Europe’s Pipes, Weak Capitals & Asia’s Reordering (24th April 2026)
This morning, I glanced at the homepages of The New York Times, Financial Times, The Washington Post and The Wall Street Journal. All four were dominated by the crisis in the Middle East. And understandably so: the Strait of Hormuz, Iran and Lebanon continue to overshadow almost everything else.
That makes this edition of Underexposed / Overexposed / Spot-On another unusual one. Once again, we are focusing entirely on the stories that are being pushed into the background. Europe is trying to build financial sovereignty, its leaders are struggling to deliver it, and Asia is assembling a new security mesh around China.
Underexposed 1 – Financial plumbing is Europe’s next sovereignty test
Headlines
The loud European story is defence spending. The quieter, and potentially more market-relevant one, is financial autonomy.
Europe is starting to treat financial infrastructure as strategic infrastructure. This is not about cutting ties with the United States. It is about reducing dependence on a U.S.-centric financial system at a time when Washington has become less predictable, the dollar system is more politicised, and Europe needs deeper domestic pools of capital to fund defence, energy, technology and industrial renewal.
Facts
The European Commission says the Savings and Investments Union should connect European savings with productive investment and help finance the EU’s strategic priorities. The scale is large: the Draghi report estimates Europe needs an additional €750–800 billion of investment per year by 2030, with defence needs adding further pressure.
The political push is also becoming more serious. In March, France, Germany, Italy, the Netherlands, Poland and Spain urged the EU to accelerate capital-markets integration and reach agreement by summer on the Market Integration and Supervision Package. The key point is centralised supervision: stronger EU-level oversight of financial market infrastructures, fewer national barriers and deeper cross-border capital pools.
The ECB is moving on the liquidity side. Its enhanced EUREP framework gives non-eurozone central banks broader standing access to euro liquidity against high-quality euro-denominated collateral.
The six-country E6 initiative makes the strategic intent even clearer: push the Savings and Investments Union, strengthen the international role of the euro, develop European payment systems and coordinate defence spending more efficiently. That is sovereignty policy through financial plumbing.
Weighing
This matters because the European autonomy debate is moving beyond the question of whether Germany can spend more on defence. The deeper question is whether Europe can finance its own strategic priorities without constantly leaking savings, listings, risk capital and payment flows into U.S.-dominated infrastructure.
The bullish interpretation is that Europe is finally connecting the dots: defence, capital markets, payments, euro liquidity and industrial policy belong in the same strategic frame. If this becomes credible, it could support European exchanges, clearing houses, asset managers, private-market platforms, pan-European banks and payment infrastructure. It could also help the euro over time by making euro assets more liquid, more useful and more globally accessible.
But the bear case is still powerful. Europe has been talking about capital-markets union for more than a decade. National regulators do not like losing power. Smaller financial centres fear centralisation. Insolvency laws, tax systems, pension systems and retail-investment cultures remain fragmented. And without something closer to a euro safe asset, Europe will still lack the deep, unified collateral pool that gives U.S. Treasuries their global role.
The key question now is whether the summer push on supervision and market integration survives national resistance.
Underexposed 2 – The Weak Capitals Problem
Headlines
Europe wants more financial sovereignty. As I wrote above, Europe needs deeper capital markets, larger domestic pools of risk capital, stronger euro liquidity and less dependence on U.S.-centric financial infrastructure. But Europe reforms through national governments, but the big euro-area governments are all fighting fires at home; they are politically weakened, distracted or already moving into election mode.
Facts
The reform push is real, but the political base underneath that push is fragile.
In Italy, Giorgia Meloni has just suffered her first major domestic defeat. Italian voters rejected her judicial reform referendum in March, with roughly 54% voting “No” and 46% backing the reform. Meloni has said she will continue governing, but the result dents the image that made her valuable in Brussels: a rare stable leader in a fragmented Europe.
In Germany, Friedrich Merz is trying to sell reform while managing a fractious coalition. His government’s internal tensions have become more visible and the CDU-SPD coalition is being strained by open conflict between senior ministers over Germany’s economic direction. Germany’s shift toward centralised EU market supervision is a big deal, but Berlin still has to deliver it through a government under pressure from weak growth, fiscal trade-offs and AfD pressure.
In Spain, Pedro Sánchez is not just facing normal minority-government arithmetic. He is dealing with a growing corruption overhang around his political circle and family. His wife, Begoña Gómez, was formally charged this month in a case involving alleged influence-peddling and embezzlement; former transport minister José Luis Ábalos is also on trial in a politically explosive corruption case linked to pandemic-era mask contracts. Sánchez denies wrongdoing and frames parts of the pressure as politically motivated, but the effect is clear: Madrid’s bandwidth for big European institutional reform is thinner.
