EU Dummies, Posing as Leaders, Accelerate Push For War Economy

In the week between the Munich Security Conference (MSC) and the Ecofin meeting of EU Finance Ministers, a strategy for rearmament started to take shape in Europe. It began with German Defense Minister Boris Pistorius, who announced in Munich a target of 3.5% of GDP for the defense budget to be reached in the next years, way over the 2% demanded by NATO. His colleague Finance Minister Christian Lindner promised a financial deregulation that will make investing in the arms race more attractive to investors.

Estonian PM Kaja Kallas, who is pushed by some in Brussels as the future EU Commissioner for Defense, exploited the hype on the Navalny case at the MSC to propose a 100 billion Eurobond to finance an arms buildup against Russia, on the model of the “Recovery Fund” launched after the Covid pandemic.

Kallas’ proposal was picked up by French Finance Minister Bruno Le Maire at the onset of the Ecofin meeting on Feb. 22 in Ghent. He proposed to “mobilize all of Europeans’ savings – €35,000 billion – to finance the climate transition, fund our defense efforts, and invest in artificial intelligence. Since things aren’t moving forward with all 27 members, I proposed that we move forward on a voluntary basis with a small number of member states…”

The stage was thus set for former ECB chairman Mario Draghi to address the Ecofin and use his undeserved aura of competence to lecture the gathered government officials on the need for massive investments in the military sector and climate transition. “I do not mean just government money,” he said, “but private savings as well: how to mobilize private resources in a much higher way than the past,” Draghi explained, adding that he was “impatient” to discuss ways and means to do that.

It should be clear what the above policy, if implemented, would mean for the European economy. So-called climate transition means a net loss of productivity, so much so that nobody is ready to invest in it without huge government incentives, while defense investments have never been productive and generate only short-lived so-called “rearmament booms”. Both tend to be inflationary. At a time when all European economies are on the decline and over-indebted, that would mean: the shrinking resources, instead of being used to create productive employment, would be diverted into non-productive activities and new financial bubbles.

The problem for Draghi, Le Maire, Kallas and their likes is that governments are so over-indebted that a way to finance the arms buildup must be found, off national budgets. Thus, the launch of a modern version of “war bonds”, to attract private savings to fund the endeavor. For Germany, the increase in the defense budget promised by Scholz means going from $65.3 billion to $142.8 billion. Currently, the aggregate figure of all national defense budgets in the EU is less than $300 bn. But EU dummies fantasize about reaching the U.S. level of $877 bn – although that implies an unsustainable effort for most national budgets.

That is why they want to launch something similar to what Hjalmar Schacht, Hitler’s central banker and Finance Minister, did to finance the Nazi rearmament effort. Schacht used a small company, Metall Forschungsgesellschaft (Mefo), to issue a giant amount of debt notes, eventually discounted by the central bank, to finance rearmament out of the national budget. The Eurobond scheme is similar, with the role of the Mefo played by the EU, a non-state entity, but ultimately the debt issued would be guaranteed by member states.