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This transcript has been generated using machine learning technology. While this technology was trained with CIBC terminology, it may contain errors.
Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I&#8217;m your host Lisa Raitt and in this podcast I&#8217;m going to share insights on current hot topics in the areas of public policy, politics and business, with some guests along the way. Welcome back to The Raitt Stuff. Today I have somebody with me that I work with every single day and I know she&#8217;s well versed and knows what it&#8217;s like to work in the heart of Europe with many of the key players that we&#8217;re talking about. Well, in Canada, she&#8217;s worked in the oil and gas industry and also in clean tech sectors. She has spent most of her career in the UK. She worked as a senior bureaucrat in the administrations of Tony Blair, who was a Labour Prime Minister, and Gordon Brown, who was again a Labour Prime Minister, but also David Cameron, who was a Conservative Prime Minister. With me today is Amber Batool, who is an Executive Director of Capital Markets here at CIBC. Also of interest is Amber was a speechwriter at the UK Treasury during the time of the Great Recession between 2008 and 2009. She also got to serve other ministers and was the Chief of Staff to a number of them. But the biggest one that impressed me the most, of course, was that she was part of the Early Transition Team for the Deputy Prime Minister, Nick Clegg. She&#8217;s got a law degree and a postgraduate diploma in law as well. So Amber, welcome to The Raitt Stuff.
Amber Batool: Thank you very much for having me.
Lisa Raitt: Well, I bother you about these questions every single morning when I come in. So I thought it&#8217;d be good to share your answers with the clients because I find them to be very, very useful and helpful as, as we try to give advice across all of our platforms. But let&#8217;s start with the biggest question. President Trump. So President Trump and his new administration are causing shockwaves here in North America, but I assume it&#8217;s happening in Europe as well. So what are you hearing from your contacts in Europe? What&#8217;s going on?
Amber Batool: Well, Lisa, as the song goes, the future ain&#8217;t what it used to be. So 44 days into the new US administration, and we find really extraordinary things are happening in Europe. I think first and foremost, it&#8217;s a complete evaporation of trust between former allies. Defence is the only story in town. And while Ukraine is the catalyst, it&#8217;s long been a sore point in US EU relations. The UK finds itself once again at the heart of Europe. Germany is seeking to bypass its constitutionally hardwired fiscal rules to increase defence spending. Far-right parties are distancing themselves from the Trump administration&#8217;s rhetoric on Ukraine and the French and the British like each other. Okay, I might have been exaggerating on the last one, but really within six weeks, President Trump has changed the transatlantic relationship and from Downing Street to the Élysée Palace to Berlin, there is so much alarm and concern, Lisa. And there&#8217;s a sense that there&#8217;s a collapse of existing kind of global norms and niceties. And as one former European colleague put it to me, it&#8217;s diplomacy by landmine.
Lisa Raitt: Oh my gosh. And you mentioned to me early on that one of the ways in which the diplomacy would work from the UK is that there would be an offer to visit royalty. And that&#8217;s happened.
Amber Batool: Absolutely. So with a great flourish when Keir Starmer was in the Oval Office, he presented a letter from the King to President Trump. It&#8217;s an unprecedented second state visit, which I think everyone knows President Trump enjoyed the first one greatly. And it&#8217;s kind of an example of some of the diplomatic finesse that the UK thinks is needed to deal with this administration. But you never know what happens. So it was received with a great flourish. Great headlines across the world. Everyone thought Lord Mandelson, the new envoy was doing great work. The next day you had the incident in the Oval Office with President Zelenskyy. And there&#8217;s a petition now to have the royal visit revoked. you know, things change so, so fast in this current world.
Lisa Raitt: And as Canadians, should we read anything into the silence that we&#8217;re hearing from the UK in terms of the annexation or the 51st state comments from Trump&#8217;s office?
