Key messages
- International instability has revived the need for a solid European foreign policy whose strength will depend largely on internal social cohesion.
- Inequality, precariousness and the sense of economic and social insecurity fuel public disaffection and strengthen populist narratives that question the democratic consensus.
- Increasing military spending at the expense of the welfare state may erode democratic legitimacy and undermine the social resilience on which security also depends.
- Europe’s external strength requires balancing security and internal cohesion, directing defence investment towards specific capabilities, industrial cooperation and strategic autonomy.
- Financing European defence should rely on solidarity mechanisms such as eurobonds, integrating it into the framework of European public goods without putting social investment at risk.
Analysis
Social cohesion as a strategic condition
Growing international instability has revived in Europe the debate on the need for a more cohesive and strategic foreign policy. However, this objective may collide with a major domestic challenge: the erosion of social cohesion within the member states. While European governments ask their citizens to prepare for a more conflictive geopolitical environment, accept sacrifices and finance higher spending on security and defence, societies are facing daily difficulties that can erode their trust in institutions. Persistent inflation, especially in food, the decline in purchasing power, increasingly limited access to housing, precarious and insecure employment, and the widening gap between elites and ordinary citizens all feed this sense of fragility.
The current debate on taxing the super-rich reflects the link between taxation, social cohesion and democratic legitimacy. Europe is home to 677 billionaire households whose accumulated wealth equals 13.9% of the continent’s GDP, a concentration that exposes the imbalance between private accumulation and collective welfare. Combined with the low effective tax burden on large fortunes and some multinational corporations, this situation reinforces the perception that states sacrifice the well-being of the majority while protecting the wealth of a mobile and sheltered elite. Examples from France, the UK and the Netherlands illustrate this fiscal imbalance. While most people pay between 25% and 50% of their income in taxes across the distribution, billionaires and centimillionaires pay between 20% and 25%. In France the debate is now centred on the Zucman Tax, a minimum annual rate of 2% on the wealth of households with €100 million or more, which enjoys the support of 86% of the population according to an Ifop survey.
Critics of this proposal argue that such a measure would only be viable globally given capital mobility and the ability of the super-rich to move their assets, potentially neutralising the tax and triggering outflows of wealth towards more favourable jurisdictions. They also question its real effectiveness, suggesting that it could distort investment and raise less revenue than expected. Zucman and others respond that states retain the capacity to tax their citizens even if they relocate abroad.
The debate illustrates that one of the main challenges for European societies in the coming years will be maintaining a balance between fiscal stability and the preservation of social protection systems. In a context marked by rising food and housing prices, precariousness and growing inequality whether real or perceived, the question is not only how to finance public spending but how to do so without eroding social cohesion or institutional legitimacy. Capital and wealth taxation therefore fits into a broader discussion on the sustainability and fairness of the European model, which requires adapting tax systems to the dynamics of the digital economy and a globalisation increasingly fragmented by geopolitical tensions yet still characterised by high capital mobility.
It remains unclear whether higher social spending automatically reduces discontent or grievances. The experience of the Common Agricultural Policy illustrates this. For more than six decades it has channelled enormous resources to the rural world without achieving a lasting reduction in farmers’ discontent, which continues to surface across much of the continent. This suggests that the sources of social malaise are more complex and that institutional legitimacy depends as much on perceptions of fairness and equitable treatment as on the actual effectiveness of public policies.
The prioritisation of security or social issues varies substantially among member states, especially in the context shaped by Russia’s invasion of Ukraine. For countries in northern and eastern Europe from Poland to the Baltics and the Nordics the Russian threat on their borders understandably raises security and defence above other objectives.
Regardless of these differences, the current context has enabled radical-right populist parties to capitalise on a combination of cultural and economic grievances. Although cultural concerns are a stronger predictor of voting behaviour, economic insecurity mobilises broader sectors. A study by the Friedrich Ebert Foundation in 2022, linked to Germany’s Social Democratic Party, illustrates this point. In a hypothetical electorate of 110 people, five of the 10 ‘culturalists’ would vote for the radical right (50%), compared with ten of the 100 ‘materialists’ (10%). In absolute terms the latter are more decisive, demonstrating that the advance of these parties depends on their ability to unite both groups.
Their rise has been favoured by successive crises that have eroded both material security and the cultural consensus surrounding European identity and the foundations of the social contract. The financial and sovereign debt crises of 2007 to 2012, the 2015 migration crisis, the 2016 Brexit referendum, the COVID 19 pandemic and Russia’s war against Ukraine, together with its inflationary effects, all converged with structural transformations such as demographic ageing, the accelerated digitalisation of labour markets, widening income gaps and increasingly tangible climate impacts.
