On the Road to a Hyperstate: EU Commission Circumvents Financing Rules
19th August 2025
The European Union is funded by contributions from its member states. At least, that’s what the founding treaties say. In practice, however, the EU has long been taking other paths.
At the core of Europe’s financial architecture lies a clear separation of responsibility and liability: Article 125 of the Treaty on the Functioning of the European Union (TFEU), the so-called “No-Bailout Clause.” It states, unequivocally, that neither the Union nor individual member states may assume the debts of other states. The purpose of this provision is to prevent free-rider effects (moral hazard) at the expense of other member states: each state is responsible for its own obligations.
Still, the clause does not exclude political support, as long as it does not mean assuming the existing debts of other states. A notable example of this practice were the bailout programs for Greece during the sovereign debt crisis one and a half decades ago.