Dutch Deputy Prime Minister Sigrid Kaag on how the EU can use geoeconomic tools to ‘assert itself on the international stage’

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Speaker

Sigrid Kaag
First Deputy Prime Minister and Minister of Finance, Government of the Netherlands

Moderator

Frederick Kempe
President and CEO, Atlantic Council

SIGRID KAAG: “The war of ideas is a Greek invention,” Karl Popper wrote in Conjectures and Refutations, “and is one of the most important inventions, so to speak, ever made. Indeed, the possibility of fighting with words and ideas instead of fighting with swords is the very basis of our civilization.”

And I’m sure we all agree with Popper that anything is better than reaching for the sword and reverting to the barbarism of warfare. For this reason alone, it’s important, it’s good that alternatives, be the words or ideas as Popper argues or the tools of modern-day economics, are there. They are essential.

Geoeconomics—the use of economic means to achieve political ends—has gained traction in recent years, and figures show that international conflicts are increasingly being fought on the economic terrain. Or perhaps we were naïve not to acknowledge it, actually, much sooner; that could be a debate. Between 2014 and 2022, the amount of trade restrictions increased fivefold. Seen in this context, the war in Ukraine is as exceptional as it is horrific. And, lest we forget, there are also significant geoeconomic components to this hot conflict.

But above all, I’d like to underscore what the ambassador just said: the need to fight, to rise, to confirm and affirm liberal democracies in our united stance against the horrific atrocities that are conducted by the illegal Russian invasion of Ukraine. Russia cannot win.

But before sharing my views on how to face up to this development, allow me to briefly outline the causes. In the field of technology in particular, it’s increasingly difficult to see or to determine where economics ends and security starts. The interwoven nature is one thing, but we need to be sharp, we need to be more determined, and more precise—as the latest developments in artificial intelligence, for instance, are of significant importance, not only economically, not only beneficial with risks to society, but also militarily.

In addition, it’s essential to recognize that in relative terms the importance of the West is declining. In 2005, the GDP of the G7 alone was still six times that of the BRICS. Now it’s one-and-a-half times. So the shift has happened in eighteen years or less, and the pace is changing.

So the implications of this downward trend are still unclear, but are we moving towards a bipolar world, tripolar, or—as the ambassador has said—or should we be gearing up for a world order a la carte? But we need to be sure where we want to be and where our allies are and who they are.

Obviously, I’m at the Transatlantic Forum, so it’s pretty clear where they are for the Netherlands, also within the EU. But transatlanticism remains a pillar of our foreign policy, but also of our economic policy.

But we also have to reconsider our assumption that economic cooperation can always be relied upon to drive political cooperation. The EU is one such product, but the end of—the end of the end of history, as some people have put it, connectedness or interconnectedness also creates areas of dependence, mutual dependence that can all too easily be weaponized if there’s a change of regime, a change of political order, and a change of interest.

And for the EU in particular, this has proven to be a disruptive insight. After all, as I just mentioned, and you know that very well, the union is founded—has risen from the ashes of the Second World War. And it’s through that economic cooperation, economic collaboration, economic convergence also fosters political cooperation. So we’ve traditionally focused on being an open economy that relies and derives its strength from international rules, alignment and compliance with those rules, and mutually created dependencies. It remains an important principle. I do not want to renege that. Far from it. But it’s also good to acknowledge, be aware, and prepare for the fact it doesn’t always work in the way it was intended.

And, last but not least, we’re seeing a backlash against globalization in public debate. I do not follow the German press on a daily basis, but I can tell you for the Netherlands globalization in some quarters has become a dirty word, synonymous with allegations, with suggestions of undermining, as if it’s corrosive to society. It’s aligned with many other assumptions that are not always easy to tackle in the same way because not all is rational. But we also know that growing inequality, and the greater rightful coverage given to this, are a factor that needs to be debated and discussed. What have been the benefits of globalization? How should globalization be altered? And how can it truly reach the benefits that all people, all citizens around this world, need to be exposed to?