In parallel, the radical left has also channelled parts of social discontent, especially among modest and precarious sectors. In France, La France insoumise consolidated itself as the main left-wing force with 22% in the 2022 presidential election. The June 2024 European elections confirmed this trend. Among voters with monthly incomes below €1,250, 38% supported parties of the New Popular Front. In Germany, Die Linke achieved around 9% in the latest federal elections, doubling its 2021 result and becoming the leading party among young voters with strong support in the east.
This accumulation of challenges has had a corrosive effect on social cohesion. While not all European societies experience it with the same intensity, the consequences are visible. There is growing political radicalisation towards the extremes, especially to the right, widespread anti-establishment narratives and even authoritarian tendencies in many countries. The combination of economic insecurity and cultural grievance has created fertile ground for the rise of radical-right populist parties. The 2024 European elections confirmed this trend. Surveys now show that Alternative für Deutschland and Die Linke together reach more than one third of voting intentions in Germany, the EU’s largest economy.
Understanding the rise of these forces requires looking back to the fractures opened by the management of the eurozone crisis. The austerity imposed by Berlin and Brussels through the troika and the absence of a common response were perceived by broad social sectors as an institutional failure. Rather than strengthening trust in governments, crisis management undermined perceptions of elite integrity and of their capacity to protect the common good. This deterioration was especially evident in Spain, one of the most pro-European countries and among the most affected by the financial and sovereign debt crisis. Between 2009 and 2011 the share of citizens with a positive view of the EU halved, while negative perceptions doubled. In 2013 during the bank rescue and with unemployment near 27%, 77% of Spaniards believed their voice was not taken into account and 70% distrusted EU institutions. A striking 37% even supported leaving the euro, reflecting the depth of the legitimacy rupture between citizens and European institutions, with an even greater erosion of trust in national institutions.
These wounds healed poorly in Europe due to subsequent crises. In Spain, the main challenge lies not only in the widening gap between rich and poor but in the structural weakness of the incomes of the social majority. Large segments of the population cluster in low and lower middle-income brackets, limiting their economic resilience and increasing their vulnerability to external shocks.
Migration later became and remains a central issue of the European political debate, used by radical-right parties as a catalyst for identity and security narratives. The pandemic tested welfare systems and state capacity to support populations through prolonged crises. Although it initially strengthened confidence in public action at the European level and revalued the role of the state nationally, its later effects of inflation, rising debt and deterioration of public services revived social discontent.
Beyond the short-term impacts of each crisis, long-term trends reveal uneven trajectories of welfare across Europe. Some macroeconomic indicators show a slight improvement. Income inequality has fallen, and poverty risk rates have declined in several countries. The Gini index confirms this with a modest reduction in income inequality in the EU over the past decade, returning to pre-2008 levels. However, the rise in inequality since the 1980s remains a structural trend across most OECD countries. Differences between states persist. Spain and Finland have seen wealth inequality rise since 2008, while Slovakia and Slovenia maintain more equitable distributions.
On the social front the situation remains worrying. Material deprivation, in-work poverty and the difficulty of making ends meet are increasing even among those with jobs. As a result, there is a growing gap between macroeconomic improvement and the everyday experience of many households. This fuels institutional distrust and a sense of injustice that transcends statistical indicators. The mismatch between aggregate progress and individual perceptions is closely linked to perceived social inequality.
Social protection systems remain essential to combating poverty, yet they are still perceived mainly as a budgetary cost rather than as a long term social and economic investment. According to the EAPN Poverty Watch, there is a lack of a systemic approach that coherently integrates all phases of the policy cycle from design to evaluation, limiting the effectiveness and sustainability of these systems. People most affected by poverty and exclusion rarely participate in designing these policies, contributing to a disconnect between institutional priorities and actual needs. Problems of coherence, coverage and financing persist, aggravated by structural challenges such as the technological transition, climate change, demographic ageing, war and the crisis of democratic legitimacy affecting many liberal regimes.
The cost of living crisis continues to affect large social groups. Inflation remains high across Europe. In July 2024 food and non-alcoholic beverages were 12.6% more expensive on average. This persistent rise erodes households’ purchasing power and the trust in governmental ability to protect the population and manage the economic situation. In 2023, 45.4% of Europeans reported difficulty making ends meet, with large differences between countries, from around 25% in the Nordics to more than 80% in Bulgaria and Greece. Housing is another acute problem. Between 2015 and 2023 housing prices rose by an average of 49% in the EU, reaching increases of up to 140% in cities like Prague and Brno. Housing pressures have become one of the main drivers of intergenerational frustration and territorial inequality.
