Brexit on steroids

The coalition of the willing Paris summit on September 4 ended in disaster. The European team has been working really hard for several weeks to thrash out a plan to save Ukraine and came together in Paris at the invitation of French President Emmanuel Macron to draw up concrete proposals.

However, the COW team has said all along that whatever they decided it won’t work without the Trump administration’s backing. At the end of the day’s talks, the top EU leaders, together with Ukrainian President Volodymyr Zelenskiy, huddled around the table again and called US President Donald Trump.

Instead of winning him over, they got a tongue-lashing. Trump told them off for continuing to import lots of Russian oil and basically ignored their agenda, which was an EU call for a peacekeeping force in Ukraine and beefing up the Armed Forces of Ukraine (AFU) so it can defend what is left of Ukraine against a second Russian invasion.

With this call, I would argue that the EU effort to back a “just peace” for Ukraine is over. The only realistic conclusion now is some sort of military defeat. There will be no US backing of peacekeepers, which was a bad option anyway. There will be no US-backed security guarantees, which actually were not even discussed in Paris, but is the real solution to getting a just peace for Ukraine. Trump has shown, yet again, that he is only interested in business, and specifically in oil. He campaigned on the promise to make America rich again on the “black gold” and when he had the EU over the barrel with its trousers down on this call, what did he do? He in effect demanded more of the EU energy market. He has already got European Commission President Ursula von der Leyen to promise to triple European energy to €750bn a year, in a deal analysts have called delusional.

The actual result from Paris is that the Armed Forces of Ukraine (AFU) will have to fight on and its ability to fight is the only security that Ukraine has, with a little help from Europe, who will do its best to supply it with weapons. That has actually been the plan all along. The result of the Paris summit is that nothing has changed. But without US help, that capacity will be greatly reduced.

Without the US, Europe is in no position to take over the entire burden of supporting Ukraine. I already released a long read yesterday arguing that Europe can’t afford to take over the burden of supporting Ukraine, either financially or in terms of military supplies. Today I release the supporting piece that shows most EU countries are either in recession or approaching a crisis. Another piece shows that despite Russia's economic problems, it is not going to run out of money for the war anytime soon.

The EU leaders are delusional. Italy’s Prime Minister Giorgia Meloni was the only grown up in the room at the White House summit on August 18, with her suggestion of Nato-lite genuine security guarantees where European nations individually offer Ukraine real Article 5-like military commitments should Russia invade a second time. That was ignored.

The EU leaders – and Nato General Secretary Mark Rutte, von der Leyen and EU foreign policy chief and former Estonian Prime Minister Kaja Kallas stand out – are clinging to the idea of “we just need to increase sanctions on Russia a little and supply a few more weapons and Ukraine will win.”

Incidentally, Kallas denied that China played any role in the victory over the Nazis yesterday prompting the Chinese Foreign Ministry to issue a statement calling her an “idiot” – something it rarely does.

The fact that Europe is now in, or almost in, a recession, the UK and France are on verge of a Greek-style debt crisis, and the French government will almost certainly collapse next week, is being almost entirely ignored. This should be front page news.

Sanctions clearly don’t work. Russia’s economic problems are bad and getting worse, but they are almost entirely self-inflicted by the massive military spending that has driven up inflation. They have little to do with sanctions.

But those sanctions – especially the doubling of European energy prices – are wrecking the EU economy. Even Germany, which is probably in the strongest position (after Poland, which is flourishing) is deindustrializing, it has been in recession for the last three quarters and now unemployment has started to rise. The engine of European growth has stalled. Most of this is happening because of the boomerang effect of sanctions, as we have extensively reported.

It's Brexit all over again but on steroids. Journalists love to follow high politics. It’s the sexy bit of the job with all its history-making geopolitics “We do it because it’s hard,” quotes and hot mic moments. But the job of politicians is to run the economy.

What was so flabbergasting about Brexit (and I speak as a Europeanised Brit here) is that it clearly and demonstrably had no economic benefits whatsoever. It was guaranteed to do enormous damage to the economy. Yet they did it anyway.

