Teamwork Makes the Dream Work: How the EU Can Tackle Big Challenges

The EU is at a crossroads, with defense, energy, and research emerging as critical areas where collaboration could yield significant benefits. However, the path forward is not without obstacles, particularly when it comes to borrowing money together.

The Debt Dilemma

Some countries, notably Germany, are hesitant about shared debt. Yet, the EU has already taken a step in this direction by borrowing 800 billion euros during the COVID-19 pandemic. This precedent suggests that joint borrowing is not entirely off the table.

Why It Matters

The EU faces growing threats from Russia, necessitating increased spending on defense. Additionally, competition from China and the U.S. is driving Europe to innovate and reduce energy prices. The IMF recommends that the EU double its spending in these areas, amounting to an additional 100 billion euros. The suggestion is to borrow together to fund these shared goals, reaping benefits now and paying back the debt over time.

Current and Future Investments

The EU already funds joint defense projects, but more investment may be necessary. Another novel idea is the creation of a European energy market. The EU must transition to clean energy and build cross-border electricity networks. Investing in research and development would benefit all 27 EU countries and their 450 million citizens.

The Power of Coordination

Coordination at the EU level could lead to significant savings. For instance:

• Coordinating energy markets could reduce clean transition costs by 7%.
• Joint defense procurement could save 30% compared to national efforts.

The EU is currently discussing these ideas for their next budget, but no decisions have been made yet.