The transatlantic alliance appears to be falling apart at the seams, meaning Europe will need to quickly develop a strategy to rein in its hard geopolitical power. The old continent may be looking to China for advice on how to achieve this. The opinion published by "Reuters" is by Joachim Clement, investment strategist at Panmure Liberum - the largest independent investment bank in Britain.
The first step is improving defense capabilities.
In the early 1990s, the leadership in China began a massive modernization of its military. The World Bank estimates that China's defense spending has increased from about $12 billion in 1993 to approximately $296 billion in 2023. - an annual growth rate of over 11% per year compared to about 3.5% in the US over the same period.
As a result, China currently operates the world's largest naval force in terms of number of ships and has developed advanced missile and unmanned systems, including hypersonic missiles - the most advanced missile systems in the world.
The European Union and the UK are already set to significantly increase their military spending after the US suspended its support for Ukraine's fight against Russia.
On February 25, British Prime Minister Keir Starmer said that the UK would aim to increase defense spending to 3% of GDP.
Friedrich Merz - the likely next Chancellor of Germany, has also stressed his desire to significantly increase defense spending. He proposed the creation of an emergency defense fund of 200 billion euros, on top of an existing fund of 100 billion euros.
Earlier today, the European Commission proposed joint loans totaling 150 billion euros as part of an 800 billion euro effort to boost the EU's defense capabilities.
But Europe may have to think much bigger, because even with these additional funds it will take many years - and possibly decades - to rebuild its military.
For example, it will take Germany until 2038 to reach the level of combat aircraft production it had 20 years ago, and until 2121 to achieve a comparable increase in artillery howitzers, according to forecasts by the "Kiel" Institute.
And simply spending more will not help much, because European manufacturers weapons will eventually reach capacity limits.
Energy Independence
Another vulnerability that Europe must address is its dependence on fossil fuels.
The Russian invasion of Ukraine in 2022 showed how natural gas can be used as a weapon. Since then, Europe has abandoned Russian pipeline gas and switched to liquefied natural gas (LNG). Much of it, however, is imported from the United States, so Europe has essentially traded one dependency for another.
And it’s a potentially risky dependency, as all indications are that US President Donald Trump would be willing to use gas as a tool of coercion. So, given the new geopolitical realities, Europe's green transition must be accelerated.
If China's experience can be taken into account, accelerating the energy transition could help Europe boost both its weak economic growth and its geopolitical power. China has become the world’s largest investor in renewables and nuclear power, two technologies that have reduced its dependence on fossil fuel imports from potential geopolitical rivals.
China’s combined investment in solar power, electric vehicles and batteries will account for 10% of the country’s GDP in 2024, with these key green sectors growing three times faster than the wider Chinese economy in 2024.
Europe is already seeing some cost benefits from investing in renewables.
According to estimates by energy think tank Ember, growing renewable energy production has reduced the EU’s bill for imported natural gas by €53 billion over the past five years. In the UK, the "net zero economy" (e.g. renewable energy and green finance) grew about three times faster than the rate of the economy as a whole in 2024.
Finally, the EU could learn to be a little more strategic when it creates and enforces regulations - something China has arguably done in recent decades.
While Europe probably has no ambition to be as strong as China in this area, the bloc does have regulatory powers that it can use more purposefully to project geopolitical power.
The European General Data Protection Regulation (GDPR) and the Digital Services Act (DSA) have already shown that the EU can enact laws and regulations that affect companies anywhere in the world.
The Digital Services Act, which aims to regulate social media platforms in particular, has the potential to be a major thorn in the side of US tech companies, as violations could lead to fines of up to 6% of global revenue.
Given the new geopolitical realities, the EU will increasingly find itself having to use its regulatory powers as a bargaining chip in the face of threats to trade or security.
These kinds of tough tactics may not come naturally to Europe, but given that other major powers seem less sensitive, it may be time for Europe to adopt this approach as well.