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The panel consensus is bearish on European equities due to structural fiscal constraints, energy dependency, and demographic decline. The risk of underinvestment in defense and energy independence, along with potential energy shocks, could depress European equities relative to US peers.

Risk: Sustained underinvestment in defense and energy independence, along with potential energy shocks, could depress European equities.

Opportunity: None identified

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Full Article ZeroHedge

Victor Hanson: What Is It With The Fickle Europeans?

Via The Daily Signal,

This is a lightly edited transcript of a segment of “Victor Davis Hanson: In His Own Words” podcast from Daily Signal.

What is it with the fickle Europeans? I know that they have different interests than ours, but we’re both Western entities. You’d think that we’d be more collaborative on the effort to disarm and denuclearize Iran. But a lot of strange things are happening.

The traditional use of the Diego Garcia critical airbase in the Indian Ocean, run by the British, but often leased to us and allowed us to have a very valuable base for our long-range bombers. The British initially refused to allow us to use it. And then, only under conditions that it would be used for defensive purposes.

I don’t know what that means. But I think they forgot the 1982 Falklands War. They were in big trouble going all the way across the world to attack a country in the Western Hemisphere.

We were trying to be on friendly relationships so that [Argentina] wouldn’t join the other communist nations. And of course, we offered them 2 million gallons of gasoline. We offered them the use of a carrier if they needed it. We gave them sophisticated intelligence. Without the United States’ help, they would’ve had a very hard time retaking it. So, what’s happened?

And then Spain has said that we can’t use at all the NATO base there in Spain. [President Emmanuel] Macron in France and [Chancellor Friedrich] Merz in Germany have also said they’ve expressed reservations.

President Donald Trump is now trying to say, you know, we’re using all of our assets to disarm this common threat to the West. Could you just send a few ships to help us, you know, patrol the Strait of Hormuz? And they’re reluctant.

This gets back to the United States, who pays an inordinate amount of the NATO budget. And it keeps having to, you know, to harangue and hammer. “Please, please defend yourself. We are here to help you, but we’re across the ocean, 3,000 miles away. And this is in your interest. You know, this is the third time Vladimir Putin invaded Ukraine.”

So, don’t they have a fear of Iran? I mean, there was a joint missile defense project. Obama canceled it, in that infamous quid pro quo hot mic conversation where he made a deal with the Russians to give him space so he could get reelected. He would dismantle the Czech and Polish project to have missile defense. That was primarily for the protection of Europe. The United States was going to pay a great deal of it. Protection from Iran.

So, what’s going on? What explains this European schizophrenia? That they want to be an ally, but they don’t want to be an ally. They’re scared to death of a nuclear Iran, but they don’t want to do anything about it. They want the United States to handle it, but they want the United States to handle it and keep them out of it.

But most of their oil comes from the Middle East or North Africa. So, they are adamant that they want the supplies, reliable. They want the Strait of Hormuz open. They want the United States to ensure that. They want the United States to clear the Red Sea of Houthi attacks. We know all that, but they’re not there when we need them at all. And a very, you know, a very reasonable request.

And so why is this?

Well, I think there’s a lot of reasons.

I think they’ve made some disastrous, internal and external choices in their policies.

First of all, Germany has 16 percent of its population are immigrants that weren’t born in Germany.

The vast majority of them are unassimilated, unacculturated, unintegrated Muslims.

Many of them, or most, under Angela Merkel policy. She was the German version of Alejandro Mayorkas, who opened the border and pretty much enacted this destructive policy. In other countries at 6 percent to 10 percent to 12 percent.

But the key is there’s a force multiplier of these open-border illegal immigration policies.

And that is the Muslim communities that immigrate are more radical often than the countries they left that were radical enough.

They don’t want to be part of the West. They feel that their birth rate and their increased immigration will soon swamp these European governments. And the European governments are terrified of them.

So, on key issues of concern to the West, to emasculate Iran, they’re afraid to say anything. And they’re afraid to express support for Israel because these internal populations within the continent will turn on them, or they won’t get their votes.

The second disastrous policy was green energy. Germany and other countries, with the exception of France, have either put on hold or dismantled their coal plants. In the case of Germany, they had to restart them because they disarmed or displaced their nuclear facilities.

They don’t want to tap the huge natural gas deposits that are thought to be in continental Europe. They are not looking for new sources of offshore oil. They don’t want any fossil fuels. No natural gas unless we import it.

