It’s been a little while since we looked at the European Union’s quest to remain “competitive,” but in the wake of Brussels capitulation to Washington on a trade deal, it’s made an oddly-timed comeback. Former European Central Bank Chairman, unelected Prime Minister of Italy, and an architect of Russia sanction policy Mario Draghi is back beating the drums for more centralization and spending in order to catapult the EU back among the world powers.
Draghi’s argument is essentially that the EU is in a bind because Putin and Trump are bad, and the bloc must issue common debt to increase spending on defense and other items like “disruptive” technologies. It’s a vision shared by many EU elite, including officials in Brussels and, of course, investors. Here’s Draghi, courtesy of Politico:
“We had to resign ourselves to tariffs imposed by our largest trading partner and long-standing ally, the United States,” he said of the shift in policy under the U.S. president. “We have been pushed by the same ally to increase military spending, a decision we might have had to make anyway — but in ways that probably do not reflect Europe’s interests.”
“Only forms of common debt can support European far-reaching projects that fragmented and not sufficient national efforts would never be able to implement,” he said.
European Commission President Ursula von der Leyen defended the US deal in a piece in several European newspapers last week. Here’s the gist of her argument:
The agreement is a deliberate choice, the choice of stability and predictability over escalation and confrontation. Imagine if only the two major economic powers in the democratic world had failed to reach an agreement and had unleashed a trade war, there would have been celebrations in Moscow and Beijing.
Ursula, too, goes on to argue that the EU must do everything in its power—as well as obtain more power—to boost competitiveness.
With Draghi’s soft criticism of the US-EU trade deal, which will see a 15 percent tariff on many European products while the EU pays hundreds of billions for the privilege, some observers believe there’s some sort of intra-elite spat between Draghi and Ursula.
I find that doubtful. They might differ on specifics, but from Brussels to Berlin to Paris they’re singing the same song: spend more to climb out of the Project Ukraine hole. If the past is any guide, the powers that be in Europe are likely waiting until the linked economic-Ukraine-Trump crises reach desperation levels in order to make another major push for common debt and other market-friendly “reforms.” That might seem far-fetched considering the Union’s unity is fraying at the seams, but over the past few years it’s become clear that it’s wise to never underestimate the bloc’s ability to find common purpose for collective self harm.
Let’s examine this obsession with competitiveness and look at what’s really happening in Europe and with the “special bond” that is the trans-Atlantic relationship.
What Do Elites Like Draghi Mean When They Talk about Competitiveness?
They mean further transforming the EU into a neoliberal paradise for the financial class. We dove into this in coverage of Draghi’s report last October, and while the chief focus might be on getting common debt, there are plenty of other little goodies that capital wants. To quickly recap:
- Less Labor Law for “Innovative” Companies
- Free Rein to AI and Tech Start Ups
- More “Disruption”
- Learn from Hyper-globalization which Decimated Labor by Embracing AI in an effort to Decimate Labor
- Overhaul Education “Skills Investment” With a Focus on Training Workers to Become Productive Tools for Capital
- And continue to slice away at the welfare state through budget cuts and privatizations that, of course, increase competitiveness.
And there’s one key piece of data that those arguing for all this competitiveness usually omit. It’s what the EU’s decision to sever itself from cheap and reliable Russian gas did to the bloc:
Nowhere do they ever consider starting down what will likely be a long and arduous path toward rebuilding ties with Russia.
Instead much of the competitiveness talk dovetails with the fantasy of winning the current confrontation with Russia. For a resource-poor Europe, there is a real competitiveness angle there:
But it’s also where all this ambitious, fantastical talk gets swallowed by cold, hard reality.
Competitiveness and the Ukraine Corrupt Pit of Death
If you’re a Keynesian or Modern Monetary Theory enthusiast, you might be tempted to get on board with Draghi’s prescription for the bloc. After all, it must be better than the usual austerity, right? But it seems the EU is only able to lurch from one bad idea to another, and in this case it’s the worst of both worlds—austerity for social programs and betting the house on rearmament.
The military keynesianism is unlikely to be a success or produce benefits for workers, however, as Isabella Weber and Tom Krebs point out in Foreign Affairs using the example of Germany, which just lost more than 51,000 auto industry jobs over the past year:
Merz’s far more generous approach to military spending will not boost domestic growth in the coming years as much as its advocates suggest. The defense sector is already operating near capacity, and in the short run, increasing government spending on weapons and tanks will have only a limited effect on production. Arms companies such as Rheinmetall have seen soaring profit margins, revealing their market power and the lack of competition they face even amid rising demand. Significant additional public spending may go into boosting their margins further. Rheinmetall’s 15-fold stock surge reflects expectations of continued windfall profits.
