The Economy Brief – Peace through strength or war through weakness?

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Yesterday’s European Council conclusions were so full of chest-thumping bluster that you could be forgiven for thinking EU leaders had just come from the gym.

The final texts reaffirm the commitment of (almost) all member states to a “peace through strength” approach to the war in Ukraine. A “robust” Ukrainian military, leaders proclaimed, will ensure Kyiv is in the “strongest possible position” to negotiate a peace deal with Russia.

Similarly, member states vowed to “weaken” the Kremlin’s ability to wage war by “strengthening the enforcement” of sanctions against Moscow. They also reaffirmed their “strong commitment” to prosecuting Russian leaders for war crimes.

The muscular rhetoric extended to economic issues. Leaders pledged to “strengthen Europe’s competitiveness”, “strengthen the single market”, and stressed the importance of “strengthening financial stability”.

Even the environment wasn’t spared the Council’s verbal machismo. In a particularly awkward paragraph, leaders stressed the role of “water resilience” (a nebulous term at best) in “strengthening the EU’s competitiveness and resilience” – implying that resilience, at least of the aquatic variety, is somehow self-reinforcing.

For all the EU's repeated assertions of its military, economic and environmental virility, the summit itself made it abundantly clear that Europe remains riddled with weakness, ineptitude and division.

EU delays imposing tariffs on US products – including bourbon whiskey and motorcycles – until mid-April. The European Commission had initially planned to reactivate 2018 tariffs on US goods from 1 April, alongside a new package of countermeasures scheduled for mid-April, in response to Washington's blanket 25% tariffs on steel and aluminium imports introduced last month. The Commission’s move will give the EU “extra time” for negotiations with Washington, EU Trade Commissioner Maroš Šefčovič said on Thursday. Read more.

European Commission doubles down on controversial proposal to centralise oversight of EU capital markets. The EU executive’s Communication on a “Savings and Investment Union”, released on Wednesday, said a proposal to transfer “certain [supervisory] tasks to the EU level” will now be made in the last three months of this year. An earlier leaked draft of the Communication had said this proposal would only be made in the third quarter of 2026. “We don't have the luxury of time anymore,” said EU Finance Commissioner Maria Albuquerque. “We need to accelerate, we need to push, to bring everything forward.” Read more.

EU sanctions can’t inflict significant pain on Russia. High oil prices and steep increases in military spending have largely cushioned the impact of the EU sanctions imposed since Russia’s full-scale invasion of Ukraine in 2022, analysts said. This means Moscow will likely be able to resist financial pressure from the US and EU to agree to a 30-day ceasefire with Kyiv. “The Russian economy can continue to support this war, and it won't be a major issue for Putin in his thinking about negotiations or ceasefires,” said Janis Kluge, senior associate at the German Institute for International and Security Affairs (SWP). Read more.

Germany’s economic growth forecast halved despite massive fiscal stimulus package. The Munich-based Ifo Institute reported on Monday that it expects Germany's GDP, the largest in the EU, to expand by just 0.2% this year – down from the 0.4% growth previously forecast in January. The downgrade came despite the recent joint proposal by the opposition Christian Democrats and incumbent Social Democrats to loosen the country’s deficit rules to boost infrastructure and defence spending by around €1 trillion over the next decade. The package was approved on Friday by the country’s Bundesrat, or Federal Council. Read more.