Increased defense spending is not just a security measure. It presents a prime opportunity to create a European safe asset, funded at both national and EU levels, which is key to developing the deep, liquid capital market Europe currently lacks.

Despite its challenges, Europe’s potential is immense, with 450 million people and 15% of global GDP. The key to unlocking this is for the continent to operate as a unified economic bloc, creating an 'investment and savings union,' rather than 27 individual states, to compete with the U.S. and Asia.

With the U.S. stepping back from its traditional leadership role, European countries are creating new, direct alliances to ensure their own security. A notable example is the emerging UK-Scandinavia-Baltic-Poland axis, which signals a fundamental shift in the continent's geopolitical architecture away from a singular reliance on Washington.

The Euro was created with monetary union first, assuming political and fiscal union would follow; they haven't. Now, with nationalist governments rising across Europe, the project's core conflict is exposed. A shared currency managed by inwardly-focused national interests is a fundamentally unstable structure.

Ed Luttwak provocatively argues that Europe's historical energy, innovation, and even population growth were fueled by constant, intense warfare between its states. By achieving peace after 1945, Europe "removed the engine of the car," leading to demographic decline and a loss of dynamism, with the most pacifist nations suffering the most.

Despite small projected growth, the trade pact is a strategic response to US protectionism and Chinese trade weaponization. It aims to diversify supply chains and strengthen political ties between Europe and Latin America in a fragmenting global economy, showing its true significance is geopolitical.

The modern belief that deep economic ties between the U.S. and China will prevent war echoes Norman Angell's 1910 bestseller, "The Great Illusion." That book argued European economies were too intertwined for a major war, a theory tragically debunked just four years later by World War I.

After the Soviet Union's collapse, Europe incorrectly assumed permanent peace. It divested from defense and technology, focusing on social welfare, which ultimately rendered it economically uncompetitive and geopolitically weak.

Europe's journey from global conqueror to self-destructive continent in the World Wars left a collective trauma. This history makes it deeply hesitant to embrace the centralized power and nationalist will necessary to become a superpower, a mindset the US doesn't share.