Former Poland PM: Europe’s impossible trinity

Mateusz Morawiecki is the former prime minister of the Republic of Poland.

The film “Everything Everywhere All at Once” took the Oscars by storm two years ago, its filmmakers offering a vision taking place in many worlds simultaneously. However, this title could just as well be the name of the strategy Europe’s been trying to pursue in recent years — unfortunately, with devastating results.

We live in one reality. But EU decision-makers want, in theory, to secure everything, everywhere and do it all at once. However, their plans don’t reflect real-world realities.

The bloc’s lawmakers want to impose the most stringent environmental standards, but they’re competing with countries that don’t care about these standards at all. They praise free trade, while all other major players choose on-the-sly protectionism. The EU imposes debt reduction requirements on its members, but it also keeps calling for ever more ambitious commitments. We hear that debt should be reduced and inflation lowered, that arms spending should be increased, that coal should be phased out and investment should be made in low- and zero-carbon technologies.

The strategic mistake Europe’s making reminds me of the Impossible Trinity concept. In the 1960s, economists Robert Mundell and Marcus Fleming developed a model, contending it’s impossible to simultaneously achieve the following three things in economic policy: a fixed exchange rate, an independent monetary policy and the free movement of capital. At most, two of these policy elements can be pursued simultaneously — not three.

And yet, today, Europe has imposed an impossible triad of ambitions on itself: Its policymakers want to maintain the most generous social policies and investments in new technologies and innovation; they want to expand defense capabilities; and they want the European Green Deal.

But in the short term, it isn’t possible to fulfill all these objectives at the same time. This is our impossible trinity.

The EU and its member countries are currently committing between €700 billion and €1.4 trillion a year to achieve climate neutrality by 2050, and they will continue to do so in the coming years. These aren’t just unimaginably large sums — the European Green Deal consists of a whole complex architecture of standards and costs, creating an unfriendly ecosystem for private industry and entrepreneurs.

It’s no wonder more and more companies are moving to countries where energy prices are lower and bureaucracy is less burdensome. The German chemicals giant BASF has set its sights on China, while other German companies — including Aurubis and Schaeffler — are expanding in the U.S. And this is just the beginning.

We in Poland are also beginning to be impacted by all this, and the examples are multiplying. For example, the GE Power subsidiary has decided to close its foundry in Elbląg, Poland and will cease operations by 2025.

All this calls into question the viability of the welfare state model. Europeans remember well the heavy sacrifices caused by Covid-19, the associated uncertainty, rising prices, the specter of bankruptcy and unemployment. As it stands, the total expenditure on social policy in the EU is between €3 and 4 trillion.

Europe’s currently spending around $400 billion on defense. | Sean Gallup/Getty Images

The truth is, no one in Europe’s prepared for significant cuts to social policy, but if policymakers persist with their unrealistic triad, the cuts will have to come. And this will mean the rupture of the social contract, the disruption of the social market economy and, very importantly, the corrosion of the essential nature of European identity. Indeed, the welfare state’s one of Europe’s greatest achievements.

Then, finally, there’s security policy. We have to boost our defense capabilities — or, to put it more broadly, the resilience capabilities of EU member countries — to protect what we’ve achieved over decades. For Poland, the Czech Republic, Slovakia, the Baltic states and Romania, the stakes are even higher and are existential in nature.

The task we face is made more difficult by the fact that we’re living in a time of rising multipolarity. The rivalry between the U.S. and China means Washington will devote more attention and resources to the Indo-Pacific and to counter Chinese influence. Multipolarity has also set up a complex constellation of interdependencies and rivalries — with Russia as the aggressor, India aspiring to become a global power, and Muslim states and countries of the global south eager to wield more influence and power.

Against this backdrop, Europe’s currently spending around $400 billion on defense — and it’s still $400 to 500 billion short. If Europe’s to be secure against threats from Russia and its friends, if it’s to be a global player, it must spend 4 to 5 percent of GDP on the military. This applies to every NATO member country.

In sum, Europe faces three big areas of expenditure, but there isn’t enough money in its national budgets to pay for them. So, it must choose from one of three possible approaches:

Either it must prioritize climate and security policy, but then accept the severe social cost and eventual underspending on innovation. Or, it can maintain the social model of the welfare state and ambitious climate targets, but give up on boosting its military power. Or, it has to favor Europe’s security and the welfare state model, but consequently reconsider its current climate policy.

I’m a strong advocate of this third option: the welfare state and the security state.

Choosing the first would mean choosing a Europe doomed to stagnation and, moreover, a Europe troubled by social conflict. How exactly do EU elites intend to convince the European public to pay the ever-increasing cost of green policies when Europe’s responsible for only 8 percent of global carbon emissions?

The second option coincides with current Brussels policy. But while the combination of the welfare state and climate policy are fine in times of peace, we now live in an era of great danger. Without strong defense, Europe will become prey to others. And whoever thinks Russia will stop at Ukraine should abandon their foolish illusions.

It’s time to wake up.

At the strategic level, Europe’s biggest problem right now is being minimalist when it comes to defense and maximalist in its climate policy. Europe must undergo a profound, wide-ranging reindustrialization — including in its defense industry. And it also needs to engage in a fundamental remodeling of its public finances. It must become a continent of innovation, investment, talent, high technology and well-paid jobs.

The European Green Deal consists of a whole complex architecture of standards. | Nikolay Doychinov/Getty Images

I’m calling for a politics of realism. European security strategy should be redefined, large-scale investments in future technologies urgently launched, defense industry spending doubled; and the EU’s tax base must be enriched by the billions of euros currently flowing out to tax havens, or being earmarked for reducing carbon emissions by 2050.

Either Europe will become the continent of the future, or there will be no Europe at all.