How Much More Is Europe Prepared to Lose? 

As Washington begins to contemplate its exit from Project Ukraine, European officials continue to flee from reality. That’s somewhat understandable considering all the water Europe has taken on since the war began nearly three years ago and how the continent’s misleadership class has made Russia into an existential enemy by blaming Moscow for all of it.

All the sacrifices made at the altar of Project Ukraine now make it that much harder for Europe to admit defeat. And it’s not just all the economic damage Europeans continue to experience; the governance structure of the EU and social values have changed in important ways as the bloc’s priorities have been upended.

In some ways the EU is almost unrecognizable from three years ago. So I think it’d be valuable to do a round up of all these changes here before turning to the European misleadership class’ ongoing refusal to accept reality and what that could mean. The list of changes in Europe in response to the war will no doubt be incomplete as there’s so much to include so I hope readers can add anything I miss in comments. Note: I’m largely omitting the economic fallout and deindustrialization as it’s been so thoroughly covered here at NC and elsewhere. Away we go.

A proper starting point might be a few items that the EU is increasingly discussing overhauling to face the great Russia “threat” and ones European capitals might be more open to following the shock of an US exit from Project Ukraine.

One is changing a central component to the entire idea of a unified Europe: cohesion funds. European governments finance this effort to strengthen the economic, social and territorial cohesion of the EU. The money — 78 billion euros in 2025 — largely goes to environment, transportation, and other infrastructure for underdeveloped regions. That looks to be a thing of the past. The European Commission is reportedly finalizing plans to allow the money to instead flow to military projects. From FT:

This will include permitting funding for boosting the production of weapons and ammunition, though the ban on using EU funds to purchase those weapons will remain.

A spokesperson for the European Commission said cohesion funds could be used for the defence industry as long as they contributed to the “overall mission to enhance regional development”, including military mobility…

The shift in policy to bolster defence-related spending will also be welcomed by net payers into the EU budget, such as Germany, the Netherlands and Sweden, which see the use of existing funds as preferable to issuing joint debt or providing more EU funding.

We’ll see if a redirection of cohesion funds is enough or if the Trump “crisis” gets Eurobonds back on the table. The Commission and the European Central Bank haven’t stopped weaseling their way towards joint debt in order to finance the purchase and/or manufacturing of weaponry. Both defense bonds and militarized cohesion funds would have gotten laughed out of the room a few years ago; now there are only a few holdouts standing in the way.

Both ideas would likely mean more money flowing out of the pockets of Europeans to enrich Northrop Grumman, BAE Systems, and Lockheed Martin. From the Stockholm International Peace Institute:

The 55 per cent of arms imports by European states that were supplied by the USA in 2019–23 was a substantial increase from 35 per cent in 2014–18. The next largest suppliers to the region were Germany and France, which accounted for 6.4 per cent and 4.6 per cent of imports, respectively.

Let the good times roll. According to Bloomberg, “in 2023, Lockheed Martin and RTX spent a combined total of $18.9 billion on stock buybacks, compared with just $4.1 billion on capital expenditures.”

Whether an overhaul of cohesion spending or Eurobonds, both would imply more centralisation of funding away from local authorities. That is a continuation of European Commission President Ursula von der Leyen’s power grab of the past three years.

Using the war in Ukraine as an opportunity Ursula was gifted with the Corporate Sustainability Due Diligence Directive, the Foreign Subsidies Regulation, International Procurement Instrument, an Anti-Coercion Instrument, and the EU Critical Raw Materials Act. Ursula’s “tools” have largely been used to keep European governments in line on Project Ukraine while furthering the bloc’s dependency on the US and ensuring its timely payment of tribute. If the EU is cast adrift from its Atlanticist moorings, will these powers return to bloc nations or will it supercharge this process in the name of fighting Russia?

Meanwhile, Ursula’s commission is quickly trashing green and tech laws put in place over the last few years. The EU is already dominated by US IT companies that supply software, processors, computers, and cloud technologies and we can expect more of that in AI. On the heels of Vice President JD Vance’s criticism last week of EU AI regulations, the EU immediately scaled its rules back, but it’s totally not because of pressure from the US:

🇪🇺EU scales back tech rules to boost AI investment, says digital chief
The EU is cutting back tech regulation to spur investments in artificial intelligence, not because of pressure from US Big Tech companies and the Trump administration, the bloc’s digital chief has said.
Henna… pic.twitter.com/lyHQQvMxAd

— CN Wire (@Sino_Market) February 14, 2025

What Else? More Weapons Is What Else

In 2022, the European Investment Bank began funding for dual-use projects. The bank is owned by the EU member states and exists to fund projects that further the EU’s policy objectives with all member states contribute to the bank in proportion to their respective GDPs. The portion of lending going towards mitigating climate change or fostering economic growth has steadily declined as more money goes to Ukraine and military projects.

Last year Following a similar call last year, the Luxembourg-based bank amended its rules on the financing of dual-use goods to allow money to flow towards projects with a predominantly military rather than civilian purpose.

