Is this the end of US exceptionalism and start of European rebirth?

Euronews

09-05-2025

There are decades where nothing happens, and then there are weeks where decades happen. The past few weeks have certainly fallen into the latter category, with remarkable intensity.
Since Donald Trump's Liberation day announcements, stock markets have made a round trip. After an initial collapse we saw one of the strongest and fastest rebounds in recent history.
For the moment, things seem to have calmed down. Still, we are clearly not out of the woods yet. Or to put it in market terms: expect volatility to persist.
This volatility originates from both the geopolitical and economic domains. As Neil Howe so eloquently argues in his book "The Fourth Turning Is Here," a fourth turning is unfortunately a period marked by wars and geopolitical tensions — an era in which extremist parties, both from the left and the right, gain strength, while the centre becomes smaller, weaker and increasingly powerless to make the decisions that, in the end, everyone knows must be made.
It is also a point in history during which sitting presidents, parties, and governments of any colour, shape or ideology are typically voted out.
The second big source of uncertainty and volatility originates from the economic sphere and is closely related to the first one. In a fourth turning, globalisation is under pressure. In our book "The New World Economy in 5 Trends," Koen De Leus and I discuss not deglobalisation but multi-globalisation.
We are no longer looking at a unipolar world solely centred around the US. Say hello to the multipolar world in which China is rapidly becoming a pole of economic and military power. Meanwhile, the old continent is struggling to speak with one voice and remain relevant.
Just to say that the economic volatility that we are witnessing is closely related to the geopolitical fragmentation. Not so long ago, when the world was still truly globalised, we had one global business cycle. All the major blocks tended to move together on the waves of global expansion and global contraction.
In this world, central banks' action would sometimes differ a bit in an amplitude, but generally the direction would be the same. Today, it is not so hard to envision the US and the European economies to grow at a different pace and central banks as a consequence conduct and all together different policy.
Also, China will, depending on the policies conducted, grow at a different speed. Japan is finally exiting more than four decades of deflation and its interest rates are on the rise, while in most other parts of the world they are coming down.
We should look at this new economic reality in terms of tectonic plates. The blocks are no longer moving at the same speed in the same direction. Instead, the plates are shifting unpredictably at different speeds.
It's no wonder that we'll see collisions, leading to massive volatility in currency and interest rate markets as a logical consequence.
In this world, volatility will be more the rule than the exception. The main conclusion of our book 'The new world economy in 5 trends' is that after the COVID-19 pandemic, we have moved into a new economic paradigm in which both interest rates and inflation will be structurally higher than from 1982 until the pandemic.
It all comes and goes in waves, it always does. And a huge wave is coming. The drivers of this totally new environment are the massive debts, aging of the population, multi-globalisation (including a new arms race) and climate change.
Innovation may play a mitigating role and may in an extreme scenario be even powerful enough to counter the four other forces.
All of this has deep and profound consequences for investors. Even though volatility will be huge, holding too much cash is not an option as inflation will eat up its purchasing power.
Above all, investors should focus on real assets like equities, real estate, wine and gold and silver, for which the bull market has only just has begun. The same goes for the commodity space. We are only in the very first inning of the largest commodity bull market in time due to massive supply shortages that we foresee.
For companies, it means that they should put in place hedging techniques for navigating a world of higher interest rates, higher inflation and higher and more volatile commodity prices.
Countries have a unique opportunity to outperform in a fourth turning, at least for those who understand the rules of the new game. Those who don't will have a hard time keeping the bond vigilantes off their backs.
Maybe in 30 years' time we will look back on today as both the start of the European Renaissance and the end of US Exceptionalism. This would bode well for both the euro and European equities.
However, it will not be a walk in the park. The road that the old continent will have to travel to be once again a voice on the world stage will be long, hard and winding.
Philippe Gijsels is Chief Strategy Officer at BNP Paribas Fortis.
Germany's Commerzbank posted better-than-expected results for the first three months of 2025. Instead of the anticipated declining net income, the bank's net result increased by 12% to €834 million.
The lender's revenues increased by 12% to €3.1 billion, while net interest income was slightly less than a year ago, standing at €2.07bn at the end of the first quarter of 2025. Meanwhile, the net commission income, driven by a strong securities business, grew by 6% to €1bn in the same period.
'We achieved the highest quarterly profit since 2011, demonstrating that we can grow even in economically challenging times,' Commerzbank CEO Bettina Orlopp said. 'We are progressing with the implementation of our strategy 'Momentum'. We plan to return more capital to our shareholders in the coming years.'
Commerzbank completed a share buyback programme of €1bn starting from November 2024, and it also proposes to pay a dividend of €0.65 per share, which will be decided at the Annual General Meeting on 15 May 2025.
The better-than-expected results are coming at a time when the German bank is making efforts to fend off Italian banking group Unicredit's takeover advances.
Unicredit has recently acquired a large stake in Commerzbank, raising its stake to 29.9%, just short of the 30% threshold at which Unicredit is required to make a public offer for the entire bank.
In February, Commerzbank announced cost-cutting measures, including job cuts of about 10% of the bank's workforce, to fend off any takeover bid by the Italian bank.
The German lender's employee representatives are also organising a protest against a possible takeover, scheduled just hours before Commerzbank's annual general meeting on 15 May.
The German bank said that this year it expects a higher net result of around €2.4bn for the full year, after restructuring expenses.
The bank set aside €40m for restructuring expenses in the first quarter, for an early partial retirement programme, which the bank will offer later this year. It is part of the job reductions, the lender is currently negotiating with the employee representative committees.
Furthermore, to preserve profitability, Commerzbank reduces its dependence on net interest income –the difference between what it earns from loans and pays for deposits–as interest rates fall.
The return on tangible equity improved to 11.1% from last year's 10.5% in the first quarter, which is seasonally strong. 'We are on track to reach our full-year target of around 9.6%,' Commerzbank CFO Carsten Schmitt said. 'At the same time, we are reducing our dependency on net interest income. We confirm our outlook for 2025.'