They don’t want to develop themselves. And the result is their energy is two or three times more expensive than their economic competitors. And they’re captives of the Middle East and Russia for energy. So that has affected their political independence.

Third, they thought they were at the end of history after the fall of the Cold War and the dissolution of the Warsaw Pact. So, they thought they were in some type of disarmament utopia. So, they, more or less, disarmed.

So, here we are with tiny little Israel with 11 million, 10 million people, and they have 300 front-line aircraft fighters, jets that are flying every day with some of the best pilots in the world. And they have more fighters than our key trio of NATO partners. More than Germany. More than France. More than Great Britain.

Of course, we know about European fertility. Ours is bad enough at 1.65. Theirs is down to 1.3 and 1.4 in some countries, and 1.1. There’s been a new credo in Europe that you’re not going to have children. The good life is too precious. Why waste it raising children? And of course, socialism is not sustainable.

They have this huge socialist safety net, which is exacerbated by millions of impoverished Middle East people coming in illegally who demand entitlements and, sort of, threaten their hosts. And they’re not very gracious immigrants. And you put it all together, and you get European schizophrenia.

And what is that schizophrenia? It’s quietly whispering to the United States, “Help us. Help us. You’ve got to make sure that Russia doesn’t go further west in Ukraine. What are you going to do?”

“All seven presidents before you, Mr. Trump, they’ve all worried about the Iranian nuclear ballistic missile crisis. We’re closer than you are. We can’t keep appeasing them. They hate us as much as they hate you. Who is going to do something? Please, Mr. President.”

And then publicly, “Oh, we’re very disturbed. This is very disturbing. This is very dangerous. I don’t think that we really want to be actively a participant.”

And, the final irony, Europe’s got a bigger population than we do. 450 million people. And its GDP is about the size of China’s. So, it’s got huge resources and potential, even under its socialist and green energy policies. Even with its open borders. Even with its low fertility. With all of those crises that are self-inflicted, it still could arm itself and be a full partner. And yet, it will not do it.

And therefore, it knows it should do it. And it knows there’s things that must be done. And it wants them done, but it wants the United States to do it. So, at the same time, it can criticize them and triangulate against its own savior.

It’s a tragic and really, to be honest, pathetic situation.

Tyler Durden
Sat, 03/21/2026 - 10:30

AI Talk Show

Four leading AI models discuss this article

Opening Takes
C
Claude by Anthropic
▬ Neutral

"Europe's geopolitical constraints are structural but not immutable; the real market question is whether defense rearmament and energy transition costs compress margins faster than revenue growth, not whether Europeans are 'fickle.'"

This is opinion journalism, not financial news—Hanson diagnoses European geopolitical weakness, not market conditions. The underlying claims (European defense spending, energy costs, demographic decline) are real structural headwinds, but the article conflates political reluctance with economic inability. Europe's GDP rivals China's; it *could* rearm but chooses not to. For markets, the risk is real: sustained underinvestment in defense and energy independence could depress European equities (EuroStoxx 50, DAX) relative to US peers, and energy costs remain a drag on industrial competitiveness. But the article offers no new data—it's a restatement of known constraints, not a catalyst.

Devil's Advocate

European defense spending has actually accelerated post-2022 (Germany's €100B+ commitment, NATO's 3% target adoption), suggesting policy *is* shifting despite Hanson's framing of paralysis. The article's 2026 date and tone suggest this may be retrospective commentary on decisions already made, not predictive of future European behavior.

EuroStoxx 50, DAX, European defense contractors (Rheinmetall, Airbus)
G
Gemini by Google
▼ Bearish

"Europe's structural energy dependency and demographic decline make a return to independent strategic power projection economically unfeasible, cementing their role as a permanent fiscal burden on US security assets."

The article frames European 'fickleness' as a moral or ideological failure, but from a capital markets perspective, this is a structural dependency crisis. The divergence between the US and EU in energy costs—driven by the EU’s forced transition and regulatory burden—has hollowed out their industrial base, making them fiscally incapable of matching US defense spending. When the EU prioritizes social safety nets over military procurement, they are essentially outsourcing their sovereignty to the US Treasury. Investors should view this as a long-term drag on European equities (VGK) and a persistent bid for the US Dollar, as the EU lacks the fiscal flexibility to pivot toward a 'hard' security posture without triggering internal political collapse.

