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The situation in Europe is getting so bad on so many different levels, the Brussels crowd had to bring in “Super” Mario Draghi to save the day — or at least write a report telling them what to do.
Draghi has spent time at Goldman Sachs, the European Central Bank (ECB) during the sovereign debt crisis, and as unelected prime minister of Italy during the early days of the Covid pandemic and runup to Project Ukraine. Depending on where you sit, he could be an odd choice to chart a path forward; while Draghi knows his way around a crisis control center, he’s also plenty experienced at creating them.
He was one of the chief architects of the EU’s disastrous economic war against Russia and he’s always been a grim reaper for working class citizens of his native country of Italy. No wonder that for months the neoliberal, war-loving spreadsheet crowd in Brussels has eagerly awaited the report as if it is manna from heaven that will help deliver them from the corner they have backed themselves into.
Curiously, his report was delayed by months, which only increased the anticipation, and it finally dropped last week, conveniently timed at another crisis point. Project Ukraine is quickly unraveling and pressure is coming from all directions for Berlin to give the go ahead for joint EU debt in order to make the EU “competitive” again and buy a bunch of weapons to do something (nobody is too sure of what exactly) about Russia. Indeed, Draghi’s report doesn’t say, nor does it ever consider making nice with Moscow.
That’s because the report, “EU Competitiveness: Looking Ahead” is a political document more than economic one intended to not only give cover to the bloc’s disastrous Russia policies, but continue to double down. And it is already being used as more ammunition for those in the Baltics, Poland, the media, US-funded think tanks in Europe, and more who are calling on Germany to support debt for an extended Cold War. Specifically, they wanted Super Mario to tell them how to get out of the predicament of their own making without changing course on Russia and a host of other issues, and Draghi delivered — as long as you don’t let reality get in the way. His answer? More money. Lots of it.
He calls for massive infusions of cash into multiple sectors: green, tech, energy, and of course defense. According to Draghi, the price tag is a minimum of 800 billion euros annually until 2030.
Asked if his message was “implement your report, or die?” he replied that “It’s ‘Do this, or it’s a slow agony.’”
The EU certainly needs an economic plan, but Draghi’s report never questions whether ongoing belligerence toward Moscow (and loss of pipeline Russian gas) is in the bloc’s best interest and it never mentions Brussels’ obsession with austerity, which is once again being forced on member countries. From a purely economic standpoint, the report is trash economics that reads like something out of the late-stage USSR, according to economist Philip Pilkington.
But it does plug nicely into the political economy of today’s EU, which is being subsumed under Washington and NATO. It is engaged in open economic war and an proxy war in Ukraine against Russia, both of which have hurt working class citizens across the bloc. The austerity-obsessed EU is once again forcing its member states to enact austerity budgets. Draghi’s report was requested by European Commission President Ursula von der Leyen, who is working to amass more power to her mostly unaccountable throne, and is one of many voices calling for a defense union and militarization and the ability to borrow and potentially levy taxes to pay for those debts.
Source: https://x.com/WhiteHouse/status/1454246494010318850
So while Draghi’s report is ostensibly about across-the-board bloc “competitiveness” (there’s plenty on weakening antitrust, for example), Russia still dominates the conversation in the halls of power. Von der Leyen wants to create an “air shield” against Russia. The EU’s new High Representative for Foreign Affairs and Security Policy is proposing a €100 billion (to start) eurobond issue to pay for more weapons to be used against Russia.
And Poland, one of the biggest backers of the war against Russia, might also be getting additional input over a whole lot of EU money. Piotr Serafin, a Tusk confidant and Poland’s European commissioner in Brussels, looks likely to be in charge of the EU Commission budget portfolio, one of the most powerful positions as the bloc is set to sort out its seven-year spending plans.
What these people do with a blank check in the name of competitiveness?
The very same week Draghi’s report came down, so did another from Nicole Koenig, head of policy for the Munich Security Conference, commonly referred to as “Davos with guns.” It is set to welcome in current NATO figurehead Jens Stoltenberg as its new chairman next year, and Koenig endorses the idea of a debt-based fund to fuel weapons purchases as part of a European defense union.
Despite all the buildup to Draghi’s report and it being accompanied by similar calls from the Munich Security Conference and every American plutocrat-funded think tank, the immediate response out of Germany was mostly nein.
Germany’s Finance Minister Christian Lindner said plainly that “Germany will not agree to this.”
Lindner is part of the three party ruling coalition that would be unable to garner 33 percent of the vote if elections were held tomorrow. His fiscally conservative Free Democratic Party currently polls around 3-4 percent — not even enough to get them seats in the next Bundestag.
Friedrich Merz, the leader of the Christian Democratic Union (CDU) and current odd-on favorite to be the next chancellor of Germany, said the following: “I want to say this very clearly, now and in the future, I will do everything I can to prevent this European Union from spiraling into debt.”
