Europe’s Leaders Risk Policy Paralysis in a Fractured World
An informal summit in Nicosia exposes deep divisions over budgets, strategy and the bloc’s capacity to act. A commentary by Marco Buti and Marcello Messori
The informal meeting of the European Council in Nicosia last week revealed a troubling reality: EU leaders risk operating in parallel worlds shaped by cognitive dissonance. Faced with a global environment irreversibly altered by unmanaged conflicts, they continue to endorse highly ambitious goals for the Union without equipping it with the necessary instruments to achieve them.
Germany’s chancellor Friedrich Merz and policymakers from fiscally conservative countries — including the Dutch leader Rob Jetten, whose recent electoral success had raised expectations — resisted any increase in the EU’s multiannual budget. They also opposed new own resources and the issuance of common debt to finance centralised spending.
In an unusual alignment, Italy’s prime minister Giorgia Meloni and Spain’s Pedro Sánchez called instead for a general suspension of EU fiscal rules to expand national spending. At the same time, they drew a red line around preserving agricultural and cohesion funds in the next common budget — even at the expense of investment in innovation and competitiveness.
The resulting inertia has been disguised behind complex bureaucratic procedures that are hard to justify at a time of ruptured international relations. This lends weight to Mario Draghi’s caustic remark to the European Parliament: “I don’t know what you should do, but do something.”
The “curse of committees” — postponing difficult decisions, focusing on technicalities and settling for the lowest common denominator — risks becoming the EU’s defining feature. It is also the surest way to undermine both internal cohesion and the bloc’s social model under pressure from Donald Trump’s policies and China’s economic weight. In the absence of a common strategy, member states will resort to short-term fixes, pushing EU institutions to further relax state aid rules. The likely outcome is growing divergence between countries with ample fiscal space and those without.
What would a more adequate response look like? The Florence Report of the European University Institute — Europe in a fractured global economy, published on April 21 — reiterates a core principle: the EU must overcome the separation between its internal and external agendas.
In practical terms, reform of the EU’s multiannual budget should entail a quantitative strengthening aimed at financing and producing European public goods. This would centralise initiatives in defence, competitiveness and social inclusion — starting with education and human capital development, including migrants. These efforts, which would also mobilise substantial private financing, should be grounded in the “One Market, One Europe” principle highlighted in the Letta Report but reduced to a mere timetable in Nicosia.
Beyond integrating Europe’s financial markets, such a strategy requires new own resources aligned with global developments and the EU’s pursuit of strategic autonomy. The European Commission had already tabled proposals in July 2025. Today, the entry into force of a regulatory framework on crypto-asset transparency provides an additional opportunity: taxation of these activities could generate new revenue streams for the EU budget.
Predictably, the US would oppose such a move. Yet any meaningful European strategic autonomy is bound to collide with the interests of Donald Trump. This is particularly true if financial market integration is accompanied by the issuance of a European safe asset capable of competing, at least potentially, with US Treasuries. As many European central bankers — including German ones — acknowledge, a common safe asset is essential to deepen financial markets and strengthen the euro’s international role.
The EU can escape its current “fragmentation trap” only by recognising that the collective gains from common action outweigh the short-term national benefits of non-cooperative strategies. If both national and EU leaders fail to rise to this challenge, it will become clear that key issues have not been blocked solely by Viktor Orbán and his allies, but also by the strategic myopia entrenched at the heart of Europe.
A previous version of this article was published by Il Sole 24 Ore
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
