Can the EU’s strategic ambitions survive its looming fiscal cliff? Without something giving, Europe won’t be able to fund and arm Ukraine

European shells for Ukraine: How long will they flow? EPA-EFE/FABIAN BIMMER


The leaders of Poland, Germany and France met earlier this month in an attempt to revive the Weimar Triangle, an attempt to coordinate defence policies that previously ran aground on the populism of Poland’s Law and Justice Party.

Renewed cooperation should be easier now that the impeccable European Donald Tusk leads Poland, but he will be hard pressed to overcome the recent and growing friction between Macron and Scholz.

The Franco-German engine that drove EU integration forward has stalled over the acrimonious relations between the two leaders, which has recently devolved to thinly veiled insults and pointed barbs. It should go without saying that these are not the usual tools of diplomacy between the EU’s two great powers. 

The need to bolster support for Ukraine is clearly focusing minds in European capitals, but the simple fact that three EU member states are meeting to forge a common approach highlights the absence of an EU executive capable of making security policy on behalf of the Union. Defence and foreign policy remain the exclusive province of member states, and so we are treated to the European equivalent of California, Texas and Ohio meeting to determine EU support for Kyiv.

The creation of an EU executive with power over defence policy is well beyond practical realities in the near or even medium term.

Despite this, an area where member states are already subject to supreme EU authority may well determine its security policy more decisively than any “coalition of the willing” like the Weimar Triangle. 

In less than two years, EU states will face the end of the post-pandemic funding that obscured the underlying fiscal realities in many member states.

The Recovery and Resilience Facility used the first example of common EU debt to bolster national economies emerging from the pandemic shutdowns. Many assumed the RRF would become a precedent for further common debt financing, but the EU’s fiscal hardliners are sticking to the agreement that the RRF was a one-shot deal ending in 2026.  

Compounding the end of the RRF will be the reimposition of the EU’s strict fiscal rules. Prohibitions on state aid to industry that were relaxed during the pandemic come back into force in 2025. Excess deficit rules return as well, although with certain modifications that will cushion the blow on notorious violators like Italy and France.

The upshot of this looming fiscal cliff will be severe constraints on many member state budgets. Funds needed to increase or even maintain support for Kyiv may lose out to social welfare budgets. The loss of RRF aid and the reimposition of fiscal rules make it very unlikely that Germany, France or Italy will match Poland’s defense spending, now amounting to over 4 per cent of GDP.

Given Brussels’ commitment to reimposing its executive authority over member state spending, where will the additional Euros needed for its open-ended political commitment to Ukraine come from?  To its credit, the senior EU leadership is considering innovative solutions to the coming fiscal crunch.

Commission President von der Leyen has unveiled a proposal to use the profits earned from frozen Russian assets, amounting to some €3 billion a year, to replenish the European Peace Facility. This off-budget fund has already delivered over €6 billion to Kyiv.

However, proposals to fund weapons for Ukraine out of the normal EU budget have been scuppered by Budget Commissioner Johannes Hahn. Hopes for new joint defence bonds remain moot as long as key member states remain committed to the one-off terms of the original RRF deal.

It is likely that Donald Tusk spent more time in Berlin this month smoothing ruffled feathers than crafting any agreement on joint security policies. But the greater danger to such policies lies not in the lack of personal chemistry between Scholz and Macron, but in the coming fiscal constraints on EU spending.

Government policy is made credible only through fiscal commitment; the recent fine words from Council President Michel are meaningful only if they result in new weapons delivered to Ukraine.

While passing the hat among member states to replenish off-budget spending vehicles is helpful, sustained support for Kyiv will likely require new joint defence bonds. Donald Tusk should perhaps devote his next Weimar meeting to persuading Germany to lift its opposition to them.