Good news!

Europe can afford guns and butter. But it still faces tradeoffs

Apologies for the bait-and-switch but we need to start with some bad news: the United States, for three-quarters of a century the guarantor of European security, is now a source of coercion and supporter of territorial revisionism. This would be bad enough if it hadn’t also changed sides in a land war being waged by Europe’s primary adversary.

There’s more. The Trump administration is publicly supporting far-right and populist parties across the region. Its recently released national security strategy singles Europe out for sharp criticism, describing the continent as facing “civilisational erasure”, led by politicians trampling on “basic principles of democracy to suppress opposition”. Friends, this is no longer a question of burden sharing.

But I promised you good news and dammit this is a newsletter that sticks to its commitments. So here it goes: Europe can quite comfortably afford to defend itself, and can do so without gutting the welfare state or selling off the French Riviera. Raising defence spending as a share of GDP¹ from 2% to, say, 4% is simply not that difficult.

This is one of those times when the headline numbers do an awful lot of heavy lifting. Europe has a population of around 750 million and a nominal GDP of roughly $28 trillion — the second largest in the world. Russia, on the other hand, has a population of 144 million and a nominal GDP of $2.5 trillion. Moreover, Europeans are more highly educated, more productive and enjoy freer societies.

Actually, it gets better. If the world is to be divided up into spheres of influence between the US, China and Russia, you really, really want your regional hegemon to be the latter. I mean, what kind of sphere of influence does Russia even claim to have when it is itself a part of China’s?