Could Europe use its financial muscle to strong-arm the US?

Summary

Podcast Summary: More or Less

Episode: Could Europe use its financial muscle to strong-arm the US?
Air date: January 31, 2026
Host: Tim Harford (BBC Radio 4)
Guest: Toby Nangle (Financial Times)

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Overview

In this episode, Tim Harford examines a provocative question sparked by a geopolitical flare-up: Could Europe use its financial holdings in the US to exert influence over American policy—specifically, in the wake of President Trump’s move to consider taking over Greenland? The discussion debunks and clarifies the numbers often cited regarding European ownership of US financial assets and explores whether those assets could really serve as economic leverage.

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Key Discussion Points and Insights

Background and Context (01:18–02:38)

• Recent Events:
  President Donald Trump’s consideration of annexing Greenland created anxiety in Europe, leading to questions about non-military means of deterrence.
• The Financial Leverage Theory:
  Some suggested Europe could threaten the US by selling off vast amounts of American financial assets, a move purported to inflict economic pain and potentially force a policy change.

Quantifying European Holdings (02:54–05:52)

• What’s Actually Held? (03:10)
  Toby Nangle: "We're looking pretty narrowly at bonds and stocks... people who own Microsoft shares or lending money to companies or to the American government, that's all going to be included."
• Headline Figure:
  Around $12.6 trillion of US financial assets (stocks and bonds) are "held" by European NATO countries.
• Market Share Comparison:
  • Total US shares: ~$70 trillion
  • US government bonds: ~$30 trillion
  • Europe holds roughly 10% of these combined totals.

Who Actually Owns the Assets? (04:49–05:54)

• Held vs. Owned:
  • Assets are often held in Europe via private individuals, companies, or custodians, rather than by European governments.
  • Some assets ascribed to Europe may actually be owned by other nations (e.g., Chinese government investments routed through Luxembourg or Belgium).
  • Toby Nangle: "So that 12.6 trillion has got a lot of noise in it... Deutsche Bank estimate that maybe when we strip out things like the Chinese government's ownership... everything drops down to around about $8 trillion." (05:24)

Could “Europe” Sell Off These Assets? (06:00–08:01)

• Direct Control is Limited:
  Only a small fraction is owned by European governments (notably, Norway’s sovereign wealth fund). The overwhelming majority is held by private institutions.
  • Toby Nangle: "...Apart from the Norwegian government in their big oil fund, they've got a chunk. Apart from that, there aren't huge ownership positions directly from government to government." (07:50)
• Logistical and Economic Challenges:
  Forcing a coordinated European sell-off would be a “logistical nightmare” (08:01).
• Self-Inflicted Harm:
  A sell-off would reduce the value of European pension funds and negatively impact European investors.

Wider Financial Fallout (08:37–09:17)

• Contagion Risk:
  Dumping US bonds would also drive down bond prices globally, increasing borrowing costs for households, companies, and foreign governments.
  • Toby Nangle: “So one consequence of US bond prices falling is that actually that tends to push other bond prices around the world... interest costs for governments around the world and also for households, for companies, they could also be pushed up by any real sell off in the US bond market.” (08:37)
  • Interviewer 2: "So Europe tries to give the US administration a bloody nose and suddenly we're all paying more for our mortgages and for our credit cards." (09:08)
  • Toby Nangle: "That's right. I guess we'd be headbutting them and both coming out pretty bloody." (09:17)

Interdependence or Vulnerability? (09:21–09:59)

• A Paradoxical Situation:
  The US is unique in the scale of assets held by foreigners— does this make it vulnerable, or simply show financial interdependence?
  • Toby Nangle: "I think that it's probably best to talk about it as a statement of fact. It's about the degree of integration there is, how much our fates are bound together financially." (09:37)
  • Interviewer 2: "But the interdependence is real. Despite the fact that both sides of the transatlantic relationship seem to be feeling rather uneasy about this interdependence, it's not a thing that's easily going to go away." (09:45)
  • Toby Nangle: "I completely agree with that." (09:57)

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Notable Quotes and Memorable Moments

• On the Scale of Assets:
  Toby Nangle (05:24): “So that 12.6 trillion has got a lot of noise in it... Deutsche Bank estimate that... everything drops down to around about $8 trillion.”
• On Financial Interdependence:
  Toby Nangle (09:37): “It’s about the degree of integration there is, how much our fates are bound together financially.”
• On Mutual Harm:
  Toby Nangle (09:17): “I guess we’d be headbutting them and both coming out pretty bloody.”

