Key Takeaways from Recent Policy Analyses
Europe’s Role in Global Coalitions
Authors Olivier Blanchard and Jean Pisani-Ferry argue that the European Union (EU) must lead in forming “coalitions of the willing” to address global challenges, particularly in the absence of strong U.S. leadership. Their recommendations focus on three critical areas:
- Climate Action: Leveraging its governance structure, the EU can form alliances with countries like China, Japan, and Brazil to maintain momentum toward net-zero emissions. Proposals include climate clubs and carbon border taxes to prevent free-riding.
- Trade Rules: The EU is positioned to reform global trade frameworks by building coalitions with partners such as Japan, India, and ASEAN countries. A dedicated summit is suggested to define a new multilateral trade agenda.
- Taxation of Multinationals: Despite U.S. withdrawal from the OECD global tax deal, the EU can sustain the agreement by excluding U.S. profits from extraterritorial taxation calculations, ensuring the deal remains effective.
The overarching message is clear: Europe must step up as a global leader to preserve multilateralism amidst growing protectionism and unilateralism.
European Commission’s Economic Strategy
Heather Grabbe and Jeromin Zettelmeyer evaluate the European Commission’s emerging 2024-2029 strategy. Key findings include:
- Innovation and Green Transition: The Commission is emphasizing reforms to boost productivity while advancing decarbonization goals. However, balancing industrial competitiveness with green policies remains a challenge.
- Industrial Policy: The Commission is proposing a new state aid framework but risks undermining competition by favoring national over EU-level investment strategies.
- Defence Investments: Efforts to strengthen EU defense capabilities are promising but require larger-scale funding and better coordination among member states.
The authors highlight that while the strategy addresses structural weaknesses, it must adapt to heightened challenges posed by President Trump’s policies.
Financing Europe’s Priorities
The EU faces a significant funding gap for its green transition, defense expansion, and international climate finance. Solutions proposed include:
- Reallocating existing budget categories (e.g., cohesion funds).
- Expanding the EU budget in the next cycle (2028-2034).
- Establishing new extra-budgetary funds or replacing the Recovery and Resilience Facility post-2026.
Without decisive action on financing mechanisms, achieving these critical objectives will remain out of reach.
Europe’s defense requirements in the absence of US support
Alexandr Burilkov and Guntram B. Wolff in this article present a comprehensive analysis of how Europe can defend itself against Russia, with or without the United States. Here are the key findings:
Russian Threat Assessment
- Russia’s military has grown significantly since 2022, with about 700,000 troops in Ukraine by the end of 2024.
- Russian defense production has increased dramatically, with 220% more tanks, 150% more armored vehicles and artillery, and 435% more long-range loitering munitions produced in 2024 compared to 2022.
- Experts estimate Russia could be ready to attack a European country within 3-10 years.
Europe’s Defense Needs
Europe needs to increase its military capacity equivalent to 300,000 US troops, focusing on mechanized and armored forces.
- This translates to roughly 50 new European brigades.
- Equipment requirements include a minimum of 1,400 tanks, 2,000 infantry fighting vehicles, and 700 artillery pieces.
- Drone production needs to be scaled up to match Russia’s capabilities, aiming for about 2,000 long-range loitering munitions per year.
Military Coordination and Production
- Europe faces a choice between significantly increasing troop numbers or enhancing military coordination among its 29 national armies.
- European-scale procurement is crucial for cost-effective military production.
- Large orders under a single European standard could significantly reduce costs compared to smaller-scale procurement.
Fiscal Aspects
- European defense spending needs to increase by about €250 billion annually (around 3.5% of GDP).
- This increase could be split equally between EU and national funding.
- Germany would need to raise its annual national defense spending from €80 billion to €140 billion.
Europe’s challenge and opportunity: Building coalitions of the willing
By: Olivier Blanchard, Jean Pisani-Ferry – Paris School of Economics, Bruegel, PIIE
Not yet Trump-proof: an evaluation of the European Commission’s emerging policy platform
By: Heather Grabbe, Jeromin Zettelmeyer – Bruegel
Defending Europe without the US: first estimates of what is needed
By: Alexandr Burilkov, Guntram B. Wolff – GLOBSEC GeoTech Center, Université libre de Bruxelles, Bruegel
