The summit meeting of G7 allies (Canada, France, Germany, Italy, Japan, United Kingdom and the United States) in Évian-les-Bains, France, on June 15-17, 2026, has an unusual agenda of military conflicts weakening their structurally unbalanced economies.

A particularly precarious situation is observed in the members of the European monetary union (the euro area) where interest rates had to be raised last Thursday (June 11) to tame an accelerating inflation in stagnant economies. And that was not a one-off policy move because the war-driven energy costs have yet to be fully reflected in wholesale and consumer prices.

To make things worse, large budget deficits (4 percent of GDP in Germany and France) and huge public debt (120 and 150 percent of GDP in France and Italy, respectively) leave no room for a countercyclical fiscal policy.

The case of Germany, whose economy accounts for one-third of the monetary union, also shows that pervasive structural problems in labor and product markets inexorably lead to another cycle of growth recession -- despite Berlin’s sharply rising military spending.

Europeans, therefore, cannot tell their allies anything encouraging about their economies.

Economy needs free energy trade

A somewhat more promising economic outlook could come from Japan. Tokyo’s strong government spending on energy subsidies is supporting household consumption and business investments. That probably will be enough to keep the economy growing, with some help from net exports and a very large current account surplus of 5 percent of GDP.

The U.S. short-term growth prospects look good. This year’s first quarter GDP growth increased 2 percent from the year earlier. A 4.3 percent jobless rate in May reflects a fully employed economy. The consumer sentiment increased this month, partly owing to some easing of gasoline prices. The consensus forecast of a 2 percent economic growth this year looks reasonable -- if current inflation trends are rapidly reversed.

That, however, will depend on how fast a credible peace can be achieved in the war with Iran.

Further afield, the U.S. is facing difficult structural issues with budget deficits of 8 percent of GDP, a rapidly rising public debt of 128 percent of GDP and a current account deficit of nearly 3 percent of GDP. All that is negatively affecting America’s net international investment position, which stood at the end of last year at -$27.5 trillion.

At this writing, it seems that U.S. and Iran might be ready to sign a document that would put an end to fighting and eventually lead to a peace accord.

Financial markets have responded to that possibility with a strong increase of asset values. Crude oil prices also declined to their early April levels, but they were still 35 percent above their futures market valuation at the beginning of this year.

World looks to America the peacemaker

Energy prices and their impact on inflation, monetary policies, economic growth and asset values in advanced economies will depend on energy trade flows and a credible transition to a sustainable peace between the U.S. and Iran.

Agreement on the cessation of hostilities, and several other measures envisaged in the memorandum of understanding, are a first hopeful step toward a peace deal.

The G7 will also have to look at possibilities of (a) restoring peace in Europe, (b) building a new continental security architecture, (c) easing tensions between China and Japan, and (c) avoiding military confrontations about contested maritime borders in the South and East China Seas.

By launching “maritime delimitation talks” -- in an area China considers its “exclusive economic zone and continental shelf in the waters east of Taiwan island” – Beijing warns that Japan and the Philippines, America’s treaty allies, have “seriously infringed upon China’s maritime rights and interests.” China says it “absolutely will not allow this” and has positioned its naval assets to conduct “law enforcement patrols.”

China, obviously, means business, and it is testing American policy of strategic stability through deterrence of military conflicts.

America’s European and Asian allies will, therefore, look at Évian for guidance on the war in Ukraine and on security and trade issues with China.

That will be a difficult task. NATO's Supreme Allied Commander Europe (SACEUR), U.S. Air Force General Alexus Grynkewich, stated last Thursday, June 11, that Russia is "not looking for a conflict" with the military alliance. But, apparently reflecting a widely held European view, Sweden's parliamentary defense commission issued a statement the next day that Russia could attack NATO members "in the relatively near future."

Getting Asian allies to toe the policy line will probably be an easier call.

America the peacemaker is what the world needs and hopes that Washington can deliver.