ECB SERVES THE PRIVATE BANKERS BY PLUNGING EUROZONE INTO DEBT
As even Trump s propaganda channel Zerohedge admits the Ukraine war has been lost and that the US has no weapons, the EU has no money and the Ukraine no soldiers, Germany s Chancellor Friedrich Merz and his EU allies are not able to prolong the conflict.
Merz won February’s snap election on a manifesto that included cutting the deficit and slashing spending on both defence and a stagnating economy. But he has done a spectacular U turn and is proposing to change Germany’s Basic Law to permit huge debt-financed investment in the military and the economy.
To get the measure through, Merz is planning to ask the outgoing Bundestag to pass it. This, knowing that his coaltion, about to take power, will not pass the plan to create €500bn special fund, also to be financed by borrowing, fuelling a crisis in democracy.
From media
Dietrich Murswiek, Germany’s leading constitutional lawyer, assessed the events as follows: “The old Bundestag is now to decide quickly, not because the project cannot be postponed, but for the sole purpose of tricking the newly elected Bundestag and presenting it with a fait accompli with the help of the old majority."
"This approach shows contempt for the will of the voters, indeed contempt for the democratic legitimisation process. An aloof political class arrogantly disregards those from whom the power of the state should emanate in a democracy," Murswiek added.
"It shows no respect for the election results and no respect for the constitution. The constitution is quickly changed because the required majority to do so was just lost in the election.”
More debt, more problems
The debt spree, misleadingly referred to as Sondervermögen (“special assets”), is equivalent in size to around 20% of Germany's gross national product. It will thus catapult the country's debt from 65% to 85%, which is not only a serious violation of the Maastricht debt criterion but will also expand the money supply and drastically worsen Germany's credit rating.
Debt of 0.35% of GDP per year, which was previously permitted under Article 115 of the constitution, will effectively become a minimum annual debt of 4.5% p.a. over the 10-year term.
Many countries in the eurozone will therefore also turn away from fiscal discipline and ignore the debt rules of the Maastricht Treaty, which will have a considerable impact on the German and eurozone bond markets, resulting in significant interest rate increases. A new European sovereign debt and banking crisis is therefore looming in a few years' time.
Rising capital market interest rates and the absorption of a large proportion of the economy's savings will crowd out private investment, the government spending ratio will increase significantly, and private investment activity will decline, causing the economy's productivity to fall.
While short-term growth may be stimulated through government demand in the spirit of a Keynesian economic stimulus program, the above-described effects will overcompensate for this in the medium term.
Given the performance profile of German authorities in procurement, it is expected that a large part of this program will be wasted. From an economic perspective, defence spending is government consumption, as tanks and other acquisitions are not designed to produce anything in the future. In this sense, they are not even investments.
Regarding infrastructure, the state’s inefficient and poor procurement system generally results in paying twice as much as private companies for the same outcome.
If €500 billion are allocated to this, significant price increases should be expected due to high demand and limited supply capacity. The real purchasing power of this program will therefore be closer to €200 billion rather than €500 billion. The same logic applies to defence spending
In conclusion, this program will accelerate Germany’s economic decline, both in terms of defence and infrastructure.
https://www.tagesschau.de/wirtschaft/konjunktur/staatsdefizit-schulden-steuern-zinsen-100.html
https://www.focusplus.de/politik/fraktionschef-spahn-erteilt-steuererhoehungen-eine-absage-4353
The metals and electronic industry in Germany lost 14,000 jobs in June alone and 76,000 jobs in the first half of the year.
From media
"Der Jobabbau in der deutschen Metall- und Elektroindustrie geht weiter. Allein im Juni gingen fast 14.000 Arbeitsplätze in der Branche verloren, wie der Arbeitgeberverband Gesamtmetall mitteilte. Im ersten Halbjahr waren es demnach 76.000. «Der Standort hat ein massives Kostenproblem bei Energie, Steuern, Sozialabgaben und Bürokratie», teilte Verbands-Chefvolkswirt Lars Kroemer mit. Hinzu kämen die weltwirtschaftlichen Belastungen etwa durch die Zollpolitik der USA.
Bundesweit arbeiten in der Branche im Juni rund 3,82 Millionen Menschen - 104.000 weniger als ein Jahr zuvor. Seit 2023 seien in der Metall- und Elektroindustrie 154.000 Arbeitsplätze verloren gegangen, so der Verband.
Mit jedem abgebauten Arbeitsplatz verliere Deutschland mehr als 100.000 Euro an Wertschöpfung, betonte Kroemer. «Das sind fast 25 Milliarden Euro weniger an Wirtschaftskraft im Vergleich zu 2019.»
https://www.zeit.de/news/2025-08/18/tausende-jobs-in-der-metall-und-elektroindustrie-abgebaut
Europe depends on old industries. That is especially true of Germany, whose economu is driven largely by auto companies, now hit higher tariffs or import taxes in the USA.
Years of low investment have damaged not just economic growth but also public services like the German railways.
Covid and the Russian sanctions and Ukraine war have also hit Germany s economy causing inflation and deindustrialization.
The cost of butter, for example, increased by nearly 30% in Germany between 2020 and 2024.
In June 2023, Germany s inflationr rate was still 6.4%.
Germany’s economy is no bigger now than it was five years ago.
Over the same period France has grown by less than 1% a year on average.
