European economic policymakers have had a packed schedule lately. First, the European Central Bank’s governing council gathered to deliberate on what would become its 10th consecutive interest-rate hike. Then, the European Union’s Economic and Financial Affairs Council met for an as-yet-inconclusive negotiation about reforms to EU fiscal rules. Finally, European ministers, central-bank governors and regulators held their traditional informal meeting to discuss economic governance and fiscal and monetary policy coordination. Unfortunately, however, none of these meetings is likely to bring the changes Europe needs.

When the Covid-19 crisis erupted, European authorities and central bankers moved quickly to implement a powerful, innovative response that few would have thought possible. But the resulting increase in public debt, together with the recent bout of inflation, has spooked policymakers. Now, some EU member states—particularly those that had reservations about the pandemic spending—are advocating a return to austerity, and the ECB has once again embraced a hawkish stance. Will this be a transient episode of reform fatigue, or is Europe poised to return to its old ways for good?

The European Commission, along with many central bankers and finance ministers, recognises that an asymmetric federation with one central bank and many fiscal authorities, each operating according to national fiscal rules, has a deflationary bias. But even though this tendency clearly puts the EU at a disadvantage compared to the United States—which can respond to crises with a far more supportive mix of policies—the political will to counter it is nowhere to be found.

The European Commission’s proposal for reforming EU fiscal rules is a case in point. Despite being less stringent than the stability and growth pact that is now in place, it includes many undesirable pro-cyclical elements. The implication is that today’s weakening growth will be accompanied by a sharp fiscal consolidation. If adopted in their current form, the proposed changes would require the EU to increase its overall structural primary surplus by an estimated 0.65% of GDP annually from 2025 to 2028. That is a significant figure—and it’s even higher in the cases of France (1.1%) and Italy (0.9%).

To achieve that level of surplus, the EU would have to undertake a coordinated fiscal tightening. And, in fact, the European Commission is already forecasting that scenario in 2024, just as the ECB has announced that monetary policy will remain in restrictive territory.

The problem, of course, is that excessive tightening under these conditions will have serious negative consequences. By 2025, at which point the ECB will probably have started its next easing cycle, one can expect monetary–fiscal crosswinds that will hamper growth and increase the likelihood of below-target inflation, as occurred in 2013–16. At the same time, the lack of fiscal space will limit public investment in critical strategic areas such as defence, energy, climate mitigation and adaptation, and technology.

Make no mistake: without some form of fiscal federalism that supports common expenditures to advance shared objectives, the EU is doomed. If the new fiscal rules are to be credible, more fiscal space must be created at the federal level. Recognising this is the first step towards breaking the EU’s longstanding political impasse (which has been reinforced by a lack of mutual trust and courageous leadership) and guiding the negotiations that follow.

On an optimistic note, the need for closer fiscal union and cohesion in tackling looming challenges is now widely recognised. However, reforms to achieve such outcomes are still viewed as tasks for the future rather than as urgent priorities. As long as the can is being kicked down the road, European fiscal and monetary policy will continue to do harm, potentially killing the patient before the cure arrives.

To be sure, macro policies aren’t everything, and the EU has a full plate in dealing with other urgent issues such as migration, market competition, banking regulation and the fallout from Russia’s war in Ukraine. But as long as there’s an excessive emphasis on stability over growth, Europe will remain mired in stagnation, convergence on common solutions will be difficult to achieve, and popular support for the EU will be at risk. This matters because economic integration without political support is neither desirable nor possible.

Next year’s European Parliament elections will be an important test, demonstrating the extent to which Europeans support a meaningful reform agenda and reject a return to the EU’s old ways. We can only hope that they choose wisely, and that it’s not too late.

Ukraine has been forced into a high-intensity war where its freedom and national survival are at stake. To fight back and be able to push out the Russian invader, Ukraine needs not just political support and money. Crucially, it needs weapons and ammunition. Weapons without ammunition are useless.