Globalization has not brought all benefits to all people in equal manner. That is something we need to acknowledge, we need to be mindful of, and we need to tackle. But globalization is also an easy target, as I just alluded, for populists who offer no real solutions to current problems. Far from it, I would add. And partly due to the structural causes, there seems to have been a negative spiral in recent years. Trade restrictions, protectionist policies, and assertive diplomacy appear to have generated a tit-for-tat dynamic between actors that has led to a hardening or a further erosion of the quality and interactions in our international relations.

We realize it in the US, economics is increasingly seen as a central battleground in geopolitical competition. We’re also seeing a similar shift in the EU. And the latest editions of Foreign Affairs even referred to the geoeconomic awakening of the EU. And I can see some of you nod, I think approvingly. But we can possibly debate that further. And that brings me to a matter how we should be dealing with his development, not only from a status quo perspective but rather from a moving forward perspective.

What’s the role of the Netherlands, the seventeenth economy in the world, the fifth in the European Union? We’re not big, but we’re forceful enough and we’re home to a number of the large, innovative companies. You will remember Philips, I wouldn’t say the olden days, but that’s a well-known one from my generation. But more pertinently, of course, a company such as ASML, a global leader in its field.

So what should be our role? How can we sustainably ensure our security, prosperity, environment, and way of life now and in the future in an increasingly complex international playing field where Western—and I align actually with the comments made by the ambassador, Western seems like an old term—liberal democracies’ influence and reach risks to be on the winning side? So we need to assert ourselves.

But before we get to these questions, we need to take a good look at ourselves. First of all, we need to improve and strengthen our own political-economic foundations as this determines our geoeconomic position to a large extent. Our homework needs to be done. We need to make our economies more competitive, innovative, and resilient to shocks. On top of that, we need effective solutions to our internal policy and political questions. And I, from an EU perspective, know that we need to find a quick solution to our economic governance review.

This may be a moment where some of you in the audience from the US might have a yawn moment, and think what is she talking about? It’s our fiscal rules. It’s how we pay our bills, how we invest, how we build our buffers, how we continue to be fit for purpose, particularly also within the euro area. But it means also we need to improve and strengthen, actually make progress towards, the Capital Markets Union. We should deepen that. EU capital markets are underdeveloped. They’re fragmented. They’re hampering early-stage investments and innovation for sustainable growth, a sharp contrast to the United States in this regard.

But back to the geoeconomic developments that we need to face. Let me state my position upfront: I see it as a mix of defensive and open policy instruments. They’re needed to meet these challenges. And it’s a little bit similar to the way my country has dealt with water over time.

You know we are below sea level. If climate change continues to happen the way it is, my country, too, will disappear. But we have some time. But the water is too powerful to be held back by only dikes, so we give space. We create space for the waters to flow. We tend to move with—as the water moves. We let it flow through the meadows and store it underground. And if the space is insufficient—we can no longer store the water in the floodplains—we have the levees, an ultimate remedy to stop the water as a last resort. So take this as a perspective on our defensive measures.

A starting point, of course, is one should never be naïve, and perhaps we have been too latent or somewhat naïve in the past. And it’s an accusation or rather a point made that could have been levied at the EU at the beginning of this century. When other actors already sought to use their economic resources for political purposes, they are successful in undermining not only our interests but, of course, also in undermining through the advancement of their interest. So we need to strengthen our level playing field within the EU as this, if we don’t act, can have major consequences for our prosperity and security.

So defensive measures remain important also for the EU, and these may take the form of instruments designed to counter economic coercion or to defend level playing field, the backbone of our internal market. And examples of how the EU has adapted to the changing world order includes the foreign direct investment screening instrument and the anti-coercion instrument. These are very practical measures taken to actually strengthen our position from a defensive perspective.

But defensive measures also have their drawbacks, not in the least negative economic consequences. And a study commissioned by the IMF has shown that far-reaching geoeconomic fragmentation could lead to a worldwide drop in prosperity of up to 7 percent of global GDP in the worst-case scenario, with, obviously, the less-developed countries and middle-income countries being particularly badly hit. And that’s the equivalent of Germany and Japan disappearing from the global economy. Decoupling is, therefore, not an option to the EU or the Netherlands, and we find it valuable that the concept of de-risking is getting more and more attention and traction, as the damage quickly goes beyond the economic arena.

