– W koncepcji przewodniczącej Komisji Europejskiej Ursuli von der Leyen Europa powinna zmierzać w kierunku czegoś, co jest kompromisem między ekologią, konkurencyjnością i odpornością – mówi Pascal Lamy, były dyrektor generalny Światowej Organizacji Handlu (WTO)

The European Central Bank has just cut interest rates for the euro area. According to the ECB’s projections, inflation will be heading downwards in 2025, which will open up space for further cuts. And in your opinion, what should be expected in 2025 in the economy? A long-awaited return to normality or rather further shocks?
Indeed, there are reasons to believe that inflation will continue to fall over the next year. Debt in individual European countries has stopped growing, energy prices are stabilising, increasingly influenced by the shift to renewable energy sources. It seems, therefore, that this return to normality is a kind of reference scenario.
A moment longingly awaited by most Europeans who are very tired of the series of crises of recent years.
But it is overlaid, however, by two major geopolitical question marks. The first is related to Donald Trump. What will he do as US president? We know what actions he has announced – but it is also known that unpredictability is his main asset, so today it is very difficult to guess what policy he actually intends to pursue. Given the crucial importance of the US in the global economy, we are entering a period of great uncertainty. The US accounts for only 15 per cent of global imports, but even so, Trump’s aggressive tariff policy would have an impact on overall trade policy and consequently global economic growth.
This is further compounded by global geopolitical tensions.
Yes, this second question mark is precisely related to geopolitics, to what will happen in countries and regions such as Ukraine, Taiwan, the Middle East and several others. We are talking in 2024. According to the current state of knowledge, I would bet that in 2025 we have 60 per cent that the reference scenario I just described will materialise. The remaining 40 per cent is an element of uncertainty related to the risk of negative events.

You point out that the source of the greatest uncertainty is Trump’s presidency. He will move into the White House on 20 January. What do you expect from him? What is his main objective?
First of all, we need to distinguish between Donald Trump and the kind of country the United States is today. Trump himself appears to be an unpredictable, transactional politician. Moreover, he is full of regrets, eager for revenge. That is one thing. Another is that his second term will take place in a different atmosphere from the first. One guess from the announcements is that it will be dominated by thinking in terms of deregulation, cuts in government, opening up space for new technologies. Trump will seek to empower the US in these areas.
The US is the entire world’s largest economy.
But they are being pushed hard by China. Beijing is already starting to put itself forward as a global leader in some areas, especially in high-tech and artificial intelligence. Trump was elected president by people who have grievances, discontent, anger at the US, believing that their country is heading in the wrong direction. Two-thirds of the American public are convinced of this. Separately, looking at the US as a European, I believe that the country is not going in the right direction – but not for economic or technological reasons, but primarily for political reasons, mainly through the ever-increasing polarisation there.
In your opinion, frustration and a sense of revenge, rather than any economic logic, were mainly behind Trump’s election? Emotions are more important than rationality?
That is precisely why he was elected. But the people who will be in power with him in the US in the coming years know what they want to do: to deeply deregulate the economy and boost high-tech development. They are not there by accident, but have a very precise vision of the future strongly linked to Silicon Valley. The best example of this is Elon Musk, the world’s richest man, who is hugely successful in the IT industry. He is now becoming an important person in the new government.

Trump announced in the campaign that he would impose tariffs on products from Europe, as much as 10-20 per cent. Is this realistic? Should we expect a trade war between Europe and the US?
I think it depends on how US trade policy develops. If they go all the way and Trump introduces these tariffs that he has announced, there is a high risk – and it would be perfectly normal – that the countries affected will retaliate in accordance with their rights under their membership of the World Trade Organisation (WTO). I would remind you that the US is still a member of the WTO, at least formally, even if in reality this can be doubted. According to international trade rules, the US cannot unilaterally raise its tariffs. If Washington nevertheless decides to raise tariffs, there will be retaliation from the EU and we will have trade disputes – and these disputes will be managed by the WTO. But that is one thread. There is also a second, more dangerous one.
What is it?
The main danger is that raising tariffs will permeate the whole system. It won’t just be a question of US relations with Europe or China. The whole world will be affected. That is the problem. The aim should be to limit the effects as much as possible.
Do you see this as a possibility? Trump seems determined in this to heavily remodel the global system.
A transactional approach is typical for Trump. I do not rule out that he has started talking about high tariffs for this very purpose. Perhaps this is his negotiating strategy. He will start announcing tariffs of 20 per cent on cars – but immediately afterwards put conditions to avoid them. It will be up to Europe whether it wants to take advantage of these opportunities.

European Commission President Ursula von der Leyen has announced that the EU will buy more LNG from America. She hopes that in this way the introduction of these tariffs can be avoided.
This is not a risky proposition. EU countries will buy more American LNG anyway, given market trends. Perhaps in this way a trade war can be avoided. It has already succeeded once. During Trump’s first term in office, then EC president Jean-Claude Juncker persuaded him not to impose tariffs on cars from the EU, and instead pledged that the EU would buy more soya from the US. This worked – and Europe needed more soya because it had nothing to feed its livestock production with. In this clever way, a compromise was reached. It remains to be seen how Trump will play it out now.
Europe has had to deal with three different economic crises in recent years. First the financial crisis in 2008, then the coronavirus pandemic, and finally the war in Ukraine, which triggered a crisis of rising energy prices. With each crisis, Europe has become weaker and weaker. What is the reason for this?
I am not sure I would subscribe to the claim that each crisis has weakened Europe. They have all damaged the EU, but some have made it stronger. Look at the response to the 2008 crisis. The road was bumpy at first, but in the end the Eurozone came out of it stronger than before. The same was true during the pandemic. The EU, fighting the coronavirus, united in a way that was not included in any of the treaties. Each of these crises had a negative impact on EU countries, but the response was not positive. The EU’s problems largely depend on structural factors, as Enrico Letta and Mario Draghi described in their reports earlier this year.