Of course, the government has insisted that this military spending will create well-paid manufacturing jobs. Yet Merz’s cabinet is full of business executives and lacks a strong voice for labor issues, an absence that has drawn criticism from the CDU itself. Moreover, the defense build-out will not likely compensate for the impending loss of jobs in ailing industries such as the automotive sector. Rheinmetall’s profits almost doubled between 2020 and 2024, but the number of its employees based in Germany rose just 25 percent in that period. The conversion of civilian plants to military use does not offer much more hope. In the East German town of Görlitz, a former Alstom train factory was taken over by the German-French defense company KNDS and now produces tanks, but the factory’s workforce has been slashed in half. The arrival of KNDS was clearly better than nothing, but it is unlikely to turn things around in a place such as Görlitz with a high unemployment rate of 7.7 percent.
And to reinforce their point, Germany’s economy just contracted again. But on the bright side, the country can produce more weapons for Israel’s genocide, NATO-Ukraine’s retreat, and continue to enrich arms manufacturers primarily in the US.
Earlier this year ammunition giant Rheinmetall overtook Volkswagen in market value. It was a symbolic shift for Germany and the EU, but that value is also reliant on keeping the meat grinders churning. Back on August 7 when Trump announced the upcoming meeting with Putin Rheinmetall stock had one of its worst days in decades. It has since recovered as investors are giddy over the state’s redirection of tens of billions towards war spending.
With or without common debt, Europe is looking at continuing to funnel money to the US fossil fuel industry:
While many have pointed out that these figures are unrealistically high, regardless of whether the imports come from the US or elsewhere, they are not coming from Russia—at least not directly—which means Europe is paying exorbitant costs for what used to come cheap and easy.
Of course, the energy purchase pledge and overall trade deal could hit the fan if the US continues to come for EU tech sovereignty. At least that’s what the Europeans are saying, but we’ve heard tough talk before only for the bloc to cave in the end. and as long as Europe’s political class is desperate to keep the US onside against Russia there’s no reason to believe they won’t cave again.
At issue is the EU’s Digital Services Act (DSA). There are a whole host of problems with it from a free speech perspective as Nick Corbishley has documented frequently here at NC.
The Trump administration and its friends in Silicon Valley might talk up that angle, but they are chiefly concerned with the rules being a burden on U.S. tech companies. The EU is already dominated by US IT companies that supply software, processors, computers, and cloud technologies, but they’re also looking for domination in all other fields, including AI, and don’t like being regulated by vassal states (even though Brussels has yet to impose a single fine for content moderation breaches, and Ursula’s Commission big splash case against X has languished for more than a year).
EU industry chief Stéphane Séjourné said on Wednesday that the trade deal will “have to be reviewed” if the US is serious about its demands for the EU to deregulate its tech sector.
We shall see.
Back in 2022, the EU promised major retaliation for the Inflation Reduction Act, which provided $369 billion worth of subsidies and tax breaks at a time European industry was just started to get killed by higher energy prices due to the NATO proxy war against Russia in Ukraine. That threat quickly faded away with EU trade chief Valdis Dombrovskis urging everyone to look at the “bigger picture,” which was apparently that only Russia and China would benefit if Europe got into a spat with the US.
We see Ursula making the same argument with the recent trade deal. And recall that shortly after “Liberation Day” some European officials talked about moving closer to China in response. How did that work out?
As part of the humiliating deal, the EU agreed to curb AI chip flows to China, which won’t do much more than dent China while the repercussions for Europe could be enormous:
The EU likes to call China and Russia adversaries, yet leans on them like crutches for the minerals that keep its high-tech dreams alive. In 2024, 46% of rare earths came from China, another 28% from Russia. That’s nearly 75% of the whole supply chain balanced on the goodwill of… https://t.co/i7TDGTCez0 pic.twitter.com/PNw2JFtiAp
— Brian McDonald (@27khv) August 20, 2025
All for Ukraine. For the European elite’s Russophobia and/or greed in thinking they could collapse the government in Moscow and snatch up a big chunk of Russia’s wealth. And now it’s their inability to stop digging—as they likely know that’s when the true scale of their misleadership will be evident—have them over the barrel with Trump who is no doubt enjoying twisting the knife.
Sabine Weyand, the EU’s top trade official, recently explained that the EU’s dependence on the U.S. security umbrella effectively forced its hand in the trade talks. What’s the plan to stop it from forcing the EU’s hand repeatedly? Here are three potential options:
- Hope and pray. Weyand further stated the following:
“I have the impression that the signs are different now and that there is a type of Zeitenwende,” Weyand said, referring to a turning point in the EU’s relationship to the U.S. “Of course this is a backdrop against which we also have to discuss our trade relationship. The EU member states were not willing to take the risk of a further escalation, which would have been the immediate response to countermeasures by the EU.”