Amber Batool: I don&#8217;t think so. So the King, you know, he invited Prime Minister Trudeau to come and visit him. They had the visit, they had the pictures. I know Mélanie Joly, the Foreign Minister, was talking yesterday about the need for kinship from the UK and the Commonwealth. It&#8217;s just a really difficult time for the royal family generally to intervene. They want to, they always, you know, and this was a precedent set by the Queen. She was famously neutral, said very little. And I think for King Charles, he&#8217;s obviously being advised by the government, but it&#8217;s a very tricky thing for him to maneuver. But Canada and the UK have always been very close and I think they will continue to be.
Lisa Raitt: So if you&#8217;re sitting in Europe right now, or if you&#8217;re in the UK, what are what do you think are the main threats that they&#8217;re facing?
Amber Batool: Well, I think one of the things that&#8217;s important to know is things were far from perfect six weeks ago, like the European Union, which is, you know, 27 odd countries who are brought together by this common economic social security kind of infrastructure. It&#8217;s been struggling. And as a governing body, it&#8217;s very unwieldy. It moves at an absolutely glacial pace and the process and the progress hasn&#8217;t benefited everyone equally. And you know, the UK famously packed its bags and left in 2020. Europe, I think, has been incredibly complacent in recent years about its security and role in the world, incredibly unhealthy reliance on the US, which as we see now is kind of coming to a head. And so I think they feel they face internal and external threats. And so let me just take the internal ones first. And I think it&#8217;s best to look at these through the kind of lens of security. It&#8217;s about securing borders. It&#8217;s about securing their economy and it&#8217;s about securing their energy. And as I said to you at the start, know, in defence, this is a reckoning that&#8217;s been a long time in the making. Back in 2016, I think it was President Obama told the EU it was too complacent. He urged NATO allies to increase defence spending to the target of 2% of GDP. They&#8217;re sort of doing that now, but in a very unwieldy way. You know, the UK has said it will meet its target, but it&#8217;s cutting its international aid budget. That resulted in the resignation of one of Starmer&#8217;s ministers. Germany, France, others are doing their best to follow, but where this money comes from is going to be really critical, I think, to their domestic populations. On the economy, the 2025 outlook for the euro area is challenging. Obviously, there&#8217;s trade uncertainties and ongoing fiscal tightening. I think the most obvious thing here is to rapidly build up things like ammunition&#8217;s manufacturing capacity, build up its military complex, and give a kind of defence-driven push to the economy. I think that&#8217;s a no regrets option and we saw defence shares jumped after the London Peace Conference on Saturday. They definitely need to bring in more investment infrastructure spending and Germany yesterday announced a 500 billion infrastructure fund. So I think more of that please. And then on energy, of course, they&#8217;ve been dealing with energy crisis triggered by Russia&#8217;s invasion of Ukraine. They managed the loss of Russian gas pipes and supplies, but it came at a really significant cost, especially to the consumer. But I think there&#8217;s case for doubling down on their current strategy to reduce reliance on fossil fuels, increase renewable energy, improve energy efficiency. And the commission is making progress, albeit slowly, on their Green Deal industrial strategy. But I don&#8217;t think they should unravel their support for net zero. And then on the external threats, I think it&#8217;s a combination of threats and opportunities. So you&#8217;ve got this vacuum left by the US. Is it taken up by China, India, Russia? Open question. Turkey is becoming geopolitically ever more significant. You know, it&#8217;s been held at an arm’s length, Lisa, for a long time when it comes to EU membership. And that was kind of hinging on their unwillingness to allow it to have the free movement of workers and people that comes from membership. It&#8217;s an interesting one to watch. And then you have the opportunities. And I think those come from places like Canada, Norway and Australia.
Lisa Raitt: When they&#8217;re thinking about increasing their defence spending, do you think they&#8217;re considering whether or not they&#8217;re going to continue to buy from the United States or are going to look internally?
