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The EU has a commitment problem. It usually shows its mettle in emergencies — as the Jean Monnet saying goes, Europe is forged in crises. The EU also excels at a sort of negative long-termism, in its fondness for legal constraints that tie its hands or cut off future room for manoeuvre — witness new fiscal rules driving budget consolidation just when massive new public investments are needed.
But setting positive long-term goals and then vigorously pursuing the means to achieve them? Not so much. It’s hard to imagine something like the Apollo programme in the EU. It’s as if its decision-making structure, and its make-up of many countries with countervailing interests, make it prohibitively averse to big long-term commitments.
The cost of commitment phobia is growing by the day. With transformational challenges across the board — decarbonisation, defence, and productivity and innovation reforms — both the public and private sector need to know the direction of travel and pace of change to make their own long-term decisions accordingly.
In Rome, where I have just spent a few days, the government has joined Berlin’s rearguard action against the EU’s ban on tailpipe emissions from new cars from 2035. This is despite warnings from Stellantis, the group which dominates Italian car production, that delaying the electric vehicle transition would only hurt carmakers’ profitability as it extends the time they must invest in parallel technologies.
When governments lack belief in their own ostensible goal, let alone policies to support it, no wonder consumers hesitate to make the shift. The result is lagging demand, increasing the challenge for the car industry and related sectors such as Europe’s fledgling indigenous battery makers.
Commitment phobia, in other words, undermines confidence in future demand for the new goods and services Europe hopes to produce. It was precisely by creating expectations of lucrative markets that Washington’s Chips Act and Inflation Reduction Act were so effective in boosting factory construction.
So if European leaders are serious about what they claim to want, they need to be willing to prove that they really mean to get there. In industrial policy this means action to create markets of sufficient size in the sectors where leaders agree homegrown capacity is essential. In fiscal policy, it means negotiating the amount of public investments in European public goods in the EU’s next seven-year budget — whether funded through more common borrowing, greater contributions or via national budgets.
For Ukraine, more multi-year financing should urgently be guaranteed. It would help to formally segregate blocked Russian central bank reserves for compensation to Ukraine. More must be done, too, to make the EU ready for Ukraine’s eventual membership.
In monetary policy, it is time to signal more strongly the expected downward path for interest rates, so businesses and households can commit long-term expenses with confidence. “We need to give more predictability”, Bank of Italy governor Fabio Panetta told me. In a recent speech, he warned against the risk of “data point dependence”, where central banks — and the decision makers who take their cue from them — are perceived as excessively reactive to short-term news and not sufficiently focused on the longer term.
He rightly calls for “directional guidance” on the current likelihood that financing costs will keep falling. In my view, the European Central Bank should go further and look at targeted operations for green investments. That would create confidence that even if monetary policy needed to be tighter for the economy on average, funding for investments elected politicians have said are imperative would be increasingly affordable.
We should give credit where it’s due: the EU does get results for many of its ambitions. In climate policy, its carbon emissions fell a stunning 8 per cent in 2023. But the proof of the EU’s ability to set goals and meet them lies a generation back.
The single market was launched just seven years on from the 1986 Single European Act. The euro was a reality within a decade of the Delors Report on monetary union. It took 10 years between opening membership talks with former communist states in 1994 and the first eight joining in 2004.
True, the EU was smaller then, and perhaps members trusted each other more. But the road is open for “coalitions of the willing” to forge ahead. And trust, too, is a form of commitment. Benjamin Franklin’s apocryphal remark applies to EU states today: they must hang together or they shall all hang separately. The choice is theirs.
