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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/p>\n
Many were mesmerised by Canadian Prime Minister Mark Carney\u2019s Davos speech three weeks ago. He told \u201cmiddle powers\u201d to drop the pretence that the US-founded rules-based order delivered what it promised, and to pair up with like-minded countries when and where they could.<\/p>\n
But in a speech<\/a> in Leuven last week, Europe\u2019s supreme elder statesman, Mario Draghi, saw Carney\u2019s hand and raised it. The old order is indeed \u201cdefunct\u201d, he said \u2014 but not \u201cbecause it was built on illusion. It delivered real and widely shared gains.\u201d What it could not survive was the willed weaponisation of economic interdependence. The EU\u2019s response \u2014 strengthening domestic capabilities while seeking deeper relationships where possible \u2014 is very Carneyesque. But, Draghi warned, this can only ever be a \u201cholding strategy\u201d. <\/p>\n The reason? \u201cIndividually, most EU countries are not even middle powers capable of navigating this new order by forming coalitions,\u201d Draghi said. \u201c[But of] all those now caught between the US and China, Europeans alone have the option to become a genuine power themselves.\u201d In short, Europe is not Canada: it must either accept the greatness being thrust upon it, or be divided and ruled.<\/p>\n But how? Draghi\u2019s answer is a \u201cpragmatic federalism\u201d \u2014 where EU members willing to share more sovereignty opt in to unite in as many areas as they can find ways to progress in. On the ground, this approach is already being put to the test. <\/p>\n Take the Spanish-led \u201ccompetitiveness lab\u201d initiative, open to EU members keen to accelerate common rules for financial markets. Perhaps in reaction, the finance ministers of the six largest EU economies recently vowed<\/a> to forge agreements between themselves. To rebut the inevitable charge that this is a wreckers\u2019 initiative, however, the group had better produce serious progress fast.<\/p>\n In security and defence, the new Safe common borrowing facility covers only about half of EU countries (and includes a few non-EU ones). Strong proposals now exist for coalitions of willing European capitals to jointly fund and build strategic military capacities previously provided by the US. In macro policy, leaders have agreed to issue new EU bonds (for Ukraine) but with side payments to let unwilling countries in effect opt out.<\/p>\n