Both pointed to the low competitiveness of the European economy.
Yes, they both pointed out that slow economic growth is a consequence of modest productivity growth and too slow a closing of the innovation gap in Europe. These are factors over which we have influence – and this is what distinguishes them from challenges such as, for example, our continent’s demographic problems. All the more so because it is not at all clear that the Union is incapable of creating anything new in the area of new technologies. After all, it was in Europe in the early 1990s that the GSM standard was invented. That was not that long ago at all.
But today, the leaders in the development of the latest technologies in the world are the United States and the Far East. Europe is definitely lagging behind.
I agree with this. I completely agree. But also the reason for this is well known. It is not that we have no brains. It is not that we do not have a developed research network. It is that we are not good at making money out of science. We are not good at translating science into innovation and innovation into products and services. This was aptly described by Mario Draghi, where he pointed out such diagnoses. We are not sufficiently exploiting the potential that we have because of the lack of unity in many areas. We do not have a capital union. We do not have a banking union, which is part of the financial weakness that explains this situation.
At the same time, the Union has ever-increasing energy prices. In July, BusinessEurope published a report which showed that in 2050 they will be 50% higher than in the USA and China – a consequence of European climate policy. How to deal with this problem?

I don’t believe these figures. These are projections based on assumptions that everything will happen in the energy field on the same basis as we have seen so far. Meanwhile, this change will look different. Energy prices will start to fall because of the speed of the transition to renewables. Of course, there are more different barriers – in Germany, for example, it takes 10 years to build an electricity line from the northern to the southern states because of the huge bureaucracy – but I still think it will change. I mean, it could change if we introduce uniform electricity prices more quickly across the European Union.
You want to introduce more regulation – and you have just pointed out how much bureaucracy is hindering the development of the electricity grid in Germany.
This uniformity should not come about through regulation, but through the natural adaptation of the market, for example by placing production plants close to where there is cheap energy. For example, industrial plants do not have to operate in Germany, production can be relocated to southern Spain where cheap energy can be obtained from the sun. This would be a normal stage in the development of the European single market – and, in my opinion, it is only a matter of time before it happens. The US still has a big comparative advantage, not least because it still uses a lot of fossil fuels. But this will not last forever. At some stage they will have to take into account how high the environmental cost of using fossil fuels is.
Trump won’t do that – he pulled out of the Paris accords in 2016, and now he’s been repeating ‘Drill, baby, drill’ in the campaign.
Trump won’t do it, but there will be subsequent presidents after him. You cited projections going back to 2050, but that is still a distant future. In fact, there are more forecasts. Take the one made by the International Atomic Energy Agency on the price of renewables. It clearly shows that we are in a much better position today than we were 10-15 years ago. Of course, this is partly due to the fact that we have left mass production of photovoltaics to China, incidentally losing this market, rightly or wrongly. The arguments on both sides are there, after all, because we can take advantage of cheap photovoltaic cells, heavily subsidised by China, besides creating jobs in their maintenance and services. In this respect, it is the right development.

Speaking of forecasts. Everything seems to indicate that Friedrich Merz, leader of the centre-right CDU party, will be the new German Chancellor – after the elections scheduled for February. What do you expect from him? What impact will he have on Europe?
I know him. I think he is deeply pro-European. In this respect, he is in the tradition of the CDU. But you should also expect changes in the party’s line so far. Merz is more right-wing than even Angela Merkel. I assume that he will want to deregulate the German economy, we will see how he manages this. It is important to remember that Germany does not have a presidential system. This country works to some extent like a Swiss watch – in the sense that there are many mechanisms in it that have to fit together, complement each other. Surely, alongside this, there must be a dimension of transatlantic cooperation – if only in how the EU organises its defence and security.
Friedrich Merz has a reputation as a politician in favour of cooperation with the US.
But it will also depend – and here we return to the first part of our conversation – on the attitude of Donald Trump. There are two keys to a new defence and security model for Europe. One is in Europe and the other is in America. And it takes these two keys to change the system or to make it move towards what I think is inevitable, which is strategic autonomy. Not because of Mr Trump, but because the US now has a much more Asian vision of the world, which I think is right. If I were an American, that is how I would see the world.
Can you expect changes to the Green Deal in the near future? What is part of Merz and his CDU’s vision?
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It is more a question of a decision by the European People’s Party, the centre-right faction in the European Parliament of which the CDU is a part. From it comes the president of the European Commission, Ursula von der Leyen. Her idea is that Europe should move towards something that is a compromise between environmentalism, competitiveness and resilience. What this looks like in practice will be perfectly clear from how the EC approaches electric vehicles imported from China. On this issue, we need to find the right balance between the various constraints and our own ambitions. After all, as the EU we still want to be green, but we also want to achieve our climate targets in a safe and competitive way. That is the search for a new balance. I expect that this issue will prove to be most characteristic of Ursula von der Leyen’s second term in the EU. But I also expect it to become most characteristic of Friedrich Merz – because he will face the same challenges.
The interview was conducted on the occasion of Pascal Lamy’s lecture at the College of Europe in Natolin