A fragmented or fragmenting geoeconomic world order impedes our ability to address global issues such as climate change, but also poverty, or actually achieve the advancements of global public goods. Fragmentation tends to be less efficient than cooperation, so fragmentation often comes at the expense of issues such as poverty reduction, education, climate change, mitigation, but to me above all adaptation. And this takes place as a time when our troubles in this era of poli crisis have increased significantly. In other words, the adverse effects of defensive measures can be major and have perhaps been a little bit underexposed in recent times. We’ve spoken to their value, but we have insufficiently acknowledged the indirect consequences.

And as a result, mutually reinforced dependencies have also gained a bad reputation, and perhaps unfairly so, because where there are dependencies—if properly managed and mitigated, through trade for instance—the benefits of trade could also be measured and could be shared. But international relations have become grimmer and a defensive reflex is the logical response, and I understand that and I support that. But we need to be mindful of a self-reinforcing mechanism that results from the defensive reflex, a process in which we lose control or are faced with a lessening of influence.

It’s therefore vital that in addition to the necessary defensive measures we make a concerted effort to shift our focus towards strengthened/enhanced cooperation, and perhaps in varied ways with different types of partnerships dependent on the country or situation you’re dealing with. Obviously, I’m making a big carveout here for the current—for the current situation imposed on the world by Russia.

Let me be very clear on this. I’m speaking more in general. Our position on the Russian—illegal Russian invasion of Ukraine is very clear, and I think we are very aligned. And we see ourselves in Europe as a frontrunner and a helpful ally where we can on sanctions, on the humanitarian field, the military field, as well as the reconstruction of Ukraine. So let me be clear I’m making a carveout.

But more—in broader terms, when we want to speak cooperation in the Netherlands, we like to emphasize the concept of open strategic autonomy. I am aware that in France one speaks of strategic autonomy; the Netherlands and Spain have put forward a paper that speaks to open strategic autonomy. One could argue that the differences may be semantic, but open for us actually likes to reflect the importance we continue attach to being an open economy, to being an open society; that we see our security also strengthened through an investment in shared prosperity, in working collaborative partnerships with whom this is possible in order to prevent further fragmentation. And in an ideal world, extended cooperation of this kind is governed still by multilateral rules and it takes place in a spirit of cooperation. And the WTO still has a key role to fulfill in this regard, and reinstating the WTO’s dispute settlement mechanism to us remains crucial.

But multilateral cooperation—and I’m certainly not naïve here—is not always equally effective when the world is changing, countries are shifting [gears], and alliances are changing. So it’s no surprise that we see a trend towards plurilateral cooperation between different parts of the world and different, shifting alliances dependent on the interest at stake. This is, however, a second-best choice. And in times of geoeconomic fragmentation, it’s sometimes the only route left open to us. When multilateral cooperation is actually mired in difficulty, other forms of cooperation—one has to be pragmatic—remain vital, may be needed, and can be useful to advance a return towards the formal multilateral forum such as the WTO or others.

And the EU is making efforts and progress in this regard. The work taking place in the Technology and Trade Council and the 2019 trade and investment agreement with Japan are two very practical examples of this approach. Meanwhile, negotiations are also ongoing with other countries, including Chile and Australia. And EU expansion/enlargement is also an example of new engagements and a changing approach to partnerships.

And the benefits of these partnerships are multiple—diversification, allowing for external shocks to be absorbed. Diversification is also a way to actually reduce high-risk dependencies compared to industrial policies such as onshoring. And just look at the crucial role played by international actors—of course, the US—in supplying gas to the EU. There are different ways to tackle problems that we’ve encountered.

Now, the benefits of open geoeconomic measures and building broader cooperation are obvious, but talk is easy, as many of you know. And I’m looking particularly to the practitioner. The gap between our talk and reality can sometimes be quite, quite tough. And whilst we acknowledge the world has changed, we also need to affirm our role in it and the instruments we find optimal in advancing and strengthening the role of liberal societies, liberal democracies, and our place in the world.