Russia’s stocks of artillery shells, and their use, are much higher than Ukraine’s—and the price for this difference is paid in Ukrainian lives. We have said repeatedly that the defence of Ukrainian sovereignty is existential, for Ukraine and for the rest of Europe. We cannot want this goal without giving Ukraine the means to achieve it.

Since Russia launched its war against Ukraine, the EU has shown that it gets what is at stake and is ready to break taboos when the need arises. One year ago, we began to finance, for the first time ever, the supply of lethal military equipment to a country under attack. Then in the autumn we started to train Ukrainian soldiers on our soil, under the EU flag. We are on track to train 30,000 Ukrainian soldiers by the end of this year. Now we are taking another big step by working together to supply Ukraine with the ammunition it so urgently needs.

On 20 March, European leaders agreed to a three-track proposal that I put forward, together with Thierry Breton of the European Commission, to finance the urgent provision of artillery ammunition from existing stocks or pending orders, to jointly procure new artillery shells, and to work with the EU defence industry to increase production capacity to address our own needs and sustain our support for Ukraine.

In the past 20 years Europeans have reduced their investments in defence industrial capacity, which we now need to ramp up again because of the radically changed security environment.

Concretely, we aim to provide Ukraine with 1 million rounds of artillery ammunition within a year, using a total of €2 billion under the European Peace Facility. With a reimbursement rate of 50% to 60%, this new package will enable us to leverage roughly €4 billion.

This decision demonstrates the EU’s ability to act quickly when we need to, and it is proof that we remain determined to give Ukraine the means it needs for its legitimate self-defence. Like-minded partners play a key role in this collective effort. I thank Australia for its unwavering support to Ukraine’s defence. It has never been more vital to step up, and the EU and Australia have promptly answered the call.

This decision will raise the question of how giving ever more weapons can bring an end to this horrible war. The answer is that to defend itself and to end the war, Ukraine needs both weapons and ammunition—for as long as Russia keeps attacking and bombing Ukraine.

We, of course, like Ukraine, want peace. But we do not seek any kind of peace. We want a just and sustainable peace, based on the UN charter, where Russia withdraws its troops from all the territory of Ukraine that it currently occupies. This is also why we support President Volodymyr Zelensky’s peace formula.

In other words, how the war ends matters—not just that it ends per se with Russia making territorial and other gains from its war of aggression.

We also want accountability, and that is why the indictment by the International Criminal Court of President Vladimir Putin is important. He must pay for the war crimes he is responsible for, including the forced abduction of so many children from Ukraine.

In this war, history and justice are on the side of Ukraine. But we need to accelerate the march of history. Our military support and our decision to buy ammunition together serve the cause of a just peace in Ukraine. It is the right decision and a necessary one.

Almost one year after Russia’s invasion of Ukraine, the war is entering a new phase. Following the failed attack on Kyiv last year and the Ukrainians’ stunning counteroffensive that liberated Kharkiv in the north and Kherson in the south, Russian President Vladimir Putin has embarked on a punitive campaign targeting civilians and energy infrastructure with drones and missiles. Stymied on the battlefield, Putin is seeking to maximise the number of Ukrainians forced to spend the northern winter in the cold and the dark.

The front line has not moved much in recent months. But the fighting remains fierce (with many casualties) and Russia seems to be preparing for a major spring offensive. The Russian economy is on a war footing, and the Kremlin propaganda machine has gone into overdrive, peddling a mix of apocalyptic threats and imperial delusions. Russia’s last independent news outlet, Meduza, and its last human-rights organisation, the Sakharov Center, are being forced to close. The mood in Moscow is defiant.

Under these circumstances, Ukraine’s allies are right to scale up their military assistance, including by providing battle tanks. The goal is for Ukraine to prevail against its aggressor. But we cannot wish for that end without giving Ukraine the means to achieve it. The alternative is a prolonged war of attrition, leading to more deaths in Ukraine, greater insecurity for Europe and continued suffering around the world (owing to Russia’s weaponisation of energy and food supplies).

