Euro looks anemic as Macron minces and Moscow sends missiles to Minsk

(Originally published Dec. 11 in “What in the World“) The political crisis at the center of Europe looks likely to deepen as its economic and security situations darken.

After helping to topple the prime minister, the leader of France’s far fight, Marine le Pen, has now set her sights on French President Emmanuel Macron. That has given the Socialists leverage as Macron tries to appoint a new prime minister to replace Michel Barnier following his ouster last week. To do so, Macron held talks with the Socialists this week but pointedly excluded Le Pen’s National Rally on the grounds that the party was part of an “anti-Republican” front.

As if drawn to the smell of blood, incoming U.S. President Donald Trump was in Paris last weekend, ostensibly to celebrate the reopening of the Notre Dame cathedral, but he also met with Macron. Europe has little to celebrate from his arrival. Already contending with the cost of defending itself against a Russian peril amid moribund economic growth, a rising right and France’s political crisis, Europe must now contend with the prospect that Trump will slap blanket tariffs on European exports to the United States.

Giant U.S. bond investor Pimco believes this witches brew of factors is likely to force European policymakers to cut interest rates, forcing the Euro lower. The Euro has already declined more than 5% against the U.S. dollar since September and the market is predicting as much as a 1.75% decline in the European Central Bank’s deposit rate, to 1.5% from 3.25%.

European nations may need to double their military aid to Ukraine, too, if Trump pulls the plug on U.S. shipments. To tide Ukraine over, outgoing U.S. President Joe Biden has approved a $988 billion weapons package for Kyiv, which believes it now has enough to keep fighting through next year. Ukrainian President Volodymyr Zelensky is asking Western allies to give it up to a dozen more Patriot anti-missile batteries, suggesting they use frozen Russian assets to pay for them.

But Europe also fears that it—not Ukraine—may be Russian President Vladimir Putin’s next target. Belarusian President Alexander Lukashenko said Tuesday that Moscow was giving it some of the new Oreshnik missiles in response to Lithuanian and Polish troops near Belarus’ western border.

Russia unveiled the new intermediate-range missile last month by using an unarmed version to strike an arms factory Ukraine. Putin has boasted that, in addition to being nuclear-capable, the Oreshnik is also hypersonic. Most intermediate- and long-range missiles achieve hypersonic speeds when they re-enter the Earth’s atmosphere. It’s not clear, however, whether the Oreshnik uses the kind of aerodynamics that differentiates a “hypersonic” missile from a ballistic one. Putin said after the Oreshnik’s launch, however, that “as of today there are no means of counteracting such a weapon.”