This route isn’t working out so well for Europeans. The next day Trump unleashed his demands on tech regulation.
2. Brussels could awake from its fever dream, face up to impending political upheaval and the realities of geography, and go bearing gifts to Moscow. We all know this isn’t going to happen—at least not until much more suffering has passed. And so we’re stuck with option three.
3. The rearmament and competitiveness path—without critical minerals and with expensive energy, collapsing economies, dimwit vultures as political leaders, and an unsupportive populace. How do we like those odds?
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One quibble: “All for Ukraine. For the European elite’s Russophobia and/or greed in thinking they could collapse the government in Moscow and snatch up a big chunk of Russia’s wealth.”
The Anglosphere is toking on the same doobie. I recall an issue of Harper’s Magazine in which there were letters to the editor from three Very Distinguished Ladies, each advocating the breakup of the Russian Federation. The harvest of stupidity always produces a surplus.
Otherwise, I agree with the assessment of the facts and the (tentative) diagnoses. Mario Draghi just showed up at the Communione e Liberazione “Meeting” (yes, the English word must be used), held yearly for forty-six editions at Rimini. Communione e Liberazione is an emanation of the Catholic bourgeoisie, so it is heavy on management types and light on socially engaged Catholics (of which there are many in Italy).
The press here used the verb “sferzare” for Draghi’s address, which was received with adulation and alleluias. Sferzare means urge (politely) or lash (less politely). So many of the large news outlets were delighted at Mario’s tongue lashing. (Your first link, to Politico, describes the groovy event.)
But it was all the usual.
Draghi is now mainly a media creation, much like Matteo Renzi. It isn’t clear to me that Draghi has a political future. So has he decided to be a Prophet of Clichés? The Oracle of Failed Policies?
Two significant splits in Europe have to be addressed. The first is France/Germany and their inseparable pal, Brexitland. What an alliance. All of them teetering on economic catastrophe, at a time when the PIIGS are somewhat more economically secure. To paraphrase Mark Rutte, “Not a euro for Germany!” (He said it about Italy.)
The second split is the diagnosis by Barbara Spinelli and others that the political weight of Europe cannot be allowed to shift to the resentments of the new Central European bloc, especially Poland, less so the herring republics of Latvia and Estonia.
Also, I’ll point to a major development (potentially) in PIIGSlandia. The Global Sumud Flotilla probably won’t succeed. Yet ships are leaving from Genova and Catania in Italy, with a major contingent being launched at Barcelona in Spain. Other boats from Tunisia, Greece, and Turkey are expected.
The sendoff from Genova drew 40,000 people. From Starmer’s point of view, this is a development worse than Kneecap. Evviva!
https://globalsumudflotilla.org/
The sendoff from Genova drew 40,000 people.
Will the boat from Genova be flying the “English” flag?
gk:
Maddai.
And not the flag of Padania, either.
From the photos I have seen, the many boats have the flag of Palestine.
As quoted by M.Travaglio :
” Hey, are you talking about us?
“Draghi is the plumber who comes to fix the broken sink trap and blurts out: ‘What the hell kind of job did they do? And he was the one who did the work.” This joke on the web perfectly describes the new summer game that has replaced the yo-yo and the hula hoop: those primarily responsible for Europe’s decline are competing to denounce Europe’s decline. “
As for recent “sferzare”, the German Minister of Labour and Social Affairs Bärbel Bas just gave a good one on Merz and welfare state – basically saying that Merz is full of [family blog], and that Germany only accepted the increased defense commitment because otherwise NATO would have imploded in June.
She was there in The Hague when it happened, so she should know.
> How do we like those odds?
Is there a scenario that doesn’t involve killer robots?
All the scenarios that involve killer robots are canceled, because they require Chinese rare earths. All the killings will have to be done manually.
It’s yet another cul-de-sac Europe’s misleadership class is determined to drive its citizenry down. Atlanticism and neoliberalism uber alles … 🤨
For me Mario Draghi is the poster boy for banksters ruling the world. It seems like the front is falling off of that project but they are loath to admit it…
https://www.youtube.com/watch?v=3m5qxZm_JqM&pp=0gcJCRsBo7VqN5tD
The resource charts should normalize for population.
Russia has about 50% the population of the USA, so on a per capita basis, they have $150 trillion relative to USA’S $45 trillion.
Europe doesn’t show on the chart, reinforcing the “Europe running on empty” story.
