I European economic data continues to be uneventful – household savings rates this week for Q3 2025 came down a bit, but remains at over 15 percent well above historical pre-Covid/Ukraine War averages, while GDP growth remains at or near potential, inflation remains essentially at the ECB headline target, unemployment at historical lows, and aggregate EU and EA government debt levels stable. The next interesting scheduled European election in Hungary is meanwhile only in mid-April, so once again the key issues to focus on in Europe this week are geopolitical in nature. With fighting between Russia and Ukraine intense, but stationary, the natural focus is on recent events in Greenland and Iran.
Concerning Greenland, this week saw the commencement of direct high-level talks between the governments of Denmark and Greenland and the Trump Administration, as foreign ministers met in Washington, hosted by Vice President Vance. According to the Danish foreign minister, it was agreed to establish a “high-level working group” to explore ways to accommodate the national security and commercial (e.g. critical minerals) concerns expressed by President Trump, while there has been no comments made by either Secretary Rubio or Vice President Vance concerning the outcome of the meeting. The White House subsequently stated that the working group would be discussing the sale of Greenland to the United States, which the Danes denied.
As such, it remains disputed that was agreed at the meeting, though the working group looks likely to meet in the next couple of weeks. Combined with Jeff Landry, Trump’s Special Envoy for Greenland, stating that he plans to visit Greenland only in March, it hence seems clear that the timeframe for further direct diplomacy between the Trump Administration and the Danes/Greenlanders are measured in weeks if not months. This will please the Danes/Greenlanders, as they will want to run down the clock on the issue until at least the end of the Republican Primary Season in the late Spring, assuming President Trump’s sway of his party in Congress will then weaken.
Diplomatic efforts also involve Congress, though it is unlikely that any votes to explicitly restrict President Trump’s freedom of action are imminent, with many GOP members seemingly reserving their willingness to explicitly politically cross their President to only the emergency of an actual about to start US military action in Greenland. In that situation, it remains the strong base case that veto proof majorities to outlaw such action by the President would quickly be found. Congressional Republicans will meanwhile hope their political signaling are caught by the White House, and that the President reads the polls about how generally unpopular the idea of military action in Greenland is among the American electorate in a mid-term election year. Only a rash and rushed decision by President Trump could hence see such U.S. military action taken, in which case a constitutional crisis would likely unfold.
Simultaneously with the diplomacy, a small group of military officers from a number of European NATO countries have now arrived in Greenland, laying the groundwork for potential military training exercises, other operations and supporting the initial planning process. The very small number of such troops – a few dozen in total – should hence not be mistaken for a lack of action, merely that the planning has begun for larger groups of troops to arrive. This action constitutes a “dual use deployment”, at once signaling to Donald Trump that his concerns about Arctic national security is actually being addressed by NATO, but also constituting a “tripwire force” that any U.S. invasion forces would have to (and easily be able to) overcome to seize Greenland by force. The deployment hence offers Donald Trump a “political win”, as he, like he has done with rising NATO defense spending, can claim he made NATO do what he wanted in the Arctic. But it also robs him of the “easy military win” in Greenland, as any invading U.S. force would have to fight and likely kill European troops in the process. This in turn would unleash potentially devastating economic, political and financial consequences for both sides of the Atlantic.
Regarding to option to buy Greenland, Greenlanders this week in Washington made it clear to the Trump Administration that they are not for sale at any price, and there does not appear to be any Congressional desire to consider appropriating such funds. These developments essentially eliminates this possible outcome.
In sum, the strong base care remains for a deescalated outcome with the “working group process” simply continuing its bureaucratic non-threatening and futile work until Donald Trump loses interest or realizes that he cannot politically proceed. Or that an agreement is reached with the Trump Administration, agreeing to see NATO address Donald Trump’s national security concerns in Greenland and facilitate the commercial access of interested U.S. businesses to Greenland. The admittedly disastrous tail scenario of Trump unleashing a military operation against Greenland and likely very large Congressional majorities remain only a very very low probability. U.S. defense firms will though likely already have lost future business opportunities (and European ones gained) among European NATO governments, as Trump’s explicit threats against a once close ally will not be forgotten.
II In Iran, no U.S. military strike in the end materialized this week, an outcome likely attributable to at least three issues. First, the U.S. did not have adequate military assets in the Gulf region to both strike Iran and effectively protect its Gulf allies (and even Israel) against possible Iranian retaliation, leading these countries to oppose such strikes for their own security. Secondly, the Iranian regime appears to both having brutally brought demonstrations to a lower level, and to have offered Trump a “de-escalatory option” by seemingly stopping public executions, allowing Trump to claim credit for this outcome. Neither of these two options, however, offer much insight into what happens next. It would not be hard for the U.S. to, over the next week or so, bring a lot more naval assets to the Gulf region (this though would be verifiable and hence reported). It could also easily be that new videos of executions in Iran suddenly emerges, reigniting Trump’s anger.
The third likely reason for why there was no strike is on the other hand likely to linger, as striking Iran offers Trump no options for his desired strategy when deploying the U.S. military, namely the “quick win”. The Iranian regime remains resilient with a core of ideologically committed and economically self-interested actors centered in the IRGC and Basij movement evidently willing to use extreme violence to sustain their rule. These groups can likely also rely on at least some public support among the most religious segments of the population. Launching even a large single strike on Iran is hence not likely to dramatically weaken the regime, and even if it did there is no coordinated opposition in Iran, making chaos in Iran the likely outcome. This being precisely the outcome U.S. allies in the regions most dislike.
It is possible that the Trump Administration will use the current turmoil to launch a new set of “nuclear negotiations” with Iran, though such new negotiations would have to address all U.S. concerns to be worth it. Steve Witkoff has already said any new diplomatic agreement with Iran would address four issues: 1) end nuclear enrichment, (2) ballistic missiles — they have to cut back on their inventory; (3) the actual [nuclear] material that they have, which is roughly 2000 kilograms enriched anywhere between 3.67 percent and 60% would have to be given over to international monitors; and (4) Iran must end all support to its regional proxies. These are not conditions the Iranian regime are likely to want to engage on, though the arrival of ever more U.S. military assets to the region in the near future might coerce it.
The accelerating economic crisis in Iran and the evident illegitimacy of its regime among most Iranians make it only a matter of time before new major uprisings occur, but it is not clear that the Trump Administration will want to make the success of such uprisings a strategic goal for the United Stated deserving of direct U.S. military support now or in the future. On the other hand, the decisionmaker here is Donald Trump, usually not constrained by strategic considerations or a desire for policy coherence when making decisions. I therefore right now have no clear call – though if pushed would lean against it – on whether military strikes remain likely in the coming weeks. I am instead watching for signs of any U.S. military build-up in the Gulf region, and for suddenly circulating new and gruesome footage coming out of Iran and being brought to Donald Trump’s attention. Both would point to a rising risk of new military action.
Jacob
