US President Donald Trump absolutely loves talking on the phone. When he wants to talk to Europe, he has a clear someone to call: European Commission President Ursula von der Leyen.
In late May, the two-term leader of the European Union’s executive branch talked Trump down from imposing immediate 50 percent tariffs on the 27-country bloc, days after his May 23 threat to start a punishing new trade regime on June 1. Ahead of June’s G7 summit in Canada, she once again picked up, smoothing the way for further trade talks and possible cooperation regarding energy and geopolitical tensions. After just a brief handshake on the sidelines of Pope Francis’ funeral in April, the two finally met in person during Trump’s appearance at the G7 outing in Kananaskis. Von der Leyen also presented a united front with European Council President António Costa.
By offering herself as Trump’s sounding board and interlocutor, von der Leyen is making space for a new wave of EU leadership bringing together Brussels, Paris, and Berlin. She has promised a retaliation plan if the talks go nowhere and Washington unilaterally raises tariffs further. She and French President Emmanuel Macron offered a joint plan to recruit more academic talent to their side of the Atlantic. And she has welcomed new Chancellor Friedrich Merz as Germany tries to shake off the political torpor of its prior government.
“Henry Kissinger would certainly no longer need to ask who to call when he wants to call Europe. He would call Ursula von der Leyen as the strong representative of a strong Europe,” Merz quipped in a May speech acknowledging her leadership achievements.
On von der Leyen’s watch, the EU has begun serious talks about how to make its economy more competitive, less dependent on the US, and better prepared for the future. The next question is, how will the EU pay for it all?
A Controversial Commission
Navigating today’s world will require more than chatting. Iran and Israel are escalating conflicts in the Middle East. Russia has shown no willingness to end the war in Ukraine. Trade war brinksmanship seems unlikely to end soon. Macron and Merz, while friendly, still approach Europe’s biggest policy questions from very differentstarting points. While they may agree on Greenland, they have nearly opposite approaches on public spending.
Still, given Trump’s preference for intimidating his way to a new global order, von der Leyen’s ability to keep a cool head is no small feat. For all of the Brussels grousing about how her administration is too centrallymanaged—and justifiable frustration with her lack of transparency, as shown by the court fight over pandemic-era text messages—there is something to be said for a Berlaymont (the European Commission’s headquarters) willing to lead in the fray. Von der Leyen is at her best during crisis moments when there is clear political will to act, if less effective at managing the commission’s vast regulatory apparatus and day-to-day tussling with member states.
Prior European Commission presidents like Jean-Claude Juncker and José Manuel Barroso were not known for their small egos. Nor can Brussels afford to be wishy-washy given the major decisions ahead. In some ways, the biggest criticism against von der Leyen may not be that she is too heavy-handed, but rather that her policy ambitions are not yet big enough to meet the moment.
Budget Battles
The EU’s next seven-year budget plan will call on every scrap of von der Leyen’s consensus-building talents. EU member states wary of expanding the European purse will go up against countries lobbying for more investment and a European Parliament eager to exert influence over the trillion-plus euros at stake. With two years to reach a deal before the current so-called multiannual financial framework (MFF) expires in 2027, the political warfare will be both drawn out and urgent.
When the process kicks off in July, von der Leyen is expected to release contentious plans for the 2028-2034 funding cycle. A February blueprint sought to lay the groundwork for consolidating the EU’s maze of dedicated funds, a move that promises simplification but also threatens established power dynamics.
If, as the European Commission wrote in February, more than 90 percent of EU funds are pre-programmed for specific purposes from the start, taking away that specificity could result in a major transfer of agency. The European Parliament, in particular, has reason to fear foregoing legislative lock-ins given the difficulty of inserting itself when Brussels makes a quick pivot.
But if Europe is serious about turning itself into a more effective global power, it needs to make peace with a more effective executive. That means letting go of the idea that every centrally spent euro comes with strict conditionality and can only be used if the implementation stars align.