What is going on now with the EU’s support of Ukraine is the same thing on a grander scale. The Ukraine war has now reached a point where it is slowly destroying Europe’s economies. The fact that the EU was already in deep trouble, as highlighted by the Draghi report last year, is being largely ignored. Bruegel says the EU needs to invest $250bn a year on defence to meet the Russian threat but while defence spending is soaring, it’s still about $100bn too little this year. And that also ignores the astonishing €800bn per year Draghi says needs to be invested to get the EU back on its competitive feet.

Like with Brexit, the COW leadership has its head in the sand and is pushing ahead with policies that will only make this crisis worse. One of the side effects of this is that they will probably all lose their jobs in the next two years as the austerity and cost-of-living crisis the war has caused is fuelling the rise of the right that now leads for the first time in the polls of all of France, Germany and the UK. Really? We are going to get a fascist government in Germany again this autumn? You thought things were bad with Boris Johnson in charge of the UK, but at least he is very clever. Nigel Farage is a stupid version of Trump. We could get a fascist government in France even earlier after Macron’s government collapses on Monday.

As bne IntelliNews columnist Liam Halligan pointed out in a recent substack post, the leadership is “not trying to fix the problems; they are only managing the decline.” And as Scottish philosopher Sir Alexander Fraser Tytler argued, empires and democracies tend to collapse after 200 years after power gets captured by their elites, who lose touch with the original idea that made them powerful in the first place. That is where I think we are today. The weekend’s SCO summit showcased who is going to take over: the Global South, led by China. Of the top five economies in the world, on an adjusted basis, three are already BRICS, according to the World Bank.

The EU leadership is not doing its job. They are not running their economies. They are, like the Brexit team, focused on empty rhetoric, terms like “sovereignty”, “irreversible direction”, “just peace”, etc. Take your pick. They should be focused on things like “IMF bailout”, “economic contraction”, “falling real incomes” and so on. The labels have taken over from policy and the press is not helping by uncritically parroting these empty phrases as they make good soundbites – which is of course the very point of them.

Editor-in-chief of Carnegie’s Comments Rym Momtaz put it nicely, saying that the EU leaders believe they “can perform some sort of Jedi mind trick by sucking up to Trump” and change his mind on some of his worst decisions. But after eight months it is now clear, “he is not on the same team as the Europeans.” Were the COW leaders seriously expecting Trump to sign off on their plan when they called him yesterday, after he has repeatedly said he would do none of the things they were asking for?

Having said all this, statesmen do focus on moral questions too, not just the ins and outs increasing national prosperity. And the moral argument of defying Russia and helping Ukraine is a lot clearer. But then you need to tell the population you are at war with Russia and that will require huge sacrifices, but they are worth it as it is the “right” thing to do.

That’s never going to happen. The austerity that has already been imposed will probably already lead to all the current leaders being ousted by the right in the next elections. We are caught right in the middle between these two poles. All the EU bigwigs must think of themselves as some sort of historical figure like Churchill or Kennedy, but they are ignoring the reality. The fact that every one of the COW leaders in Paris were constantly banging on about “robust security guarantees” for Ukraine, yet Meloni was the only one actually talking about real security guarantees, highlights the point. If you want to be a historic figure then put your gun where your mouth is and offer Ukraine real protection – and risk WWIII in the process. Putin almost certainly won’t go there. But it is an “almost”, not a “certainly.”

What makes them doubly delusional is the assumption that they can win Trump over. After eight months I think everyone has the measure of the man now. And he has said over and over again that he will not support Ukraine either with money or weapons. They have really good analysts in MI6 and France’s DGSE – surely they have worked out by now that Trump doesn’t care about Ukraine but does want to do business with Putin. He said as much out loud repeatedly since he took over.

At this point I think Ukraine needs to call it a day. The deal is not pleasant as it means giving away 20% of Ukraine’s territory and returning to neutrality. But that worked well enough for Finland as Finnish President Alexander Stubb reminded everyone this week, and actually as a strategy neutrality has been pretty successful. And as I have been arguing for years, we needed a new pan-European security deal, which is what Putin really wants. Then both Trump and Europe can do their business deals with Russia. That is another aspect of the hypocrisy that is not discussed: Europe is still doing a tonne of business with Russia – exactly Trump’s point. Just look at the Kyrgyz customs data, or the fact that at least 20% of the “shadow fleet” is actually Greek, EU-regulated, tankers happily profiteering off the war.