Jokers In The Pact Threaten EU War Machine

Regrowth would make economic sense, if serious

Mar 09, 2025

Europe's plan to revive its defence industry hangs on the will of investors
Corporations can raise own funds, but EU borrowing threatens stability
Threat to industrial revival lies in the dead weight of EC policy
Two new 'recovery plans' suggest the answer is more centralisation
Is the rearmament plan really strengthening Europe, or does it hide its demise?

(2,400 words or about 10 minutes of your company)

Mar 9, 2025

Countries have their specialities: Poland and the Baltic states focus on ammunition, border monitoring and air defence; the Netherlands adds space and maritime domain awareness; France has that and more, including military AI and deep-strike capabilities. [1]

Capability is there, but capacity is lacking, along with political will.

This is a test of whether the European Commission, and the Union that it commands, is fit for purpose.

The proposed increase in European Union defence spending is in effect permission to spend. It would have to be borrowed from the market. And investors need to be convinced.

Threat perception

Maybe Russia is a threat; maybe it's a bogeyman. Either way the Ukraine war has put the spotlight on weakness.

The claim that Russia has designs to invade Europe rests on assumptions like it doesn't already have enough land, across 11 time zones, much of it sparsely populated — above all threatened by the greater populations to the east and those fast-growing 'stans to its south.

The claim that Russia wants to invade the Baltics or Poland further assumes that it would want to onboard large Catholic populations, segments of which are hostile, even vehemently anti-Russian. Some of these had ultra right-wing organisations that collaborated with the Nazis such as Latvia's Arājs Kommando — similar to the Azov-style forces that Russia is trying to repel in Ukraine.

Why Russia, which says it wants to "de-Nazify" Ukraine, would bring more people with similar attitudes within its borders beggars common sense.

Russia has the mineral resources it needs, while the value added increasingly comes from Asia. Why it would want a de-industrialised Western Europe when Russians can, and are, buying the homes they want on Lake Como, makes a mockery of such claims.

But if Western Europe is serious about confronting Russia, or repelling a Russian force, a French-German think tank suggests it would need something like the U.S. Army's Third Corps.

G.I. style

RAND Corporation's assumption is that 100,000 U.S. troops in Europe would, in war, be supplemented by an additional 200,000.

Including the UK, Europe fields just short of 1.5 million active duty military personnel, according to Bruegel and SIPRI data from 2024. In comparison, Russia is reportedly working to expand its active duty force to 1.5 million troops.

Europe would need to equip such a force over three to ten years, raising spending on military equipment from about 0.7 per cent of total spending (gross domestic product, GDP) while defence spending is under 2 per cent.

The money required would be in the order of that proposed by the EC, assuming it would shoulder the burden of U.S. military aid to Ukraine.

Since Russia's February 2022 invasion, Congress has passed five major bills aiding Ukraine, which together amount to $175 billion in spending, according to the Council on Foreign Relations.

The question is how much Europe could produce, given its shrunken industrial capacity.

Arms race

European leaders have been grudging about a peace deal with Russia in Ukraine and you can see why.

They fear that Russia, having revived its military production, would build its stockpiles even faster if it were not having to fight in Ukraine.

This is where military planning can become a self-fulfilling prophecy. Planners estimate that Russia would soon have a big enough force to overwhelm the EU, so the EU will follow suit. On paper it makes military sense, and if it leads to the continent's re-industrialisation, it might even make economic sense.

The spending hikes would be financed by debt initially, though this would boost interest rates and inflation. In the longer term governments would have to spend more on defence, and less on other services.

Germany alone could account for half of the €125 billion annually for the next five years at EU level by raising its own defence spending to about 3.5 per cent of GDP.

Practical problems

The limits to expanding European defence are sometimes comical.

When the Norwegian-Finnish company Nammo wanted to make more 155 mm shells for the Ukrainian army, they struggled expand production at their Oslo factory because a nearby TikTok data centre was consuming all the electricity.

Other problems include coordination. The EC has two bodies, one which coordinates defence investment, and one which raises money. Then it has multiple bodies which set standards and regulations, including the rapidly-expanding carbon rules and Net Zero.

The European Commission has appointed a new Commissioner for Defence and Space, Andrius Kubilius, but member states tend to classify their military production data as national security.