The CDU currently polls around 31-33 percent nationally. The insurgent party on the left and right, the Alternative for Germany (17-19 percent) is anti-EU and would never support joint borrowing. I haven’t seen a position from the Sahra Wagenknecht Alliance (7-10 percent), but would imagine its hyperfocus on German working class issues means it is also not in favor.
Robert Habeck, leader of the war mongering Greens (10-12 percent), is in support.
Chancellor Olaf Scholz is remaining silent on the issue, omitting any mention of it from his Wednesday speech to the Bundestag. While he has in the past made his opposition known, it’s worth knowing if his thinking has changed as it did repeatedly for nearly every step of escalation in Ukraine. Scholz’s government enjoys record unpopularity, and his Social Democratic Party is being decimated — in the European elections they were embarrassed, in recent state elections they were thrashed, and in national polling they have fallen from 26 percent of the vote in the 2021 election to 14 percent currently.
So yeah, the timing for Berlin to deal with such major European funding requests is not ideal. From another point of view, though, maybe there’s no better time to take advantage of the chaos and get the green light from the lame duck government in Berlin. There are once again rumblings that Scholz should step aside and clear the way for his pugnacious defense minister Boris Pistorius who has been pounding the table for endless military spending ever since he was plucked from the obscure position as the Saxony State Minister of the Interior and Sports.
Secretary of Defense Lloyd J. Austin III is greeted upon arrival to the Ministry of Defense in Berlin by German Defense Minister Boris Pistorius and US Ambassador Amy Gutmann Jan 19, 2023. (DoD photo by U.S. Air Force Tech. Sgt. Jack Sanders)
Any attempt to enact a joint borrowing scheme would require unanimity from the European Council, which is composed of all the bloc’s heads of state, but there is a belief that if Germany goes along others like the Netherlands can be persuaded.
Germany is dealing with its biggest political upheaval since World War II, it’s deindustrializing, and it’s in a recession largely caused by structural problems and its own missteps. Standards of living are declining following years of record immigration, and it’s all combining to produce the most unpopular government in modern German history.
Despite all Germany’s problems, it is still the most powerful economy in Europe that drives the bloc, and any major EU changes must run through Berlin.
And everyone is pressing now.
Poland and the Baltics are haranguing for more. Southern Europe is on board. Countries like Italy and France have supported joint borrowing for years.
US-funded think tanks stateside and in Europe, which really act as plutocrat-funded shadow governments, are pumping out piece after piece about how Europe (Germany) must use joint debt to fund defense.
Here’s yet another recently-released report from the Council on Foreign Relations, “From the Ukraine Conflict to a Secure Europe.” It argues like so many others that the EU, as an auxiliary to NATO, must take the lead role in ensuring that Russia is bordered by unfriendly states:
A European pillar based on the EU would go a long way toward easing if not eliminating the continuing tension between NATO and the EU in the field of security. For all practical purposes, the EU would become a member of the alliance, and cooperation between the two entities should be seamless. Non-NATO EU members would thus enjoy an implicit Article 5 security guarantee, which would be extended to new members as the EU expanded to include non-NATO allies in the Balkans and the former Soviet space.
Unfortunately for Germany and the EU, that will also include propping up whatever is left of Ukraine and probably making sure its bondholders are made whole while still finding spare change to bring Armenia, Moldova, Georgia, and who knows, Kazakhstan(?) on board as well. How to pay for all the color revolution efforts, bribes, military hardware, state aid, and everything else required by the EU’s now-openly subservient role to US imperial ambitions? The CFR piece cites Macron’s big April speech at the Sorbonne as a blueprint, which of course requires common EU debt.
Yet Germany remains opposed.
The country is dealing with its own budget woes and is cutting almost everywhere except on the military. It has a constitutionally-enshrined cap on spending, known as the debt brake, which it tried to sneak around last year, but a court struck it down. And Berlin is even cutting contributions to the EU rather than looking to back bloc-wide debt.
At issue is how EU debt would be repaid. It would either be done through the creation of new EU budget resources, such as taxes levied by the bloc, or through an increase in member states’ contributions to the budget.
Following the release of Draghi’s report, German bond yields rose as investors placed bets on more spending and, therefore, more rate hikes. As I understand it, it would also make the currency stronger since the debt would be safer, and that would be about the final nail in the coffin of the German model as a stronger euro would be another strike against Germany’s export-oriented industry — or whatever is left of it.
At the same time that German yields rose, however, Italy’s borrowing costs fell. That’s because if the EU and its AAA rating covered the debt of poorer member states or borrowed directly to cover member states’ energy crisis needs and more military spending, countries like Italy would have an easier go of it.
