Debt, Doom and Demise

Europe’s major countries are deeply in debt, yet they still plan to finance their future defense through loans.

European Commission President Ursula von der Leyen (Photo: Olivier Matthys)

What drives the world? Is it love? – the good-hearted person hesitantly asks. Is it money? – the realist counters. Or perhaps interest? – the even more pragmatic one suggests. Compound interest – the truly clear-sighted realist states with confidence.

Money is the most expensive commodity. If you buy 200 grams of cheese for 1,000 forints, you pay exactly 1,000 forints at the register. But if you borrow 1,000 forints, you may have to pay back 1,100, 1,500, or even more, depending on your creditworthiness. This extra amount is called interest; in the case of bonds, it’s called yield, and for struggling borrowers, it’s called a premium.

Europe’s major countries are currently drowning in debt but still want to finance their defense through borrowing, fueled by the fear of the "Russian threat." Pro-war Western European states are trying to yank others into a political debt trap, disregarding the future consequences.

Europe's push to rearm itself was triggered by the Russia-Ukraine war, but the urgency has increased as Donald Trump signals a U.S. retreat from hitherto honored commitments. Now, Europe is doubling down, preparing to spend 800 billion euros on defense—a massive sum even at the EU level, roughly comparable to the U.S. Pentagon’s annual budget.

Two decades ago, when I worked in Brussels, the EU’s economic "Bible" stated that national debt cannot exceed 60% of GDP. Today, countries like Greece, Italy, Spain, Belgium, and most importantly, France have debt levels exceeding 100% of GDP—an unsustainable burden.

Interestingly, there's hardly any mention of these Maastricht criteria in Brussels lately. After all, fear overrides fiscal responsibility—the narrative now suggests that if Putin issues the order, Russian soldiers could be dining tomorrow in Gyor, Vienna, Frankfurt, or Strasbourg after occupying them.

Fear is a powerful force, but so is debt repayment. The U.S. national debt counter currently displays $36.6 trillion—a staggering sum. Yet for major economic players like China, lending to the U.S. is still an enticing, safe investment, guaranteed and with yields.

Europe, is a different story. During the Greek debt crisis, some retirees committed suicide because they were driven into financial ruin. We assumed Brussels had learned from the past, from the days when people took out zero-down-payment loans to buy Suzukis, only to drown in debt later. But clearly, the banks and arms manufacturers (and their major shareholders) have different priorities. British, German, French, and Italian arms producers are celebrating, the EU's massive rearmament plan announced recently by Ursula von der Leyen.

Europe, is a different story. During the Greek debt crisis, some retirees committed suicide because they were driven into financial ruin. We assumed Brussels had learned from the past, from the days when people took out zero-down-payment loans to buy Suzukis, only to drown in debt later. But clearly, the banks and arms manufacturers (and their major shareholders) have different priorities. British, German, French, and Italian arms producers are celebrating, the EU's massive rearmament plan announced recently by Ursula von der Leyen.

Let’s be clear: Europe must be capable of defending itself. It’s hypocritical to reject U.S. interference in European affairs while expecting NATO’s protection. But this is about the long-term future, not just Putin, Trump, or Zelensky. They will be gone one day, but our grandchildren and great-grandchildren—will still be here. We cannot accept the enormous financial burden that comes with unchecked borrowing. Lesons of recent history, Nicolae Ceausescu repaid Romania’s national debt but impoverished his people in the process. Meanwhile, Janos Kadar took on massive loans, leading to Hungary falling under the control of the World Bank and Soros's foundation. Low debt goes hand in hand with sovereignty. And if Washington or Brussels offers to "help"—that’s when one should be most cautious.