Green meanie

Green regulations work mainly through the banking and finance sector. Before they lend money, they must estimate how clean are inputs and outputs according to Environmental, Social and Governance metrics, or ESG.

One of the architects of carbon taxes Mark Carney — a candidate to replace Justin Trudeau as prime minister of Canada — says no business may be exempt, regardless of the regulatory burden.

He even said that companies which fail to comply with his Green Horizon standards will be forced to close.

So it is not just a matter of loosening rule so countries can borrow more; the EC will also have to encourage banks to lend to weapons manufacturing despite the years of Green policy.

As the editor of Babel, Glib Gusev, puts it:

“To summarize the problem of Europe's "defence" as simply as possible, it looks like this. When the European Union tries to centrally manage it, individual countries resist this. And when it tries to centrally finance it, it runs up against its own "green" policy." [2]

On March 19, the EC will issue a paper on European defence which is expected to prioritise joint development of military equipment and financing options.

The idea is to persuade EU member states, plus Britain, to increase spending on defence by 1.5 per cent of GDP, allowing for €650 billion, while excusing defence deficit spending from rules that limit deficits to 3 per cent of GDP.

The second proposal is €150 billion of loans. This produces the headline figure of 800 billion euros over four years.

Last year the EU spent about €325 billion on defence spending, so €200 billion would bump it up but not quite reach the 3 per cent of GDP target that some EU leaders want.

The EC might take money from unspent Covid funds, or from the bank stabilisation fund set up after the 2008-today financial crisis. But even if it raises the money, can Europe build it.

Vanishing industry

The de-industrialisation of Europe is not a new concern but is accelerating. We date it from the 1980s when Thatcher, president Mitterrand and prime minister Chirac of France, and chancellor Kohl of West Germany, decided to de-industrialise, and shift Europe to a service sector.

This was a decade after oiler and banker David Rockefeller set up the Trilateral Commission in 1973. Rockefeller would lead a delegation in 1981 from North America, Western Europe and Japan to meet paramount leader Deng Xiaoping and reintroduce capitalism in Chinese society after a 30 year break.

See Crisis Update: Rethinking Left & Right - Deindustrialisation and the worker's ruin - Kamala's price controls #2 (Aug 22, 2024)

Germany Votes For The World - A Canadian eye on Europe's entrapment (Feb 22, 2025)

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Resource short

Europe has always been reliant on imported raw materials but there is new competition for those resources.

Its industrial might was built upon mercantilism, defined by Wiki as “an economic practice by which governments used their economies to augment state power at the expense of other countries.”

Military force and empire was used to extract raw materials from developing countries at low prices, suppress local manufacture, add the value in Europe behind protective tariffs, and sell it back to poorer countries.

From a security standpoint, Europe today is dependent on China for minerals and on Russia, until sanctions, for cheap gas. High skilled labour is offset by automation, and by lower wages abroad.

Europe's high wage, high tax economy was a choice. EU politics favour redistributing wealth rather than encouraging industrial growth. The European Regional Development Fund (ERDF), one of the European Structural and Investment Funds (ESIFs), aims to reduce regional disparities in income, wealth and opportunities.

These are the EU's biggest budget items and constitute the majority of total EU spending.

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Loving regulation

The European Union produces hundreds of regulations per year, which take on average 18 months from drafting to implementation. New ones appear all the time: from emission reductions and new carbon rules, to digital standards and data protection.

Regulations don't come out of thin air; nor is the first concern health and safety, or even the environment. Regulations restrict competition and they are often proposed by the dominant corporations that can shoulder the burden in a way that smaller rivals cannot.

Regulation is seen by more than 60 per cent of EU companies as an obstacle to investment. The worst example are reporting requirements, tax adjustments and cross-border regulations.[3]

Competing again

Of the world's top 50 tech companies, three are European: Schneider, SAP and ASML. There are other big names — Ericsson, EADS, ABB, Rimac, Siemens, Bosch, Dassault Systèmes — but not on the scale of a Google, Apple or Microsoft.

Efforts are being made to revive European growth, but as we shall see these hide other agendas — in fact they may not acknowledge the causes of de-industrialisation.