Borrow Better
The pandemic-era Next Generation EU (NGEU) program offers both hope and warning for how the next iteration of EU spending could play out. On the one hand, EU members finally agreed to pool their collective fiscal reputations to make a big investment in Europe’s common future. Recovering from the pandemic was an undisputed collective priority. The borrowing architecture built to support these endeavors is a transformative piece of infrastructure.
On the other hand, as momentous as the NGEU pandemic borrowing program was, it is likely to wrap up with substantial unspent funds. Only about half of the total planned disbursements had gone out the door by May 2025, the commission said. Given the September 2026 deadline for requesting future payments, which must be made by the end of that year, it seems unlikely that the rescue plan will reach its full potential.
This suggests that a looser approach will be necessary to make the most of every possible euro. Furthermore, the EU will need to backtrack from its vow that NGEU was a one-time effort, not to be repeated. To meet the challenges ahead, European leaders will need to change course without immediately going back on their word.
Public Goods
The graceful way to build on NGEU’s successes would be to follow up as quickly as possible with a follow-on “one-off” initiative dedicated to European public goods. Ideally this would be a big, publicly financed fund to update and connect the EU’s electric grid, perhaps with a side of new and improved high-speed trains. But as it turns out, defense may be the cause that catches on.
In that case, finding a way to link EU-wide defense funding with Europe’s security needs would be a very good outcome. It might be intellectually simpler to have the EU fund non-military objectives, thus freeing up national funds for national armies. But there is not, at this time, political support for a massive new infrastructure spending plan, whereas there is interest in seeking a joint solution on military preparedness.
Von der Leyen has already sought to ride this wave with the €150 billion “Security Action for Europe” (SAFE) program, approved in May by member states. It offers an extension of the EU’s new borrowing capacity—and AAA credit rating—to member states interested in taking out defense spending loans. Individual countries will now have a chance to consider what they need and if it makes sense to borrow through the EU or on their own.
As for Brussels, it would get better borrowing costs if its stock of debt were seen by the markets as consistently available, rather than due for imminent paydown. This puts the politicians in a sticky situation. Merz, for example, has said the EU should under no circumstances move toward a permanent debt, even as Macron has called for doubling the EU budget. Under these circumstances, a succession of non-renewable one-off programs is probably the way forward.
As it explores its joint defense procurement options, Europe should resist the urge to create yet another special purpose vehicle, such as the euro crisis financial institutions, or turn to financial engineering as a source of so-called safe assets. Back when those options were first put forward, the EU did not have a joint borrowing program of any size, so even €10 billion or €15 billion in new available debt would have been a boost to the common currency. Now, these mechanisms would be steps backward. Even if Europe creates a new organization to manage policy, procurement, and cooperation with allies, it should funnel borrowing through something that already exists.
Trump’s chaos opens a window for advancing the euro’s international role, and that requires a deep and liquid pool of safe assets that does not succumb to further fragmentation. The EU debt, backed by all 27 countries and managed by the European Commission, is the best choice. Another solid option would be un-mothballing the European Stability Mechanism, an institution managed by eurozone members outside the EU treaties, which already has a top rating and a mature capital market presence. To the extent that political consensus requirements limit either of these avenues, EU leaders should make every effort to offer guarantees and other technical measures to move forward and also accommodate countries that opt out.
Getting Ahead
Von der Leyen’s classic way of operating is to get out ahead of the crowd, put up a tentpole, and see if the consensus rallies around it. This opens her up to criticism that she is operating without a mandate. Yet her greatest talent emerges precisely when these initial forays do not end in success. Rather than double down on a stalled strategy, such as the sovereignty fund she proposed in September 2022, she moves to a new spot on the policy map and tries again.
This willingness to lead flexibly is what Europe needs now, particularly now that Paris and Berlin appear to have relatively stable governments that can turn their attention to European affairs. Merz, Macron, and von der Leyen have an opportunity. Europe should answer the call.
Rebecca Christie is IPQ’s Brussels columnist and senior fellow at Bruegel, the economic think tank.
