Europe’s Budget Debate Has a Blind Spot

Europe is slowly realizing that the best way to manage future crises is to reduce exposure to them in the first place.

When EU leaders gathered in Brussels last month to discuss the 2028 to 2034 Multiannual Financial Framework, familiar fault lines resurfaced. Frugal countries such as Austria, Germany, and the Netherlands are calling for deeper cuts.

The 16 member states in the Friends of Cohesion group, primarily from Southern and Eastern Europe, are instead defending cohesion spending. France is pushing for new own resources. This debate is once again focused on who pays for what, with the European Union’s budget at the center.

These discussions are disconnected from the broader debate in Brussels about competitiveness and security. The recent energy crisis taught Europe a costly lesson: competitiveness is not only about productivity, but also about reducing vulnerability.

Europe still imports around 57% of its energy and has spent an additional €60 billion on fossil fuel imports since the crisis began. Every energy price shock, supply disruption, or geopolitical crisis ultimately hits European households and businesses.

Brussels policymakers are beginning to realize that investments in energy systems are also investments in resilience and security. The European Commission’s recent proposal to give member states greater fiscal leeway for clean energy investments reflects this shift.

The European Parliament is debating what competitiveness should mean in practice: not only productivity and innovation, but also resilience, strategic autonomy, and energy security. However, the overall signal remains contradictory, with some areas receiving more attention than others.

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While clean industry is increasingly recognized as strategic, climate and environmental spending, along with MFF tracking requirements, continue to come under pressure. Other economies have already acted on these lessons.

China offers perhaps the best example of how investment in energy systems can strengthen competitiveness. For decades, Beijing has treated electrification, grid infrastructure, and clean energy technologies as strategic assets, investing heavily in these areas.

The result is what some analysts call the world’s first “electrostate”: an economy built around abundant electricity and dominance in clean energy supply chains. China plans roughly $574 billion in additional grid investment by 2030 and treats electricity infrastructure as a source of economic power.

The United States has come to similar conclusions and is scaling up grid investments. Last year, the U.S. invested $115 billion in electricity grids, around a quarter of global grid investment and more than any other country.

In comparison, the European Commission estimates that around €600 billion in grid investments will be needed by 2030 to support electrification and system integration. Yet Europe still struggles to translate this into budgetary priorities.

It is a complex issue.