GEAB 191

With the US withdrawal from the Russian-Ukrainian conflict now in sight, Europe will be forced to confront its own responsibilities and the European edifice will likely crumble under the weight of reality.

As we’ve previously mentioned[1], Europe’s ideological straitjacket will be violently challenged in 2025, marking one of the defining features of the year, in a world rapidly reorganising on new grounds, leaving Europe to grapple with its political and strategic weaknesses, but also its deep divisions that will come to the fore, and countless paradoxical injunctions. In particular, Europe will be torn between two conflicting paths: the temptation to align itself with Trump’s America in a multipolar West[2] – reviving patriotism within the framework of a very large economic and strategic Alliance stretching from the Americas to Russia (and all its former satellites). On the other, Europe will hold on to its old dream of strategic autonomy[3], associated with the unification of a European continent whose limits have become unclear, built on “values” that many no longer identify with. All this on the basis of the immense discrediting of the “classic” political classes, early elections[4], resignations, parliamentary dissolutions[5], failed coalition attempts, and so on[6].  

The pacification of its Eastern front could be good news, reducing the pressure on its supplies, trade and therefore inflation. But, as in the Covid era, Europe will rapidly realise that in three years of war, it has been even further removed from international trade routes, which no longer all lead to Rome[7].

Figure1 – Trends in European imports and exports worldwide. Source: European Commission

The reopening of the public debate promises to be intense, and only the strong leaders emerging on all sides of the EU will be able to calm a very desperate public opinion. There’s nothing particularly original about that.

What stands out, however, is the prospect of a new wave of enlargement triggered by the Ukrainian-Russian peace agreement. This development is going to send part of Europe and Europeans into a frenzy, further fracturing the Brussels institutional edifice, which is also under increasingly criticism for its ideological decisions (whether concerning the environment[8] or foreign policy)[9].

Macron and Starmer probably have the vision for a new stage in European integration and the ability to implement it. Nevertheless, their national bases are volatile and they will find it hard to stay in place in the context of a general alignment of European governments with Washington.

The gap will therefore continue to widen between Europe (where all the crises are converging) and the rest of the world, which is changing rapidly in terms of governance, technology, modernity, etc.

Outside Europe, currencies are continuing to be digitalised[10], and vast free trade areas (RCEP, CPTPP, etc.) are being set up outside the jurisdiction of the WTO[11]. The UK has managed to secure a position in these 21^st-century trade blocks[12], but it is important to note that the UK is not the EU and Macron’s attempt to tie the EU to the UK is not certain to succeed.

The BRICS dynamic is unfolding, and will cease to polarise the world in 2025, even if China risks finding itself both commercially at the centre and politically isolated. We even believe that the BRICS will de-Sinify/de-Russify so that the ambition of the Russians and Chinese to build a multipolar world can succeed – especially as Russia will once again be drawn into the European camp, which paradoxically still has the least understanding of the logic of a multipolar world.

That said, China is undoubtedly keen to forge closer links between the BRICS and the West, which could help it to reduce the intensity of its confrontation with the US. Its application to join the CPTPP[13], in which the Anglo-Saxon camp is significant (UK, Australia, NZ, Canada) and which provides a highly restrictive framework for China in terms of subsidies for state-owned enterprises in particular, proves that it is ready to pursue a process of compatibility with the world as soon as containment strategies diminish.

This year, the international monetary system will move on from the USD-vs-CBDC confrontation to that of BTC-vs-CBDC, forcing the Western banking system to rapidly adopt new technologies suited to the administration of these ultra-fast financial transaction tools. This will be a challenge that probably not all institutions will be able to meet, particularly in Europe.

The United States will have a good year, reinforcing its attractiveness to FDI despite its immense structural weaknesses.

The major threat to the global economy and finance this year is the ‘technological canker’. We anticipate that 2025 will be the year when the real capacity of human and organisational societies to keep up with the pace of technological transition will be severely tested[14]. The challenges to natural resources linked to the deployment of AI will begin to be felt,[15] technological investment will weigh heavily on the real economy, and there will be major risks of a cognitive crisis, as well as significant resistance to change. And then, in 2025, we will come down from the hype caused by the thunderous arrival of ChatGPT, probably too soon. If we’re right, Western (mainly American) tech could find itself in trouble this year, despite the fact that it is the sector that drives the financial markets and has absorbed huge sums of money that are far from being written off.

Figure2 – The plot of a Gaussian Function. Source: Wikipedia

Finally, let’s return to our visualisation of the crisis in the form of a curve. We believe we have passed the tipping point of the global systemic crisis alongside the COVID pandemic. We stand by this analysis, despite the ongoing wars in Ukraine and the Middle East. This indicates that the world is being reorganised, that the difficulty lies in understanding what is going on, as everything is new and the information systems are struggling to adjust their scope of observation. The ‘vertigo’ effects are being felt in the face of the extent of this uncharted new world, still to be mapped, while we remain in a zone of high crisis intensity. Nevertheless, the crisis is receding and 2025 won’t be as bad as the (now outdated) trend analyses that flooded us at the end of the year suggested.

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[1] Anticipated in our September 2024 issue and first explored as early as November 2023.

[2] As highlighted by Christine Lagarde’s statements calling for no trade confrontation with Donald Trump, and advocating for more American imports (Source: Financial Times, 28/11/2024) as well as by Merz, the frontrunner in the German election, calling for the relaunch of negotiations on a transatlantic free trade agreement (Source: DW, 02/01/2025).

[3] Source: European Parliament, 07/2022

[4] Source: Le Monde, 07/11/2024

[5] Source: Le Monde, 23/12/2024

[6] Source: Euronews, 05/01/2025

[7] Source: Bloomberg, 09/04/2024

[8] Source: Euronews, 27/09/2024

[9] Source: DW, 21/09/2024

[10] Source: Digital Pound Foundation, 10/01/2025

[11] Source: Modern Diplomacy, 26/11/2024

[12] Source: Reuters, 15/12/2024

[13] Source: Reuters, 16/09/2024

[14] Source: Travel Perk, 19/12/2024

[15] Source: Lawfare Media, 19/12/2024