So that means cooperation cannot only focus on the usual suspects, our closest allies. We also need to find ways in tackling and changing and building new partnerships or [relationships] with countries with whom we find it much harder and with whom we often do not have much in common, but still a shared agenda of peace, security, poverty reduction, sustainability. And I would like to urge all of us to look at different and different-shaded cooperative ventures in the public and private sectors with third countries that have an outward-looking stance and have a shared interest still in rule-based trading order, because countries that can offer mutual gains and prosperity—and for us as an EU—the Netherlands as an EU member can serve as a reliable partner.

And in saying this, we consider a new approach to the Global South essential. And I know the EU president, Ursula von der Leyen, has also spoken to this. This, too, is a part of an effective new geoeconomic policy, but one that is open as opposed to only defensive, and which offers more advantages than disadvantages. In this complex world, I think it’s upon us with the tools, the instruments, and the experience to not always change track, but certainly offer greater diversity in our solutions. That’s the only way we can [be] effective. We have the means, and we certainly still have the funding and the financing to be an effective counterpart in this multipolar world.

Thank you.

FREDERICK KEMPE: That was an important statement. Thank you so much.

So, Madam Deputy Prime Minister, Madam Minister, let me start. There’s so much richness in your speech on Russia cannot win, the importance of Western decline—relative decline that we’re talking about issues, the geoeconomic awakening of the EU. I want to come back to that. Geoeconomic fragmentation, really taking a look at a quite different world that we’re going into. We’ve got—we’ve got ten, fifteen minutes, I think, that the organizers have given us. So let me ask a couple of questions, and I hope we get to the audience.

Let me start with sanctions. And the first panel talked about this a lot too. Putin’s still there.

SIGRID KAAG: Yeah.

FREDERICK KEMPE: The Russian economy doesn’t seem to be doing all that badly. His engagement and the nature of his war hasn’t been influenced by sanctions. So there are dangers to sanctions, as you said, there’s upsides to sanctions. How is—what grade would you give these so far? How have they worked?

SIGRID KAAG: Hmm. Well, I think they have had a significant effect on the Russian economy. There is a decline—a sharp decline in consumer spending—despite of what the Russians tell us, of course but based on other sources—rising inflation and declining production in the arms industry. Sanctions are always a matter of—and I’m looking to the ambassador, the former coordinator—of having the long haul. If anybody believes that in imposing sanctions that a dictator or an aggressor will immediately say, oh, that’s right. I’ve seen it now. I’ve seen the light, I give in. No, that’s never happened. The history of sanctions is one of long term, sadly.

So I think sometimes we need to communicate effectively that we will not relent, we will always find new packages, more sharper and so-called smarter sanctions to target and effectively a halt as quickly as possible all instruments of warfare, money being an important factor. But had we expected an immediate overturn? No. And I think that’s upon us to explain that better. But we have evidence that the eleven sanctions packages that have been introduced so far have worked and are working.

The question is to maintain and sustain the pace and always look for the loopholes to avoid sanctions diversion. That requires particular work by the EU. And we’re working on that. And it means—it requires ministries of finance to be particularly accurate, to find which ways the Russian economy is still finding their financial avenues. Of course, we also need to look at other big players. I mean, the whole point of crypto and diversion is a big risk. How is the war effort still sustained? How do we deal with other international players that are directly or indirectly enabling the war effort? Those are the political questions to tackle alongside the maintenance and sustenance of sanctions.

FREDERICK KEMPE: So you would be in favor of, as one says, tightening the screws at this point even further? Would you do more sanctions? Would you do secondary sanctions? What do you think we should be looking to next?

SIGRID KAAG: Well, in terms of a principled stance, the Netherlands is always willing to explore additional sanctions. One needs to be mindful of the fact that we need to introduce measures that can either work, have a primary, or secondary effect. I’m not in the latest inner workings of the discussion of what we’re discussing in Brussels today. I can’t do that. We only pronounce them once they’re adopted. But we—our stance is that we should not leave any avenue unexplored. And that’s alongside the discussion if we can use the Russian frozen assets, under which conditions legally is viable to use the frozen assets, to assist in the reconstruction of Ukraine.

