Wynia’s Week: Soon Europe will be a planned economy with a debt bubble

(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.

Netherlands House of Representatives:

Motion of Member Eppink,

Tabled 12 October 2023

The Chamber,

Following the deliberations,

Considering that President Abbas of the Palestinian Authority has not distanced himself from the terrorist attacks of Hamas;

Considering the recent remarks of the Palestinian diplomatic representative in The Netherlands, only referring to ‘brutal aggression of Israel’;

Considering that the EU supports the Palestinians with 691 million euro;

Requests the government to advocate in the EU to suspend all payments to the Palestinian Authority, as soon as the Palestinian Authority expresses support for Hamas;

Requests the government to commit these funds thereafter through other channels to directly support humanitarian purposes in the Palestinian areas;

and proceeds to the order of the day,

[Derk Jan] Eppink

Is the war in Ukraine stumbling into a nuclear phase?

By Derk Jan Eppink, Distinguished Fellow (Member of the Parliament of the Netherlands (JA21-ECR), formerly an MEP and a journalist)

Seth Cropsey, a former U.S. top military officer, published his vision on the war in Ukraine in The Wall Street Journal on 27 April, writing: “The U.S. should show it can win a nuclear war.” However, what does “winning” mean in case of a conflict with a nuclear power s prepared to deploy nuclear weapons? The war in Ukraine is increasingly turning into a war between Russia and the United States, albeit on Ukrainian soil. A war by proxy.

On 9 May, Russia celebrated its victory over Nazi Germany with a large parade on the Red Square in Moscow, showcasing Russian nuclear weapons, as a big warning to foreign countries. This includes the Sarmat, Russia’s most modern intercontinental missile.

For a long time after the Cold War had ended, the West saw such parades as empty displays of power. For decades, the United States, the Soviet Union and Europe have been discussing controlling their nuclear weapons: from the SALT I and II Treaties, to START and New START. Over the years, that discussion died down, but the nuclear weapons remained, as they were also modernised in the meantime. Today, a generation of politicians that did not consciously experience the Cold War, with political leaders for whom a nuclear conflict is akin to a Hollywood film, is in charge.

Nuclear power as life insurance

Already in 1957, in his book Nuclear Weapons and Foreign Policy, Henry Kissinger described the essence of a conflict with a nuclear power. He stated that a country with nuclear weapons will not capitulate without first having used them. This makes a conflict with a nuclear power by definition different from a conflict with a country without nuclear weapons. For the regime in North Korea, for example, and soon perhaps Iran as well, nuclear power is a kind of life insurance. That certainly applies to the Kremlin.

The war in Ukraine requires that politicians who talk about ‘winning’ – like the President of the European Commission, Ursula von der Leyen, – gain more insight into Russian nuclear doctrine, which is a legacy from Soviet times. Russian military thinking is based on power and huge explosions with the most powerful guns or bombs, like the hydrogen bomb (nicknamed the Tsar Bomb). Here, destruction comes before precision. This nineteenth-century pattern of warfare was visible during the Tsarist Empire as well as the Soviet era and it can be witnessed today under President Vladimir Putin.

Russia’s status is based on its nuclear power

Russia’s status as a great power is not based on its economy – Russia’s gross national product is about the size of the countries forming the Benelux. Russia’s status is founded on its nuclear power, which rivals the nuclear potential of the United States. In 1982, the Soviet Union made a «no first use declaration»: Moscow would not be the first to deploy nuclear weapons. This promise was made during the discussion about placing American medium-range missiles in Western Europe. This helped the peace movement. It should however be recalled that at that point, the Soviet Union had already stationed SS-20 missiles itself.

After the collapse of the Soviet Union in the early 1990s, Russia abandoned its no-first-use policy, in 1993, and it introduced the strategy of preventive nuclear attack. This involves Russia reserving itself the right to strike first as soon as it faces a nuclear threat. This definition has been increasingly broadened. When the nuclear doctrine was redefined in 2010, it also included a conventional attack threathening the survival of the Russian state and its institutions. In 2020, the doctrine was strengthened further. It now also applies to a conventional attack on military bases in Russia, after which Moscow will use tactical nuclear weapons to deter the attacker. This policy is called «escalate to de-escalate» and it applies in the current war with Ukraine.

A thin dividing line of what constitutes «war»

Today, we find ourselves on a thin dividing line of what constitutes «war». The West, in particular the United States, is supplying more and more valuable military equipment to Ukraine. Initially, the arms deliveries were intended to repel the Russian attack, which partly worked.

The question is whether the supply of modern weapons is helping Ukraine or whether it is fuelling the conflict.

Another question is whether Russia, with its tactical nuclear weapons, is in the process of moving to “escalation” in a bid to de-escalate. We are, as it were, slipping imperceptibly into the nuclear phase.