The EC commissioned two blockbuster reports on regaining competitiveness and they were published last year.

The Draghi report on the future of European competitiveness (2024) proposed joint borrowing, something that member states immediately rejected. [4]

Technocrats rule

Mario Draghi is a technocrat, a former president of the European Central Bank who was drafted to rule Italy when it looked like it might exit the euro after the 2008 financial crisis.

His report was criticised for paying little heed to the development of central and eastern Europe. It was mired in the language of "sustainable competitiveness," a Clean Industrial Deal and something called open strategic autonomy.

The Letta report, Much More Than A Market (2024) examined the shortcomings of the so-called single market. He addresses military manufacture directly.

In 2022-2024 while supporting Ukraine, Europeans spent substantial amounts, yet around 80 per cent of these funds were spent on non-European materials. Conversely, the US sourced around 80 per cent of the military equipment directly from American suppliers.

He cites the lack of integration in the energy market where, despite a continent-wide energy grid, investment is dictated at national level. He wants more cross-border auctions of renewable resources. [5]

A "Clean energy delivery agency" should provide a one-stop shop for permitting, certification and funding by 2027.

It wants more and better data — for example, where is Russian gas entering the supply chain; how many households have heat pumps — because in two years they will pay a carbon tax that will raise prices and "force behaviours."

Energy is one of three sectors previously considered matters of national security, along with financial and electronic communications. Enrico Letta proposed that the EU should now integrate them.

This report was also mired in the moss of jargon: a “fair, green and digital transition” to ensure success in a "novel global order."

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Centralize moar

The European Parliament's response was a press release stating that "both reports insist on the urgency to act." Professor Glenn Diesen calls it "Euro speak" which frames centralised decision making, through the control of language, as the pursuit of virtue.

See U.S., Russia Outline Ukraine Peace Talks - EU can't let go of the war mindset (Feb 18, 2025)

The first thing to spot is that both reports see the answer in more centralisation: stronger central control. The other is the technocratic pursuit of control via energy, the focus of Letta's report.

This was evident from the Trilateral Commission's 2023 meeting in New Delhi. Investment will be directed to follow energy transformation, and war in Ukraine had shifted priorities.

According to the off-the-record style of the Trilateral Commission one unnamed speaker said

“Three decades of globalization — defined as integrated, free-market based and deflationary — has been replaced by what will be a multi-decade period of globalization defined as fragmented, not-free-market-based but industrial-policy based and structurally inflationary. This year, 2023, is Year One of this new global order.”

See Xi Visits Putin: To NWO Or Not? - Trilateral Commission delegate says 2023 is the first year of the New World Order (Mar 21, 2023)

Open questions

This leaves us with a few questions, about ability and purpose.

The lesser point is whether the European Union can rebuild defence manufacturing. The answer is yes. Europe has long-established names in defence procurement.

It's probably no coincidence that this year's Bilderberg Group meeting will be chaired by former NATO chief Jens Stoltenberg, and is expected to take place in Sweden, home of the Wallenberg family, a leading name in technology and defence.

Will this reverse the decline in European manufacturing and the broader crisis within the European Union?

Leading politicians

Another question is political will and the reason it's lacking.

Germany and France have struggled in the past year to pass a budget, Britain had a market meltdown cutting short the premiership of Liz Truss when she tried tax cuts to shock the economy into a new spurt of investment.

Countries are failing to make long-term budget commitments, not because they can't, but they lack the will to get enough political support behind them.

A further issue is market size. The U.S. defence contractors have huge international markets and winning (pressuring) customers is baked into its foreign policy. U.S. intelligence agencies prepare the ground, and occasionally see off rivals. Europe's orders are sometimes too low to justify industrial production.

Scale has the advantage of interoperability, which Europe's fragmented defence manufacturing lacks, as demonstrated by the varied systems supplied to Ukraine.

In practice, as Alexandr Burilkov and Guntram Wolff wrote in a widely-published article, buying European does not rule out working with non-EU partners were that is more timely, cost effective or has no impact on strategic autonomy. [6]

Rebooting industry would make economic sense, if serious, but EU Net Zero Green carbon rules obstruct growth, new companies and tech. Centralising control over energy is the kiss of death.

What do you think?

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