Submitted by Thomas Kolbe
In public debate, the introduction of joint European bonds, Eurobonds, has so far often been dismissed as a fantasy. That the European Taxpayers’ Association has now issued a clear warning against joint debt issuance should give critics of the Commission pause. Are the plans for standardized EU bond issuances possibly more advanced than we have realized?
The TAE is the umbrella organization of national European taxpayers’ associations, a private law foundation, independent, market-liberal, and a critical observer of the fiscal power plays of the Brussels central authority. When it speaks out decisively on fiscal issues, it does so for a reason.
The seemingly advanced plans of the EU Commission have apparently convinced the TAE to dedicate a campaign to the issue of European financing. Under the program title Stop EU Taxes. Stop EU Debt, it presents a fiscal policy agenda that would be welcome in party politics among economically liberal parties.
The TAE fundamentally warns against the European Commission’s lack of democratic mandate and sees the danger of Brussels’ powerful central body arrogating ever more tax powers to itself, thus, one could paraphrase, growing into a kind of state above the states. From this, the advocates of European taxpayers derive their demand: There must be no joint debt issuance within the EU.
No matter how the budgetary situation in the European member states develops: That the EU’s two main pillars, Germany and France, will record budget deficits of at least five percent this year is a national problem. And it must be resolved there, in the national capitals. It is unacceptable to distribute money to the public with one hand while taking it from European taxpayers with the other through higher taxes or future debt indirectly via inflation.
With these demands, the TAE firmly stands on the subsidiarity principle consistently advocated by its largest member organization, the German Taxpayers’ Association. Budgetary policy is a national matter. Excessive centralization of political power leads to inefficiencies, opacity, corruption, and systematic mismanagement by an increasingly powerful central apparatus that ultimately cannot even control the flow of its own funds.
The warning of the taxpayers’ association may, however, come too late. The European Commission operates under the motto: “Never let a crisis go to waste.” Following this spirit, the first true joint European bond was issued during the lockdown five years ago. Under the program name NextGenerationEU, the European Commission raised approximately €800 billion on the capital markets, backed by Germany as the main rating anchor, which with a national debt of 65 percent continues to stabilize European capital markets.
On an EU level, a whole arsenal of crisis financing instruments has been established. The European Stability Mechanism (ESM) intervenes in acute crises, issuing bonds itself, and would be applied in a looming sovereign debt crisis just like the so-called SURE bonds set up to mitigate regional unemployment.
We are facing a slow, erosive process in which the EU is increasingly penetrating the capital markets, always with the guarantee of major economies and European taxpayers behind it. EU Green Bonds are a particularly vivid example: Here, the ideology of the green transformation merges with the practical implementation of joint debt issuance. Capital is directed into channels of a green crony economy that has already heavily damaged the overall economic structure.
And it came to pass as expected: The warning from taxpayer representatives was more than justified. Large parts of the borrowed debt were immediately funneled into the public budgets of Italy and Spain to mitigate precarious national fiscal conditions. Spain provides the clearest example: President Pedro Sánchez’s socialist government finances large portions of its state budget through these programs, enabling massive public sector employment growth. Much like in Germany, Spain’s labor market is shifting from the struggling private sector to the public sector, which acts as a final safety net for a gradually eroding middle class.
As if European statism were not already the costliest and economically most disastrous project of our time: productive forces are further stifled by this debt program, and the capital market is virtually drained by the public sector. Moreover, access to credit for small and medium-sized businesses becomes increasingly difficult when fewer funds are available.
This phenomenon can be observed across nearly all levels of European economic policy. What has unfolded under the program name Green Deal as a green transformation within a massive redistribution mechanism unfortunately establishes incentives that also attract productive private capital. Who would not prefer a government- or institution-guaranteed minimum return that exceeds market rates and is risk-free, as in the case of renewable energy investments?
The TAE does not state it explicitly, but if the EU Commission under Ursula von der Leyen continues to expand its fiscal powers, this path could accelerate Europe into economic third-class status.
Every major past crisis offered Brussels the opportunity to expand and consolidate its fiscal power. Whether the Dotcom bubble 25 years ago or the sovereign debt crisis fifteen years ago, which was quasi drowned by former ECB President Mario Draghi in fiat credit – all these events eventually culminated in the first European joint bond, the so-called NextGenerationEU.
It was the great original sin. A political bastard of the lockdown era. What else could this period have produced but further problems? We must assume, with Europeans’ response patterns in mind, that the looming EU sovereign debt crisis will inevitably feed into the Eurobond project.
It will spawn additional political bastards, such as the digital euro, designed as a capital flow control to prevent flight. A digital identity for monitoring public discourse is likely to be implemented. A minimum tax regime is also planned to finally eliminate tax competition in the EU. Welcome to Brussels, welcome to the hyperstate that will produce nothing but debt, behavioral control, and inflation.
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About the author: Thomas Kolbe, a German graduate economist, has worked for over 25 years as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.