Russia invading Europe would create a lot of resource issues for Russia to take care of the conquered territories.
Letting Europe self destruct seems like a good plan for Russia
Would Russia be wise to let an impoverished neighbor – and one with whom its relations were ruined by the USA – become fertile ground for a potential fascist threat? Especially in light of the USA’s ulterior motives?
re: a bit related? – Porsche employees against building weapons
machine-translation
Workforce rebels: Porsche employees don’t want to build weapons
https://archive.is/WMauf
In the MSM, the term rare earths is mostly misused and abused shorthand. Political leaders imagine to their sycophant media stenographers that opening Western-controlled rare earth mines would be a good idea (yet a single mine produces at most a few rare earths, and environmental litigation and review take decades).
The reality is that the West’s MSM discourse makes not a micron of difference, because the issue is the rare earth supply chain*, including refining, processing, and manufacturing into components. Oh, and mining, which depends on Chinese supply chains.
For example, the low-altitude economy (only military in the West) is only feasible with rare earth motors (and all the components.
Basically, EU competitiveness cannot succeed by antagonising China (a key US demand for the next war), as well as all the other points mentioned in the article.
*Made in China 2025 worked with the rare earth supply chain is almost entirely Chinese and trending higher.
Thanks for this good write-up, Connor.
One other upshot of the Ukraine war, at least as I see it, has been the collapse of the EU as a powerful bloc and it’s resurrection as a muddle of low wattage fiefdoms. This may be more a case of reality being revealed rather than reality being altered, but in any case I think European nations have really stepped to the rear on the world stage in the last few years. Trump, with a bully’s unerring sense for weakness, has not held back in taking advantage of this and will probably continue to do so.
The necessity for the EU to act as a wartime power has revealed how poorly it is politically structured for rapid and unified decision making. Every political decision regarding the war has taken months and frequently reveals the rot beneath more than anything else. The war has also revealed just how much every single EU country has disbanded its military forces since World War II and how they mostly exist now as smallish jobs programs and efforts to subsidize certain national industries. We have all seen the headlines about how every European country would run out of ammunition in a few days in an actual war, and how their navies, if any, can barely get their ships out of port. I dislike ranking countries by the size and strength of their militaries, but it is certainly a factor to be considered, especially if they like to strut in the military arena.
Another thing that has been made plain is the almost complete lack of concern by European leaders for the welfare of their populations. The Ukraine war, something that every European leader could probably have ignored in its entirety, has instead been used to cook up a huge shit sandwich and force it down the throats of their constituencies. Leaders took policy positions that would clearly and predictably gut their populations’ economic and social welfare by smashing Russian supply chains, and inexplicably raised russophobia to weird and impossible heights in transparent efforts to try to make this seem like sound leadership. The standard of living of the European populace has crashed in the short term, and has been irrecoverably sabotaged in the long term for no apparent reason.
Not long ago I was thinking that Europe was much better positioned for success in the 21st century than, say, the US. What a difference a few years can make.
Sad to see. In combination with recent tensions between Poland, Hungary and Slovakia vs Ukraine, and Poland’s demands for reparations from Germany, it’s not looking good for Project Europa.
At my provincial grammar school, I picked up three bits of insight in my history classes which helped clarify my view of the world. The first is that Russia’s greatest offensive capability lies in its willingness to retreat, even to the extent of burning down Moscow and forcing the French to face nothing but scorched earth to feed themselves. And as the French limped home, the Russians killed their army, soldiers and camp followers alike. I took this to mean that it is a terribly bad idea to piss the Russians off because… well… logistics.
Second was a great phrase thrown off in the heat of the moment (at least, I’ve not be able to trace a source) “When history is exciting, it rises to the level of a carnival parade consisting of the grotesque, the dying and the dead. If it is boring, then it is not history.”
And the third came from Palmerston discussing the United Kingdom’s relationship with the rest of the world in 1848 when the grotesque were dancing on the bone of the dead: “We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.”
We have a frivorously disfunctional EU led by professional carnival hucksters, the interests of which conflict with the interests of the vast majority of people in the vast majority of member states and it is reaching a pitch of excitability which will be impossible to contain, and if the countries of Europe are ever going to avoid being forced to survive at what will effectively be at a post-industrial subsistence level wracked by violence, it may be an excellent time to begin to kiss and make nice to the Russian Federation and the Russian people rather than threaten more war, as if Russia does not already have enough casus belli against those countries foolish enough to attack it physically and economically to justify the most brutal retaliation, because…well…logistics. And bring back boring.
Future generations of European leaders will come to their senses and align themselves with Russia and China, but in the meantime it’s going to be an orgy of neoliberal looting and privatization of their social welfare systems