comply. Mr Fazi points out, for example, that the European Central Bank (ECB) allowed the interest rates on Italian bonds to rise as soon as right wing populist Georgia Meloni won power in Italy, “only intervening to bring them down once the new government pledged to submit to the EU’s economic agenda.”

It appears to be doing the same in France. Spreads on French sovereign bonds have risen in response to right wing populist and Autonomist Marine Le Pen’s victory in the European Parliamentary elections this month, which prompted President Macron to dissolve the French legislature and call snap elections. Although it may be argued that this is a natural market reaction to heightened political risk, the simple fact is that since the Global Financial Crisis of 2008, Eurozone sovereign bonds have been priced within limits allowed by the ECB, not by markets. Yet in the recent case of France, the ECB refuses to act. The central bank’s chief economist Philip Lane said that the surge in French bond spreads to German bunds did not meet the criteria for intervention, despite the fact they rose to their highest level since 2017 virtually overnight.

Meanwhile, the European Commission has chosen this precise moment to open an ‘Excessive Deficit Procedure’ against France for the first time. This mechanism is the ‘corrective arm’ of the EU’s Growth and Stability Pact, which seeks to ensure countries remain inside certain fiscal deficit and sovereign debt levels. It is true that France, with a 2023 deficit of 5.5%, is far above the 3% limit; however, the French fiscal deficit has only been below 3% for two years out of the last 15. Why suddenly now? It is important not to fall into conspiracy thinking, but it’s difficult to ignore the timing.

Equally, Hungary was put under heavy pressure due to its resistance to EU policy on the war in Ukraine — as it was earlier, along with Poland, for ‘Rule of Law’ violations, charges which were dropped for Poland shortly after EU insider Donald Tusk replaced right wing populist Mateusz Morawiecki as Prime Minister.

Because EU Acquis is superior to national law, the Atlanticist control of the EU’s commanding heights can, as Thomas Fazi says, be deployed against ‘populist’ adversaries in nation states, and their electorates, if needed. This is a powerful position to hold and, combined with the Atlanticist dominance of the most powerful civil society NGOs, legacy media and global financial architecture, it has been an effective bulwark against the rise of the Autonomists in Europe.

Nevertheless, there is reason to believe that time is on the side of the Autonomists, not the Atlanticists.

First, as the great power competition between the US and China continues to intensify, the pincers squeezing the EU economy are likely to grip ever tighter. The cost of strategic subordination to Washington will continue increasing — and become increasingly difficult to deny or ignore.

Secondly, while the populist parties have thus far been integrated or subjugated into the existing European establishment through the mechanisms detailed above, the wave washing away the legacy centre right and centre left parties in Europe continues to gather momentum. It should be noted here that these parties are heterodox on their foreign policies. Some, like Georgia Meloni, take a different view on, for instance, Ukraine aid, than figures like Slovakia Prime Minister Robert Fico; Marine Le Pen has traditionally held the opposite position on EU strategic alignment with the US than, for example, the aforementioned former Prime Minister of Poland, Mateusz Morawiecki.

Nevertheless, all populist parties must know that their popularity cannot last long if it is restricted to fighting a verbal culture war: they must also improve the lives of their electorates. Freedom to buy cheap energy from Russia and trade extensively with China would be easy wins, raising industrial production and lowering inflation.

Italy, Croatia, Slovakia, Finland, Hungary, the Netherlands and Czechia already have populist governments. The Swedish government relies on a confidence and supply agreement with a right wing populist party, the second largest in the legislature. Marine Le Pen is favourite to become next president of France, and her Rassemblement National party is set to win the above-mentioned snap legislature elections in the meantime. The EU can delay this, and make life extremely difficult for those populists that achieve power, but it cannot stop them forever.

Finally, and most importantly, the US will have to withdraw most of its military and diplomatic attention from Europe if it is to have any chance of success in its confrontation with China. This process would doubtless accelerate under a Second Trump Administration, but would have to happen anyway, or Washington would cede mastery of the Western Pacific, the global centre of 21st Century economic gravity, to Beijing. As this withdrawal happens, Europe will be forced to be more strategically autonomous, whether it likes it or not.

Tempora mutantur, nos et mutamur in illis.

Andrew Collingwood is the co-host of the Multipolarity Podcast and a political commentator on geopolitics. He tweets at @multipolarity and has a podcast here.