FREDERICK KEMPE: Most of which are held in Europe.

SIGRID KAAG: Most of which are held in Europe. Certainly the state-held –

FREDERICK KEMPE: I was just talking to the deputy prime minister of Canada, Chrystia Freeland. They hold about five billion [dollars], and they’re willing to do it. But of course, that’s not three hundred billion [dollars]. And that would make a big difference as we rebuild this.

On the positive measures—those are the coercive measures. On the positive measures, are we doing well enough on the coercive measures? To a certain extent you’re saying, yes, but we should do more. On the positive measures, let me link these together with your comments about the geoeconomic awakening of the EU, and plurilateralism, geoeconomic fragmentation, somehow that seems to all fit together.

And, you know, we have implemented our Inflation Reduction Act. That seems like a piece of fragmentation. You have to tell me if you agree it is. The EU has got an answer to that. I don’t know if it will work as quite as well, but it’s very interesting. So as you’re looking at the positive measures, particularly transatlantic positive measures, give us your situation report. How well are we doing or how poorly are we doing? And particularly in the context of trade, and the fragmentation you’re talking about, and the IRA and the European equivalent?

SIGRID KAAG: Yeah. Well, I think as a matter of principle, as strong allies from a transatlantic perspective, the EU, but of course also in NATO, we should always be mindful the fact that any measures we adopt, certainly from an EU perspective, doesn’t run counter the broader geopolitical interests we have, our shared values. I found that the EU was not the response to the IRA. I think a follow-up to the IRA I would call the EU actions taken. Should not be seen as a defensive posture to the US. The US has leapfrogged. I think it’s beneficial to tackle climate change. It aids the American economy. And actually, I’ve always looked at it as something where we shouldn’t say, oh, look at the Americas, they’re doing this. No. We should be getting our own act together. We should position ourselves in a way that we can be both complementary. And we’re using different instruments.

The difficulty if you compare the systems, separate from a few areas that may be sort of not totally in alignment with the WTO, I don’t think that’s the heart of the matter. The Americans—the US government has introduced a system that works via tax credits, which is easy, it’s accessible, that works quickly. And within Europe, we sometimes tend to be sort of slow. And certainly for businesses—despite the volume of financing available—they’re finding it very hard to basically have access to the funding. So we need to get our own house in order, that we’re more agile and more flexible.

That’s not an American problem. I think there’s an inter-European problem. So I don’t think that actually results in further fragmentation. It’s how we use it and how we sort of position ourselves. So I don’t think the battle is not EU-US. The issue is really are we fit for purpose to go and build this new economy, that is green, that is inclusive, and that creates jobs for the future, and that assists our companies to be competitive? We both have free market economies. And we should sustain that. And competition is healthy. One shouldn’t be daunted by it. And an overdue rate of state subsidies is not helping our economy.

FREDERICK KEMPE: So I’m going to ask one more question, then I’m going to look to the audience… But I want you to define and tell me what you’re thinking about when you talk about the EU’s geoeconomic awakening. That was a really interesting term for me, and a new term for me. So what is—what is the awakening about it, and how would you describe it?

SIGRID KAAG: Well, I think—in in political practitioners terms I would say it, because I’m not the political scientist here, I think it’s an awakening of the fact that we always thought we were—we work towards the internal market. Then we’ve been very preoccupied with accession and enlargement, but it’s always EU-centered. When I worked outside, I’ve worked a lot in the Middle East and so-called fragile states. I was—I always encountered an EU that was busy with the market and with trade, but didn’t spread its political wings. And many countries and players look towards the EU—and I don’t want to quote Henry Kissinger, but you know what I mean—to say, who do we deal with, when do we deal with them? And it’s not really happening.

And the latest phase, perhaps also further accelerated and triggered by a war on the continent, has shown that the EU needs to not only get his house in order, use the instruments it has, has but it needs to assert itself on the international stage. And you can use instruments in a way that advances that position, but in a collaborative way with its partners. And our strength is not the military, because that is derived from NATO, the alliance, and the Americans being the leader of NATO. We need to get our house in order when it comes to defense expenditure, but we also need to get our house in order when it comes to the political decision making. Abolishment, for instance, of the vetoes on EU foreign policy would be, like, the big first ticket item. But geoeconomics is a source of our strength. Trade agreements, offering support, offering access to our markets, building capacity. It’s soft –

FREDERICK KEMPE: And regulatory standards too, yeah.

