(This article was written by Derk Jan Eppink, appeared in the Wynia’s Week. Derk Jan Eppink: Soon Europe will be a planned economy with a debt bubble – Wynia’s Week)

In the European Union, plans are piling up. In the summer of 2020, the corona recovery fund of 750 billion euros was portrayed as ‘once in a lifetime’. Apparently a short ‘lifetime’, because on September 9, 2024, the former ECB president launched the Draghi plan with a price tag of 800 billion euros. Last week, Ursula von der Leyen, President of the European Commission, presented the ‘ReArm Europe’ plan. Bill: another 800 billion euros. In the EU, a lifetime is five years, the term of office of a European Commission.

The corona recovery fund has already shown which way that financial bonanza is heading. For the first time, the European Commission itself went on the capital market to collect 750 billion euros, under the guarantee of the member states; The Netherlands for about 46 billion. To the shock of the Commission, interest rates went up and the costs of the operation rose by 57 billion. The final amount now stands at 807 billion.

Casino Budget

The budget of the European Union evokes the image of a casino. In the current 2021-2027 budget cycle, with a size of more than 2 trillion euros, 30 percent is ‘climate-related’. Frans Timmermans’ Green Deal, presented in December 2019, permeates the entire EU budget. The ‘Green Deal Investment Plan’ (2021-2030) comprises a total amount of 1 trillion euros, with partly financing from the EU budget, the EU Emissions Trading System and funds through the European Investment Bank (EIB).

The energy and climate transition is now encountering realities. The ‘Timmermans Plan’ has unachievable goals, such as Europe as the ‘first climate-neutral area in the world by 2050’. Europe is pricing itself out of the market. Companies are leaving the continent because of high energy costs. The economy is stagnating, and the Timmermans Plan has to be lowered a notch.

But don’t worry, there is the aforementioned Draghi plan, from the mind of the former ECB president who wanted to save the euro in 2012 with the statement ‘whatever it takes’. The ECB then printed unlimited money. ‘Super Mario’ cannot be left behind and launches a ‘competitiveness compass’ to get the European economy back on its feet.

How does that work in Brussels? The European Commission sees the ‘unforeseen damage’ of the energy transition and is making a ‘rescue plan’ of the climate plan. The report is written in Brussels, with a ‘headpiece’ for the sale. No one can do that better than Draghi, both famous and notorious in Europe.

The Draghi plan is in line with the internal market, because it is about competitiveness. Draghi conjures up a ‘competitiveness compass’ with two goals: more decarbonization and more competitiveness. In the current situation, this is contradictory. Anyone who wants to implement climate policy even faster (fossil-free by 2050) completely torpedoes Europe’s competitive position. China and the US immediately jump into the gap. But Draghi is not to be fooled, because he wants a ‘Clean Industrial Deal’ after Timmermans’ Green Deal himself. This is an acceleration law with ‘action plans for decarbonisation of intensive sectors such as steel, metals and chemical products’.

Bureaucratic centralism

Draghi then launches a ‘compass’ that belongs in the GDR handbook of bureaucratic centralism. He formulates ‘three transformative, horizontal imperatives: innovation, decarbonisation and safety’. He then unleashes five ‘enablers‘ (kind of drivers) of competition vertically on this: simplification, fewer obstacles in the internal market, more competition on financial markets, quality jobs and better coordination. This mix should strengthen competitiveness.

It would be better if Draghi started by simplifying his own plan. It is a mystery what that 800 billion euros is needed for, albeit as a financial lubricant for his policy mix. Expensive, though. But Draghi will not do it for less than 800 billion.

Ursula von der Leyen cannot be left behind. The quarrel in the Oval Office of the White House between President Trump and his Ukrainian ‘counterpart’ Zelensky gave her the long-awaited opportunity to turn the EU into a military power factor: from toddler to giant in record time.

She immediately spoke of a ‘Wiederbewaffnung‘ (sounds different in German than in English) and the official title became: ‘ReArm Europe Plan’. She joined the leading group: 800 billion! ‘Uschi’ (her pet name among intimates) won’t settle for less. The EU wants to borrow money on the capital market, just like during the corona recovery fund: 150 billion euros. The Commission then lends that money on to member states that set up common defence production or make joint purchases. There must be a European internal defence market. It should be mentioned that Von der Leyen, as German Minister of Defense, left the Bundeswehr in a lamentable state, even though she took parades on horseback.

Box of tricks opens

For her 800 billion, however, the commission president is 650 billion euros short. The bag of tricks opens. The member states are in financial distress. The criteria of the Stability and Growth Pact (SGP) – a maximum budget deficit of 3 percent and public debt of a maximum of 60 percent of GDP – are widely violated. There is no room for a financial arms race, unless, for example, member states cut pensions, close hospitals, reduce education and lay off civil servants. This leads to a revolution on the home front.

Von der Leyen has a magic formula: 1.5 percent of GDP for defense does not count in the assessment of the SGP criteria. She invokes Article 26 of Regulation 2024/1263 which provides for a ‘national escape clause’ due to ‘extraordinary circumstances, beyond the control of the Member State, which have a major impact on finances’. The European average of defence spending is 1.5 percent of GDP. Some are far above it; others far below. With that Brussels arithmetic, Von der Leyen comes to an extra 650 billion euros for defense spending: 150 + 650 = 800. The European flag is flying.

It remains to be careful, because the Commission is setting its sights on European savings and pension assets: around 300 billion euros are held on capital markets outside the EU. This makes sense because capital flows to markets with the highest returns. They are happy with it. Not everyone is like pastor Harmen van Wijnen, chairman of the executive board of the ABP, who withdraws money from lucrative markets in faraway places because they are ‘not morally responsible’. As a pastor preaching in the pulpit of the capital market, he can now invest ABP’s assets in the ‘European arms industry’. The European Commission wants to bring that 300 billion euros back to the ‘European Capital Markets Union’, now renamed the term: ‘Savings and Investment Union’.

The question is: how long will this money bonanza last? The annoying thing is that loans have to be repaid. The corona recovery fund has already shown how quickly interest rates can rise, and with it the costs. Prices are also rising, especially in the defense market where there is now a huge demand, and delivery times are getting longer. Higher inflation undermines purchasing power, savings and pensions.

Debt bubble

There are bubbles in the European plans. Of the corona recovery fund, 52 percent is a gift and 48 percent is a loan. Who pays back those ‘gifts’? Repayment will start as early as 2028. Countries that received the most gifts, Italy and Spain, shout: no! – want a gift. Will net contributors in the Netherlands have to pay extra again? The interest costs make the corona recovery fund extremely expensive, up to about 860 billion; The coverage is buttery soft. Result: the call for European taxes.

All planned economies have failed so far. The Pavlovian reaction to failure is: plan even more. The European planners are blindly heading towards the debt bubble. It snaps. We just don’t know when. But at this rate certainly ‘within a lifetime’.

At the end of 2024, ‘Rechtsomkeert’, the new book by Derk Jan Eppink, was published. In it, he outlines in clear language how a political revolution is taking place in Europe, the United States and certainly also in the Netherlands. The book was published by Blauwburgwal Publishers, costs € 22.95 and can be ordered HERE.

Derk Jan Eppink is a Distinguished Fellow at the Gold Institute for International Strategy, a Washington D.C. based foreign policy and defense think tank.