Blain’s Morning Porridge Feb 18^th 2025: The End of The Atlantic Age – A new Mediterranean Age begins?

“In discussing barbarism and Christianity I have actually been discussing the Fall of Rome.”

Month 1 of Trump V2 has been…. “interesting”. The playbook is not to win friends, but to shock former allies into compliance with Trump’s America First agenda. The results may not be what Trump and his minions expect. There will be push back. New Alliances and Trade patterns will form – with or without America

Earlier this month I was in Canada and was astounded as President Trump achieved something extraordinary – uniting the whole Canadian nation behind Justin Trudeau, the deeply unpopular prime minister who had just announced his resignation. Trudeau stood up to Trump’s threats of tariffs and annexation. This week I’m in Egypt on business, where Trump has done it again – uniting the entire country behind President Sisi after he cancelled a trip to Washington in protest at Trump’s plans to annex Gaza and dump 2 million displaced Palestinians on its borders.

Over the weekend, Trump’s attempts to bounce Ukraine into giving up its mineral wealth in return for the dubious benefits of an undefined protection racket was profoundly shocking, as was JD Vance lecturing Europe on “free speech”. Paul Hegseth announcing the likely terms of a deal with Russia broke every rule of negotiation – but he was not offering diplomacy; he was delivering Trump’s message.

Yet….

One-day Europe will thank Trump for being the catalyst – the kick-up-the-arse – it desperately needs to wake from economic somnambulance, and take responsibility for its future, especially in defence. Europe’s immediate priority will be managing Russia (which is entirely feasible) while protecting Ukraine. Long-term the place of Europe in a Post-America global economy will be very different from what we expected just 4 years ago.

What is abundantly clear is the Atlantic Age is over – what emerges next will have profound significance for the global economy East of the Azores.

There are two ways Europe could go from here:

• We could revert to a continent of squabbling little tribal states duking it out for regional dominance (a continuation of the last 1000 years). That’s the way it looked yesterday as European leaders squabbled in Paris about whether to commit troops to a Ukraine peacekeeping force, or begging the Americans to give security guarantees. Well done Sir Kier Starmer promising a UK contingent – but begging the question where they will come from?
• The alternative is for Europe to grow up, and work out how to combine its diversity of nations and economic heft. It’s something we’ve been stumbling towards since the end of the last great European unpleasantness in the 1940s. It remains work in progress. (The United Kingdom hints how the challenges of identity can be overcome – we Scots, English, Welsh and Norn Irish retain our distinct culture, but the motto of Scotland sums us up the Union: Nemo me Impune Lacessit; provoke us, and you will regret it.)

If Europe can unite, then the potential economic upside could be enormous.

Post The Atlantic Age, I’m highly optimistic a new and vibrant Mediterranean economy – benefitting the whole continent – could emerge as Europe, The Middle East and emergent African economies sieze the opportunity for a new trading golden age and stage something akin to the dramatic rise of the South-East Asia economies over the last 50 years. Loosing America might just be the best thing to happen to Europe in Centuries. There is no reason China, and one day (post Putin) Russia could not be part of the Middle Sea era.

Meanwhile, I will wish the USA every success with the great economic experiment of MAGA populism. You might almost think the blizzard of Trump’s foreign interventions was designed to detract attention from the multiple macro, fiscal and monetary challenges the Trump/Bessent economy will face:

• I will wish Trump luck on cutting the national debt while slashing taxes.
• I wish him luck avoiding the recessionary and inflation implications of tariffs on consumption, and rising labour costs as he deports illegals.
• I wish him luck meeting the aspirations of 51% of Americans who voted for him and their expectations he will deliver them a more secure and comfortable future.
• I will wish him luck reconciling the goals and ambitions of his cabinet of billionaires with the expectations of his MAGA supporters.
• I will wish him luck funding America’s deficits as the rest of world redefines global trade.

I could present an economic analysis on how each of these could come together as a perfect storm on the recessionary threat board, but I’m sure you get the drift… What is sustaining US markets today is a large element of smoke and mirrors: that under Trump US tech giants will continue to thrive, that invention and innovation will leave the US ahead of the competition, and blind confidence will overcome threats of a dangerous market correction, while recession and rising inflation can be avoided. None of these are negligible macro-risks.

For Europe, the immediate challenge is bluff and bluster – can we come together swiftly enough to stem the Russian Tide in Ukraine?

Even if the EU and UK were to agree dramatic increases in defence spending today, the effects will not be apparent for years. It will take time to rebuild defence infrastructures, reawaken the development of new European defence technologies, build logistic tails and create the supply chains structures necessary to kick start the mass production of weapons. For instance, I am told the only place we can now obtain the specialist steel necessary for the production of armoured vehicles is from China! It might be time for the government to reopen the Port Talbot blast furnaces, and approve the West Cumbria Coal Mine to supply the metallurgical coal needed to make armour. It is no wonder Goldman Sach’s European defence stock index is the top stock pick. (Funnily enough, when Britain started re-arming in the 1930s it discovered the only place to get the required armoured plate for battleships was from Germany, or Czechoslovakia (which was ceded to Germany in Munich 1938!))

The switch to a wartime economy In Europe will take years, time many say we don’t have. Yet, history teaches us that time and time again, victorious armies have been on the edge of destruction when the other side has prematurely given in. The Russian’s military superpower is Maskirovka, the art of deception and distraction – persuading their enemies to see something other than is in front of them.

My guess is Russia is in no state to win a war with a Nato denuded of US support. The reality is the Russian economy is a fraction the size of Europe. It is teetering, worn down by the effects of sanctions Putin is desperately trying to hide. The rebuilding of the Russian Armies remains deeply constrained by supply side crises while tactical doctrine remains centralised command and control for fear that expecting Russian soldiers to show initiative is way too risky. Russian can be beaten on the field and beaten off it. Europe just needs the cojones to believe it.

The first thing Europe has to do is call both Trump and Putin’s bluff by committing to support Ukraine – whatever the dictators agree in Saudi Arabia next week.

We need a more sober assessment of Trump. Most, if not all the things, he threatens are unlikely to happen – they are noisy negotiating, but they add uncertainty. He has cultivated the image of a strong man and canny deal-maker – but no one has called his bluff.

Let’s be realistic. It’s highly unlikely the USA would put hostile boots on Greenland’s Ice and Snow. Panama will be threatened – but a military intervention is unlikely. Canada will not surrender its sovereignty to become the 51^st State. The Palestinians will remain in the ruins of Gaza – having nowhere else to go. (Far from creating Mar-a-Lago-on-Med and crystalising a lasting peace in the Holy Land, Trump has pretty much ensured the now significant global wealth of the Arab States will remain solidly aligned behind the troublesome Palestinians)

In 2026 Trump’s power will be significantly dented in the mid-term elections. I wonder if the Democrats will have learnt any lessons by then?

Interesting times ahead… Normal Porridge resumes Thursday….

Bill Blain

Author of the Morning Porridge

Founder Windshift Capital