Inequality and in-work poverty show mixed trends. While income inequality has tended to moderate over the long term, signs of reversal have emerged in recent years. Between 2022 and 2023 inequality increased in one third of EU states while in-work poverty remained high at around 8.3%, affecting especially temporary and part-time workers, most of them women. Although tax and welfare systems mitigate inequalities to some extent, many countries still fail to address the structural roots of precariousness. Employment no longer guarantees effective protection against poverty. Even full time work often fails to ensure a dignified standard of living.
The sustainability of the welfare state requires not only preserving it but also reforming it to adapt to new economic, technological and demographic challenges. Ensuring its viability requires rethinking public financing through a broader and more progressive fiscal base that shifts part of the tax burden away from labour and towards capital and wealth while combating tax evasion more effectively. These measures are essential to secure the resources needed to sustain high quality public services without resorting to austerity policies that weaken social cohesion.
At the same time social sustainability must align with environmental sustainability. Climate and social policies still tend to advance in parallel when they should be integrated into a common strategy that combines equity and green transition. Incorporating redistributive objectives into climate policies is essential to avoid new imbalances and ensure a just transformation. Strengthening public participation in policy design and evaluation, especially for those experiencing poverty and precariousness, is equally vital for ensuring that the welfare state remains a source of democratic legitimacy and social resilience.
Militarisation and the spending dilemma
Among public services, security now occupies a central place in European public perception. According to the Spring 2025 Eurobarometer, 73% support increasing military production capacity and 69% favour raising defence spending. The support shows that security is perceived as an essential public good, although it does not necessarily imply accepting social cuts in exchange. The July 2025 Elcano Royal Institute Barometer indicates that most Spaniards (57%) believe Europe should increase its investment in armament and defence, but opinions diverge when it comes to raising national military spending if this entails reducing other public budget lines.
There is broad consensus among governments, analysts and public opinion that Europe must strengthen its defence effort. The Russian threat, the new context of geopolitical competition and uncertainty regarding US commitment make it necessary to develop autonomous capabilities and reinforce the European industrial base. Yet this process raises a fundamental dilemma: how to balance external security with internal stability.
Moreover, spending more does not necessarily mean spending better. Attempting to reach an abstract percentage of GDP instead of setting concrete capability objectives creates incentives to spend without attending to results or taking advantage of economies of scale. These national targets fragment planning, reduce efficiency and hinder European industrial cooperation. The priority is not to raise spending in isolation but to coordinate demand, consolidate production and undertake coherent joint procurement that strengthens Europe’s strategic autonomy.
Defence investment can have positive effects on the economy. It boosts industry, stimulates research and technological development and generates highly-skilled employment. However, the orientation of spending cannot be guided solely by economic and industrial considerations. Defence must be understood above all as a public good linked to European security and strategic sovereignty. A Europe that seeks to act autonomously and exert influence must spend better: with a common vision, joint planning, and sustained reinforcement of its defence industrial and technological base.
The reality is that rising military budgets in a context of limited public resources and strong pressures on social spending constitute a first-order strategic risk. The issue is not that social spending is stagnant but that the defence effort may displace essential priorities in housing, healthcare, education and pensions. Some European leaders have openly acknowledged this. The Finnish Prime Minister said in March 2025 that ‘in Finland we have had to cut public spending’ to increase the military budget. A strategy disproportionately centred on the military dimension could therefore undermine in the medium term the internal cohesion it seeks to protect.
It is also important to note that a sustainable European defence cannot rely on the massive acquisition of US equipment. This technological and commercial dependence deepens strategic subordination to Washington and weakens European industry, preventing investment efforts from translating into innovation, productivity and technological sovereignty.
At the same time, it must be remembered that for many Europeans, especially in the west and the south, everyday threats do not take the form of missiles or enemy armies but of unaffordable rents, overstretched public services or ineffective transport. The Spring 2025 Eurobarometer shows that 51% of euro-area citizens and 48% outside it identify inflation and the cost of living as their main concern, ahead of security or defence. It should be recalled that in the EU 93 million people live at risk of poverty or social exclusion, a figure that underscores the need to maintain a strong welfare state. This is compounded by the deterioration of psychological well-being. According to the October 2023 Eurobarometer, 46% of Europeans experienced some emotional or psychosocial problem, such as anxiety or depressive feelings, in the previous 12 months.
