Preparing the European Economy for War by Lucrezia Reichlin

In response to the war in Ukraine, European leaders pledged to strengthen their shared defense and foreign policy capabilities. But, on this point, the historical record is clear: building a common defense capability will require the EU to build a shared economic capability.

LONDON – The European Union has shown remarkable – and, for many, surprising – political unity in response to Russia’s invasion of Ukraine. From suspending the Nord Stream 2 gas pipeline to excluding certain Russian banks from the SWIFT financial messaging system for international banking payments, to revoking Russia’s “most favored nation” trading status, members of the EU have taken decisive steps to squeeze Russia economically. But Europe has yet to take adequate steps to protect its own economy from the fallout from Russian President Vladimir Putin’s war.

At an informal meeting in Versailles last week, French President Emmanuel Macron urged his fellow European leaders to focus first on what they need to achieve and leave discussions of how to get there for more. late. This is a wise suggestion from a leader who understands that new political instruments, which may involve greater burden sharing among member states, tend to be much more divisive than common goals.

Thus, EU leaders Express their “resolute” commitment to strengthen investments in defense capabilities. Germany, for example, will allocate an additional 100 billion euros ($111 billion) to defense this year. And the EU has unveiled a plan to cut Russian gas imports by two-thirds this year and end its reliance on Russian fossil fuels entirely by 2030 – a process that will require an accelerated green transition.

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Mary I. Bruner