From Switzerland to the World: How Europe Seeks Strategic Autonomy
Dr. Thomas Borers speech for AXA Investment Managers – Tuesday, 4 November 2025, Hotel Widder, Zurich
I. Introduction and Situation
Ladies and Gentlemen,
As a young man, I experienced the collapse of the Berlin Wall and the rise of globalization.
Eternal peace – at least in Europe – seemed guaranteed. And globalization promised eternal prosperity. The political and economic situation of the world looked as if it was only going upward.
Then came Russia’s attack on Ukraine in 2022, which violated international law and sent shockwaves through Europe.
Now in 2025, the free trade system was replaced by industrial policy, driven primarily by President Trump.
In addition, the long-standing rivalry between the US and China intensified. President Xi steered China increasingly in an aggressive direction and exploited the war in Ukraine to his advantage.
And Europe is right in the middle of all of these geopolitical upheavals.
If the last few years have taught European business anything, it’s that “geopolitics” are no longer just something on the evening news. They have become part of our daily business reality.
The old global system, built after World War II to promote peace through cooperation and trade, no longer fits today’s world. Now, we’re dealing with protectionism, tech rivalries, and opaque algorithms. Trust is breaking down at the highest levels. It’s no longer about shared values, but about power, control, and who comes out on top.
This matters because our dependencies are now used as leverage. The examples are clear: Russia turned off the gas in 2022; China halts supply of rare earths. Even smaller players can hurt us. Iranian-backed Houthis disrupted shipping lanes in the Red Sea.
The result? Europe is vulnerable.
Moreover, the EU may be an economic giant in terms of numbers, but it is a military and technological dwarf.
In the Ukraine war, the EU learnt a hard lesson: Military power still decides the game. Moral or ethical aspects play a minor role. The EU used strong language but couldn’t really put Russia in its place with actions.
It still relies on its big brother, the US and ever since Trump took office, that support comes with a price tag. Reliance on Russian gas, U.S. tech giants, and Asian supply chains revealed Europe’s limited control over its own destiny.
As a result, countries and companies are increasingly striving for reduced dependencies. Their aim is to obtain strategic autonomy. And how did the EU react to this challenge? In the way Brussels does best: with a 300-page report and a new slogan: “open strategic autonomy.”
What does that mean?
The European Commission’s 2021 Trade Policy Review explains it as cooperating multilaterally “wherever we can” and acting autonomously “wherever we must.”
In practice, this is Von der Leyen’s “de-risk, not decouple” approach.
In other words: Keep trading where possible but avoid dangerous dependencies.
The Challenge for Europe is therefore: Europe’s soft power, our ability to persuade, to set rules, to attract others, must translate into hard power: real strength, real capacity, real resilience, military and technological power.
Strategic autonomy means Europe needs the ability to act independently economically, technologically, and militarily.
II. What Europe is Doing
So how is Europe trying to build this so-called strategic autonomy?
The playbook is simple: more public money and more central control for Brussels. A lot of programmes to fund them all, and several committees to manage them.
One of the main challenges lies in the energy sector. Europe needs new energy sources; how else can it meet the constantly and rapidly growing demand for electricity?
Brussel founded the Connecting Europe Facility for Energy to finance big cross border energy projects and endowed it with a budget of 5.8 billion Euros for studies and works.
The open question is: will EU countries follow the German system – only green alternative energies – or the French system, which relies heavily on nuclear power?
For once, I really hope that Paris will prevail, otherwise, the EU will be deindustrialized.
Then there’s the EU Chips Act, and despite the EU agricultural lobby – no, potato subsidies won’t help this time.
Europe needs to catch up in the semiconductor race. It’s about scaling Research and Development, building mega-factories, training talent, and yes, bending state-aid rules just enough to stay competitive. Backed by 3.3 billion Euros from the EU budget, the goal is bold: 20% of global chip production by 2030.
Success in this area is much needed because the EU countries are now technological nobodies. The US is far ahead. Apple, Nvidia, Microsoft, Google, Amazon you name it.