Now most EU nations are calling on the bank to go even further. From AFP:

A letter circulated Friday, signed by 19 of the 27 European Union members, including France and Germany, urged the European Investment Bank (EIB) to loosen its rules on what it can fund and up the amount of money available…

But the lender is still unable to directly fund the production of arms and ammunition — something that helps it preserve an excellent rating, allowing it to borrow cheaply but which the signatories would like to change.

The signing countries also urged the bank to discuss the possibility of “specific and earmarked debt issuance” for funding security and defence projects.

The EIB is still only spending two billion euros (with another billion for Ukraine) out of 95 on strictly military projects, but the trend is clear.

Elsewhere, member states have also slashed a common fund called the European Sovereignty Fund, which was intended to help Europe compete with the US subsidies from the Inflation Reduction Act, from €10 billion to €1.5 billion. The remaining money is being steered away from climate projects to ones focused on weapons.

Destination Greece 

European governments have already committed 241 billion euros in aid for Ukraine (compared with 119 billion by the U.S.) since 2022. They’ve spent nearly a trillion on the self-inflicted energy crisis. They’re also busy continuing to completely restructure their societies in order to buy more weapons. They are now being pushed to spend a whopping five percent of GDP on purchasing (mostly American-made) weapons. A few short years ago, the target was already a challenging two percent.

Von der Leyen’s commission now plans to trigger an emergency clause that will allow European governments to significantly increase their military spending while not having it counted against them in their EU-imposed budget deficit limits. Those will of course still apply to other budget items like education and healthcare.

Essentially that means starving other public services in order to buy weapons. It brings to mind Greece. From Equal Times last year:

No other country has suffered so directly from the austerity measures prescribed by Brussels. At the same time, it is the country – within the Nato group – that has allocated the highest percentage of its GDP to military spending, reaching 3.5 per cent this year – even more than the United States. In line with the programme of the formations that won the European elections at the beginning of June, this very approach – greater austerity and high military spending – will mark the budgets for the coming years. This veritable squaring of the circle can only mean significant cuts in social spending.

…the example provided by the Greek laboratory offers very little hope. After a decade of fiscal adjustment, purchasing power in Greece has plummeted, falling to the bottom of the ladder in the EU, ahead only of Bulgaria, while some of its public services, such as healthcare, have seriously deteriorated, creating a deep sense of disquiet and discontent among the population.

All the military hardware the EU is purchasing might be mostly useless against Russia, but perhaps it will be useful in disciplining the discontened local population in the name of competetiveness:

This will be standard across the EU before long pic.twitter.com/ZJ5QRfmo96

— Kit Klarenberg 🔻🔻🔻🔻🔻 (@KitKlarenberg) July 2, 2024

Greece has since been overtaken by a few other countries in military spending:

But as EU suffers through deindustrialization, talks about further sanctioning Russian gas exports to tilt the market in favor of American producers in a bid to stay in Washington’s good graces, prepares for more austerity in non-military spending, and sees economies contract, the percent of GDP earmarked for defense sees diminishing returns. For example, check out the results in Greece of years of austerity:

If the EU pursues social austerity while member states hold fast to NATO defense spending targets, they will have to keep increasing in order to spend the same amount, leading to a sort of militarization economic death spiral. That looks to be the preferred path rather than admitting defeat.

No Turning Back?

A few items stand out from the Trump administration’s multitude of statements on Ukraine that in the span of a week have gone from rare earths nonsense to Trump talking of a deal with Moscow and Beijing for the three countries to halve their military budgets (and that only a few days after he said he wanted to raise military spending). It’s difficult to tell what’s real and what’s not, but the fact remains that there are major obstacles to peace in Ukraine, and in the US statements thus far there are pieces that indicate US support for Europe’s ongoing suicide. Those are:

1. The US has made clear that it does not intend to help defend a line of cessation of fighting between Ukraine and Russia, stating that any such defense will have to come from European countries.
2. The US is hinting that US airpower and missile technology might be available to the Europeans.
3. Should fighting continue in Ukraine, Europe is expected to buy more weapons for Ukraine while the US backs away.

So best case scenario there’s a settlement. That’s still a potential disaster for Europe. From Bloomberg:

[US Secretary of Defense Pete Hegseth] was explaining to his European allies that they are going to have to shoulder most of the burden for any settlement. Bloomberg Economics calculates that protecting Ukraine and expanding their own militaries could cost the continent’s major powers an additional $3.1 trillion over the next 10 years.

Such a commitment would expose fractures the EU has been glossing over for years. But with an authoritarian petro-state menacing its eastern borders and a growing realization that they can’t rely on the White House, the cost of inaction could be much higher.

And if there’s not a settlement or if the EU and Ukraine refuse to go along? Those three items above — if they gain traction — leave the door open for Europe to become the next Ukraine if they’re delusional enough to walk through it.

High Representative of the European Union for Foreign Affairs and Security Policy Kaja Kallas, at least, is eager to run through that door. According to Politico:

[Kallas] backed NATO membership for Ukraine as the “strongest” and “cheapest” security guarantee available. She suggested the war would continue with European support if Zelenskyy is cut out of the talks. “If there is agreement made behind our backs it simply will not work,” she said. “The Ukrainians will resist and we will support them.”