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Timestamps for Important Segments

• 01:18 — Episode theme: European financial leverage over the US
• 04:00–05:54 — How much US financial assets are genuinely controlled by Europe?
• 06:00–08:01 — Feasibility and logistics of a European sell-off
• 08:37–09:17 — Global financial consequences of mass US asset sales
• 09:21–09:59 — The interdependence paradox, financial ties between the US and Europe

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Conclusion

The episode debunks the popular belief that European countries could easily “strong-arm” the US by dumping financial assets. While the raw numbers are impressive, most US assets in Europe are privately owned, not government-controlled. Any forced sale would carry immense self-inflicted costs and ripple through global markets—making financial strong-arming an impractical tool. Ultimately, the story is less about power plays and more about how deeply entwined global financial systems have become.

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For feedback or questions, listeners are invited to contact the show at moreorlessbc.co.uk.

Transcript

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[Tim Harford]

Hello and thanks for downloading the More or Less podcast with a program that looks at the numbers in the news, in life and in global economics. And I'm Tim Harford. Late in January, US President Donald Trump sent shockwaves through European countries as he appeared to seriously consider taking over the island of Greenland, which is an autonomous territory of the Kingdom of Denmark, a NATO ally. At the height of the crisis, many in Europe were trying to think of ways to dissuade President Trump. If a military response was unthinkable and diplomacy wasn't working, perhaps the answer might be financial pressure. Suddenly, people started throwing around some vague plans involving huge numbers claims about trillions of dollars worth of US Financial assets owned by Europe. The idea was that Europe could threaten to sell those assets, inflicting such pain on the US Economy that that Trump would change course.

[Interviewer]

European countries hold trillions of stocks and bonds from the U.S. do you worry that they would start selling those in retaliation?

[Donald Trump]

If they do, they do. But you know, if that would happen, there would be a big retaliation on our part and we have all the cards.

[Tim Harford]

President Trump appears to have changed course anyway, but whatever, it all raises a fascinating set of questions. So how many trillions Are, are there? And could Europe really use them for leverage?

[Toby Nangle]

Well, here we're looking pretty narrowly at bonds and stocks.

[Tim Harford]

That's Toby Nangle, a journalist with the Financial Times. He's been examining the value of American financial assets owned by European NATO members.

[Toby Nangle]

So we're forgetting all the real estate and infrastructure projects, all that kind of stuff. So people who own Microsoft shares or lending money to companies or to the American government, that's all going to be included.

[Tim Harford]

Like most developed countries, the United States allows foreigners to buy its financial assets, whether that's shares in American companies or American corporate or government bonds. They're IOUs that guarantee you a fixed return if you lend someone your money and which you can sell on yourself you if you want. And the thing is, a big chunk of these US Financial assets have indeed been sold to people or institutions outside.

[Toby Nangle]

The U.S. it's around $12.6 trillion of U.S. assets that are held by European NATO countries.

[Donald Trump]

Right.

[Interviewer 2]

$12.6 trillion, I'm going to call it. That sounds like a big number. Is it a big number?

[Toby Nangle]

It definitely is a big number, yes.

[Tim Harford]

Okay.

[Interviewer 2]

That's obviously a lot of money, but I don't know whether it's 1% or 10% or 70% of the outstanding universe of financial assets in the U.S. the.

[Toby Nangle]

Market capitalization of all U.S. shares put together right now comes to around about $70 trillion. And if you thought just about U.S. government bonds, that's another $30 trillion.

[Tim Harford]

When you also take into account corporate bonds, it looks like roughly 10% of these US financial assets are held by European NATO countries. But what do we mean by held?

[Toby Nangle]

It's a great question because it's probably more accurate to say that it's held in European NATO countries rather than by the countries, because it's not the governments owning them. These are bonds and shares that are owned by private individuals who reside in these countries or people who live outside of these countries that just happen to hold these securities through either custodians or asset managers based in these countries.

[Tim Harford]

Just because $12.6 trillion of shares and bonds are held in Europe, that doesn't mean they're owned by Europeans.

[Toby Nangle]

So that 12.6 trillion has got a lot of noise in it. Deutsche bank have done some analysis and they estimate that maybe when we strip out things like the Chinese government's ownership of US Bond through Luxembourg and Belgium, that sort of stuff, everything drops down to around about $8 trillion. Now, we haven't done independent work, but I would have thought that Deutsche bank would have done a Reasonable job at that.

[Tim Harford]

So it looks likely that a good.

[Interviewer 2]

Chunk of that $12.6 trillion figure is.

[Tim Harford]

Isn'T within the control of Europe, although it's hard to be precise. But whether the number is 8 trillion or 12.5 trillion, why does it matter that Europe owns US financial assets? Shares and bonds are the building blocks of financial systems. So owning American shares or bonds gives you influence over a country's finances. If you own them, you can choose to, well, not own them anymore. Selling enough of them would drive down the price. If foreign investors sold vast numbers of shares, it would damage the US stock market and the wealth of the US as a whole. And government bonds are arguably even more important. If you sell those, that has two effects at the same time. It both drives down the price of bonds and raises the interest rate that the government has to pay when issuing new bonds. That makes it more expensive for governments to borrow money, which the US does a lot of. And if you sold trillions of dollars worth of bonds, you could cause some serious pain.

[Interviewer 2]

You've got $30 trillion of U.S. government bonds. So how much of those U.S. government.

[Tim Harford]

Bonds are held in Europe?

[Toby Nangle]

So again, held in Europe is the right question. And the answer, according to the US Federal Reserve, that's the US central bank, is around $2.8 trillion. Of that $30 trillion, it's about 10%. That's right.

[Tim Harford]

Again, that number doesn't strip out the bonds held in Europe on behalf of non European investors. So it could be somewhat lower. Nevertheless, in theory, Europe could sell off its U.S. bonds and create havoc. In theory, could they do it because.

[Interviewer 2]

They don't personally own many of these assets?

[Toby Nangle]

Absolutely right. Apart from the Norwegian government in their big oil fund, they've got a chunk. Apart from that, there aren't huge ownership positions directly from government to government.

[Tim Harford]

The overwhelming majority of bonds aren't owned by governments. They're held by private institutions, such as insurance companies, banks or pension funds. And of course, individual investors too. Forcing them to sell would be a logistical nightmare. But even if you could organise a big sell off, it would come at a cost for Europe. Many European pension funds have invested heavily in US assets, and if they're suddenly worth much less, then Europeans will have a lot less in their pension pots than they thought. And that's not all.

[Toby Nangle]

So one consequence of US bond prices falling is that actually that tends to push other bond prices around the world of other countries down as well. One of the things that happens when bond prices go down is that bond yields go up. That's like another way of saying interest costs. And so interest costs for governments around the world and also for households, for companies, they could also be pushed up by any rate, real sell off in the US bond market.

[Interviewer 2]

So Europe tries to give the US administration a bloody nose and suddenly we're all paying more for our mortgages and for our credit cards.

[Toby Nangle]

That's right. I guess we'd be headbutting them and both coming out pretty bloody.

[Tim Harford]

There's a paradox underlying this whole discussion. The US is almost unique in the scale of how many of its assets are held outside America. But is this a massive vulnerability or is it a source of influence?

[Toby Nangle]

I think that it's probably best to talk about it as a statement of fact. It's about the degree of integration there is, how much our fates are bound together financially.

[Interviewer 2]

But the interdependence is real. Despite the fact that both sides of the transatlantic relationship seem to be feeling rather uneasy about this interdependence, it's not a thing that's easily going to go away.

[Toby Nangle]

I completely agree with that.

[Tim Harford]

Our thanks to Toby Nangle from the Financial Times. If you have any questions or comments, please get in touch at more or lessbc.co.uk we'll be back next time. And until then, goodbye.

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