Italy currently pays a little under five percent on its 10-year debt, while the EU pays just over three percent. That’s why countries across the EU south, which face higher borrowing costs, are in favor of EU-wide bonds. Countries like Italy in southern Europe have faced decades of privatizations, budget cuts, and wage suppression in efforts to appease the market gods all to no avail.
How fitting that it would be that joint debt might finally get the go-ahead, not to improve the lives of citizens, but to spend hundreds of billions on a bunch of weapons that will leave them bankrupt and still outclassed by Russian firepower and manpower. Maybe there’s some hope for some military Keynesianism militarism effect, but at least to start with, it will likely be funding overpriced and ineffective American weapons.
One can read in Draghi’s plan or Macron’s Sorbonne speech about their concerns for the working man, European families, as well as the climate, and should a plan for joint debt go through there will no doubt be efforts to spin it that way (there already are) but it’s not hard to see where the priorities lie.
The release of his report comes at the same time that the EU is pushing more austerity on its members states. Brussels is then turning around and using those artificial budget shortages as a reason to borrow at the EU level to cover military expenses.
Bloomberg reported back in March that EU officials and investors are using the fiscal rules to push for an EU-wide bond program that would bring investors bigtime profits while allowing the bloc to ramp up military spending without individual nations incurring more debt. See? Win-win, except for the vast majority of Europeans who work for a living and will continue to see social services crumble while life gets more expensive.
This is not a plan to “save” Europe. It is part of the ongoing effort to recreate Europe as a neoliberal paradise for the financial sector and an anti-Russian servant to Washington.
No hundreds of billions in weapons purchases and streamlining will make a difference in Ukraine or in some hypothetical war agaisnt Russia, but it does take advantage of the self-inflicted crisis to shift more power to Brussels, reward investors, and punish workers holding back productivity. The report laments how the US is so much more “successful” in the realms of private equity and venture capital, and has such higher productivity in sectors like healthcare. Yes, who wouldn’t want to emulate the US healthcare system? Maybe all the military hardware will be useful in disciplining the local population in the name of competetiveness, however:
We should be moving to a four day work week, not a six day one. Forty percent or more of of jobs are either pointless or actively harmless. Get rid of them to start. https://t.co/Ubdr4Q5VCi
— Ian Welsh (@iwelsh) July 2, 2024
Think a lot more EU spending will benefit the bloc’s climate goals. There’s a good chance it could take money away from energy investment as Draghi’s report calls for Brussels to free up funding by modifying the European Investment Bank Group’s lending policies and the EU’s sustainable finance frameworks and environmental, social and governance rules to allow for defense investments instead. And let’s not forget that militaries and warfare are the biggest emitters around.
And as the EU cements its role as an underling to Washington and NATO, it will almost certainly need to proceed with further “de-risking” from China the same way it did with Russia. Yet, China dominates multiple stages of the green tech industry. From Draghi’s report:
Some believe that there is little chance that Draghi’s and all the others’ plans come to fruition. Personally, judging by how Project Ukraine has gone and the West’s overall vitriol directed at Russia, I think it’s safer to assume Europe is a long ways from spent and that the EU will continue to dig.
I guess we’ll see. It will certainly be clarifying to see if Germany has an ounce of sovereignty left or if it will give in on its sacred cow. As Ukraine continues to flounder and reaches the inevitable conclusion, it’s likely the calls on Germany to relent will only grow louder and more recriminating.
As the hysteria over Europe’s “agonizing death” reaches a fever pitch it’s worth remembering that there’s one option that always goes unmentioned by the likes of Draghi, Macron, and company.
The Failed Logic Behind the Draghi Report (and All the Others Like It)
Let’s take a step back and really look at what Super Mario is saying in his 400-page screed.
It’s all about EU competitiveness. Well, there are plenty of issues, but one of the biggest reasons the EU’s slow decline became a full-blown crisis is energy. What happened? Here’s Draghi’s story:
Europe has abruptly lost its most important supplier of energy, Russia. All the while, geopolitical stability is waning, and our dependencies have turned out to be vulnerabilities…EU companies still face electricity prices that are 2-3 times those in the US. Natural gas prices paid are 4-5 times higher. Europe was able to satisfy its demand for imported energy by procuring ample pipeline gas, which accounted for around 45% of the EU’s natural gas imports in 2021. But this source of relatively cheap energy has now disappeared at huge cost to Europe. The EU has lost more than a year of GDP growth while having to re-direct massive fiscal resources to energy subsidies and building new infrastructure for importing liquefied natural gas.
There’s more:
High energy costs in Europe are an obstacle to growth, while lack of generation and grid capacity could impede the spread of digital tech and transport electrification. Commission estimates suggest that high energy prices in recent years have taken a toll on potential growth in Europe. Energy prices also continue to affect corporate investment sentiment much more than in other major economies. Around half of European companies see energy costs as a major impediment to investment – 30 percentage points higher than US companiesii. Energy-intensive industries (EIIs) have been hit hardest: production has fallen 10-15% since 2021 and the composition of European industry is changing, with increasing imports from countries with lower energy costs. Energy prices have also become more volatile, increasing the price of hedging and adding uncertainty to investment decisions.
