Trans-Atlantic Ties Should Put Finance, Not Security, First

Biden will need a progressive Europe policy for a post-Trump age.

A branch of the German bank Commerzbank
A branch of the German bank Commerzbank in Berlin on May 13. John Macdougall/AFP via Getty Images

As presidential candidate Joe Biden’s team begins cautiously sizing up furniture for the White House, they will have a lot of damaged relationships to repair should U.S. President Donald Trump lose in November. Europe may not top the agenda, but the need to find a new approach to trans-Atlantic relations is an urgent one, especially after Trump’s abrupt withdrawal of troops from Germany. Democrats should not mistake worn rhetoric about “special or inviolable” defense organizations for a forward-looking strategy. To actualize his vision of a “foreign policy for the middle class” if he is elected, Biden must embrace a progressive Europe policy.

Today, an oversecuritized worldview still sees ties with Britain and the European Union primarily as military matters or tools for superpower rivalry. But the factors binding Europe and the United States together are far different from those present in 1949, when NATO was founded. At that point economies were mostly national, capital flows were controlled, and the Cold War looked capable of going hot at any moment, making military cooperation an imminent priority. Today, a new approach to Europe needs to focus on what really ties the two continents together: the power and threat of global money.

What best captures the staggering potential of U.S.-Europe cooperation is not NATO’s European Deterrence Initiative to forestall Russian aggression, but the 2008 financial crisis, when the U.S. Federal Reserve lent more than $8 trillion to the European Central Bank and more than $900 billion to the Bank of England to keep the globalized economy, and with it the dream of a united Europe, afloat. Though foundational, this awesome financial nexus has not yet shaped the U.S.—and Democratic—foreign-policy outlook toward Europe.

A look at the Democratic-majority House Foreign Affairs Committee reveals where the party’s Europe thinking is right now. Since June, the outgoing chairman, Rep. Eliot Engel, has commented on important issues such as Russian politics, U.S. troop withdrawals from Germany, electoral reform in Albania, and Polish President Andrzej Duda’s White House visit, but he has ignored the existential economic fights roiling the U.S. allies in Germany, France, and Italy over the future of the European project. In the race to replace Engel, the most senior candidate, Rep. Brad Sherman, highlights crises in Russia, China, and the Middle East, and calls for more focus on Africa and Latin America. Even candidates with more expansive and self-consciously progressive foreign-policy visions, such as Reps. Gregory Meeks and Joaquin Castro, do not connect their focuses on such transnational challenges as “financial crisis” and “inequality” with Europe, the indispensable partner to implementing any solutions when it comes to such fights. Indeed, Castro and Sherman do not even mention Europe in their statements, with Meeks simply noting past meetings with “national leaders in Brussels and Beijing.”

Either by ignoring Europe or viewing the trans-Atlantic partnership as an overwhelmingly security-based alliance against Russia or China, Democrats are missing the real Europe questions and the real European opportunities. These will come from greater engagement with Brussels and London as economic and financial partners. Unlocking this will require Democrats to have a clearer idea of what they want from Europe and the desire to be more involved.

Breaking with precedent, Trump has shown just how much a U.S. president can involve himself in European politics. His administration has inaugurated an interventionist, even more securitized relationship. In the past weeks, the United States escalated sanctions against Russia’s Nord Stream 2 pipeline to Germany and celebrated the U.K. decision to exclude the Chinese company Huawei from its 5G network after American pressure. These measures come on top of the ongoing disputes over NATO funding and U.S. troop levels on the continent. An overfocus on Europe as a partner against threats like Russia and China has meant too little attention on what Europe and the United States can offer each other directly. This goes beyond traditional national security assurances and instead requires rethinking the purpose of foreign policy for the United States in the 2020s.

The Democrats have already begun this process. Biden, a former vice president, is running on “a foreign policy for the middle class.” This approach brings together traditional Democratic themes—Biden has proposed a “Summit for Democracy” aiming to “renew the spirit and shared purpose of the nations of the free world”—with an acknowledgment of the changed economic and geopolitical landscape. Earlier this month, Biden previewed what this new policy looks like: a fusion of industrial policy and foreign policy. He announced his plan to rebuild supply chains to protect national security and create U.S. jobs, suggesting how Democrats can combine foreign policy toward China and Russia with ambitious domestic economic goals.

