EL 86 | Getting Out of the Dead End
ITALIAN | FRENCH | GERMAN | GREEK
Europe is in danger, caught between the threat of a trade war with the United States and the uncertainty of the conflict in Ukraine, on which its security depends. The new course of American politics has revealed the unsustainability of a divided Union, incapable of supporting Kyiv and defending its own economic sovereignty. The negotiations on the Multiannual Financial Framework (MFF) 2028–2034 could become an opportunity to relaunch the process of reforming the Treaties. The European Parliament must use its veto power over the MFF to demand that the European Council initiate a procedure for revising the Treaties aimed at giving the Union genuine fiscal capacity.
The acceleration of history experienced in recent months has made it increasingly clear that Europe must become capable of acting as a federal state in the face of the overwhelming threats that, from every direction, endanger the security and well-being of its 450 million citizens. Unfortunately, the current institutional framework — still largely based on an intergovernmental decision-making system — forces the Union to fight for its own survival, hampered by the short-term and often conflicting interests of its 27 Member States.
The situation has drastically worsened with Donald Trump’s return to the White House. The new U.S. administration has moved from a policy of disengagement from Europe to one of dominance over our continent. The goal is to establish a new transatlantic relationship based on the subjugation of Europe to the “America First” doctrine. This paradigm shift is already producing severe consequences, particularly in the realms of security and the economy.
In the case of the war in Ukraine, Trump’s statements — at times openly hostile toward Zelensky — have made the future of Kyiv’s resistance against the Russian invasion highly uncertain. While U.S. military and technological support remains essential for now — especially in terms of intelligence and satellite capabilities — political and financial commitments have been significantly scaled back. Faced with this vacuum, the European Union has been forced to step in. Yet, its efforts to maintain support for Ukraine are progressing with difficulty, marked by deep divisions among Member States, unequal military contributions, and weak political coordination.
In an attempt to appease Trump and secure at least minimal U.S. support, European countries have agreed to purchase American-made weapons for Ukraine and to increase their defense spending, aiming for 5% of GDP within ten years. The NATO summit in The Hague at the end of June, which defined this commitment, was characterized by an excessively submissive European stance toward the U.S. administration — made evident by NATO Secretary General Mark Rutte’s obsequious behavior toward Donald Trump. At the same time, the European rearmament plan is mainly resulting in the asymmetric strengthening of national armies, with no real initiative to develop a common defense policy.
Equally critical is the growing economic tension between the European Union and the United States, which has now escalated into a full-fledged trade standoff. The Trump administration is working to introduce a broad system of tariffs on all foreign imports, aiming to reduce the U.S. trade deficit, promote domestic reindustrialization, and — above all — secure the funds needed to cover the costs of the “Big Beautiful Bill,” the new federal budget law recently passed by Congress. The heavy tax cuts for the wealthiest brackets and the significant increase in spending on defense and immigration control cannot realistically be offset by the drastic welfare cuts foreseen in the legislation.
In a letter addressed to the European Commission, Trump has threatened to introduce across-the-board tariffs of 30% on European exports to the United States — a measure which, if enacted, would have an impact comparable to an embargo on many sectors of European exports, particularly the automotive, chemical, and agri-food industries. Despite this mounting pressure, the European Commission has so far adopted a cautious, if not submissive, approach.
This is all the more problematic given that negotiations with the U.S. administration intersect with security issues and Europe’s dependency on Washington in many strategic areas. Brussels is well aware that it lacks the political leverage and capacity to shift the conversation from the technical level of trade agreements to the real arena of power politics — despite the fact that, given the size of its market, the EU would have significant room for maneuver. As a result, the Union is attempting to avoid an immediate escalation by tolerating a series of unilateral concessions. One prominent example is the exemption granted to U.S. companies from the 15% minimum corporate tax previously agreed upon at the OECD level.