Notice the lack of agency in Draghi’s telling? It’s as if a natural disaster swept down from the heavens, destroyed all the pipelines transporting Russian gas to the EU, and now prevents them from ever being repaired. In reality, the decision is wholly that of the Scholzs, Macrons, and von der Leyens of Europe (and their benefactors). Notice in the following graphs that prices were a little higher than the US, but where does the divergence really start to take off?
Draghi doesn’t investigate further. But as Russian President Vladimir Putin recently put it for the hundredth time at the Eastern Economic Forum in Vladivostok:
It is very strange, and I cannot get my head around it. They up and blew up the gas pipeline in the Baltic Sea. They blew up both Nord Stream 1 pipelines and one Nord Stream 2 pipeline. The second one is fully functional, though. What stops the German government from pressing the button, coming to terms with us and turning it on? How much is it? 25 billion cubic metres through one pipeline?…It was the Poles who shut down the Yamal-Western Europe pipeline. Now Ukraine is closing [transit through Ukraine], and the Nord Stream 2 route along the Baltic Sea bed is not turned on. Well, if they don’t want to, they don’t have to. It will be a loss for them. For us, there will be a certain reduction in revenues, but it’s no big deal.
The EU’s self-imposed lack of competitiveness now requires hundreds of billions to rectify. Since reports are the theme of the week, here’s one more: the German business association BDI released a study claiming that 20 percent of industrial value creation in the country is under threat. At the top of the list of causes is high energy prices and it says Germany needs about $1.55 trillion of investment by 2030.
That’s not all, of course. Not only did the EU harm itself by refusing pipelined gas from its neighbor, it now must spend billions arming itself to supposedly protect against that very same neighbor it launched a proxy war against.
Maybe instead of harming oneself economically, antagonizing your neighbor, continuing to run around like headless chickens warning that the Russians are about to overrun Europe if you don’t spend billions attempting to militarize, you could just not do any of that.
The EU could just stop all this now. The goal was clearly to cause a collapse of the Putin government, install a puppet friendly to the West, and exploit Russia. It failed.
Time to go hat in hand and start begging and maybe in time regain some of what has been lost. Russia has no designs to conquer Europe. So there’s no need to drop hundreds of billions on weapons that, at best, would help escalate to a nuclear war.
Instead get 400 pages of smart-sounding economic nonsense in line with all the think tank fantasies about the EU taking the Russia baton from the Americans who will turn their attention toward China.
Or in Draghi-speak:
With the return of war in the EU’s immediate neighborhood, the emergence of new types of hybrid threats, and a possible shift of geographic focus and the defense needs of the US, the EU will have to take growing responsibility for its own defense and security. The EU’s defense industrial base is facing structural challenges in terms of capacity, know-how and technological edge. As a result, the EU is not keeping pace with its global competitors.
He adds that Brussels must encourage mergers in the defense industry, and companies should have no restrictions on accessing EU funding. Currently, bureacrats are forced to concoct schemes to get around the ban on the EU budget funding defense purchases as EU law stipulates that such funds go to boring old items like agriculture and regional development. But who needs stuff like that when you can point long-range missiles at Moscow and be targeted in return?
Will open-ended spending on defense do what all the weapons to the Ukraine proxy war and unprecedented sanctions couldn’t do?
I guess we’ll see. Draghi’s smart-sounding report is a good companion peace to the recent argument that they just need to keep up the pressure until…Putin dies of old age. That’s the thinking from former senior CIA analyst and Principal Deputy National Intelligence Officer for Russia and Eurasia at the National Intelligence Council Peter Schroeder, writing at Foreign Affairs that, “what is certain is that, at some point, he will die.” More:
The evidence suggests that on Ukraine, Putin simply is not persuadable; he is all in. For him, preventing Ukraine from becoming a bastion that the West can use to threaten Russia is a strategic necessity. He has taken personal responsibility for achieving that outcome and likely judges it as worth nearly any cost. Trying to coerce him into giving up is a fruitless exercise that just wastes lives and resources.
Did it really takes hundreds of thousands of lives lost and hundreds of billions spent for brain geniuses like Schroeder to understand what Russia had been telling them along? Well, if we read on we get to this:
If Putin is unwilling to halt his assault on Ukraine, then the war can end in only one of two ways: either because Russia has lost the ability to continue its campaign or because Putin is no longer in power.
We’ll see how that works out. If it doesn’t, well, hopefully Draghi is still kicking so he can get to work on another report.
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Thank you, Conor.
It seems that in EU as in US, the only “good” debt is that taken on to fund militarism.