The funny thing about all the gnashing of teeth over the Trump administration’s moves to back out of ukraine is that the idea Europe shouldering more of the “reules-based order’s” load in the Russian periphery has long been the stated goal.

If we look at what neocons, the plutocrats’ think tanks on both sides of the Atlantic, and European politicians have been saying, this was always the plan. Here’s a September report from the Munich Security Conference, commonly referred to as “Davos with guns”:

Russia’s aggressive revisionism has underscored NATO’s primacy in European defense. However, the real possibility of Donald Trump returning to the White House means that Europeans may soon have to seize a much larger share of the burden, both in supporting Ukraine and deterring Russia. A strong European Defence Union, based on the EU’s regulatory powers, ability to pool resources, and large single market, can become an important enabler of a more robust European pillar within NATO.

Here is a team from the influential Center for Strategic and International Studies (CSIS) writing earlier this year in Foreign Affairs about how Europe must lead in the fight against Russia so the US can focus on China:

That complicated reality requires U.S. allies, especially in Europe, to take on a larger share of directing the containment of Russia. Europe has shown its political and economic resilience in the face of Russian aggression. Yet militarily, the continent remains dependent on the United States. This dynamic must change, in part because the United States must commit more of its resources to Asia. The growth of European defense spending since Russia’s full-scale invasion of Ukraine is an encouraging step. In 2023, 11 NATO members hit their spending target, allocating at least two percent of GDP to national defense, up from just seven members in 2022. The rest need to follow suit.

Europe must also resolve the problem of coordination. Right now, the United States coordinates more than 25 militaries in Europe. While it must continue to do this in the short term, it must push individual European countries and the European Union to take over this role and to create a stronger European pillar in NATO.

The Centre for European Policy Studies with more:

Against this backdrop, the EU’s true ‘Hamiltonian moment’ in defence would be a decision to issue joint debt to properly fund the ambitions set out in its Defence Industrial Strategy.

Based on Art. 122 TFEU and implemented in accordance with Articles 173-174 TFEU, such bonds—possible under the EU’s Financial Regulation—could provide the backbone for grants to Member States to bolster the Union’s defence production capacity if paired with existing incentives for joint capabilities research, development, production, and procurement. This would avoid the two-speed logic and weaker conditionalities surrounding proposals to use the European Stability Mechanism (excluding key countries such as Poland, Sweden and Denmark) to issue loans to EU Member States for defence spending.

Like how the Covid-induced Recovery and Resilience Facility stabilised European markets and sustained demand during and after the pandemic, Euro-defence bonds are a potential game-changer for the EU’s defence ambitions due to the potential speed and scale of resource mobilisation, and the potential impact on market de-fragmentation. And, fortunately, the German Constitutional Court should have nothing to object to this time around.

And you can read the same in German Chancellor Olaf Scholz’s Zeitenwende, and in the speeches by German Foreign Minister Annalena Baerbock that Germany will lead the fight in Europe for the “rules-based order” while the US focuses on China.

So what’s the problem now? That they actually need to do it now rather than just talk?

Well, Claude-France Arnould, former executive director of the European Defence Agency, explains one key operational question that revolves around the Supreme Headquarters Allied Powers Europe (SHAPE) — the headquarters of NATO’s Allied Command Operations in Belgium:

The awareness of that need resulted from the Yugoslavia experience. The shock of those wars and a humbling reliance on the US led to the Franco-British Saint-Malo Declaration [1998]. We were unable to keep the peace in our own neighbourhood. The British realized that the Americans didn’t like that. There was a risk of US disengagement if Europe needed them to manage Serbia’s behaviour in the region. The EU had to be capable of carrying out such operations autonomously. The details were set out in the Berlin Plus agreement, allowing Europeans to use SHAPE for missions within an EU framework…

If a member state is attacked, for example. Let’s say a Baltic state, or Poland, or Romania, or a state not yet in NATO, such as Ukraine, which hopes to join the EU as soon as possible. Of course, not all threats necessarily come from the east. In such scenarios, we find ourselves having to defend an EU member state with our own resources. Rather than making yet another grand declaration about the EU and NATO, we therefore need to ensure that as Europeans we can use SHAPE. The best case is for us to act in concert with allies, with the Americans, Canadians and Turks. But if that’s not the case, can we use NATO’s command capabilities? I mean the human resources, secure communications systems, all the logistics needed to be able to plan and command an operation involving several European states—either as part of a ‘European pillar’ of NATO or within the EU.

We’ll see what happens, but considering how much Europe has already lost on this doomed conflict, would it be surprising at all if its incompetent leaders still don’t know when to call it quits?

The EU misleadership class might not have the money, manpower, tech, operational capacity, public support, but they’re convinced they have the right mindset:

Finland has over 50,000 air raid shelters.

Their preparedness aims to strengthen their resilience and to deter aggression.

We have so much to learn from the Finns.

This is the change of mindset I want to help bring during my second mandate. pic.twitter.com/xo64LKX1qD

— Ursula von der Leyen (@vonderleyen_epp) June 4, 2024