The EU thread

[Zanza]

The ECB is working on introducing a digital Euro to break the American dominance in payment processing. Let's see if they can make it work. There have been other such attempts from private actors before that failed.

For digital services there are European alternatives in most cases already, but convenience and  network effects lock people into these American services. EU sovereign cloud is a big topic in IT operations these days as resilience means you cannot rely on American hyperscalers. I do not see a cost efficient alternative yet though and the European capital markets are too weak to fund a massive homegrown competition.

[Sheilbh]

For digital services there are European alternatives in most cases already, but convenience and  network effects lock people into these American services. EU sovereign cloud is a big topic in IT operations these days as resilience means you cannot rely on American hyperscalers. I do not see a cost efficient alternative yet though and the European capital markets are too weak to fund a massive homegrown competition.

This is where I run against the AI boom risks because I think there's actually a relatively good case for building publicly owned cloud infrstructure and data centres both for that and sovereign LLMs (I think Switzerland has done this - I suspect not least because of the needs of Swiss banks to, as best they can, steer clear of American intelligence agencies ). If the capital markets aren't there and it's necessary 21st century infrastructure, then the state should build it (and own it).

On payments I'd not really thought it was that American dominated - China, Russia and other BRICS states have built alternatives. But also I actually thought this was a challenge for Trump trying to do a deal with Russia on sanctions is that, say, Swift is Belgian. But also I thought fintech was an area where Europe was pretty competitive the US (with other payment providers like Adyen being very successful) because the US was a bit more old school on payments - still lots of signing and cheques and consumer fees etc.

Certainly my experience in Europe is that we're closer to Asia on payments with lots of methods and relatively smooth tools etc - although to be honest Germany is an exception in my experience (and I know there's a lot of specific payments complications in Germany because I once worked for a payments firm and it was a global project with a team of global lawyers basically being able to do the same thing - plus Germany which was different ).

Edit: Although I would point out that the data sovereignty is not necessarilly better from a privacy perspective. The restrictions and standards that European states apply around personal data to third countries (around rule of law, "essentially equivalent" protections etc) do not apply to European law enforcement or national security agencies - this is a big sticking point in the EU's recently abandoned attempt at updating the E-Privacy Directive. That directive is best known for cookie banners but is actually important in lots of other ways, it's from 2002 and I think the institutions were in trilogue over an E-Privacy Regulation since 2014 and have now just admitted there's no way to a draft.

I don't know that it's true - and it's too good to check - but I knew a Dutch lawyer who mentioned this and then noted that the law enforcement agencies in the Netherlands alone have more active authorised wiretaps than the FBI. So there is a perverse argument that from a privacy perspective a European citizen's data is never more secure than when it's in a third country

[The Minsky Moment]

Is minitel still in operation?

[Zoupa]

We don't talk about Minitel. Same as Concorde. It's too painful.

[The Minsky Moment]

Martin Wolf's editorial in the FT, worth reading: https://on.ft.com/48iyoOD

The subject matter is a review of a book by a US economist Neal Shearing, The Fractured Age. Shearing argues that the world in splitting into two competing economic blocs, one led by the US and one by China.  He argues that the US-led bloc will triumph because it is far stronger economically.

Wolf points out an obvious flaw in Shearing's argument: he assumes that Europe is "strongly aligned" in the US bloc, along with other traditionally US-aligned countries like Japan, Canada, and Australia, and that other countries like Mexico, South Korea, and Turkey "lean" US

All that would have seemed completely justifiable at most points from 1945 until January 20, 2025.  But it seems ludicrous to argue in November 2025 that the EU and the USA are "strongly aligned." And that is why the Trump administration has been so catastrophic diplomatically; it has weakened both the US and Europe drastically as against China.

What is interesting is that Shearing's "US aligned" bloc combined has significantly more combined GDP then either the US or the "China bloc".  It does not seem to be unavoidably inevitable that a split of the world economy into blocs would have to be two blocs . . .

[crazy canuck]

Even prior to January 2025 it was not obvious there were only two, and as you say, now that claim is entirely invalid.

[Zanza]

Martin Wolf's editorial in the FT, worth reading: https://on.ft.com/48iyoOD

The subject matter is a review of a book by a US economist Neal Shearing, The Fractured Age. Shearing argues that the world in splitting into two competing economic blocs, one led by the US and one by China.  He argues that the US-led bloc will triumph because it is far stronger economically.

Wolf points out an obvious flaw in Shearing's argument: he assumes that Europe is "strongly aligned" in the US bloc, along with other traditionally US-aligned countries like Japan, Canada, and Australia, and that other countries like Mexico, South Korea, and Turkey "lean" US

All that would have seemed completely justifiable at most points from 1945 until January 20, 2025.  But it seems ludicrous to argue in November 2025 that the EU and the USA are "strongly aligned." And that is why the Trump administration has been so catastrophic diplomatically; it has weakened both the US and Europe drastically as against China.

What is interesting is that Shearing's "US aligned" bloc combined has significantly more combined GDP then either the US or the "China bloc".  It does not seem to be unavoidably inevitable that a split of the world economy into blocs would have to be two blocs . . .

I work for a very exposed multinational. We try to de-risk by going for a local-for-local strategy. But with three blocks: USMCA, China and European Union. This includes RD, procurement, supply chains, production, integration with local cloud services, etc. Sales was always local anyway. I guess that's the general approach of the German economy as leaning strong towards the US at the cost of giving up on China is not a sustainable or reliable model.

[Sheilbh]

I think there's different sets of questions for states and for companies - and I think they may point in slightly different directions.

So there are couple of other complications. I think one was made in an Economist piece about the growing combination of terror and anger in Europe about China's economic impact, which is pushing European policymakers away from China. That's not necessarily going to end up back in the US - but as someone who's aware that there's been discussions of Europe as a third pole for at least the last 60 years and it's still not happened I think it will perhaps end up being back with the US, but occasionally making disobliging comments (although not with the current administration). But the point in the article which I thought was interesting is that China already views Europe as basically an American satrapy so already sees America behind Europe and as European policymakers' attitudes harden it is quite possible that China will interpret that as American influence, even if it is something Europeans are concluding themselves. But because of that misinterpretation China may end up pushing Europeans and Americans together in spite of themselves.

The other thing that struck me was the news that I think VW may be looking at manufacturing in China for export which is something unimaginable a few years back. I wonder long-term if the effect of that will basically be to destroy the brand a little if the sense is that Western brands are manufacturing this in China, why not just buy the cheaper Chinese brand. Those long-standing Western companies may literally just become brands in the end.

It's very niche (if a multi-billion dollar industry) but that story made me think of the luxury goods sector where there's lots of Chinese industrial influencers on social media pushing the line that they actually make Hermes bags etc so why not buy direct for a fraction of the price. With subsequent and significant pushback from those companies that they don't manufacture in China and re-emphasising their artisanal practices and European heritage. It was interesting. Especially as I think the markets for both of those are each other. So it's Westerners who can't necessarily afford or don't care so much about the brand identity of the luxury goods firms going to dodgy drop-shipping companies to buy fake Hermes scarves from China, while it's China's new rich who are the huge growth market for legit hand-crafted European luxury goods