This rethink should extend to Europe. Here, a “foreign policy for the middle class” requires different tools than one targeted at American opponents. Washington, Brussels, and London are the control centers of the global financial system, so moving further beyond industry and trade, this would fuse foreign policy and financial policy. To fulfill a progressive foreign policy, trans-Atlantic leaders cannot allow the financial infrastructure they control to be neutral before the issues they most care about, whether it is European banks in Hong Kong cutting off pro-democracy activists or U.S. states enabling anonymity, kleptocracy, and inequality. Only trans-Atlantic partners at the heart of the financial system can put an end to these problems.

Making this happen will require a progressive Europe policy to be more, not less, engaged in European politics than the United States was under former President Barack Obama. Take the fight in Brussels over post-pandemic reconstruction. Even as the Federal Reserve propped up global finance and the U.S. military provided security guarantees to all of Europe, Washington sat on the sidelines as the “Frugal Four”—the Netherlands, Denmark, Austria, and Sweden—scuttled full coronavirus crisis debt mutualization, which would have marked a major step toward European integration, and then constrained the much-needed 750 billion euro ($880 billion) assistance to member states. Though European leaders ultimately agreed on a final package that included EU-wide common debt and other steps toward a more united Europe, Washington still wasted an opportunity to serve as a countervailing force, breaking these political stalemates and ending European politics’ doom-loop of economic sluggishness and political upheaval.

Washington should be more involved in such negotiations, because key U.S. interests are at stake in this European clash. As Matthew Klein and Michael Pettis argue in their recent book, Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace, insufficient European spending has harmed both U.S. and European middle classes. Weak European demand driven by austerity economics has hit U.S. manufacturing and harmed American workers. U.S. intervention in the Brussels stalemate is a unique opportunity to bolster the middle class on both continents. A more generous recovery package, one with more generous grants and fewer strings attached, could have kick-started the European recovery and spending, boosting growth on both sides of the Atlantic.

U.S. aloofness on the trans-Atlantic economic question has meant that other Democratic priorities became bargaining chips as well. In an effort to reach a deal, EU leaders sacrificed long-term investments in fighting climate change. They reduced the Just Transition Fund, which incentivizes countries to increase carbon-cutting measures, from 40 billion euros to 17.5 billion ($47 billion to $21 billion). European leaders also abandoned the “rule of law” conditions that would have made recovery funding dependent on good governance in backsliding countries like Poland and Hungary. Here, phone calls from a President Biden to those in Brussels involved in the negotiations signaling U.S. priorities could have made a significant difference.

Even the most traditional national security-focused portfolios of Europe policy would have benefited from U.S. involvement in the negotiations. Successful economic cooperation will forge the strong trans-Atlantic ties necessary if Washington chooses to pursue strategic competition. It will also undo past blunders. Clashes over austerity have fueled Euroskepticism, and weakened traditionally pro-U.S. governments like Italy. Meanwhile, European domestic spending restrictions have made investments from abroad, particularly China, especially appealing, further complicating Washington’s efforts to protect allies’ critical economic sectors from competitors’ reach.

Recognizing the economic and financial foundation of the trans-Atlantic relationship should bring about a new era of U.S. engagement and cooperation with Europe over progressive priorities. Bolstering the EU’s nascent plans to tackle its tax haven problem, the United States should enlist Brussels and London in a Global Offshore Initiative to tax corporations where they earn their revenue, rather than where they hide it. Washington should start a Global Kleptocracy Initiative to make the global financial system unsafe for dark money, building on the incremental, but patchy, improvements that Britain and the EU have made to clamp down on kleptocracy. And by aligning Biden’s recently announced $2 trillion climate change plan with European Green Deal efforts, a new administration can push the world’s leading central banks in Washington, London, and Frankfurt to make a global energy transition a reality. Biden can integrate these major trans-Atlantic initiatives into his broader agenda by making them central to his Summit for Democracy: There is no better way to make clear that global democracy cannot flourish without a strong internationalist economic policy.

The lines between domestic and foreign policy have broken down at home and abroad. Biden’s “foreign policy for the middle class” has made clear that the solutions to U.S. domestic problems run through U.S. foreign policy. By extension, a successful U.S. administration will need to be deeply engaged in EU and British domestic politics. Therefore the Democrats should neither revert to Obama’s hands-off approach on Europe nor like Trump treat it solely as a tool to compete with Russia and China. When it comes to achieving key Democratic objectives in the United States—whether curbing corruption, taming financial flows, reviving the world economy, or tackling climate breakdown—all roads lead to Europe.

Edoardo Saravalle is a former researcher at the Center for a New American Security and a former fellow at the Senate Committee on Banking, Housing, and Urban Affairs. Twitter: @esaravalle

Ben Judah is a British-French journalist and the author of This Is London and Fragile Empire.