In France, Emmanuel Macron is already in lame duck territory. France passed its 2026 budget only after no-confidence motions failed, and the government remains a weak minority administration under pressure from Brussels and rating agencies to rein in debt. The 2027 presidential election is now close enough that political positioning is starting to crowd out reform space. France may still push strategic autonomy rhetorically, but Macron’s ability to trade concessions in Europe is much weaker than it was five years ago.
Weighing
Europe has finally understood that financial plumbing is strategic power, but obstacles abound. Centralised supervision means national regulators lose influence. Deeper capital markets threaten protected domestic ecosystems. Cross-border consolidation creates winners and losers. A stronger European market structure may be good for Europe, but it is not automatically good for every national exchange, bank, regulator or finance ministry.
That is why the domestic politics matter so much. Meloni’s setback makes her less invincible. Merz’s coalition problems make German follow-through less certain. Sánchez’s scandals make Spain more defensive. Macron’s lame-duck phase makes France louder on vision than on execution. This raises the odds that Europe gets a watered-down compromise: enough language to signal ambition, not enough power transfer to transform the system.
The real test is whether weakened national leaders can spend scarce political capital on reforms whose benefits are European, long-term and diffuse — while the costs are national, immediate and politically visible. That is where Europe’s financial-sovereignty push will either become real, or become another elegant Brussels plan trapped in the pipes.
Underexposed 3 — Asia’s plug-and-play security network
Headlines
A quiet security mesh is taking shape around China’s maritime flank. The clearest signal is Balikatan 2026, which opened in the Philippines on 20 April and runs until 8 May. More than 17,000 personnel from seven countries are taking part: the Philippines, the United States, Australia, Japan, Canada, France and New Zealand. U.S. Indo-Pacific Command has called it the most expansive Balikatan exercise to date.
That scale matters, but the real story is the network effect. Indo-Pacific deterrence is moving beyond the old U.S. hub-and-spokes model. It is becoming a looser, denser coalition grid: more countries, more access points, more shared procedures and more operational habits.
Facts
Japan and Canada are joining Balikatan as first-time official participants. Japan is sending its largest contingent yet and is taking part in missile-firing drills. Canada describes this as its first active participation. That is not just symbolism. It shows that more U.S.-aligned countries are becoming operationally present in the region, not merely diplomatically supportive.
This is not an Asian NATO. It is messier, looser and more modular. It works through exercises, access deals, shared logistics, surveillance cooperation, missile practice, port calls and political signalling, all layered on top of existing U.S. alliances. The result is a system China has to monitor in many places at once, rather than a single bilateral alliance it can pressure.
The next visible checkpoint is the Shangri-La Dialogue in Singapore on 29–31 May. It should show how far governments are willing to turn practical military cooperation into political signalling, especially after a year of higher tension around Taiwan, the South China Sea and allied defence spending.
The broader shift is that Asian middle powers are not simply choosing between Washington and Beijing. They are building more room for manoeuvre through hedging, selective alignment, partnership diversification and economic-security cooperation. Put simply: countries want more options, more partners and fewer single points of dependence.
The Philippines is the key geographic node. It sits near both the South China Sea and the Luzon Strait, making it central to any Taiwan or maritime-contingency scenario. The U.S. has access to nine agreed sites in the Philippines under EDCA, while the Japan–Philippines Reciprocal Access Agreement entered into force on 11 September 2025, making it easier for Japanese and Philippine forces to operate on each other’s territory.
Weighing
This remains underexposed because analysts still default to a U.S.–China frame. That misses what is changing on the ground. Middle powers are no longer just reacting to great-power rivalry; they are helping shape the map on which it plays out.
The Philippines is becoming a frontline enabler. Japan is moving further beyond its old post-war restraint. Canada, France, Australia and New Zealand are embedding more visibly in regional deterrence. None of this creates a clean alliance bloc. Many of these countries still trade heavily with China and want to avoid open confrontation. But the direction is clear: more interoperability, more access, more shared logistics and more political signalling.
The next stage of Asian order-building will not look like alliance theology. It will look like modular coalition engineering: less formal than NATO, but increasingly real where it matters — at sea, in the air, at ports, on runways and across the logistics chain.
Take a look at my latest Global Political Analysis: Beyond Hormuz — The Geopolitics of Chokepoints
