2025: Donald Trump’s win in the US, Europe’s economic reckoning | JP Fabri

Trump’s resurgence should serve as a wake-up call. His ‘America First’ rhetoric, coupled with a focus on economic self-sufficiency and innovation, exposes Europe’s vulnerabilities

To break free from this inertia, Europe must implement bold reforms
To break free from this inertia, Europe must implement bold reforms

JP Fabri is an economist and was asked by MaltaToday to share his expectations on the Trump presidency and its impact on the European economy in the new year

Donald Trump’s political resurgence invites familiar debates about transatlantic relations and global stability. However, beyond geopolitics, it raises a deeper, more pressing question about Europe’s economic and innovation stagnation. Trump’s return reflects global volatility and a willingness to embrace disruption, traits that Europe increasingly lacks. This moment highlights the continent’s failure to cultivate a dynamic economy capable of responding to 21st-century challenges.

The reports that delved into Europe’s competitiveness by Mario Draghi and the single market by Enrico Letta, published earlier this year, provide a stark analysis of Europe’s persistent weaknesses. It paints a picture of economic lethargy marked by fragmented markets, regulatory burdens, and an entrenched aversion to creative destruction. While the recommendations outlined in the reports are sound—calling for streamlined regulations, bold industrial strategies, and a culture of risk-taking—they remain largely aspirational. Political compromises and a fixation on preserving the status quo have rendered these proposals toothless. The lack of urgency is especially concerning in a world rapidly defined by technological innovation and geopolitical competition.

Imaginative stagnation

Europe’s stagnation is not merely economic but imaginative. Startups and entrepreneurs, the lifeblood of innovation, face formidable challenges in scaling their ventures due to regulatory complexity and an ingrained cultural fear of failure. While Silicon Valley and Shenzhen foster environments where risk-taking is rewarded, Europe clings to a conservative ethos that discourages ambition. This ethos is not only reflected in business practices but also in the broader regulatory frameworks that prioritise stability over dynamism. As Peter Thiel argues in Zero to One, innovation demands “definite optimism” – a belief that the future can be shaped and engineered. Europe’s hesitation embodies “indefinite pessimism,” where incremental adjustments replace transformative leaps.

The inertia is compounded by a bureaucratic culture resistant to change. The European Union’s governance structures, designed to maintain balance among member states, have inadvertently created a system that stifles agility. This is evident in the slow progress of flagship projects like the European Green Deal and digital sovereignty initiatives. While visionary in scope, these initiatives are mired in delays and political disagreements, eroding their potential to position Europe as a leader in critical industries like AI, quantum computing, and renewable energy.

Trump’s resurgence should serve as a wake-up call. His ‘America First’ rhetoric, coupled with a focus on economic self-sufficiency and innovation, exposes Europe’s vulnerabilities. For too long, the continent has relied on the stability of its regulatory frameworks and the strength of its traditional industries, neglecting the need to adapt to a world shaped by technological breakthroughs and shifting power dynamics. If Europe continues on its current trajectory, it risks irrelevance, sidelined in a global economy increasingly dominated by those willing to embrace disruption and reinvention.

The lessons for Europe are clear, and Peter Thiel’s critique in Zero to One offers a compelling blueprint for action. The continent must embrace the unknown, prioritise first principles of thinking, and reward ambition over conformity. It is not a lack of talent that holds Europe back but a lack of courage to back bold ideas. Innovation thrives in environments where failure is not only tolerated but celebrated as a precursor to success. Yet, in Europe, the stigma surrounding failure stifles entrepreneurial energy, forcing many of its brightest minds to seek opportunities abroad.

Breaking free from inertia

To break free from this inertia, Europe must implement bold reforms. Streamlining regulations to allow startups to scale across borders is a critical first step. Governments must also incentivise high-risk, high-reward ventures through targeted grants and tax benefits. Education systems need urgent reform to prioritise creativity, critical thinking, and entrepreneurial skills, moving away from rote learning that fails to prepare young people for an unpredictable future. Perhaps most crucially, Europe must undergo a cultural shift to celebrate failure as an integral part of innovation rather than a mark of shame.

The Draghi-Letta reports lay the groundwork for these reforms, but words must translate into action. The stakes are high: a world defined by rapid technological advancements and geopolitical uncertainty will not wait for Europe to catch up. Without decisive action, the continent risks becoming a spectator, watching as others shape the future of industries that will define this century.

Trump’s return is a reminder that the global landscape rewards those who dare to innovate and disrupt. For Europe, this is a moment of reckoning. Will it continue to drift in a sea of bureaucracy and caution, or will it seize the opportunity to lead through ambition and experimentation? The choice is clear, but the path is not.

Breaking free from inertia will require not only structural reforms but a reimagining of Europe’s identity as a hub of creativity and courage. The alternative – a future of irrelevance – should compel Europe to act with urgency and purpose.