The 52nd G7 summit kicks off this Monday, June 15, in France and will run until the 17th, organized by President Emmanuel Macron. Born during the global oil crisis of the 1970s, the G7 brings together the world’s most advanced industrial economies to foster cooperation in facing global economic and political challenges. Six of its seven members (excluding Japan) are also NATO members, and despite the numerous attacks by the United States President, Donald Trump, against the closest allies of his country, the United States is expected to participate in the meeting.
But the U.S. will do so on its own terms. It has demanded restrictions on who will participate, the topics that will be debated, and the final statement. Unlike the final communiqués of previous meetings, this one will not include binding recommendations, only “shared diagnostics” of current political challenges. The U.S. has already rejected even non-binding recommendations for an “European-style” regulation of American AI companies.
“The U.S. has already rejected even non-binding recommendations for an ‘European-style’ regulation of American AI companies”
So, what will the G7 leaders debate? As in several previous occasions, global macroeconomic imbalances will be a main topic, but Trump will oppose the G7’s diagnosis. According to a memorandum prepared for the French government by four renowned economists, the G7 leaders should focus on the large and growing current account imbalances that threaten economic growth and financial stability.
In 2025, the U.S. current account deficit rose to 4.6% of GDP, a level not reached since 2006 (just before the global financial crisis); China’s current account surplus reached an estimated 3.5% of GDP; and the European Union’s surplus reached 2%. These imbalances—which the International Monetary Fund labels as excessive, large, and persistent—have their origins in saving and investment behaviors, which in turn feed net capital inflows or outflows and trade frictions.
Although China is not a member of the G7, its current account surplus poses a common economic challenge for everyone. It is channeling investment toward manufacturing and high-tech sectors (electric vehicles, green technologies, and critical minerals) and, therefore, relies on external demand to absorb a significant portion of its output. Its economy is clearly too large to continue depending on exports as the main growth driver, but its domestic consumption has been chronically weak, accounting for just 56.6% of its GDP in 2024, well below the 82.9% represented in the United States.
The new five-year plan for China does indicate a possible shift toward consumption, emphasizing public support for healthcare, social safety nets, and repairing the balances damaged by the country’s real estate market crisis. But it also promises additional policies in favor of innovation and manufacturing. In any case, whether China truly pivots toward its export-led growth model depends on President Xi Jinping, not on the G7 leaders. For now, the renminbi (yuan) remains significantly undervalued, acting as a macroeconomic industrial policy that reinforces its microindustrial policies.
U.S., by contrast, faces an unprecedented savings deficit, which obliges it to rely on the rest of the world to cover that gap and finance both public spending and investment. Even with full employment, the United States has a massive and growing federal budget deficit that is absorbing the savings of the EU and the rest of the world to finance tax cuts for the rich, massive military spending, the enforcement of immigration laws, and a senseless war in the Middle East.
Why does the rest of the world allow the U.S. government to get away with this? Undoubtedly, U.S. government assets are liquid, offer attractive inflation-adjusted real yields, and have been perceived as risk-free from default. And yet, the three major U.S. credit rating agencies have downgraded the federal government’s debt in the last three years.
“Even with full employment, the United States has a huge and growing federal budget deficit that is absorbing the savings of the EU”
The U.S. government now issues public debt totaling about 6% of the country’s GDP each year. The debt-to-GDP ratio, an indicator of default risk, has risen to 101%, and is on track to reach 120% by 2036. Meanwhile, interest payments on the existing federal debt already exceed 3% of GDP, forcing cuts in public spending on health care and other programs that enjoy broad voter support, and this will fuel political discontent, while the government’s limited fiscal room to maneuver will constrain its ability to respond to future crises.
For the EU, the challenge is weak investment demand, reflected in a persistent current account surplus. Given that a significant portion of EU savings is invested in U.S. financial assets (both private and public), Europeans are contributing—without realizing it—to financing Trump’s war against Iran, which in turn has driven up its energy costs.
So, what should the EU do to reduce its current account surplus and redirect its savings toward productive investment and domestic growth?
First, it should adopt policies to deepen the integration of its goods, services, and capital markets, following both the recommendations of former European Central Bank president Mario Draghi in his important report on European competitiveness and Enrico Letta’s recent report, a former Italian prime minister, on strengthening the EU’s single market.
To that end, the EU recently passed a new and ambitious law, known as the “28th regime” — or EU Inc.—, which allows companies to incorporate and operate in the twenty-seven EU member states under a single set of rules. While not free of flaws, it is a significant step in the right direction, and further advances are expected.
To tackle the fragmentation of the capital markets, the EU is developing policies to strengthen its Savings and Investment Union (which would reduce dependence on banking finance for investment); to reform national pension systems, whose assets are currently parked in bank deposits and, therefore, excluded from risk-adjusted-return financial assets; and to create a single EU supervisory authority akin to the U.S. Securities and Exchange Commission.
Looking ahead, the EU should also create safe EU government bonds that could serve as an alternative to U.S. Treasuries. Since the EU has committed to increasing spending on its defense industrial base and its energy security, the proceeds from new EU bond issues could be tied to one of these priorities.
“European G7 leaders are behaving like responsible adults”
Slowly but surely, the EU is taking steps to reduce its current account surplus and devote a larger share of its substantial savings to its own investment and growth. The EU’s European leaders at the G7 are behaving like responsible adults. If this summit does not offer meaningful solutions to some of the world’s greatest economic problems, it will not be those leaders who should be blamed.
© Project Syndicate, 2026.