That is a major change in the nature of the conflict.

Politicians without a memory of the Cold War will not hear the alarm bells. Then the battle is no longer about

Ukraine’s sovereignty, which should be the objective, but about the competitive struggle between two nuclear powers.

The command to deploy nuclear weapons is riskier in Russia today than it was during Soviet times.

During the Cuban crisis in 1962, the explosive character of Soviet Party leader Nikita Khrushchev did not seem the best guarantee for a controlled nuclear policy. Fortunately, a hotline was installed: a direct line of communication between the White House and the Kremlin. Under Leonid Brezhnev, who took office in 1964, collective leadership was installed, with more power for the Politburo. Secretary-General Brezhnev was a ruler, but not an autocrat. Putin is a de facto autocrat. Power does emerge from the party, but from the person. The ultimate decision power belongs to him.

A stalemate is needed for a way out of the conflict

The way out of the conflict in Ukraine must be found through negotiations. For that, a stalemate is needed, so that none of the parties has anything to gain. Continuing a war of attrition does not yield anything. Only then will there by a step from the battlefield to the negotiation table.

There, a route to the exit can be found, with questions like: «What should be on the agenda», «what are the goals of each party», and «what room is there for agreements?» With a final compromise, there would be some ‘wins and lose’ for each party. Nobody would be the big ‘winner’.

However, those recklessly pushing for nuclear war will make everyone a loser.

Originally published in Dutch by Elsevier Weekblad

European Union and Abraham Accords

The policy of Iran is bringing Sunni countries together with Israel. KSA has relations though not a diplomatic status, as far as I know. The developments with UAE, followed by Oman and Bahrein broaden the network. Qatar will be more reflectant, given its Shia majority, if I am right.

The policy of Iran is bringing Sunni countries together with Israel. KSA has relations though not a diplomatic status, as far as I know. The developments with UAE, followed by Oman and Bahrein broaden the network. Qatar will be more reflectant, given its Shia majority, if I am right.

European countries and the EU had to admit that the ‘normalization of relations’ between Israel and the UAE is a good step forward, which they probably had not expected to be achieved by the current US administration. The EU High Commissioner for Foreign Policy, Josep Borrell Fontelles, ‘welcomed’ the move but added that plans to annex the West Bank should be completely abandoned immediately.

The EU is not in the driving seat as far as the Middle-East is concerned. It always regarded itself as the caretaker of the Iran nuclear deal, once the US government decided to leave it. During the Obama administration the EU had been given a disproportionate part of the praise allowing the US government to remain less visible for the political forces in US Congress, in particular the Senate. Obama had to maneuver carefully because there was no majority in the Senate for ratification in terms of a treaty. So, it became a ‘deal’.

The EU felt it owned the deal, hammered out by the US, and that it made the EU ‘relevant’ in world politics. The EU negotiating at the table made it a ‘reality’ on the ground. For the first time since the introduction of a Common Foreign and Security Policy ten years ago the EU could point at an achievement. For the EU the deal was all about the EU, not about the content of the deal.

After the US left the Iran deal, the EU was on its own. Strongest supporters of the deal were Germany and France. Most lukewarm were countries in Central and Eastern Europe like Poland, Czech Republic, Hungary, Romania and Bulgaria. They tended to support the US. In particular Germany pretends the Iran nuclear agreement is still in place and the German Greens, an upcoming force in German politics, are the strongest supporters of the ayatollah regime in Iran.

Simultaneously, the EU is a strong critic of Israeli policies in the Gaza and the West Bank. Again, there is a rift within the EU between East and West. Some East European countries supported the relocation of the US embassy in Israel from Tel Aviv to Jerusalem. France and Germany predicted ‘violent demonstrations’, but little happened. Also, BDS is strongly rooted as a movement in several West- and North European countries, though not state policy. The EU tries to target products from the West Bank with customs formalities.

But generally, the EU is running after the facts and taken by surprise. Borrell speaks about ‘normalization’ between Israel and UAE, avoiding the term ‘full diplomatic relations’. Bahrain and Oman are likely to follow. Egypt and Jordan already have normal diplomatic relations with Israel for many years. Saudi-Arabia maintains relations with Israel through the backdoor. Arab countries come closer to Israel, while the EU shifts further away, with the wrong focus.

For the EU the Palestinian issue is the heart of the problem in the Middle-East. For Arab countries Iran is the problem. Iran is the troublemaker and Palestinians have a knack to end up at the wrong side of history. The US has understood that; the EU hasn’t. The US focuses on solving the Palestinian issue within common ground on policies towards Iran. The EU befriends Iran hoping it will help the Palestinians in some way. But it won’t. Therefore, EU policy is misguided; and the current US government has shown to understand the heart of the problem much better, using the right focus.