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Re: the German opposition to Eurobonds, the thought occurs, “gee, it turns out that ordoliberalism is good for something, after all.”
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re: this bit: ” on weapons that, at best, would help escalate to a nuclear war.”
I earnestly hope that is not the best outcome. Perhaps it would be more accurate to say “on weapons that will almost certainly never be used defensively, and that might — if employed offensively — help escalate to a nuclear war.”
The report (both part A which Connor links to, as well as the extensive part B) does not deal with of the major methods by which the EU, in the past decades, intended to either increase its competitivity, or take advantage of it: Free Trade Agreements (FTA). In fact, there is just one desultory mention lost in the middle of all measures to be taken:
Use Free Trade Agreements (FTA) and the Team Europe approach to increase leverage. FTAs and Team Europe cover a wide range of countries. These tools could support EU companies in securing needed supplies.
That’s it.
If one looks at this page shows something that might be significant:
1) Negotiations with majors economies of Asia and Oceania seem to have been on a stop-and-go modus for a long time and are not yet concluded: Australia, China, India, Philippines, Indonesia, Thailand, Malaysia.
2) Negotiations with many African countries (including some really important suppliers of raw materials such as DRC, Ethiopia, Zambia), as well as oil and gas producing Near-Eastern countries, stalled quite some time ago.
In some cases, even when negotiations concluded, signature and ratification seem to proceed very slowly (e.g. Mercosur: negotiations concluded in 2019, signature and ratification are “on-going”).
There is a detailed examination of the current status of negotiations provided by the Commission (as well as a handy map). I have not looked into it in detail.
Not that FTAs are necessarily good for EU citizens and SMEs in general, but I find intriguing the fact that FTAs are not given any prominence in Draghi’s report. Perhaps I am exaggerating the importance of this aspect, but shouldn’t it be dealt with a bit more at length in a report about the competitivity of the EU?
vao, i believe that the time of FTAs is gone, though I can stand corrected if someone knows better. With regards to the procurement of some materials, those considered critical, it am almost certain there applies some Regulation or Directive on Critical Minerals which probably sets something, i don’t know, a procurement strategy or so, almost certainly in the most neoliberal/neocolonial style, thus flawed.
“I believe that the time of free trade agreements is gone…”
A critically important question that must be answered then is why China is showing that the time of FTAs is right now. China has just extended no tariff trade to 33 African countries. Pedro Sanchez has just made clear that Spain needs freer trade with China. Norway, which is not part of the EU, is increasing trade with China against EU restrictions. BRICS is already bigger than the G7 and is going to expand with members working on increased trade.
I would argue that European limits on trade with China have limited European competitiveness.
Norway, which is not part of the EU, is increasing trade with China against EU restrictions.
Switzerland signed a FTA with China 10 years ago or so — the EU has not finalized the negotiations regarding its own FTA with China.
It is noteworthy that EFTA countries (Norway, Switzerland, Liechtenstein, Iceland) just signed a FTA with India — something the EU has not yet achieved. While the EFTA-Mercosur FTA has been finalized in 2019, just like with the EU, it is not yet ratified.
And while China is extending FTA with many African countries, the EU has quite a number of stalled negotiations with countries in that continent.
As far as procuring materials via some EU directive, this is insufficient. Some countries — e.g. Indonesia — now require at least refining of raw materials, and even transformation into semi-finished products to take place locally. Which implies that EU countries will have to invest in industrial capacity within those countries. The conditions which determine how such investments can take place and the level of legal protection (e.g. IPR) are typically set in FTAs…
And if the EU is so keen to “decouple” from China, why has it not yet arranged a FTA with the ASEAN?
FTAs were all the rage in the EU till, well, just before Covid. Now, they barely deserve two lines in a 400 pages report. Somehow this all seems odd to me, but I cannot interpret why this is happening.
“As far as procuring materials via some EU directive, this is insufficient. Some countries — e.g. Indonesia — now require at least refining of raw materials, and even transformation into semi-finished products to take place locally. Which implies that EU countries will have to invest in industrial capacity within those countries…”
Indonesia is now the 7th largest economy:
https://fred.stlouisfed.org/graph/?g=1pV6t
August 4, 2014
Real per capita Gross Domestic Product for China, Indonesia, Brazil, United Kingdom and France, 1977-2023
(Percent change)
https://fred.stlouisfed.org/graph/?g=1pV6A
August 4, 2014
Real per capita Gross Domestic Product for China, Indonesia, Brazil, United Kingdom and France, 1977-2023
(Indexed to 1977)
Maybe the Americans and the Atlanticists are doing their best behind the scenes to prevent it?
wrong, what we are witnessing is nothing less than the inevitable collapse of free trade.
the bill clinton/tony blair world view of we the chosen ones(white)will use our god given superiority to design what the world needs, and the sub humans(anybody that is not white, or has traits of others mixed in. south africa under apartheid was very good at categorizing people) will dig, sweat and toil in the wall street owned mines and factories of tomorrow.
free trade is a trap. its how america got Hawaii, and how briton and other euro powers colonized the world.
china knows this.
what china is doing has a long long history, its unloading its poverty, unemployment and deflation onto other countries. it way way over produces.
any country dumb enough to get suckered will regret changing one master for another.
best to be your own master as best as you can.
