Thank you Mr President

• Alexis Bienvenue
  Fondsmanager
  LFDE

Of course, the US hurricane is wreaking havoc worldwide and some of the damage – such as the time lost in the race to reduce greenhouse gases – will be irreversible. But like any storm, it is also creating a burst of regeneration. Paradoxically, Europe is finding new momentum, which had lain dormant for a long time. And markets are celebrating. The MSCI Europe has risen by 10% in euro since the beginning of the year (close to 15% in dollars), whereas the US S&P500 has fallen more than 3%, opening up a gap of 18% (in dollar terms) in under three months*!

If Europe becomes “great again”, it is certainly not thanks to the US President directly. He was not elected on such a programme, and that’s putting it mildly. In truth, Europe has only itself to thank for this momentum, and the energy it is devoting to overcoming the anti-European shift introduced in US policy, particularly on the military front. Press-ganged into taking greater responsibility for its own defence and that of Ukraine, it has achieved an historic turnaround in just a few weeks. At the beginning of March, the European Commission adopted a massive support package for the defence sector with ReArm Europe, which should amount to some EUR 800 billion over four years. It authorises higher national debt levels for spending on armaments, which will not be included in the calculation of debt limits prescribed by European treaties. On top of this comes the German initiative to remove the country’s constitutional debt brake – for a long time a sacred cow. Coupled with a fund of EUR 500 billion to support infrastructure investment, Germany’s spending could rise by EUR 1,500 billion over ten years. And this should stimulate European GDP by between 0.5% and 1% per year over several years, primarily thanks to Germany. At the same time, forecasters are downgrading growth expectations for the US, dampened by the fall in confidence among consumers and industry, as a result of the fluctuating trade policies of the new president. Some strategists even expect European growth to outstrip that of the US in 2026 – an inconceivable situation up until very recently.

In the wake of the Old Continent’s enforced autonomy, some industrial sectors are also seeing their prospects reassessed. This is the case for the strategic card payments sector. The crushing domination of the US Visa and MasterCard systems is starting to raise concerns. Proprietary European networks are now receiving active support from local institutions. This is the case for the CB network and the Wero solution promoted by the National Payments Committee (CNMP) in France. In the aerospace sector, at the end of 2024, the European Commission launched the Iris² programme, responsible for establishing a multi-orbital constellation of 292 satellites from 2030, ultimately reducing dependence on US networks, notably Starlink controlled by Elon Musk and Kuiper, held by Amazon boss Jeff Bezos. The new European Ariane 6 launch system, an essential part of this plan, has just successfully completed its first commercial flight.

The Old World is waking up, thanks to the New World. But is it all a dream? Behind these announcements, there are still some cracks – particularly with regards to financing.Germany is the last major eurozone country in a position to be able to massively increase its debt. The other big economies – France and Italy – are already teetering on the edge of what is sustainable. The German plan is therefore Europe’s last shot – once this has gone there is no room for further massive national debt uplifts. In addition, despite these various plans, Europe will remain diminutive in the digital sector.There are no technology giants in Europe to rival those of the US or China. Any search for autonomy is unlikely to worry the White House. Trump will not be fooled on this issue. Nonethless, in terms of growth and employment, and on financial markets, the European reaction will have a tangible and sustainable impact. Thank you, Mr President, even if it wasn’t your intention.

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*Source: Bloomberg, data as at 20 March 2025.

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This information, data and opinions of LFDE are provided for informational purposes only and therefore do not constitute an offer to buy or sell any security, nor do they constitute investment advice or financial analysis.