Blain’s Morning Porridge Aug 29 2025 – The Renaissance of the European Economy approaches.

“Everyone sees what you appear to be, few feel what you are…”

Everyone knows Europe is finished. Over-regulation, bureaucracy, a demographic bust, dusty old industries and the prospect of slow lingering decline.. Nonsense. The Sun may shortly rise on new prospects and growth as geopolitics and new trade develops. Might be time for the great rotation back across The Pond.

There is a market consensus that is very difficult to challenge. It is simple – invest in the USA. It is the strongest, fastest, most powerful, most innovative, most inventive, best supported by capital and legislation (of a kind) economy on the planet. Its companies are the most successful, most influential and most in demand investments. Its global strength is backed by the mighty US Dollar, the global currency of trade which in turns fuels the most liquid market on the planet; the US Treasury Bond Market. Although its recent politics have been “interesting”, the market is resilient and thriving.

What’s not to like about America? Its markets look a little overvalued – but investing into success comes with costs. Yet…

Compare and contrast with Europe….

We can all agree the sun went down on Europe a couple of decades ago. We look and see stagnation under the dead hand of an over-regulated single market, the stultifying bureaucracy of the European Union. We watch in horror at the slow process within the political gab-fest that is the European central bank were national self-interest undermines the ambitions of a single currency.

Monetary union without fiscal or political union was never likely to be a recipe for economic success – but it seemed to move Europe closer to its long-term goal… Many believe a new European debt crisis will become inevitable as busted European economies seek to borrow themselves out of crisis out-with the rules of the ECB – everyone is looking at France at the moment as its government teeters.

Any number of articles will tell you that Europe’s economy faces a multitude of economic issues. These include stagnation as tired economies are buried by the escalating costs of infrastructure and welfare even as demographic challenges hit them. Growth has been sclerotic, there has been a failure to innovate to create jobs and productivity gains. Poor policy decisions that have left Europe chronically exposed at the end of vulnerable supply chains for goods, commodities and energy. The divides between the comparatively wealthy Northern Europe vs the Poor South are being exacerbated by the increased focus on immigration in Europe – a movement likely to increase as climate change triggers larger and larger human migrations northwards.

All these things beg the questions: What has European unity achieved? What was the goal?

My American chums believe Europe is a polity. It is not. Europe is a concept, as yet merely an area on a map, but one with a 3000 year history at the unfashionable Western End of the Asian/European landmass. 49 European nations, (including the European part of Turkey), range from the immensity of Russia to the tiny Vatican City state. There are multiple tribes and clans even within each nation. In many cases their only shared historical reference has been enmity towards each other, divided by race, religion, leadership and power.

The history of Europe is one of conflict. Whether it was Greeks vs Greeks, Romans against everyone, Gauls, Goths, Visigoths, Vandals, Huns, Britons, Angles, Saxons, Picts, Celts, Vikings, Normans, and hosts of conflicts in North, East, South and West Europe protecting Europe from the Islamic Conquests of the 9^th Century, the Tartars, the Mongols… the Turks. You name them and everyone in Europe has pretty much fought everyone else at some point. Bit by bit nations hauled themselves into being, and rose to prominence before falling back down. Only in the last 200 years have Germany and Italy coalesced into Nations, and even the UK is only 300 years old, established after Scotland and England agreed to Union.

In the last 5 centuries we have witnessed the rise and fall of European Empires – The Spanish, the Dutch, the French, the British, and very nearly the Germans and Russians. The wars of the 20^th Century – destroyed much of the Continent. Ruined European Cities, the horror of the Holocaust, lost generations in the fields of Flanders, Kursk or Normandy, floods of refugees fleeing, fleeing, fleeing. Riven nations provided the impetus for European unity.

The European Union’s roots are in the conflict of the 20^th Century. All agree it must never happen again. Even today much of Europe’s infrastructure is tired and exhausted after the wars. From the European Coal and Steel community through the Common Market to today’s imperfect European Union, the ambition has been largely met. Aside from regional bitterness in the Balkans, till Russia invaded Ukraine it was the longest period of peace. Now we know it had made Europe complacent, reliant on the US to fund its defence against Rogue Russia.

Give Europe credit – the last 80 years of rebuilding nations, and the cultures that makes Europe so uniquely diversified, created stable if staid economies. Maybe we got a bit too comfortable, a bit too lazy about holding back the power of state bureaucracy. We got sleepy under the US umbrella. We lost that bellicose spark that fuels entrepreneurship. We can yet shock them.

Over the last decade Europe looked likely to become an economic dead end – left adrift as the Pacific Rim trade between Asia and North America looked set to define and dominate global geopolitics. President Obama made (politely) clear his liking for the trappings of European cultures, but Europe’s irrelevance in the new geopolitical order.

That has all changed again. The new geopolitics comes at a time when America’s brief period as Empire, as global hegemon is being challenged. From a trade perspective, the combined economies of South-East Asia; China, India, the Emerged States plus Korea and Japan will soon dwarf the USA in terms of scale, and wealthy middle-class consumers. They are the future. Not restoring the aging demographics of smokestack America.

The new politics of trade will be about new trade lines. The Chinese showed great foresight (but limited skills in political and financial diplomacy) in the establishment of the Belt and Road concepts, and their stated goals for new Silk Roads. These things will happen – and faster than envisaged as the shutters come down on the USA. It is not just China that stands to gain, but the next nexus of global growth, innovation and wealth will not be America’s oligarchy, will be the Asian century.

And that may be exactly the economic boost a new Europe requires. The new Trump era has been a very necessary wake-up call to Europe. We realise peace comes with costs – and we need to rearm. That is politically difficult in these times of stretched finances, and when the possibility global inflation in the wake of Trump heralds a future bond bear market.

But Europe may prove more resilient than expected. There are excellent Universities brimming with ideas, entrepreneurs seeking opportunities, and increasing awareness of the problems and how to address them. The future of Europe will not be from closing its borders through trade regulation, but by becoming a core part of the new global trading system – one end of the new Europe – Middle East – Asia commercial barbell.

We are seeing that the USA investment attractiveness is falling as a result of the unpredictability of policy decisions. Trump will likely ignore the one-sided trade deal he struck with Europe on Tariffs in order to punish it if the EU’s Digital Services and Markets acts are enforced against US Tech firms. There is only so much “Cake and eat it too” unfairness the EU will tolerate.

That makes European companies increasingly interesting. There is a need for better financial chains to finance capital for innovation, productivity and growth. With US firms trading on PE ratios in the high 20s while Europe are still in the teens, it’s clear any hints of renewed European growth would trigger a rotation in the old continent. It is now happening.

I suspect that new trade reality will see a renewed focus on what Trump has made so unfashionable. As Asia and Indian become wealthier they will focus on restoring the environment and addressing climate change, while society will demand increasing fairness and justice (inevitably leading to friction with autocratic govt). The struggle for Human rights won’t disappear because the likes of Trump disregard them.

Let America pursue America First. In the long-term they will likely be doing it on their own.

Out of time, and back to day job – have a great weekend.

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital