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How Trump's criticism of the EU makes the region stronger

  • President Trump's attacks on the European Union's shared policies – like climate change, free trade and defense – have forced EU countries to jointly defend their goals and strengthen ties with other global allies.
  • A new report shows the EU's future is looking brighter with only 19 percent of businesses citing a eurozone break-up as the key medium-term risk for the global economy.

President Trump hasn't been shy to voice his complaints with the European Union.

Since taking office, the American president has chastised NATO allies for not paying their fair share, accused the EU of being "very protectionist" and announced the U.S.' withdrawal from the globally-endorsed Paris climate agreement.

But Trump's bullying could turn out to be exactly what a fractured European Union (EU) needed in order to band closer together. His attacks on the European Union's shared policies – like climate change, free trade and defense – have forced EU countries to jointly defend their goals and strengthen ties with other global allies.

"He has indirectly vindicated the entire European approach," Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics told CNBC via phone earlier this month.

Kirkegaard said last month's G20 meetings in Hamburg exhibited how countries can more effectively solve real-world economic problems when they join together, which is the fundamental ideology behind the EU. Trump's "America first" philosophy was on full display at the summit when 19 countries endorsed the Paris climate accord – leaving the U.S. behind on the world stage.

"What it shows is that no country is independently able to, shall we say, change or undermine the global economic and financial system," Kirkegaard said.

European leaders feared President Trump's election and the U.K.'s vote to leave the EU would spur a wave of nationalist victories across the continent. But voters rejected populist candidates who aligned themselves with the American president in elections in Austria, the Netherlands and France. France's Emmanuel Macron rode a huge victory over his far-right opponent Marine Le Pen on a pro-EU message.

French President Emmanuel Macron at a press conference at the Chancellery on May 15, 2017 in Berlin, Germany.
Axel Schmidt | Getty Image
French President Emmanuel Macron at a press conference at the Chancellery on May 15, 2017 in Berlin, Germany.

"Your victory is a sign of hope," European Council President Donald Tusk tweeted in response to Macron's win. "For a Europe that protects, wins and looks to the future."

Optimism for the European Union has surged since Macron's election, according to new research by Oxford Economics published Friday. Only 19 percent of businesses cite a eurozone break-up as the key medium-term risk for the global economy, down from 28 percent in the second quarter survey and the lowest level in more than a year.

Jamie Thompson, Head of Macro Scenarios at Oxford Economics, told CNBC via phone on Friday upbeat sentiment about the eurozone correlates with a drop in concern over European populism.

"Since the Le Pen defeat, concerns about that have collapsed," Thompson said. "Of the eight top risk categories…populism is basically at the bottom."

European leaders have stressed the importance of an integrated EU in response to Trump's populist and protectionist threats. The EU and Japan negotiated a major trade deal ahead of the G20 summit that would remove tariffs on some exports between the two blocs.

"The depth of this agreement goes beyond free trade… it shows that closing ourselves off to the world is neither good for business, nor for the global economy, nor for our workers," European Commission President Jean-Claude Juncker said in a statement in July.

EU leaders are also taking steps towards creating more military cooperation across the union. The new European Defense Fund aims to generate more than $6 billion per year after 2020 in defense research and development.

Meanwhile, German Chancellor Angela Merkel echoed calls for a stronger, more united EU in a speech in Munich in May, saying Europeans must "take our fate into our own hands." Merkel pledged to increase Germany's military spending to two percent of its GDP, amid Trump's repeated demands that EU allies must pay more for defense.

"The times in which we can fully rely on others are somewhat over," Merkel said in her speech in Munich in May this year.