Henry Foy
Appearances
Today, Explained
Fear is the economy killer
It was a pretty amazing moment. The Munich Security Conference, traditionally kind of the most transatlanticist kind of festival of defense and security. Traditionally, the U.S.
Today, Explained
Fear is the economy killer
vice president comes, gives the keynote speech, and every single year that people can remember, they've come and they've talked about the importance of the bond with Europe, the undying love for Europe from America, the need to protect European democracies, etc., etc., Of course, this year, J.D. Vance turns up and gives a pretty brutal speech.
Today, Explained
Fear is the economy killer
Filled with criticism of Europe essentially tying American support to Europe, to Europe's social values.
Today, Explained
Fear is the economy killer
People were shocked. It wasn't a sort of case of this is he's not being nice to us. It was this is completely out of order. And the fact that it was done by a U.S. vice president at the Munich Security Conference really struck home that this is a very different administration. And that if Europe thought there was a way that maybe reality and rhetoric wouldn't match, that's now out the window.
Today, Explained
Fear is the economy killer
This is now action stations. We need a plan and we cannot rely on America anymore.
Today, Explained
Fear is the economy killer
You do what you should have done for the last 70 years, which is start to spend on your own defense so that you don't rely on America anymore. So there's one statistic, really, and that is what Germany has done in the last month.
Today, Explained
Fear is the economy killer
The newly elected chancellor of Germany, Friedrich Merz, he's not yet installed as chancellor, but he is the leader of the largest party, and they're in coalition negotiations now, and barring some enormous crisis, he will be chancellor. The night of his election, he said, we can no longer rely on America.
Today, Explained
Fear is the economy killer
My absolute priority will be to strengthen Europe as quickly as possible so that step by step we can really achieve independence from the United States. And a few days later rolled out this extraordinary spending plan of a trillion euros, which comprises of two big parts. The first is half a trillion euros spent on defense.
Today, Explained
Fear is the economy killer
And the second was a move to essentially de-link defense spending from debt spending, saying it doesn't matter how much we borrow for defense. So just to put this into perspective, the sort of scale of the German pivot on this, the Germans have a word, Schuld. It means debt and it also means guilt. They have linked these two ideas to the extent that having a balanced budget is...
Today, Explained
Fear is the economy killer
is sort of part of their national psyche. So for Merz to come in and say, this doesn't matter anymore, what matters is defending Europe, it is a huge moment, not just for Germany, but for all the other countries who look at them and say, wow, if they're getting serious, then we should too. And there's real world benefits here, right?
Today, Explained
Fear is the economy killer
The German car industry that used to be sort of the symbol of European industrial greatness, exporting all around the world, it's gone through some really hard times recently with high energy prices, with competition from China, with this looming trade war. You're now seeing kind of mothballed car factories being converted or discussions about converting them into tank factories.
Today, Explained
Fear is the economy killer
There are real-life things happening, and at a given time, if this all plays out the way the Europeans hope, you could have a much better European economy as a result of this huge defence boom.
Today, Explained
Fear is the economy killer
That's an excellent question. And it's really kind of step two of this whole process. You can spend the money, you can build the arms factories, you can kind of plan for a European defense strategy that doesn't involve the United States Army. But are your societies going to keep up with you? Are they going to keep voting for you while you do that? And for me, I see three big pressure points.
Today, Explained
Fear is the economy killer
The first is just higher taxes in a very simple sense. If they're going to be spending more money, they're going to be borrowing more money, they're going to have to take more money in in taxes. And that's a conversation that hasn't really happened yet in a lot of European countries. Whenever France talks about increasing the pension age, there are mass riots all across France.
Today, Explained
Fear is the economy killer
I mean, this is a really big problem for a lot of countries. The second is conscription, national service. You're going to need a lot more troops. You're going to have to start talking to societies about how many more people are they willing to put in harm's way. And the third thing is just societal preparedness. I mean, this is a whole societal shift.
Today, Explained
Fear is the economy killer
to think we could have war back on the European continent again, you know, for the first time since 1945. And societies that have got used to being at peace, got used to really living and prospering in this peace that, to a certain extent, was provided by America, might not be here much longer.
Today, Explained
Fear is the economy killer
We might need to get back into a war footing, thinking about conflict, thinking about crisis as an everyday part of our lives.
Today, Explained
Fear is the economy killer
It's a great question. It's a question that really can only be answered by the leaders of these countries. What we are seeing in the last few weeks is this sort of coalition of the willing. It's been dubbed coming together. It's being led by Sir Keir Starmer, the Prime Minister of the United Kingdom, and Emmanuel Macron, the President of France.
Today, Explained
Fear is the economy killer
They've been meeting regularly as leaders, sort of 12 to 15. And these are the big countries, Italy, Denmark, Spain, Poland, meeting and discussing how to do this. So far, the unity has held. The big question is going to be about money. But ultimately, there is no choice.
Today, Explained
Fear is the economy killer
The Europeans stick together and sort of defend themselves against Russia and any other threat that they might have, or they divide and they're picked off one by one.
Today, Explained
Fear is the economy killer
And so if you have this situation where the European defense industry, the defense industrial complex, which in many ways has suffered as a result of America being so dominant in Europe in the defense space and therefore providing all the best weapons at high prices built in America. If you can build a European one that's joined up, that isn't 27 different countries competing.
Today, Explained
Fear is the economy killer
The economies of scale from that are enormous. And then all of the beneficiaries that the American economy, for example, gets from its defense industry, I'm thinking of research and development, innovation, education, skills that benefit other parts of the economy, dual-use products, this will spill into Europe.
Today, Explained
Fear is the economy killer
This is the thinking behind, okay, if we can use defense as a big push here to increase our competitiveness or economic clout, that can spill over into other areas. If you can get the reinvestment right, get the orders in, make it work, it could be a huge driver for the entire economy at large.
Today, Explained
Fear is the economy killer
They're going better than perhaps people feared they really would under Trump. The euro's up in the last six months. You've got a lot of money flowing into the stock market, specifically in defense stocks.
Today, Explained
Fear is the economy killer
While this is probably not good for the U.S., European defense stocks soar. There's a certain amount of positivity coming back to Europe as... the feeling that by becoming more independent of the US and finding more sovereignty, that there could be actually a really good growth story here.
Today, Explained
Fear is the economy killer
That contrasts massively with this fear from six months ago, which was that when Donald Trump became president, there would be this huge backlash against Europe and the European economy would get even more squeezed than it is already.
Today, Explained
Fear is the economy killer
I mean, it was all really about expectations. There was this fear, of course, of the trade war and that these enormous American tariffs would really smother European exports and, you know... Regardless of the politics, Europe relies a huge amount on American trade. The coronavirus pandemic hit Europe really badly.
Today, Explained
Fear is the economy killer
It found itself cut off from global supply chains, as did many countries of the world. But for Europe, it was quite a big crunch. You also then, of course, the Russian invasion of Ukraine. Russia was the biggest supplier of energy to the EU. So that conflict, the stance that the EU took, which was to stop buying Russian pipeline gas, pushed up energy prices to a level that was around four times
Today, Explained
Fear is the economy killer
US average gas prices. So the European economy took a massive hit from that. Europe has really struggled to come out of that funk.
Today, Explained
Fear is the economy killer
And then, yeah, in the last few months, there's been this kind of more optimistic rhetoric coming out of European capitals to say, OK, if the Americans are going to leave us by ourselves, we're going to have to do this and actually put some money behind our economy and get things moving.