The EU invests 59 billion annually in agriculture and only a couple of billions in research. No wonder, the best technological universities in Europe are in Switzerland – ETH and EPFL in Lausanne, not in EU countries.
While others are racing ahead with AI and quantum chips, Brussels’ big innovation seems to be making sure our plastic bottle caps don’t get lost.
Another important area of EU activity to become more autonomous is the defence industry. Here the EU established the European Defence Fund (EDF). The budget is about 7.3 billion Euros. The aim is simple: build key systems together.
I call it the ‘don’t-build-this-27-times’ fund. It is well known that EU countries already spend large sums on defence, but each country has its own defence system.
For example, Germany has the Leopard 2 tank, France the Leclerc, Poland the Black Panther, Italy the Ariete. It is obvious that this makes little sense economically and militarily.
Therefore, the new fund will pay for joint R&D and early prototypes. It is about plugging gaps exposed in recent conflicts with less duplication and more interoperability. It is basically NATO IKEA: same screwdrivers for everyone, less swearing in combat.
All of this has one thing in common: Brussels makes the lists, writes the templates, and uses EU money to push countries toward the same priorities.
That matches the Draghi 2024 recommendations: fix productivity and security with big, coordinated public spending and EU-wide tools.
The intent is good, and some parts make sense on their own. The question is: Is it the right way to fix the EU’s problems?
III. The Issues with Today’s Strategic Autonomy Politics
The tools of Trump and the EU down the road have a similar result. A tariff raises the price at the border. A subsidy, the EU’s favourite tool, raises the price through taxes.
Either way, someone pays more.
Think of it this way: A tariff is a cover charge, and a subsidy is buying everyone’s drinks. Either way, it’s an expensive night. Consumers pay for tariffs; taxpayers pay for subsidies. The bill just shows up in a different place.
In the end, trade law treats both as distortions. The WTO calls out subsidies as well. The IMF and OECD warn they are costly, distort markets and invite retaliation. Therefore, they function similar to tariffs.
So, the question is simple: How is the EU any less protectionist than American tariffs?
If “de-risk, not decouple” is going to mean anything, we need a real de-risking program, not a different protectionism.
The second problem is that these subsidies are unlikely to be temporary. As Milton Friedman wrote in Tyranny of the Status Quo, “Nothing is so permanent as a temporary government program.” This will likely only worsen the productivity gap that Draghi and EU lawmakers are trying to fix. Economists call this “Eurosclerosis.”
Herbert Giersch (1985) used this term to describe Europe’s rigid institutions that slow growth and raise unemployment even when the global economy is strong.
EU leaders are right to want stronger economic and strategic competitiveness. But doing more of the same big-government intervention is not reform; it is doubling down on an ineffective policy.
American policy may have shot us in the foot; we don’t fix it by shooting the other foot ourselves.
IV. The Swiss Alternative: Strategic Resilience
Comparing Switzerland to the EU, I believe that some lessons can be learned from our success and strategic resilience. If Europe wants basic independence without hurting long-term health, Switzerland is one of the models to follow.
Switzerland puts private hands on the wrench; we do not spend so much public money to be productive. Switzerland’s diversification, innovation, and global trade connections show how a nation can remain globally competitive, even with major headwinds.
We have strategic resilience built not on big government programmes, but on relatively lean rules, direct democracy, subsidiarity and Free Trade Agreements. Let me specify:
The first part of this is subsidiarity. This contrasts with the French approach of centralism, which characterizes the EU, and we can see that centralism is currently failing.
Together with direct democracy, federalism is Switzerland’s strongest weapon. Local solutions to local problems are often better than a one-size-fits all approach.
Another part is fiscal policy. Switzerland uses a tight fiscal rule, the “debt brake.” It caps spending at trend revenue. This keeps the state relatively lean and limits crowding-out, instead of leaning on the kind of mega-programs the EU uses.
The Swiss have a debt brake; the EU has a spending accelerator and many steering committees.
The third part is innovation. In Switzerland, two-thirds of R&D is funded by business itself. That’s why we are leaders in patents per capita. The state does not drive this actively but instead focuses on framework conditions. Even the European Court of Auditors warns the Chips Act is unlikely to hit its goals because funding is fragmented and under-coordinated.
