December 13, 2024

Good luck, Ursula von der Leyen!

The new Commission faces significant challenges.

On Sunday, December 1st, the new European Commission began its work. Comprising 16 men and 11 women, with one representative from each member state, it effectively serves as the cabinet of the European Union, led by Ursula von der Leyen as President. For quite a time, it seemed that the European Parliament would block certain nominations, but in the end, von der Leyen managed to get all her candidates approved, which is quite unusual. Parliamentarians from various factions gritted their teeth and voted for candidates who, in normal times, would have been scrutinized more closely or outright rejected.

But these are not normal times. Therefore, it is a relief that the parliament did not throw a fit over individual candidates and thatthe Commission is now operational. Across the Atlantic, Donald Trump is gearing up for a second term. And he has little good in store for Europe. Europe must be ready to deal with the Trump-related challenges. In most fields of international affairs, it is the EU collectively, not nation states, interacting with foreign powers.

Brussels must negotiate tariffs with Trump

An immediate economic threat comes from Trump's dogged determination to impose import tariffs not only on Chinese but also on European products. Sometimes he speaks of 10°%, sometimes of 20°%. Europe's trade surplus is a significant issue for him. Trump bizarrely believes a trade surplus is a sign that the exporting country is exploiting the population in the importing one. Germany is playing the leading role: over 40°% of the European surplus comes from German products. In September alone, it was a record-breaking $7 billion. Only China and Mexico have larger surpluses with the US.

It seems unlikely that Trump will be dissuaded easily from his tariff obsession. Nevertheless, an attempt should be made. This requires a functioning Commission, which we now have. And there is reason for hope based on past experience. In the summer of 2018, the then EU Commission President, Jean-Claude Juncker, managed against all expectations to dissuade Trump from imposing punitive tariffs on European cars through a deal. In return, the EU promised to buy more soybeans and liquefied natural gas from the U.S.

However, von der Leyen will have a much harder time than Juncker, as Trump 2.0 appears more entrenched in his position and determined to carry out his protectionist threats.

Europe's decision-making ability impaired

Moreover, Europe is in a politically weaker position than during Juncker's time. Germany and France are without majority governments, and Spain's is struggling. Italy is led by a government that is rather Eurosceptic. The Berlin-Paris axis has rarely been so weak. In many other countries, right-wing populists are consistently winning elections, not only in Eastern Europe but most recently also in Austria. The political center is flagging. This is also evident in the composition of the European Parliament, where centrist parties hold the slimmest majority in decades. This is not what powerful unity looks like. Trump and the warmonger in the Kremlin will be pleased.

Additionally, Europe's economic weight is continuously decreasing, weakening its negotiating position. A functioning Commission is a necessary but not sufficient condition to effectively tackle the growing challenges.

Let us wish the new Commission political wisdom. And the necessary luck!

This publication is addressed exclusively at recipients in the EU, Switzerland, Liechtenstein and the United Kingdom. This report is not being distributed by LBBW to any person in the United States and LBBW does not intend to solicit any person in the United States. LBBW is under the supervision of the European Central Bank (ECB), Sonnemannstraße 22, 60314 Frankfurt/Main (Ger many) and the German Federal Financial Supervisory Authority (BaFin), Graurheindorfer Str. 108, 53117 Bonn (Ger many) / Marie-Curie-Str. 24-28, 60439 Frankfurt/Main (Germany). This publication is based on generally available sources which we are not able to verify but which we believe to be reliable. Nevertheless, we assume no liability for the accuracy and completeness of this publication. It conveys our non-binding opinion of the market and the products at the time of the editorial deadline, irrespective of any own holdings in these products. This publication does not replace individual advice. It serves only for informational purposes and should not be seen as an offer or request for a purchase or sale. For additional, more timely in-formation on concrete investment options and for individual investment advice, please contact your investment advisor. We retain the right to change the opinions expressed herein at any time and without prior notice. Moreover, we retain the right not to update this information or to stop such updates entirely without prior notice. Past performance, simulations and forecasts shown or described in this publication do not constitute a reliable indicator of future performance. The acceptance of provided research services by a securities services company can qualify as a benefit in supervisory law terms. In these cases LBBW assumes that the benefit is intended to improve the quality of the relevant service for the customer of the benefit recipient. Additional Disclaimer for recipients in the United Kingdom: Authorised and regulated by the European Central Bank (ECB), Sonnemannstraße 22, 60314 Frankfurt/Main (Germany) and the German Federal Financial Supervisory Authority (BaFin), Graurheindorfer Str. 108, 53117 Bonn (Germany) / Marie-Curie-Str. 24-28, 60439 Frankfurt/Main (Germany). Deemed authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Worldwide

LBBW locations worldwide

Notifications

Stay up to date with our notifications.

An Error has occurred

Notifications are not available

To receive notifications, it is necessary that you activate or allow notifications in your browser settings. Notifications may not be available on your device.

Select the categories for your notifications. You can change these settings at any time.

An Error has occurred