The core issue, once again, is that the European front is far from united and fails to provide the Commission with the necessary political backing. Some Member States — those most economically vulnerable to U.S. retaliation — are pushing for a more conciliatory line, while others are demanding greater firmness and the immediate launch of countermeasures. However, this phase of apparent waiting cannot last much longer. If an acceptable agreement is not reached by August 1st, the European Union may be forced to launch a package of retaliatory measures, prominently featuring the long-debated digital services tax — a measure that would directly affect major American tech platforms operating in Europe. What is at stake is not just the resilience of transatlantic trade, but the EU’s ability to defend its economic sovereignty in a global order increasingly governed by the logic of brute force.
Trump’s strategy relies on a form of “economic gangsterism”: threats, blackmail, and unilateral impositions. If European states want to protect their citizens and escape the dead end their divisions have led them into, they must agree to equip the European Union with the tools necessary to hold its own against the world’s major economic powers.
Against this complex backdrop, the European Commission has recently published its proposal for the Multiannual Financial Framework (MFF) for the 2028–2034 period. This is an attempt to modernize the EU budget and make it more suitable (or perhaps less unsuitable) for addressing the many threats to the Union’s survival. First of all, it should be noted that the new MFF would reach €2 trillion — slightly more than the current framework set in 2020 at €1.074 trillion, plus the €750 billion from Next Generation EU. The new financial architecture proposes a significant rationalization of spending programs, aiming to simplify administration and strengthen the Commission’s political oversight.
The proposal also reflects a profound shift in the Union’s political priorities, with significant increases in allocations for migration management and defense. A new European Competitiveness Fund would also be established, with a budget of €409 billion, aimed at supporting the development of strategic technologies. In terms of funding the budget, the Commission proposes introducing new “own resources.” These include an extension of existing carbon taxes via the ETS and CBAM mechanisms, a contribution linked to non-recycled electronic waste, a fixed levy on tobacco excise duties, and a tax on large companies with a turnover exceeding €100 million. Furthermore, the Commission would be allowed to borrow up to €150 billion to provide loans to Member States for strategic joint projects. Although many observers consider it an ambitious budget proposal, it still falls short of the spending targets clearly identified in the Draghi report to enhance Europe’s competitiveness vis-à-vis American and Chinese competition.
The most important political point, however, is that even this minimal modernization of the EU budget seems unlikely to succeed, as it runs up against the constraints imposed by the Treaties’ legal framework. Articles 311 and 312 of the TFEU give the approval process for the MFF a strongly intergovernmental character. In particular, when it comes to own resources, unanimity is required both at the EU level — within the Council — and at the national level, through parliamentary ratification. Given these constraints, it seems unlikely that the budget will be adopted in the form proposed by the Commission — especially since it has already sparked criticism from various interest groups, the Committee of the Regions, and several governments, including Germany’s.
And yet, the underlying political issue — the vital need to overcome the status quo and equip the Union with the minimum tools necessary to ensure its security and competitiveness — remains a common problem for all Member States, even those most reluctant to accept greater sharing of resources and expenditures. The European Union needs a federal budget, of adequate size and, above all, free from national vetoes, to effectively respond to global and internal challenges, on which the political and economic stability of individual Member States also depends.
Armed with this awareness, the federalist and pro-European forces within the European Parliament must use the negotiation on the new Multiannual Financial Framework (MFF) as a strategic lever to relaunch the battle for Treaty reform. Thanks to Article 312 TFEU, the Parliament holds a veto power over the MFF’s approval: this prerogative must be exercised decisively to force governments to initiate the procedure for revising the Treaties, with the goal of giving the Union true autonomous fiscal capacity. This reform should include, in particular, extending the ordinary legislative procedure to the approval of both the own resources decision and the MFF itself. This demand has already been put forward by the AFCO Committee as part of the Treaty reform proposal adopted by the European Parliament in November 2023.
The Parliament must therefore maintain its veto over the MFF until the European Council agrees to convene a Convention for Treaty reform. In that context, Parliament must strongly revive the constituent battle, placing at its core the creation of the Union’s own fiscal capacity — a battle that must be actively supported by all those governments that wish to lead Europe out of the dead end and revive the process of political integration.
The European Letter is published in 7 languages under the auspices of the Luciano Bolis European Foundation in cooperation with the Union of European Federalists, whose activities are co-funded by the European Union.