If we must “pick winners”, let’s pick the ones who can pass a competition test in the free market.
Hand in hand with strong innovation driven by the private sector goes the education system that is otherwise only known in Germany: the apprenticeship system.
Another factor is Switzerland’s much better developed free trade system, compared to the EU. The Swiss foreign trade policy has established partnerships with countries like China, India, Indonesia and Latin America. We currently have a broad network of 33 free trade agreements (FTAs). The EU has to step up her efforts in this area. I would argue that it is possible to enter into thematic alliances or “mini-deals” with some countries below the level of an FTA – e.g., with regard to the supply of critical raw materials, supply chains, the removal of technological barriers to trade, or quantum technology.
Last, but not least, Switzerland has a relatively lean state: The EU however remains an economic giant with a bureaucratic heavy hand. It provides reliable rules, but it also produces a flood of regulations that overwhelm smaller companies in particular.
More than half of SMEs in Europe cite regulation as their main problem. The burden is enormous. In Germany, compliance costs amount to 65 billion euros annually, with an additional 146 billion euros in potential lost due to overregulation.
But now you might ask: Does Switzerland also have weaknesses?
Of course, many; we make similar mistakes as our neighbors, fortunately somewhat more slowly, which is why we are still in a better position. For example, our government is also growing, and the public spending ratio is rising.
Or coming back to defence: We have criminally neglected our army and will have to pump billions into rearmament over the next few years.
And, of course, we are economically and strategically heavily dependent on the EU.
Around 60 percent of our total trade in goods is with the EU. That’s around 300 billion Swiss francs.
More than half of our exports go to Europe and over 70 percent of our imports come from there. What many people don’t know is that the EU has a trade surplus with Switzerland of 20 billion. As a buyer of EU goods, we are almost as big as China!
None of this means Switzerland is perfect. But overall, our model of resilience works better.
According to the International Labour Organisation, Switzerland’s labour productivity is about 85 Dollars per hour (2024), while the EU average ranks significantly lower at 71 Dollars per hour (at purchasing power parity).
Ultimately, Switzerland sets the example for Europe because we are one of the most successful European countries.
V. Concluding Remarks
Let me close with this. Excessive state intervention has never been the answer. It is great as a life jacket, terrible as a boat facing the rough seas we have ahead.
If Europe meets this moment with any success, it will not be due to directives or committees; it will be due to innovation, investment, and ingenuity amongst the very kind of people here today. European talent does not need to be commanded or bureaucratised; it needs to be unleashed; it needs freedom.
This matters for investors beyond theory. The winners of tomorrow are companies that build resilience into how they work. They keep critical stock on hand. They fund their own R&D. They train talent through on-the-job programs. They win contracts on price and performance, not on politics.
Business models that rely on changing government subsidies risk to collapse the moment the subsidy ends. Which is why too many factories end up running on Europe’s newest renewable: hope and press releases.
If Europe wants productivity like Switzerland’s, it needs a similar approach. As investors and owners, you can act now: value companies as if subsidies could disappear any day, reward operational discipline, and push for clear, stable rules that attract private capital. Real strategic resilience is not “make everything at home.” It is “make Europe the best home for globally competitive firms.” That is how resilience grows year after year.
Prophets repeatedly predict the downfall of the EU.
I believe in the tremendous power of liberalism, democracy, human rights, and the rule of law. It is really quite simple: People ultimately decide with their feet. This is clearly reflected in global migration patterns: millions aspire to move to Europe or the United States.
By contrast, neither China nor Russia are experiencing comparable waves of inbound migration. Trump might be right in at least in this. However, in my opinion democracy is superior to autocracy. The people themselves can govern a state better than a single strong man.
I hope that Europe becomes aware of its values and once again makes them the standard for its actions. It may sound lofty, but history has shown that the European ideals of freedom, equality, and human dignity have the power to overthrow dictators.
For once I agree with President Emmanuel Macron:
“Europe is not just a market. It is a civilization with values, with a soul, and with a future to build.”
Thank you