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EUROPE’S HALF-BUILT UNION

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25 November 2025

EUROPE’S HALF-BUILT UNION: WHY THE EU WILL NEVER MAKE IT TO SUPERPOWER

Europe is trapped in a structural contradiction. It has a single currency but twenty seven separate financial systems, tax regimes and debt markets. This half-built architecture leaves the EU too integrated to be flexible and not integrated enough to be strong, producing the strategic weakness we see today and is described below. 

Until Europe completes the missing pillars - capital markets, eurobonds and unified taxation - it will remain an economic giant but a geopolitical lightweight.


The 4F boiler plate method used to write this article is described at the end.

There is a glossary and references.

Support from guided AI has helped generate this article.

1. THE FAULT - EUROPE’S STRATEGIC WEAKNESS

  • Europe built a single currency without building a single financial system.
  • Twenty-seven states still run their own banking rules, bond markets and tax regimes.
  • This creates a hybrid structure. Too integrated to be flexible. Not integrated enough to be strong.
  • Every shock reveals the gap. Eurozone debt crisis. Covid borrowing. Ukraine. De-industrialisation.
  • Europe remains economically huge but strategically weak. Its financial architecture is incomplete.

2. THE FIX - WHAT A UNIFIED EUROPE WOULD LOOK LIKE

2.1 A unified European capital market

  • One rulebook for banks, insurers and investment funds.
  • Capital flows across borders as easily as within a single state.
  • Savings in Germany can finance factories in Italy or Spain.
  • European companies gain access to deeper funding pools.
  • Startups scale faster. Big projects become feasible.

2.2 Eurobonds

  • Bonds issued by the EU as a single sovereign entity.
  • Borrowing costs converge across the Union.
  • Italian or Greek debt no longer triggers market panic.
  • The euro becomes a stronger reserve currency.
  • A shared debt instrument stabilises crises and increases confidence.

2.3 A unified taxation framework

  • Not a single rate, but a single structure.
  • Common rules for corporate tax.
  • Ends internal competition between Ireland, Luxembourg, the Netherlands and others.
  • Creates predictable revenue for shared EU programmes.
  • Brings Europe closer to a federal model without eliminating national variations.

3. THE FORMULA – HOW A FULL UNION WOULD FUNCTION

  • Eurobonds provide stable long-term financing for defence, energy and industrial policy.
  • A unified capital market pools continental savings and lowers financing costs.
  • Cross-border banking reduces fragmentation and increases resilience.
  • Aligned tax rules reduce volatility and support investment.
  • Europe finally gains the financial backbone required for strategic autonomy.

4. THE FALLOUT - RISKS, COSTS AND POLITICAL TRADE-OFFS

Risks include:

  • Northern states fear underwriting southern liabilities.
  • Loss of national autonomy over taxation and regulation.
  • Transition costs for low-tax states such as Ireland.
  • Increased centralisation in Brussels.
  • Public backlash against integration.

The price of inaction is visible:

  • De-industrialisation in Germany, France, Italy and the UK.
  • Persistent low productivity.
  • Increasing dependence on US and Asian capital.
  • Weaker supply chains.
  • A slide towards strategic irrelevance.

Europe is declining not because of external threats, but because it lacks the collective will to complete its own project.

5. THE FEEDBACK - STRATEGIC RENEWAL AND LONG-TERM LEARNING 

  • A completed financial union allows Europe to act strategically instead of reactively.
  • Crises become less frequent and less severe.
  • The EU can finance its industrial and energy policies without relying on external powers.
  • The euro strengthens as a global reserve currency.
  • Political legitimacy improves as decision-making gains coherence and confidence.
  • Europe rises from managed decline to managed renewal.

6. REFERENCES

7. GLOSSARY

  • Capital Markets Union – A project to integrate EU financial markets so capital moves freely across borders, ie one deep pool.
  • Eurobond – A bond issued by the EU as a whole, backed collectively by member states. War bonds are the attempt at starting this.
  • Fiscal Union – Shared taxation and spending structures that reduce divergence and competition between states.
  • Financial Fragmentation – When lending conditions differ sharply between countries, despite a shared currency.
  • Profit Shifting – Moving corporate profits into low-tax EU jurisdictions.
  • Reserve Currency – A currency widely used in global trade and finance. The dollar dominates. The euro lags.

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  • See next: Why Europe Cannot Become an Empire

  • The 4F Method
  • It's a boilerplate problem-solving method for churning out quick on-the-fly action-centred answers to situations calling for change. Nothing clever, just methodical. 
The 4F method for managing change distils decades of practical problem solving into a simple four-step discipline: diagnose the fault, define the fix, design the formula and assess the fallout. It is the fastest way to cut through complexity and get clear understanding, direction and risk awareness. Applicable in any political, economic or organisational situation.

It starts with identifying the ailment; then diagnosing the root causes; proposing a strategic solution on best use of resources to achieve the objectives while mitigating the risks; and finally planning with programs of work, implementation/ execution; while always testing for and mitigating risk; and progressing with full stakeholder involvement. 

It works for wars, political transitions, economic reforms, geopolitical shifts, any change-management situation — and it is btw the backbone of this blog's "Heart of Empire Collapse" series.

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