Strengthening the welfare state through reforms should therefore be understood as a security strategy in its own right. This view is rooted in the model of European solidarity-based capitalism that emerged in the Rhine region as a result of the cooperation between Christian democracy and social democracy, which gave rise to the social market economies after the Second World War. That social balance may now be at risk. Rising military spending risks absorbing the political and financial capital that should be directed to climate resilience, digital equality, education and healthcare. Ultimately, investing in cohesion, in affordable housing, quality education, strong local governments and robust health systems is also investing in security.
Europe should not conceive security as a trade-off between defence and welfare. Both realms are complementary. External projection also relies on internal cohesion, and military strength is much more sustainable when grounded on a solid social foundation. In this respect, France, which is experiencing significant political instability, offers a compelling example of the challenge ahead. Despite being the EU country that allocates the largest share of its GDP to social protection (32%), in recent years it has seen the gap between the poorest and wealthiest households widen sharply following the withdrawal of social benefits and a favourable environment for more affluent and protected groups. This rise in inequality has fuelled discontent and weakened the state’s ability to sustain an inclusive social contract. In this context, building a strong state and a committed citizenry willing to accept sacrifices becomes increasingly difficult, and any external strategy suffers from a lack of internal legitimacy. France illustrates the need to reform the welfare state.
Unlike other powers, Europe cannot and should not build its security by sacrificing its social model. Authoritarian regimes like Russia can do so precisely because they lack accountability mechanisms and base part of their legitimacy on nationalism. Today defence is Russia’s largest economic sector, accounting for more than 7.5% of its GDP, the highest figure since the Soviet Union, following a 70% increase in spending in 2024. That is not the model Europe should emulate.
In the 21st century the strength of European democracies may depend as much on the accumulation of military capabilities as on their ability to generate trust and legitimacy. This is not built through headlines about new defence programmes alone but also through effective responses to citizens’ everyday concerns. There is no doubt that Europe needs to reinforce its military capabilities to confront immediate risks, but its long-term security will also depend on social resilience. A cohesive society with trusted institutions and strong basic services provides the foundation on which any national or European defence strategy must rest.
It is also essential to advance innovative financial mechanisms such as issuing eurobonds and creating progressive own resources that make it possible to reinforce common defence and other European public goods without overburdening national budgets or jeopardising social investment. The precedent of the NextGenerationEU funds demonstrated that joint action and European financing can mobilise vast resources with substantial transformative impact. The same logic could be applied to security and defence, conceived as European public goods whose provision must be collective and solidarity based. The latest Eurobarometer shows that nearly 80% of Europeans support the EU financing common strategic projects, which provides a solid political basis for advancing in this direction. Integrating the defence effort into the Multiannual Financial Framework, following the example of the recovery funds, and combining it with cohesion, industrial, innovation and green transition policies constitutes a pathway consistent with Spain’s interests and with the European model of security and welfare.
Conclusions: Social cohesion, resilience and external legitimacy
Europe needs to reinforce its internal foundations if it seeks to project strength abroad. Social cohesion is one of the pillars of resilience and without it sustaining an ambitious foreign policy becomes significantly more difficult. A solid social contract is an important condition for ensuring that external action is not perceived as distant or unfair. Otherwise, it risks being delegitimised in the eyes of citizens and losing international credibility.
Social cohesion is not an abstract concept, but an essential element of the democratic resilience of the EU and its member states. It is reflected in institutional trust, political participation, inclusion and civic engagement. Where it is strong, institutions enjoy legitimacy and citizens feel part of a shared project. Where it fractures, scepticism towards the elites grows and resistance to accepting collective sacrifices expands. The consequence is clear. Without internal cohesion, resilience to external shocks weakens and external strategy loses its foundation.
The COVID-19 pandemic offers an important lesson in this regard. At first, the lack of European coordination, especially visible in countries such as Italy, where assistance from Russia and China contrasted with the EU’s divided response fuelled mistrust and a sense of abandonment. However, the subsequent launch of solidarity mechanisms such as the NextGenerationEU funds and joint vaccine procurement demonstrated that expansive and cooperative policies can reverse disaffection and strengthen institutional legitimacy. The recovery of public support for the EU to historically high levels confirms that trust is rebuilt when institutions deliver tangible and effective responses to crises.
The battle against COVID-19 was won through unity and solidarity in exchange for reforms. Europe’s major challenge now is to balance external security and internal cohesion on the basis of the renewed principles of the social market capitalism that characterised the continent since the post-war period. Only then will Europe be able to articulate a solid foreign policy in an international environment marked by great power rivalry.
*The authors would like to thank Ignacio Molina, Judith Arnal, Federico Steinberg, José Pablo Martínez and Raquel García for their comments on earlier drafts of this paper