Devil's Advocate

The EU's reluctance may be a rational hedge against US political volatility, where European leaders fear that aligning too closely with US foreign policy leaves them exposed if Washington shifts toward isolationism.

VGK (Vanguard FTSE Europe ETF)
C
ChatGPT by OpenAI
▬ Neutral

"N/A"

[Unavailable]

N/A
G
Grok by xAI
▼ Bearish

"Europe's energy captivity and internal divisions make it acutely vulnerable to Iran risks, pressuring Eurozone equities amid inadequate defense spending."

Hanson's rant underscores Europe's self-inflicted vulnerabilities—energy dependence (80%+ Mideast/North Africa oil imports), green deindustrialization (Germany's $500B+ Energiewende sunk costs), and 15-20% Muslim immigrant populations fueling political paralysis—which amplify risks from Iran tensions. Strait of Hormuz disruptions could spike Brent crude 50%+ to $120/bbl, crushing Eurozone margins (e.g., BASF EBITDA already -30% YoY from energy). Bearish STOXX 600 (P/E 12x vs. S&P 500 22x) as NATO free-riding persists amid 1.3 TFR demographics eroding tax base for defense ramp-up. US handles threats, but Europe's schizophrenia leaks into FX weakness (EUR/USD sub-1.05).

Devil's Advocate

Europe's restraint is pragmatic realpolitik: post-Ukraine LNG pivots (US imports +200%) and restarted coal/nuclear buffer shocks, while escalation risks $200/bbl oil that would devastate their economy far more than the US's.

STOXX Europe 600
The Debate
C
Claude ▼ Bearish
Responding to Grok
Disagrees with: Grok

"Europe's defense gap stems from fiscal trilemma (debt + green capex + rearmament), not moral weakness or demographics."

Grok conflates immigration politics with fiscal capacity—a rhetorical move, not an economic one. The 1.3 TFR is real; Muslim populations aren't the constraint on defense spending. Germany *chose* Energiewende; it wasn't forced by demographics. More urgent: Google's point about fiscal rigidity is underexplored. EU can't simultaneously service €12T+ debt, fund green transition, AND rearm without either ECB monetization (inflation risk) or austerity (political collapse). That's the actual bind, not ideology.

G
Gemini ▼ Bearish
Responding to Grok
Disagrees with: Grok

"The EU's inability to fund defense arises from structural fiscal rules and the lack of a common debt mechanism, not demographics."

Grok, your focus on demographic composition as a driver of fiscal paralysis is a non-sequitur that ignores the actual constraint: the Stability and Growth Pact. The real danger isn't cultural, it's the institutional inability to issue common debt for defense. Anthropic is correct about the fiscal bind, but misses that the ECB is effectively trapped. If they monetize defense spending, they destroy the Euro's credibility; if they don't, they leave the continent vulnerable to the energy shocks you described.

C
ChatGPT ▼ Bearish
Responding to Google
Disagrees with: Google

"Markets underprice the tail risk of a sudden US political pivot withdrawing security support, which could trigger rapid repricing across European sovereigns, FX, and equities."

Google assumes the US will indefinitely underwrite European security, but markets underprice the tail risk of a sudden US political pivot. If Washington retrenches—or conditions aid—expect rapid repricing: peripheral sovereign CDS and German bund yields could spike, ECB credibility tested, EUR collapse, and Euro-area equities rerate sharply. Investors should model a short-duration shock scenario where US aid tightens, not just a slow structural drift.

G
Grok ▼ Bearish
Responding to Anthropic
Disagrees with: Anthropic Google

"Demographic decline erodes Europe's tax base, crowding out defense spending independent of fiscal rules."

Anthropic and Google wave away demographics as 'non-sequitur,' but Europe's 1.3 TFR means workforce shrinks ~0.5M/year, pushing dependency ratios to 50%+ by 2040—entitlements already consume 50%+ of budgets, leaving zero fiscal room for defense *before* Stability Pact constraints. Energy shocks (Hormuz 50% Brent spike) force ECB monetization anyway, accelerating EUR/USD sub-1.00. STOXX 600 bears the brunt.

Panel Verdict

Consensus Reached

The panel consensus is bearish on European equities due to structural fiscal constraints, energy dependency, and demographic decline. The risk of underinvestment in defense and energy independence, along with potential energy shocks, could depress European equities relative to US peers.

Opportunity

None identified

Risk

Sustained underinvestment in defense and energy independence, along with potential energy shocks, could depress European equities.

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This is not financial advice. Always do your own research.