SIGRID KAAG: And regulatory standards, yeah. You know, that’s where we come to little wood pellets, for instance, for the US. But regulatory standards. There are many ways. And I think the foreign direct investment screening, that’s new to us. I couldn’t have imagined that perhaps ten years ago. When it comes to outward bound screening, outward bound investment screening, that’s under discussion. The fact that we have the global gateway when it comes to building partnerships with countries with whom we do not have a trade agreement but we want to have some form of economic exchange or interest. And so you build elements of a potential partnership.

So all these areas, I think, are bolstering the presence of the European Union, even though we are twenty-seven member states, different backgrounds, different political systems. But bolstering the presence. And geoeconomics in a world where it’s more about those areas of influence and wealth that can be leveraged and/or peacefully weaponized, that’s an area, I think, that is new. But we need to build on that.

FREDERICK KEMPE: Yeah. No, I note, when I was—also, when I was running the Wall Street Journal in Europe, we introduced the term into the lexicon of the EU as a superpower regulator. But now it’s gone way beyond that, to using economic elsewhere.

So I’m looking for questions, please. Norbert, and then why don’t we pick up these two questions and then—and the microphone here in the front. And not everyone knows who everybody is, so please introduce yourself to the audience as well.

NORTBERT RÖTTGEN: No, it’s on. My name is Norbert Röttgen. I’m the vice chairman of Atlantik-Brucke and a member of the German parliament.

I have a question on Russian gas. As you know, so far no gas sanctions have been—no European sanctions on Russian gas have been imposed. Russian gas is not entering Europe via pipelines. The one has been destroyed, the other not completed. But Europe has become the relatively largest consumer of Russian gas, nevertheless, because it is shipped now as LNG to European ports, then regassified, and then transferred and sent across Europe. So we are filling with billions of dollars yearly—annually the war chest of Vladimir Putin. Is your view on that, that he should stop this as Europeans?

SIGRID KAAG: That’s a tough one. I was worried that you were going to ask me about North Stream, the pipeline. Well, to be honest, I’m not sure if we have—if we have adopted a position in the Dutch Cabinet. So I want to be mindful that I’m not sort of expressing myself in advance of a government position. I think it is the right question to ask, because we cannot be naïve or suggest that we stopped using gas.

The Netherlands was one of the first ones to be out of Russian gas, and we even had a debate with our municipalities that had contracts with Gazprom, and we tried to sanction them. Actually, it didn’t hold up in front of the courts. But the real question is, indeed, are we indirectly enabling diversion? It comes in through different ways, but it still ends up in the Russian coffers. I think that’s a debate to have in Brussels. So I’m taking your question forward. I also want to know from my colleague.

The other question, of course, is—and you come to the point of mutual dependencies—can we afford it? And I don’t mean financially. How significant is our dependency? You may know the—you may know the answer, but I take forward your question.

FREDERICK KEMPE: OK, please.

MARTIN MÜHLEISEN: My name is Martin Mühleisen, ex-IMF and now with the Atlantic Council [as a] senior fellow.

You mentioned the long-term impact of sanctions. And indeed, keeping the pressure up on Russia for hopefully not too many years, but many years, will be necessary to see this conflict come to a successful conclusion, from the European and US perspective. But there’s also significant pressures on the other side in keeping that coalition together. There’s the military expenditure, you mentioned climate costs, very tight fiscal positions everywhere, relatively high inflation, rising interest rates, that—plus, I think tremendous political difficulties coming over the coming years, too. There are important elections in the US. There are elections also in Europe with forces that are more Russia-friendly than many of us in this room would like to see possibly gaining votes. So how do you see the long-term capacity of Europe, of European countries, the EU, and also our transatlantic partners to maintain that position and to see this conflict through to a successful conclusion?

FREDERICK KEMPE: And I guess I’d add to that. With your own elections in November, will they—how do you see the impact of them on this as well?