Hence a paradox (of which there are many) within late capitalism: the incompetence of the bourgeoisie has itself become a historical force, one which a minimal amendment to Schumpeter allows us to identify: destructive destruction. Or, to give it its proper name: McKinsey.
Frederic Lordon
I would correct that and write “defense commissioner” instead. Minister is not correct and helps making von der Leyen look like Prime Minister and validating her credentials in a democratic way.
Good point. Thanks for pointing that out, Ignacio. Fixed!
Ah! it was the “High Representative for FA & Security”, the Warmonger in charge. I believed it should have been the Commissioner of Industry. You are very welcome Conor, i enjoy your articles.
I believe twhen you wrote (vDL’s) “defence minister” refers to the industry commissioner. There is no such defence commissioner let alone defence minister as the EC has no competence on defence. There is no “common defence”.
In reality that last sentence should read ‘common aggression’, and there is such a thing – just not ‘officially’, and with no commissioner or minister – just a common ‘understanding’.
As if Russian strategic imperatives on its borders are merely a function of one man’s personal obsessions and not a feature of permanent national interests. Did the Monroe Doctrine “die” with Monroe? This is the kind of brain rot one can expect from a society whose most prominent and successful cultural artifacts are Marvel movies.
Reminds me of 1974. After the Saudi price shocks, the plutocrats were sitting on massive piles of cash. Kind of like the old Disney character Scrooge McDuck. The filthy rich had to do something with the money, so they started lending it to the eastern Europeans…known fondly in those days as The Soviet Bloc. Fifty years ago now, but I’m still not over the depressing photo of Kissinger and Tito toasting a large “western” development loan.
Yep, fifty years later and after much more shoe-on-the-neck rapaciousness it’s the same story…we gotta do something with this mountain cash! Declining rate of profit and debt/deflation…still the predominant zeitgeist. The swine refused to be taxed. The only thing left is to steal it off them, or eat them.
Don’t you think you should be more reflective on Tito? For someone like me who worked in Yugoslavia in the 1960s, Tito is seen as someone who defied Stalin and tried to build a certain sort of democracy with equal rights given to the different regions of Yugoslavia and workers given powers over their labour. His history is far more complex than you suggest with your apparent dismissal of him as is the history of the region in the period to which you refer which he responded to and acted on with infinite subtetly.
Don’t you think you should be more reflective of Stalin? Tito defied him, because post-war Stalin was trying to hold on to the agreements made with Western Allies during the war, as he was still hoping for European security arrangement along the lines agreed in Yalta and Potsdam.
This meant Soviet Union did not support the communist uprising in Greece, opposed Yugoslavian dominance over Albania and capturing parts of Austria and Italy. And even, at some point, restoring the crown of Yugoslavia. It was very little about ideology, and a lot about Stalin wanting a return to status quo while Tito was about to become a regional big man.
Immediately after the war Stalin didn’t much care about ideological issues in Eastern Europe – just look at Austria, Finland and Yugoslavia – as long as the governments were in friendly terms with Soviet Union.
Maybe, just maybe, this war is fracturing the EU finally. It has lost it’s cheap reliable energy source as Super Mario has stated, most of the EU countries have been demilitarized (except for Hungary), the strains of all this has broken even the German budget so that they are in no mood to help support a 4 trillion Euro debt over the next five years, political support for the leadership has fallen off a cliff which in Germany forced them to block the Schengen Zone to appease lost supporters – which may be repeated in other countries like the Netherlands. Ursulla, having been re-appointed as EuroQueen, may find that Germany is far too big a country to make it buckle down like she has Italy leaving few options for the EU Commission. Even if this money was raised, most of it would be squandered on a MIC which is not a productive use of all that money but does present lucrative opportunities for the EU leadership to get kickbacks and the like. Having written this, it seems that Europe will be in for a few lost decades like happened with Japan. The main problem is that the people that created all the problems besetting the EU are the very ones that think that they are capable of solving them which is ridiculous. To do so, they would have to admit that they screwed up which is the last thing that they will do. Maybe if the far right can shake up things in the EU there might be some sort of course correction but either way, the EU is in for a rough ride.
An especially important comment in that European debt has increasingly been used to increase military spending at the expense of “civilian” research and development and infrastructure investment. As Robert Solow showed in the 1960s, growth is spurred primarily by civilian investment. The Chinese have understood, Europeans have turned away relatively speaking.
