After a strong rally in May, European stock markets began June with a correction – the Stoxx 600 index fell by 0.5% following Donald Trump’s announcement of plans to double tariffs on steel and aluminium imports, sparking fears of a new round of global trade disputes, particularly hitting shares of metal producers, carmakers, writes Alona Lebedieva.
A New Global Economic Landscape.
Yet from a broader perspective, Europe still maintains an advantage: eight of the ten best-performing stock markets in the world this year are European. This positive trend is supported by Germany’s expansive fiscal plans, the strengthening of the euro, and expectations of monetary policy easing by the ECB. According to UBS estimates, up to €1.2 trillion in investments may flow into European markets over the next five years.
By contrast, the US faces inflationary risks, rising bond yields, and a deepening budget deficit. Moody’s has downgraded its credit rating, and the S&P 500 index — one of the year’s underperformers — has shown minimal growth of just 0.5%, while global markets (excluding the US) have grown by 12%.
When the rules change, those who adapt quickly win. Europe has taken advantage of a window of opportunity, but this is not the finish line — it is only the beginning of a new battle for a place in the global economy. The world is being reshaped, and in this new order, the weakness of some becomes an opportunity for others.
Internal Limitations of Europe’s Advantage.
Despite encouraging external signals, serious structural problems have accumulated within the European Union. Germany, the EU’s economic and political powerhouse, has long adhered to an export-oriented growth model. Had it adjusted this strategy during the EU’s formative period by also focusing on imports — particularly from Southern European countries — the current economic difficulties of Italy, Greece, Spain, and other peripheral nations might have been less severe. Instead of fostering internal economic cooperation, Germany pursued external trade surpluses at the expense of its partners. This led to deep imbalances, with the German economy now stagnating and industrial output steadily declining.
One of the key characteristics of a successful economy today is labor market flexibility. In this regard, EU labour markets significantly lag behind those of the United States. The COVID-19 pandemic is a telling example: in the US, unemployment surged sharply at the onset of the crisis — but this had a positive side.
First, Americans changed professions three times more often than Europeans, seeking better-suited and more profitable niches. Second, by the second half of 2020, the US saw a boom in new business registrations. This was enabled by a policy of direct financial support: instead of artificially preserving jobs, companies were allowed to lay off staff, while workers received generous benefits. This gave millions of Americans the chance to find better jobs or start their own businesses. In Europe, by contrast, the focus remained on preserving the status quo — reducing economic adaptability.
Even more decisive, however, is the factor of innovation. The EU lags in R&D spending not only behind the US, but also South Korea, China, and Japan. The issue is not just the scale of investment, but its structure. While around 85% of US R&D spending goes to high-tech sectors, in the EU only about 50% is directed toward medium-tech industries — heavy machinery, automotive, and household appliances.
This means that the US, Korea, and China are creating fundamentally new products, while Europe mainly improves existing ones. This is not necessarily bad in itself — but it yields far smaller long-term gains. Moreover, the medium-tech segment is becoming increasingly competitive, especially due to the rise of Asian economies that combine speed and scale.
Formally, the EU remains a union of equal nations with vibrant cultural diversity and unified political rules. In practice, however, the system is becoming increasingly imbalanced. Some countries — primarily the largest economies — accumulate resources but do not always use them efficiently, investing mostly in “traditional” industries. Other countries are effectively deprived of autonomous economic policy tools. In times of crisis, this leads to cases like Greece — and more broadly, to growing long-term instability.
The Strengthening of the Euro: A Symbolic Shift
The strengthening of the euro has also become symbolic. The euro-to-dollar exchange rate is driven by global financial market demand. Despite US Treasury bonds offering significantly higher yields, investors are increasingly choosing the euro. This may seem paradoxical — but it’s understandable: Trump’s unpredictable policies have made the US less attractive in terms of stability.
Against this backdrop, European investment projects and financial instruments appear more reliable. And it’s not just about the numbers — it’s about reputation: a liberal economic model, predictability, market logic, and a willingness to cooperate all provide the EU with a competitive edge in a world torn between nationalism and populism.
Europe as an Opportunity — for Itself and for Ukraine.
But these advantages will not last forever. To maintain its position, Europe must wake up. If it continues to prioritise comfort alone, it risks falling irreversibly behind in breakthrough technologies that are already defining a new industrial era in the US and Southeast Asia. Europe risks not just losing its competitiveness — it could cease to be the Europe that humanity admired in the 19th and 20th centuries.
In this context, Ukraine has an important role to play. The aggressive rhetoric from the US and Russia toward Europe reveals one truth: the democratic core of the continent has no choice but to restore its economic, political, and security potential — and to do so together with Ukraine.
We must not remain on the sidelines. Ukraine needs its own strategy: deep reforms, infrastructure investment, industrial modernisation, and the development of a domestic capital market. Only then can Ukraine become not just part of the new Europe, but a full-fledged player in the global game that has already begun — a game in which the winners will not be the strongest, but the most adaptive.