From Michael Every at RaboResearch, January 20:
Market comment
As our senior strategist Ben Picton underlined yesterday, the US has total escalatory dominance in its clash with the EU over Greenland, which all emotions aside, is not in the EU or even in Europe: geographically, it’s in the Western Hemisphere / North America.
There is no field where the EU can hurt the US more than it hurts itself. In trade - it’s a net exporter; in tech - it uses US systems in the absence of its own; in energy - it now relies on US LNG, not Russian; in finance – it’s deeply interwoven into the Eurodollar system, which the US controls; and in defence - it still needs the US in Ukraine, and NATO, and can’t defend itself, nor Greenland… and certainly not from the US. This is not to be provocative, just to look at raw facts.
Europe may talk about using its trade ‘bazooka’ Anti-Coercion Instrument, but it seems unlikely to do so. Ironically, it’s too powerful, so would unleash too awful a retaliation. In this respect there’s a parallel to nuclear weapons, which France possesses independently of the US.
Military strategists point out it’s also critical to have conventional capabilities at every level of the escalatory ladder, which Europe doesn’t, because otherwise every conflict either ends in nuclear war or defeat.
One must consider such thoughts when reacting to headlines like Denmark dispatching additional troops to Greenland. If, and it still seems extremely unlikely, the US were to take the world’s largest island by force, it would be over in the same timeframe it took to seize Venezuela’s Maduro. The idea of an EU-US war is of course ridiculous. Yet so are all Europe’s other geostrategic ‘options’. Is it going to strike a defence deal with Canada, which can’t defend itself?
Or will it pivot to China, which implies embracing its own deindustrialisation and abandoning Ukraine/reaccepting Russia? The former would greatly irritate the US to no end effect for Europe.
The latter would make the US an EU opponent in a way that dwarfs Greenland.
Logically, the EU --through clenched teeth-- is likely to be forced to concede once a face-saving deal can be struck. Wolfgang Munchau argues the same via UnHerd stating: “So here is my bold prediction: Trump will win his battle for Greenland. The Europeans will not stop him, for they are weak and divided. The irony is that the EU chose this military and geostrategic weakness.”
Some talk of Europe then upping its efforts towards strategic autonomy. If so, Stefan Auer argues either EU power needs to be pushed up to Brussels or back down to the member states, asthe current structure cannot react fast or decisively enough in the geopolitical context. Even if either were achieved, the economic costs of the changes required are staggering: neo-mercantilism, not ‘we like free trade’ Merkelcantilism, and a near-war economy starting from large budget deficits and high public debt. Even if those obstacles were overcome, such steps would cause huge frictions with the US, which wants Europe to be a subordinate part of its neo-mercantilist bloc, not independent. The US would step in as the EU flag was being woven, let alone unfurled. In short, the logical path of least resistance, and damage, still flows back to concession.
For Europe, 2026 may well be seen by historians as a bookend to 1956. Then, the UK and France tried to show they were still Great Powers by sending their armies to Egypt after President Nasser had nationalised the Suez Canal. The US opposed the action and, using economic statecraft, caused a major run on both Sterling and the French Franc. Both countries were forced to retreat and accept they would only be supporting actors to the US on the world stage....
....MUCH MORE (hyperlinks and bolding in original)