Chinese investment as a share of GDP in 2023 was 42.1%, while that through the European Union was 23.2%. Investment in the UK in 2023 was a mere 18.4%.
Thanks for depressing me even more Conor. Hopefully the Bundesbank will stand firm, although usually I’d argue otherwise. A Military Keynesian is not going to help.
I was cheered by the spelling mistake “good companion peace,” – If only.
Thank you, Conor!
The threat of the lame duck traffic light coalition selling Germany out to debt bondage seems all too possible. Are the German Constitution and its Supreme Court strong enough to stop it?
Thank you for the information!
Suppose the EU budgeted 100 billion euro’s for F-35, would those be new F-35 squadrons for Belgium or Netherland? Or will EU start its own air force?
Once you buy 100 billion in weapons you have to pay 200 billion euros over the next 25 years to keep them capable. Would the 4 billion euros per year be borrowed too? Unless they trigger nuclear war which could be a budget plan!
Heck of a way to plan!
Small point: European Council is heads of state or government.
800 billion year for the EU is impossible but even if they get 50 billion a year that is alot of arms. The longer this war continue the harder it will be for Russia to win this. People say Russia is trying to save soldiers by not going all in but in my opinion this will backfire and russia will lose alot of soldiers by going in so weak.
Not so. The Russians have avoided massive casualties by not charging against fortified positions and are playing it like the professionals that they are. Their army is constantly getting bigger and more and more formations are being blooded in combat which will make them better soldiers. Their equipment and their doctrine is also getting an upgrade with the industry behind it is ready to supply all their needs in whatever the numbers needed. As it stands, if a NATO brigade was sent into the Ukraine to the front lines, it would be annihilated in short order.
50 billion a year is a lot of arms, as long as you can find someone that can deliver lots of arms for cheap. Throwing more money at Boeing and Raytheon won’t get you more weapons, but same ammount at higher price. It’s “free market economy”.
Thanks for the post, Conor.
One way or another, I have been involved or followed closely the last three EU medium-term budget negotiations, which happen every 7 years.
The member states have mostly been preoccupied with limiting the powers and the budget of the European Commission, which is why the EU budget proper has remained at around 1% of GDP.
Of course, in 2020 Germany surprisingly agreed to limited joint borrowing under exceptional circumstances and resulting in less than a doubling of EU spending from 1.2 billion euros to 2 billion euros over the full 7-year budget period.
I honestly doubt that there would be political appetite for more than doubling this over the next 7-year budget period.
In fact, at the current mid-term adjustment of the current 2021-28 budget, countries more or less reverted to their pre-2020 positions and the only areas that got additional spending were Ukraine and migration plus a little bit for research. Some very positive and future-proof priorities (not).
So while investment is indeed needed (we can discuss the amount), it is unlikely to be through EU borrowing. Instead, the European Investment Bank and member states’ development banks may be asked to lend even more and private sector expected to do the rest – a big ask given the current economic fundamentals and so will be minimal.
I don*t remember where I heard it first, maybe Ingmar Bergman or Woody Allen or somebody else, but somebody said that self-deception is a noble art. Maybe our evil folks in the EU misleadership levels of society are just misunderstood artists? Within every incompetent EU-critter there is just a Dante, Dostoyevsky or Hesse wanting to come out?
Thank you, Conor!
what china is doing has a long long history, its unloading its poverty, unemployment and deflation onto other countries. it way way over produces.
[ Forgive me, but this is completely incorrect. China ended poverty for the 1.4 billion several years ago and is steadily increasing income for the lowest income households. China’s employment level has been stable for years. China has had no deflation. China assuredly produces what is necessary.
There is no reason to attack and try to defame China. Evidently trying to do so is truly saddening. ]
What China has been trying to become is a world development partner. So that 53 of 54 countries in Africa are already part of the Chinese Belt and Road Initiative, and just now 53 African heads of state have come to China to expressly further the development partnership. China has pledged $50 billion in economic assistance, the creation of 1 million jobs in the coming 3 years. China has immediately offered zero tariff domestic market access to 33 African countries.
China will be rebuilding a railroad built by China long ago, stretching from Zambia through Tanzania. There are agriculture projects from Ethiopia to Namibia to Ghana…
This is a Chinese-African shared vision.
it would be nice if this was the case. however, we have not seen yet how this plays out. i do not take much at face value.
the real history of the world makes me hesitate that china will not exercise their immense power and wealth, on the weak.
free trade is a trap, it was in the past, it is today, and it will be tomorrow.
why is china over producing then? because that is how they lowered poverty, they exported it. this is a very old story.
adam smith talked about it in the late 1700’s.
i do not chastise them for doing it. after all, they are not the first to do it, nor will they be the last.
are they offering a different form of kum-by-ya then what clinton and blair did, we do not know yet.
but in my eyes, it appears everything is being based on made in china, with ports for unloading made in china, and railroads connected to the inners of third world countries where
commodities are.
to be loaded up in the ports and shipped to china.