Ukraine’s partners had already committed to provide advanced air defences like the US-made Patriot missile system, more capable howitzers and additional armoured combat vehicles. But before the recent big breakthrough, there was an intense debate about whether to supply tanks like the German-made Leopard 2 or the US-made M1 Abrams. I, for one, have long argued that we must provide Ukraine with the means to push Russia out. Tanks are necessary for Ukrainian forces to break through the current stalemate of trench warfare and to regain the momentum they had last year when they retook Kharkiv and Kherson.

Reaching the ‘tank agreement’ took time and intense discussions, including at the European Union Foreign Affairs Council. The breakthrough came when Germany agreed to deliver Leopard 2s, in coordination with the United States, which will provide some 30 M1 Abrams. Although delivery of these assets will take time and require intensive training and maintenance, the result is not confined to the battlefield. We have sent another powerful signal to Russia that Putin was wrong—once again—to doubt our resolve.

Of course, some will argue that more weapons will prolong the war and risk further escalation, and that diplomatic negotiations are the only solution. But while Europeans will always remain open to anyone who is serious about seeking a negotiated and just end to the war, Russia so far has made clear that it intends to persist with its war crimes. Everyone who has tried to negotiate with Putin has come back emptyhanded. Until that changes, we must conclude that the only way to end the war is to give Ukraine the means to drive out the invader.

The EU’s task, therefore, is to do everything in its power to support Ukraine. And that is what we are doing. Together with EU member-state governments, we have already mobilised €12 billion ($18.5 billion) worth of weapons and related supplies for Ukraine, €3.6 billion of which is coming from the European Peace Facility. When also accounting for macro-financial and humanitarian aid, our total support comes close to €50 billion.

The EU is now the leading provider of military training for Ukrainian personnel. Through the EU Military Assistance Mission in Poland and Germany, we are on track to have trained 15,000 troops by April, and we are prepared to double the effort and train another 15,000—including in the use of tanks such as the Leopard 2.

The EU is also working on a 10th package of sanctions, having already cut our dependence on Russian energy imports within the space of just a few months. And make no mistake: the sanctions are working. Russian oil is selling at a US$40 per barrel discount to Brent, and its daily energy revenues are expected to fall from around €800 million to €500 million after our latest measures kick in this month. The war is costing the Kremlin dearly, and these costs will only rise the longer it lasts.

Last January, just before the invasion, I visited the Donbas region and saw the front line. For obvious reasons, that trip has stuck with me. On my way back through Kyiv, Ukrainian Prime Minister Denys Shmyhal acknowledged that ‘the invasion is coming, and we know you will not come to fight on our side’. But, he hastened to ask, ‘Will you give us the weapons we need to defend ourselves?’

Frankly, I was not sure how to respond, because I did not know how strong European resolve would be. Today, the answer comes easily. Ahead of today’s EU–Ukraine Summit in Kyiv, no one doubts that Europe has risen to the occasion. Now, we must continue to give Ukraine the means to defeat the aggressor, restore its sovereignty and find its place in the European Union.

It seems obvious that sanctions—an increasingly important tool of Western foreign policy—should inflict significant pain on the target without exacting unsustainably high costs from the country imposing them. But the European Union’s sanctions on Russia—intended to punish the country for its brutal war of aggression against Ukraine—do not meet this condition.

At the centre of the EU’s plan to punish Russia is an effort to eliminate its dependence on the cheap Russian energy that long powered its growth, including by increasing its reliance on liquefied natural gas imported from the United States and elsewhere. But LNG has long been an overpriced (and carbon-intensive) alternative to piped gas: before Russia invaded Ukraine, it was four to five times more expensive. Now, it’s even more exorbitantly priced: since the war began, the cost of LNG has more than doubled.

But with the Kremlin slashing gas flows to Europe, in order to ensure that it—not the EU—dictates the timetable for phasing out Russian supplies, European countries have had little choice but to rely increasingly on LNG imports. This is creating serious challenges for Europe’s manufacturing base, to the point that some European firms are now considering shifting production to the US, which offers not only cheaper fuel, but also massive subsidies and tax credits under its new Inflation Reduction Act.