Since the euro was introduced, growth rates in Europe have become weaker and the gap in living standards with the USA has widenend as many warned.
Experts have warned the 500 billion euro spending spree could accelerate Germany s decline due to inflation caused also by corruption and a misallocation of funds.
From media
"The debt spree, misleadingly referred to as Sondervermögen (“special assets”), is equivalent in size to around 20% of Germany's gross national product. It will thus catapult the country's debt from 65% to 85%, which is not only a serious violation of the Maastricht debt criterion but will also expand the money supply and drastically worsen Germany's credit rating.
Debt of 0.35% of GDP per year, which was previously permitted under Article 115 of the constitution, will effectively become a minimum annual debt of 4.5% p.a. over the 10-year term.
Many countries in the eurozone will therefore also turn away from fiscal discipline and ignore the debt rules of the Maastricht Treaty, which will have a considerable impact on the German and eurozone bond markets, resulting in significant interest rate increases. A new European sovereign debt and banking crisis is therefore looming in a few years' time.
Rising capital market interest rates and the absorption of a large proportion of the economy's savings will crowd out private investment, the government spending ratio will increase significantly, and private investment activity will decline, causing the economy's productivity to fall.
While short-term growth may be stimulated through government demand in the spirit of a Keynesian economic stimulus program, the above-described effects will overcompensate for this in the medium term.
Given the performance profile of German authorities in procurement, it is expected that a large part of this program will be wasted. From an economic perspective, defence spending is government consumption, as tanks and other acquisitions are not designed to produce anything in the future. In this sense, they are not even investments.
Regarding infrastructure, the state’s inefficient and poor procurement system generally results in paying twice as much as private companies for the same outcome.
If €500 billion are allocated to this, significant price increases should be expected due to high demand and limited supply capacity. The real purchasing power of this program will therefore be closer to €200 billion rather than €500 billion. The same logic applies to defence spending
In conclusion, this program will accelerate Germany’s economic decline, both in terms of defence and infrastructure.
https://www.tagesschau.de/wirtschaft/konjunktur/staatsdefizit-schulden-steuern-zinsen-100.html
https://www.focusplus.de/politik/fraktionschef-spahn-erteilt-steuererhoehungen-eine-absage-4353
Morever, it seems that a portion of the money will be spent buying weapons from America which America does not have and which increasingly now seem out of date.
It is China and Russia which are leading in the new generations of weapons, including hypersonic and anti ship missiles.
The US, UK and Europe industrial and research base is now so weak that it may take years if not decades to catch up.
When engine of the Europe s economy, Germany is in decline, the EU s massive debt burden becomes ever more unsustaible.
There are plans to hike the retirement age from about 65 to 70 to help avoid a crisis in the country s pensions and social welfare system and balance the budget.
Tax and social security contributions increases are also under discussion to help keep up payments on the country s massive debt to the private bankers and other items.
But these measures are deeply unpopular and fuelling voter rebellion.
And Merz s plan to add another 500 billion in debt to pay for a lost war is fuelling that rebellion.
In France, Emmanuel Macron faces the same problem of stagnant or shrinking economy exacerbated by the soaring energy costs caused by Russian sanctions
Low tax revenues and high debt servicing costs put pressure on social security pensions or to hike taxes.
The European Central Bank may have to step in to buy French and German bonds in the event that investors abandon the market and interest rates start to soar.
The one winner out of the catastrophe are the private banks.
The ECB is a public institution on paper only. It gives about 7000 private banks access to the euro and not governments, allowing private banks a de facto monopoly on money creation.
When the ECB creates money out of thin air, it gives it overwhelmingly in one way or another to the banks by buying up eurozone debt and not to the government to fund their operations directly....
Die EZB hat in den vergangenen Jahren unglaublich viel Geld aus dem Nichts geschaffen und damit vor allem Staatsanleihen der Euroländer gekauft.
The ECB also gives private banks hundreds of millions of euros directly as interst on their deposits held by the ECB for no reason...
From media
When central banks raise interest rates, they also raise the cost of payments on commercial banks’ excess reserves. The best way to avoid a windfall for bankers – and a burden for taxpayers – is to shrink the central bank’s balance sheet by selling government bonds while implementing a temporary increase in minimum reserve requirements.
LONDON – In an effort to tackle inflation woes, major central banks have been raising interest rates aggressively. But a byproduct of the recent rate hikes is higher interest payments on central-bank deposits held by commercial banks – in effect, a transfer of public-sector money to private banks.
In the United States, the Federal Reserve recently voted to raise the interest rate paid on reserve balances to 4.65%. That means it will owe $140 billion in interest payments on roughly $3 trillion of bank reserves this year. The Bank of England is also on the hook for similarly massive handouts to commercial banks.
...
The latest monetary-tightening cycle implies profits for commercial banks and financial losses for central banks, raising anew the question of whether commercial banks should be remunerated for holding reserves at the central bank. Is paying interest on reserves necessary to conduct monetary policy? Or can central banks raise interest rates without giving massive handouts to commercial banks?
While many economists take it for granted that bank reserves earn interest, the practice is a rather recent phenomenon. The ECB introduced interest payments on excess reserves when it started its operations in 1999, and the US Congress authorized the Fed to do so in 2008. Prior to 2000, the general practice was not to pay interest on banks’ deposits.
China has a state central bank funding governments directly and its economy is booming.
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