The war in Ukraine has
had a profound impact on the European Union’s (EU’s) economic outlook,
exacerbating the pre-existing frictions from the post-COVID recovery. Russia’s
illegal invasion of Ukraine has plunged the EU into a period of structurally
low economic growth and high inflation, while also exposing the excessive
dependence of certain Member States on Russian oil exports. In response, the EU
must introduce new, permanent fiscal instruments: on the one hand, to address
the social and economic consequences of the conflict on the wealth of EU Member
States and help reduce inequalities; on the other hand, to better respond to
new geostrategic challenges in a more unstable continent and strengthen the
EU’s foreign policy. This article explores how the war in Ukraine has
influenced the development of the EU’s fiscal capacity. A permanent fiscal
capacity would represent a quantum leap in European legal integration by
enhancing the Union’s strategic autonomy and enabling more predictable,
long-term financial support to Ukraine. However, this article argues that the
EU’s fiscal response thus far remains exceptional in nature, and that
establishing a permanent fiscal capacity would require a profound reassessment
of the legal framework within the EU Treaties, as well as major reforms to
dismantle the EU’s deeply rooted intergovernmental governance system.