If the EU bets on domestic demand

The strategy for the 2028-2035 budget, presented last week by the President of the European Commission, constitutes the response that Europe intends to give in the medium to long term to the challenges - ecological, military, energy, migratory, economic - that the planet is facing. An assessment of its possible effectiveness cannot, however, disregard the US pressures that are reaching the Old Continent via President Trump and that are a source of further complexity and criticality for the European Union.

The US is asking us for two things, which are not insignificant: to accept tariffs without reacting and to decisively increase military spending. The reasons? To rebalance its trade deficit and make its public debt sustainable again, while securing the stability of its currency and Treasury bonds. Behind these economic-financial aspects, however, lies a political need: to bring the sources of development back within its borders, ceasing to be the world's buyer and returning to being the world's producer. And this both for reasons of national security and to respond to the Trumpian electoral base, devastated by the effects of globalisation on employment and wages of blue-collar workers.

It seems that Europe, which has always been reluctant to assume strategic leadership in the Atlantic alliance, is on its way to accepting US demands without distinction, with the exception of the Spanish one on military spending. This acceptance is certainly costly, with tariffs affecting EU exports and the increase in military spending depressing social spending (the recent Bayrou proposal for the French budget is a striking example), but above all it is dangerous, because it adds fuel to the already high fire of populist and anti-European movements, increasing the risk of the EU itself splitting and imploding.

An alternative way, one that accommodates and even helps US demands, while stimulating the European economy and thus European 'policy' exists. It consists in assuming, as the EU, the role of the world's consumer, hitherto played by America, abandoning the mercantilist model à la Germany, based on exports and wage competition in the eurozone, and instead stimulating our domestic demand, coming from a population one-third larger than that of the US, and thus eliminating the trade deficit with the US thanks to the increased imports due to our higher growth. This increase in domestic demand, to be driven by private and public investment to regain competitiveness and make wage increases possible, would further stimulate demand, production and income, thus triggering a virtuous circle.

The only constraint on this proposal is the Stability and Growth Pact, which, by imposing austerity policies, blocks the recovery, thus perpetuating those high public debts over GDP, which the EU pays lip service to reducing. Of course, the 2028-35 EU budget proposal seems to wink at these public investments, proposing an increase from 1,200 to 2,000 billion euros, entirely self-financed by Brussels: but we are talking about 100 billion more a year, a drop in the ocean of the EU's 16 trillion GDP. Even more irrelevant in view of Germany's position, which, while on the one hand does not intend to accept the EU proposal, wishing instead to proceed with its own expansive fiscal policy, on the other hand opposes the use of similar expansive policies by the 'non-frugal' member states, definitively undermining the possibility of these policies having the desired and necessary effect.