Giorgia Meloni has urged the European Union to consider suspending its fiscal rules if the Iran crisis escalates. Her warning reflects growing concern that geopolitical instability is now directly threatening economic stability in Europe.
At the same time, the conflict itself has revealed something deeper: the weakening of the post 1945 rules based international order, traditionally upheld by institutions like the United Nations and the European Union.
Crisis of the Rules Based Order
The war has highlighted the limits of multilateralism when major powers act unilaterally. The system built after World War II was designed to prevent precisely this kind of escalation through collective security and legal norms.
However, recent events suggest those mechanisms are no longer effective. Instead of acting through international frameworks, states are increasingly bypassing them, relying on military force and strategic alliances.
This raises a fundamental question: if rules are ignored by the most powerful actors, can the system still function?
The United Nations Paralysis
The Iran conflict has exposed deep structural weaknesses within the United Nations, particularly the Security Council.
Designed as the central authority for maintaining international peace, it has been effectively paralysed by competing interests among its permanent members. The use of veto power and selective political alignment has prevented a unified response.
While a resolution was eventually passed, it focused narrowly on condemning Iran without addressing the broader context, including the initial strikes by the United States and Israel. This selective framing reinforces perceptions of double standards and undermines the UN’s credibility.
There are mechanisms such as the Uniting for Peace procedure that could bypass Security Council deadlock, but their absence in this crisis reflects a lack of political will rather than institutional incapacity.
European Union Marginalisation
Despite its economic weight and historical role in diplomacy, the European Union has remained largely sidelined.
The EU’s identity as a normative power based on diplomacy and soft influence has limited its ability to respond in a conflict increasingly shaped by hard power. Internal divisions among member states have further weakened its position.
Some countries have supported US and Israeli actions, while others have pushed for restraint, preventing a unified European stance. This fragmentation has reduced the EU’s ability to act as a credible mediator.
Moreover, Europe’s reliance on the United States for security constrains its strategic autonomy, limiting its willingness to challenge Washington even when its own principles are at stake.
Economic Shock and Policy Response
Meloni’s proposal to suspend EU budget rules reflects the economic consequences of geopolitical breakdown.
Rising energy prices, market volatility, and uncertainty linked to the conflict are already affecting growth projections. A prolonged crisis could push European economies into deeper instability.
The Stability and Growth Pact, which restricts government deficits, may limit the ability of states to respond effectively. Suspending these rules would allow governments to increase spending to cushion economic shocks, similar to the response during the COVID-19 pandemic.
Structural Weaknesses in EU Power
The EU’s limited role in the crisis is not just a result of internal disagreement, but of deeper structural and psychological constraints:
- Lack of a unified foreign and defence policy
- Dependence on US security guarantees
- Reluctance to use coercive power
- Persistent belief in the durability of transatlantic alignment
These factors combine to produce a form of strategic passivity, even in moments where European interests are directly affected.
Implications for Global Governance
The Iran war suggests a broader shift in international politics:
- Multilateral institutions are losing influence
- Power is increasingly exercised through unilateral or alliance based actions
- Legal norms are being selectively applied or ignored
This does not necessarily mean the end of the international order, but it does indicate a transition toward a more fragmented and contested system.
Can the System Be Revived
Despite current weaknesses, both the United Nations and the European Union retain significant institutional capacity and resources.
The issue is not the absence of tools, but the absence of political will. Mechanisms exist to restore relevance, whether through reforming decision making processes or adopting more assertive strategies.
For the EU, this could mean developing greater strategic autonomy. For the UN, it could involve greater use of General Assembly mechanisms when the Security Council is deadlocked.
Analysis
Meloni’s call for fiscal flexibility is a symptom of a deeper geopolitical shift. Economic policy is increasingly being shaped by security crises, while traditional mechanisms for managing those crises are failing.
The Iran conflict illustrates a dual breakdown:
- A geopolitical breakdown, where major powers bypass international institutions
- An institutional breakdown, where those institutions fail to respond effectively
The EU’s economic concerns and the UN’s political paralysis are two sides of the same phenomenon.
Ultimately, the “patient” of multilateralism is not dead, but it is severely weakened. Its survival will depend on whether states are willing to reinvest in collective frameworks or continue down a path of unilateralism and strategic competition.
At present, the trajectory points toward the latter.
With information from Reuters.
