EU Faces Tough Balancing Act Between Climate Goals, Economic Independence, and Fiscal Restraint
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The EU faces a trilemma of completing the green transition, achieving economic security, and maintaining fiscal discipline. It likely can't accomplish all three.
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The green transition is necessary to address climate change, but it will be costly if costs are distributed unfairly.
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Economic security is also needed to reduce dependence on other global powers like the US and China. This also requires public investment.
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Germany favors strict fiscal discipline, while the US is investing heavily in the green transition and economic security at the expense of fiscal discipline.
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The EU needs more centralized fiscal capacity and an industrial strategy to compete with the US and China while assisting countries with less fiscal room.