"You don't insure your home by hoping every month that nothing will go wrong. You take out insurance and pay premiums because you know that risks are inevitable, and if something goes wrong, you need to have money available.
In Europe, we wait until something goes wrong. While the need to invest jointly in security, digital infrastructure and climate resilience is growing, the European Union continues to muddle through with temporary exceptions and ad hoc measures.
As a result, the European budget remains an anachronism: around a third still goes to agricultural subsidies from the last century, while today's fundamental challenges — security, energy security, digital sovereignty — remain underfunded.
Common interests
When will we recognise that Europe has new public interests and therefore needs a new, democratically legitimised way of financing them?
Joint expenditure on public issues that can be better achieved and financed at European level because it cannot be done by individual member states or simply because it is cheaper to do so together. Security meets both criteria, while energy and raw material security are particularly more efficient to tackle together. Specialisation and cooperation between countries are necessary to build a circular economy and energy independence.
The past, not the future
Yet these essential interests receive only a fraction of the European budget, which is already small compared to what countries spend individually. This is widely recognised, including in the Draghi report and by the European Commission itself, but it has not led to a new budget structure. The European budget still mainly finances the past, not the future.
Once we finally agree on what needs to be done structurally at European level, it makes sense to also look at revenue in a structural way. Anyone who wants to work seriously towards a future-proof Europe cannot avoid a fundamental review of the revenue side. Ideas have been around for years: a digital tax, a financial transaction tax, harmonised corporate tax. This would not only ensure more stable and fairer financing, but also ease the pressure on national budgets and make investments in European public goods more transparent. And yes, those who do not want this will choose the only other option: higher contributions from countries to Europe. This is a choice that even the most Europe friendly governments cannot get their constituencies to support.
European debt
But, you may well ask, what has become of the much-discussed Eurobonds? There is something to be said for financing certain temporary expenditures through joint debt financing, such as during the covid crisis or for a one-off wave of investment in defence. But financing structural expenditures through debt is a different story. No one wants to see financial markets panicking again about European debt — panic that, as we know, leads to stupid policies. The main counterargument is that the challenges we face do not require more money, but rather clear priorities. Debt is therefore not the appropriate instrument.
The debate on defence spending — ReArm Europe in Brussels jargon — is currently focused mainly on stretching national budget rules and partial joint financing. Too little attention is being paid to a joint plan for spending this money. And, just as importantly, any new temporary loan arrangement without a clear democratic basis will further erode confidence in the EU. Why spend €800 billion on defence and not on the energy transition?
Technocratic tinkering
While Europe needs more integration to weather the geopolitical storm, it risks losing its legitimacy by continuing to opt for technocratic tinkering.
What threatens is a half-hearted discussion out of fear of electoral repercussions and angry farmers, ending in more debt financing and thus more democratic erosion and financial instability. The geopolitical reality calls for more European spending, yes — but above all for a reaffirmation of European solidarity and democratic control.
This is no longer a budget debate. This is a test for European democracy. The question is not whether we invest together, but whether we dare to organise it honestly, transparently and collectively. Those who do not dare to do so leave Europe uninsured. And we can all imagine how that will end."
This opinion piece was previously published in Dutch newspaper Financieel Dagblad.
In a recent episode of our podcast Money for Change, Hans Stegeman discussed this topic with Anna Koolstra and Ernst Hobma. Listen to the episode (in Dutch) here.