Europe’s Fiscal Dilemma: The “Von der Leyen’s Curse” and the Quest for Prosperity
In 2007, Jean-Claude Juncker, then president of the European Commission, famously quipped, “We all know what we have to do, but we don’t know how to get re-elected once we have done it.” Fast forward to 2025, and Europe faces a new iteration of this challenge: politicians know what needs to be done but are stumped on how to fund it. This conundrum, dubbed “Von der Leyen’s curse” after the current commission president, underscores the EU’s struggle to balance ambition with fiscal reality.
Three major reports published in 2024—by Enrico Letta, Mario Draghi, and Sauli Niinistö—urged European leaders to deepen market integration, boost innovation, and invest in critical sectors to ensure prosperity, strength, and security. Though, this vision comes with a staggering price tag. Draghi alone advocates for an additional €800 billion in annual spending. The question looms: where will this money come from, and how can it be mobilized to support common priorities rather than narrow national interests?
The Funding Conundrum
| Potential Solutions | Challenges |
|———————————-|——————————————————————————-|
| Public-Private Partnerships | Coordination across 27 member states is complex; even simpler initiatives like the European defence bond have failed. |
| Taxes (import tariffs, levies) | Risk of harming European industries or sparking trade wars with key partners. |
| Debt Mechanisms | Stability of the monetary union limits deficits; mutualised debt remains politically contentious. |
The most elegant solution, massive public-private partnerships, would require the EU and the European Investment Bank to entice institutional investors with stakes in Europe’s economic and technological future. However, coordinating such efforts across 27 member states is a Herculean task.
Taxes, another potential avenue, could generate tens of billions annually. Yet, they risk harming the very industries europe seeks to protect or triggering trade wars with strategic partners.
Debt mechanisms, while feasible, are constrained by the stability of Europe’s unfinished monetary union. Mutualised European debt, invested directly from Brussels, remains a political rubicon yet to be crossed.
The Efficiency Problem
The EU’s challenges extend beyond funding. Its processes are slow, bureaucratic, and frequently enough opaque, hindering its ability to compete in a global arms race of state capitalism and mercantilism. While China, russia, and the US wield notable political and financial heft, Brussels struggles to keep pace.
To overcome this, the EU could scale up its existing platform for important projects of common European interest. Alternatively, an ecosystem of investment initiatives outside formal EU programmes, driven by coalitions of investors and member states, could emerge.
The Role of first Movers
Countries with a stake in strategic sectors can claim future market share by contributing to collective EU ambitions. Poland, for instance, has led the charge in mobilizing public spending for defence and security along Europe’s eastern border and the Baltic.
Lifting the Curse
The path to lifting “Von der Leyen’s curse” lies in allowing coalitions of states to combine their self-interest with strategic partnerships with industries. This approach would elevate state aid to a coordinated multinational level,integrating the European market for geopolitical purposes.
Forget the old separation of the European market and domestic state aid.Forget the decision-making machineries that ofen stymie EU action. Rather, create room for ad hoc arrangements within the bloc’s overall strategy. Even the distinction between member states and third countries can be blurred—what matters is the right geopolitical coalition in support of EU policies.
In a surprising twist, lifting “Von der Leyen’s curse” might also alleviate the Brexit curse, as the UK could play a pivotal role in security and defence coalitions.
Europe’s fiscal dilemma is daunting, but not insurmountable. By embracing innovative funding mechanisms, streamlining processes, and fostering strategic coalitions, the EU can turn its curse into an chance for renewed strength and prosperity.