Amber Batool: I think it&#8217;s going to be hard to decouple themselves from the US, but I think they have to. They have no choice, Lisa, but to increase it domestically. And they&#8217;ve got some really good companies, Rolls-Royce, BAE Systems, Airbus. The opportunities are there, and Germans are looking at doing this domestically as well. It&#8217;s just where you find the money from. And once the kind of initial support for Ukraine etc. dies down, how you sell it to your domestic populations and you know all of them are weak domestically. Starmer has a very difficult economic situation to handle. Macron with his self-inflicted elections, then you&#8217;ve got the new Chancellor Mertz who is going to be busy trying to put together his coalition. It&#8217;s very, very tricky.
Lisa Raitt: So we&#8217;re talking mainly about short and midterm. What about long term issues and concerns for them?
Amber Batool: There&#8217;s a few here. I think obviously the big one is tariffs. They are thinking that the US is going to put tariffs on. They have retaliatory tariffs that they are thinking about. The impacts aren&#8217;t going to be as devastating as they are for Canada. But what I heard from my colleagues yesterday was, you know, with this tariffs on, tariffs off, it&#8217;s a kind of game of shadow boxing at the moment. So they&#8217;ve put that in a box called uncertainty, but that&#8217;s something that they&#8217;re going to have to think about. We talked a little bit about energy. I think they have to grasp the nettle here. There&#8217;s opportunities in renewables. You know, wind and solar projects have expanded dramatically. There&#8217;s opportunities in clean tech. The UK is trying to make itself a hub for CCUS and a plug for our fantastic, top quality colleagues in CIBC in London and in Canada who are absolute experts in project finance and have been working over there to help that. I think it&#8217;s definitely going to be a contrast to the drill, baby drill that we heard from President Trump, but they have to find a way to decouple from the US hard as it will be. Two more things I wanted to mention on the kind of long-term lease. So one is AI, tech and innovation, intellectual property, all of that. That&#8217;s a huge opportunity and an existential threat. There&#8217;s a lack of urgency, endless regulation, not very much ambition. And I know there&#8217;s always been a kind of limited risk appetite for long-term tech plays in Europe, but I think they need to be a little bit more audacious. You know, the IEA published some excellent research highlighting the expectations of energy demands from data centers and digital services, something to think about. And then you saw President Trump announcing this 500 billion Stargate project to fund AI infrastructure. We cannot be left behind. And then international institutions, again, I hear from across the board, and I phoned a whole bunch of people I used to work with in the EU. They all say NATO is all but dead. One former colleague said to me, look, even if the personnel changed or there was a new administration, it doesn&#8217;t matter. We see how quickly things can crumble and we can&#8217;t go back. And I was asked to mention more than once that Article 5, the attack on one is an attack on all, has only ever been used once in NATO&#8217;s entire history. And that was invoked by the US after 9-11. And even today, Prime Minister Starvmer talked about the 642 British personnel who died fighting in Iraq and Afghanistan. So NATO, you know, it&#8217;s all but dead, as I said. Thoughts and prayers with whoever is organizing the G7 that Canada is hosting in Alberta. The latest rumors are the US, you know, they&#8217;re not even planning possibly on turning up. And you and I know, because you&#8217;ve been to these things, I&#8217;ve prepared for these things, the choreography and the ballet that goes on behind the scenes to make this happen is extraordinary. So that&#8217;s going to be difficult. And then you have things like the World Health Organization now that the US has left that World Bank IMF. They&#8217;re all vulnerable. Europe needs to step up.
Lisa Raitt: And on your point, Amber, about how many sacrifices there were in the UK, I mean, in Canada, we lost 158 of us in that same situation when the US was attacked. So it is a tough situation, isn&#8217;t it, right now, and lots of emotions around it.
Amber Batool: Absolutely.
Lisa Raitt: Why don&#8217;t you tell us what you think happens next? Figure it out. Tell us what&#8217;s happening next, Amber. But what do you see? What do they see? What is going on? Yeah.