There is indeed a lot of fat on the European pig and the financiers of the world and the US butcher knives are all sharpening to slaughter this hog.
The demographics in Europe will go to the gutter and the millions of migrants from Africa and the Middle East, and the decimated Ukraine will not help at all in increasing prosperity and productivity.
The 1848 was a big year all over Europe. My guess is that, based on all these plans, which will start slowly being implemented, the situation will be overipe in the next 24 years (if we don’t get a nuclear war before that) that a revolutionary year wil sweep across old Europe, and the emigrants and their descendents will be part of the spearhead.
In 1848/49, the Czarist armies helped the European potentats quell the revolution. Will the US troops serve the same role in 2048? Or the US will be in the same shitter?
And everyone will be sweltering. Maybe a nuclear war can help with that and stall things a bit while the overall consumption drops. Silver linings are good, even if they come from the dark clouds of nuclear mushrooms…
Good one.
Macron? speech???
O.M.G.
Yeah, gonna read it.
Ending:
“Yes, I believe we can regain control of our lives, of our destiny, through the power, prosperity and humanism of our Europe. And at a time of uncertainty, to quote Hannah Arendt in the Human Condition: “Promises are the uniquely human way of ordering the future, making it predictable and reliable to the extent that this is humanly possible.”
What I propose is that, on the strength of our clear-sightedness, we make these few great promises for Europe over the coming decade, and fight hard to keep them. Then we may have a chance of knowing the future. In any case, we will have fought to choose ours.
Vive l’Europe ! Vive la République et vive la France !”
Which means basically in a fancy way: “We have no clue what we are doing”.
And this idiot is currently being sold as the incredibly educated guy in Germany.
To quote Martyanov: I wouldn´t let him mow my lawn.
Or do my dishes. Since I have no lawn.
Macron to staff “find me a clever Arendt quote for this one”.
“Boris Pistorius who has been pounding the table for endless military spending ever since he was plucked from the obscure position as the SAXONY State Minister of the Interior and Sports.”
It was in LOWER Saxony (Niedersachsen. Saxony ~ Sachsen, a much smaller federal state~Bundesland with less population in the former DDR). I doubt anyone in German politics would call ‘Interior minister of Lower Saxony’ an obscure position, since Boris’ example shows, that it might be just two steps away from Bundeskanzler (Chancellor).
His “pounding” has made him very popular, although this might be more a kind of reverence for his gumption¹ than a majority’s enthusiasm for war.
¹And he was one of the very few politicians, who served his compulsory stint in the German army instead of the ‘weaponless’ alternative service (Zivildienst) or being declared unfit, like many of the fiercest male warmongers, e.g. Anton Hofreiter
Come on don´t be mean to Toni.
Remember: this is JUST a trauma he is trying to get over.
Toni was supposed to become agricultural minister.
The guy has ZERO knowledge of guns and the army.
He is the nice guy selling eggs at the local market.
Then however came the JOKER, Cem Özdemir, who needed a job and since he is more powerful within the Green swamp, they pushed Toni out of the only position he ever did know anything about and made him – court jester, without the wit.
“Did it really takes hundreds of thousands of lives lost and hundreds of billions spent for brain geniuses like Schroeder to understand what Russia had been telling them along? Well, if we read on we get to this:
If Putin is unwilling to halt his assault on Ukraine, then the war can end in only one of two ways: either because Russia has lost the ability to continue its campaign or because Putin is no longer in power.”
Scott Horton told this anecdote about Bob Kagan. It encapsulates the mindset of these people:
Kagan visited US forces in Afghanistan. He was shown around by an officer. Things wouldn´t go well the officer explained the problems. Afghanistan was in big trouble.
Yet whatever the officer put forward, Kagan´s only response: “Ah…I think you´re wrong.”
btw. What´s Draghi´s secret plan? Outlive Putin? Draghi turned like 77 this year…
Thomas Piketty has praised the Draghi report for “challenging the dogma of austerity”.
https://www.lemonde.fr/en/opinion/article/2024/09/14/thomas-piketty-the-draghi-report-is-a-step-in-the-right-direction_6725996_23.html
Paywalled.
Absolutely staggering levels of stupidity – these people live in an alternate reality, where money can be created and spent without consequences, and the long suffering citizens tapped for more when needed.
Europe is on track to becoming a third-world bloc in a decade or so. As the US goes down, it is dragging Europe down with it.
Did someone put something in the drinking water in Brussels, Paris, London and Washington, and a slightly reduced dose in Berlin?
I’m so glad I don’t live in Europe anymore.
Where do you live that is ‘better’? Just askin’.