Already, Europe’s decision to turn its back on Russian gas has increased the likelihood of a deep recession. Skyrocketing gas prices—which are a staggering 14 times higher than two years ago—have fuelled inflation and destabilised eurozone financial markets. So, just when Europe’s economies are on the brink of contraction, the cost of living is spiking—and the threat of rolling power outages looms.

European policymakers’ adoption of desperate measures like price caps and regulated tariffs could well exacerbate the situation. To conserve gas, some European governments have even turned to coal. European leaders like French President Emmanuel Macron have pleaded with US President Joe Biden to ease pressure on their economies by adjusting some controversial provision in the Inflation Reduction Act. Months after an agreement to strengthen and expand NATO, transatlantic relations are beginning to fray.

The one thing the EU appears unwilling to consider is changing course on sanctions. Just this month, it imposed an embargo on imports of Russian crude and joined its G7 partners in introducing a US$60-per-barrel price cap.

Europe’s sanctions recall America’s 1930 Smoot–Hawley Tariff Act, which substantially raised import duties on more than 20,000 goods. Far from protecting US industry, the tariffs prompted other countries to retaliate, deepening the Great Depression and contributing to the rise of political extremism, especially in Europe.

Today, too, many European countries’ politics are lurching rightward. Italy’s current governing party traces its roots to Benito Mussolini’s fascist movement; likewise, the Sweden Democrats has neo-Nazi roots. In Poland and Hungary, right-wing governments show increasing authoritarian tendencies. If soaring energy prices and runaway inflation worsen economic conditions—a likely scenario in the short term—far-right forces could gain further ground across the continent.

One might be able to argue that the sanctions’ large costs were worth shouldering if they were significantly hampering Russia’s war effort. But while Russia has certainly suffered, and Ukraine has achieved some high-profile military victories, nearly a fifth of Ukrainian territory remains under Russian occupation. If the EU is enduring so much pain, while Russia’s aggression proceeds apace, sanctions become tantamount to self-flagellation. This is why moral outrage, however justified, should never drive policy.

To be sure, the EU’s international image has long rested on its reputation as a force for democracy, human rights and a rules-based order, which strengthens the case for a bold, if costly, response to Russian aggression. But, had cooler heads prevailed, it would have been obvious that a rapid transition away from Russian energy supplies would undermine the EU’s global standing by denting its sustainability credentials—the turn to coal is a case in point—and causing a global energy crisis, which is hurting poorer countries.

Given that the EU accounts for 11% of global energy consumption, its quest to secure replacement supplies was bound to disrupt the entire global economy. After all, the alternative supplies the EU secured were not idle. International oil and LNG supplies were already tight, and there was inadequate production capacity to compensate for the loss of Russian supplies.

As a result, when the EU rejected Russian energy, the world suddenly faced energy scarcity, with countries in Asia, Latin America and elsewhere losing access to some supplies on which they had previously depended. In fact, soaring European gas prices have encouraged some shippers to divert LNG cargoes from Asia to Europe.

For far too long, the EU believed that economic and trade relations could be managed without regard for foreign-policy and security considerations. The Ukraine war made that approach untenable. But that should have prompted a more considered debate about what should come next, rather than an abrupt transition away from Russian energy supplies. This was a huge decision directly bearing on Europe’s socioeconomic security; by making it rashly, the EU committed a major strategic blunder.

Russia’s actions in Ukraine are clearly both unjustified and unconscionable. But it makes little sense for Europe to respond by damaging its own competitiveness and global standing. It will take years for Europe to recover from the unprecedented energy crisis that it has helped to create.

On 25 September, Italy went to the polls and elected a record number of far-right members of parliament. As a result, the leader of the largest party in the winning coalition, Giorgia Meloni, is expected to form a government later this month. If that happens, it will be a first for two reasons: the country will have its first far-right government since the end of World War II and its first government led by a woman.

Since these unusual characteristics apply to a G7 nation with the world’s eighth-largest economy—right in the middle of an international crisis—observers are understandably worried. While doubts abound, I’ll focus on two key aspects: the so-called risk of fascism and the foreign-policy challenges of Rome’s new government.