Amber Batool: (laughs) Such a good question. I think first and foremost, hopefully, a just and sustainable peace in Ukraine. That&#8217;s the top of everyone&#8217;s agenda. know, Lisa, I think there&#8217;s a danger in trying to explain day to day the impact of what&#8217;s coming out of the US administration. I don&#8217;t think humans were built to have this much information given to them at all times. But I do think Europe recognizes that it needs to move and move quickly. President Trump backed by the House and the Senate has an agility to get things done at breakneck speed. Europe moves too slowly. It has to get consensus. It&#8217;s got some restrictions in place, but it&#8217;s time to do things and time to do them quickly. And then to kind of conclude, I&#8217;ve been thinking as we&#8217;ve been talking about a scene from The Sound of Music, which is like required viewing in my home every Christmas, much to my children&#8217;s dismay. And as the drumbeat of like World War II is coming closer to their country and their homes and their livelihood, Uncle Mac says to Captain Von Trapp, what&#8217;s going to happen is going to happen. Just make sure it doesn&#8217;t happen to you. And so I think the ultimate question will be, do countries opt for self-preservation, seek individual deals, try and have special relationships with the US, or do they coalesce as a union, as an economic and security union, and face this threat as a united front? And I think time will tell.
Lisa Raitt: It&#8217;s interesting because the perspective you&#8217;re giving me today is that Europe and the UK aren&#8217;t necessarily waiting to react to what comes next out of the United States. They have to figure out what&#8217;s going to happen for them in general. And that&#8217;s a lesson to be learned, I think here in Canada as well. So thank you for your insight, as always, fantastic. And I&#8217;m so happy to be able to facilitate you sharing with the rest of the folks out there who are listening in today. And I know you&#8217;ll be back on because this file isn&#8217;t going anywhere.
Amber Tool: Thank you, Lisa.
Lisa Raitt: And that&#8217;s it. Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at lisa.raitt@cibc.com. Your interactions actually will make this better. I&#8217;m your host, Lisa Raitt, and this has been The Raitt Stuff.
Disclaimer: The materials disclosed on this podcast are for informational purposes only and subject to our Code of Conduct as well as CIRO rules. The information and data contained herein has been obtained or derived from sources believed to be reliable, without independent verification by CIBC Capital Markets and, to the extent that such information and data is based on sources outside CIBC Capital Markets, we do not represent or warrant that any such information or data is accurate, adequate or complete. Notwithstanding anything to the contrary herein, CIBC World Markets Inc. (and/or any affiliate thereof) shall not assume any responsibility or liability of any nature in connection with any of the contents of this communication. This communication is tailored for a particular audience and accordingly, this message is intended for such specific audience only. Any dissemination, re-distribution or other use of this message or the market commentary contained herein by any recipient is unauthorized. This communication should not be construed as a research report. The services, securities and investments discussed in this report may not be available to, nor suitable for, all investors. Nothing in this communication constitutes a recommendation, offer or solicitation to buy or sell any specific investments discussed herein. Speakers on this podcast do not have any actual, implied or apparent authority to act on behalf of any issuer mentioned in this podcast. The commentary and opinions expressed herein are solely those of the individual speaker(s), except where the author expressly states them to be the opinions of CIBC World Markets Inc. The speaker(s) may provide short-term trading views or ideas on issuers, securities, commodities, currencies or other financial instruments but investors should not expect continuing analysis, views or discussion relating to those instruments discussed herein. Any information provided herein is not intended to represent an adequate basis for investors to make an informed investment decision and is subject to change without notice. CIBC Capital Markets is a trademark brand name under which Canadian Imperial Bank of Commerce (“CIBC”), its subsidiaries and affiliates provide products and services to our customers around the world. For more information about these legal entities, as well as the products and services offered by CIBC Capital Markets, please visit www.cibccm.com.

The future ain’t what it used to be: Europe in the Trump era

Lisa Raitt

Vice-Chair, Global Investment Banking

CIBC Capital Markets

Amber Batool

Executive Director, Investment Banking

CIBC Capital Markets

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