SIGRID KAAG: Yeah.

FREDERICK KEMPE: Yeah.

SIGRID KAAG: Well, first of all, it depends, really, on our ability to continue to foster economic growth in the eurozone. That’s extremely important. Now, I know in Germany it hasn’t been so fantastic, let’s say, in recent periods. We still have very modest growth, but it’s nothing to write home about. So that is sort of the underpinning.

Secondly, a lot of countries, including my own country, we have spent significantly and generously last year to deal with historic inflation rates and provide for purchasing power packages for consumers, for our citizens. However, we’ve done it in such a large measure it’s not sustainable over time.

And that brings me to the need to have the proper fiscal reforms. You know, we need to start living—post-corona, post-2022—the economic hit—we need to start living within our own means again. And that’s where the crunch comes, that a lot of citizens have gotten used to generous compensation by the state. Now we’ve reached the time where we can no longer afford it, economic uncertainty has crept in. So we need to start taking tougher choices—either raise taxes, not always very popular, or cut costs; either one of the two. So this is, I think, a potential Achilles’ heel.

On top of that, in a number of European countries new governments have been elected with populist voices either supporting it or being within the government. And they often feed the idea—we hear it, too, in our Dutch parliament—as if there’s a false choice, false contradiction between support and the cost of financing the courageous war effort led by the Ukrainians against the Russian invasion militarily and at a humanitarian level and the need to keep up the financing of the state of Ukraine to assist in that way, and the cost of living, the debate we’re having domestically. It’s a false narrative. If we lose the war in Ukraine, we’re all lost. No peace and security on this continent. This is something we have to keep financing. And I think we need continued courageous political leadership from mainstream political parties, right or left on the spectrum, to keep bringing home this message. It’s not free of charge, so it requires also prudent fiscal choices domestically, which are not always very popular but necessary with a long-term view.

So how I see it? I’m not entirely optimistic, certainly if I look at elections in a number of countries. I was the former party leader of a progressive liberal party. We’re not doing fantastically in the polls, euphemistically put. But you shouldn’t be scared or polls or polling to be—to say the right thing and to stand for what is right, and I think that’s what matters right now.

FREDERICK KEMPE: That’s terrific.

Well, I fear we’ve run out of time, but what a rich conversation this has been. And you’ve put a lot of terms/thinking on the table that I think we’ll continue talking about as we go forward. And I hope we’ll pick up on this conversation on plurilateralism.

SIGRID KAAG: Yeah.

FREDERICK KEMPE: I wrote something last week saying the time of multi-alignment—the time of non-alignment is over; it’s now multi-alignment.

SIGRID KAAG: That’s correct.

FREDERICK KEMPE: And people don’t want to choose sides, China or the US, particularly in the Global South. And so I think this is going to be a confusing shakeout period. That seems to be what you were saying there. Is that right?

SIGRID KAAG: I think so, but also I think we have to be fairly pragmatic. When I was minister for trade in the previous Rutte government, I was actually—although being a staunch multilateralist, I believe that working in a plurilateral way towards, hopefully, multilateral-endorsed outcomes is a way moving forward and not giving up on the system, and not also becoming a passive bystander of an erosion of what are internationally agreed rules and values and standards. We have to sort of breathe new life and perspective into the system. You do not have to continuously reform the system; you have to make it work in a different way.

And I think there plurilateralism can be a way to continue to engage and to bring different players into the system, because there is no such thing as one bloc and one bloc. Not everybody from the Global South agrees on every topic with each other. There are also varied and different-shaded interests, same as we have them in the EU, let’s face it. But we’re still members of the EU.

FREDERICK KEMPE: Thank you.

SIGRID KAAG: And proudly so.

FREDERICK KEMPE: Thank you. Thank you for making the trip to Berlin this morning. And I’d ask the audience to join me in thanking the first deputy prime minister and minister of finance of the Netherlands.

SIGRID KAAG: Thank you.

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Further reading

Related Experts: Frederick Kempe

Image: Sigrid Kaag speaks at the Transatlantic Forum on GeoEconomics in Berlin on September 22, 2023.