A far-right government, not a fascist one

Dozens of catchy headlines suggest that Rome may soon have its first ‘fascist government’ since the dark days of Benito Mussolini. Sure, Meloni herself praised the country’s dictator multiple times in her younger days. Several high-profile members of Meloni’s party, Fratelli d’Italia (Brothers of Italy), share a common past among the ranks of post-fascist organisations, and indeed the party itself rose from the ashes of a former post-fascist party, whose controversial symbol (a tricolour flame) it still bears today.

However, cries of fascism are thoroughly exaggerated, due to a number of internal and external factors.

Domestically, Meloni’s far-right coalition rests on tenuous ground. The three key parties have different views on a number of vital issues (including sanctions against Russia, which Meloni supports, unlike the two other coalition parties), and there would be no parliamentary majority if any of the three left the government.

On top of that, keeping the coalition’s electoral promises would be far too costly, and the necessity to ditch many of the proposed reforms would likely impair governmental stability, which, after all, has never been a feature of Italian politics (the country has had 67 governments in the past 76 years).

That said, Italy has a number of checks and balances that would avert any serious risk to democracy. The president of the republic acts as a guarantor of the constitution and has significant powers to that end; the Constitutional Court oversees the admissibility of all laws; and the political opposition and civil society as a whole continue to remain vigilant.

But there are many external constraints as well, since Rome has countless high-profile international engagements that inevitably influence the direction of any new government.

Italy is a founding member and a top-10 donor of many international organisations, whose prearranged obligations prevent substantial deviations from the commitments set by previous administrations—a condition known as path dependence.

It is also the number one peacekeeper of the global north, in terms of both the number of missions it leads and the number of troops it deploys. This strong commitment to the rules-based order would be virtually impossible to relinquish during the average lifespan of an Italian government (1.7 years, since 2000).

And as much as the winning coalition campaigned for regressive social policies with an abrasive rhetoric, its ability (and perhaps real willingness) to make substantial changes is limited, and so dark words like ‘fascism’ have no place in this case.

Rome’s new foreign and security policy challenges

The first major foreign policy challenge for the new government will be Italy’s military expenditure, which will rise from 1.5% to 2% of the country’s sizeable GDP ($3.3 trillion in 2021) in six years. It will have to partially decide where to allocate the large extra funds while avoiding unproductive expenses.

Within the EU, Meloni and her allies will have to demonstrate that they can effectively lead the union’s third-largest economy and second-largest manufacturer and continue to consolidate the country’s public finances. Much of Italy’s huge post-Covid-19 recovery plan, which is worth around $340 billion, depends on this.

Close to home, a volatile Mediterranean remains a significant concern, exacerbated by the ongoing Libyan civil war, very strong flows of irregular maritime arrivals (71,000 in the first nine months of 2022) and regional rivalries with France, Turkey and Egypt.

Further away from Italian shores, but still inside its Mediterraneo allargato (enlarged Mediterranean) sphere of interest, Italy’s numerous trade routes and peacekeeping missions provide ongoing strategic challenges, including the key NATO mission in Iraq that Italy has commanded since May.

In addition, the ‘enlarged Mediterranean’, which stretches to the Arabian Sea, is witnessing a growing Chinese presence through Beijing’s ‘Maritime Silk Road’ and Russian military presence through its bases in Syria, further complicating Rome’s deployments under multilateral and unilateral missions aimed at strengthening the rules-based order.

And, finally, Italy is quietly focusing on the Indo-Pacific, by virtue of its long-term engagement in the Western Indian Ocean and recent partnerships with ASEAN, India, Indonesia, South Korea and Vietnam. How Rome will engage with the world’s geopolitical and geoeconomic epicentre—and its many potential flashpoints—will be a substantial test for the new government.

Overall, these challenges will put much pressure over the new Italian administration, which could seek not to fail by maintaining existing foreign policy postures—although we can also expect occasional controversial measures (especially when it comes to trying to stem irregular maritime arrivals). Should political divisions continue to worsen due to domestic and foreign policy divergences, however, Italian politics could always play its time-tested trick and change yet another government.