🟡The Economy Brief - Can Greenland’s Viking history teach us anything about the EU economy?

Donald Trump’s warning that the US could invade Greenland inevitably caused the sparsely populated Danish territory to surge to the top of this week’s global news agenda.

Putting aside multiple legal and political scruples, the President-elect’s economic rationale for annexing the world’s largest island is easy to discern.

Strategically located between North America, Europe, and the Arctic, Greenland is replete with reserves of oil and gas, as well as critical raw materials used in numerous modern technologies such as electric vehicles and batteries.

These abundant resources will likely become significantly easier to extract over the coming years as global warming – which Trump has, somewhat ironically, labelled “one of the greatest scams of all time” – accelerates the melting of Greenland’s vast ice sheet.

Less obvious, however, is the fact that Greenland’s tragic history holds numerous salutary lessons for current EU policymakers. Indeed, its past provides ominous warnings about where the bloc’s economy might eventually be headed.

As US author Jared Diamond notes in his acclaimed 2005 bestseller, Collapse, Greenland’s history is marked by the notorious disappearance of its Viking Norse settlers, who lived on the island for hundreds of years before dying out around the mid-15th century.

While the immediate causes of the Vikings’ disappearance remain a matter of scholarly debate (did they ultimately starve to death? Did the Inuits kill them off?), Diamond points out that a clear consensus has formed about the long-term factors behind their decline.

Some of these reasons are of little contemporary relevance: Europe, for instance, is hardly at risk of another “Little Ice Age”, which ravaged Norse agriculture from the early 1400s. If anything, it is facing the exact opposite problem.

Other factors, however, bear striking similarities to Europe's present situation.

Improved sustainability reporting rules can help Europe secure the investment it needs to meet its climate change targets, says the European Central Bank (ECB). In a paper published on Wednesday, the ECB also noted that the EU must ramp up investment, potentially by an extra €558 billion a year, to meet its 2030 climate ambitions. Read more.

Eurozone inflation rose in line with analysts’ expectations in December, preliminary data released on Tuesday showed. The uptick, predicted by economists in a recent Bloomberg poll, was largely driven by so-called ‘base effects’, notably lower energy costs this time last year. The news paves the way for further European Central Bank rate cuts over the course of 2025. Read more.

Tuesday’s data came in spite of the fact that Germany’s inflation rate rose by more than expected last month. Headline inflation in Europe’s largest economy increased to 2.9% in December, federal statistics office Destatis reported on Monday, up from 2.4% in November and above the 2.6% rate predicted by economists. Read more.