From Crisis to Command

How Europe Can Lead in a World Unmoored by American Instability

In his July 14, 2025 article “Is America Breaking the Global Economy?” published in Foreign Affairs, economist Mohamed A. El-Erian delivers a stark warning about the fragility of the global economic system. El-Erian, Chair of Gramercy Funds Management and former CEO of PIMCO—a leading fixed-income investment firm owned by Allianz, where he helped shape asset strategies that continue to influence global insurers and reinsurers—describes a world shaken by the United States’ policy volatility, where long-standing assumptions about American leadership in trade, finance, and innovation are rapidly eroding. The implications for Europe are profound, and the continent now faces a critical choice: reform to build resilience or risk being swept aside by the tides of uncertainty.

El-Erian outlines two diverging scenarios for the United States, each with global consequences. In the optimistic vision, the U.S. undergoes a Reagan-Thatcher-style restructuring, emerging with a leaner government, fairer trade practices, and a revitalized private sector. This would entail a reset not only of the domestic economic order but of the global one, with the U.S. continuing to lead in innovation and productivity. In the pessimistic scenario, however, the U.S. slides into stagflation and recession, reminiscent of the 1970s, with eroding institutional trust, rising deficits, and diminished global influence. The ripple effects of such a downturn would be felt worldwide, with Europe particularly exposed.