Europe
Germany embraces an era of ‘military Keynesianism’

It appears that an era of “military Keynesianism” has begun in Europe, focusing on military expenditures as a means to boost profitability amidst declining new investments.
German economist Lucas Zeise, in his analysis published in the newspaper junge Welt (jW), points out that the idea of “military” or “defense” Keynesianism is older than “widespread and civilian” Keynesianism.
Robert Skidelsky, whom Zeise describes as John Maynard Keynes’s biographer and “one of the few sensible voices” in the British House of Lords, also reiterated this last week.
According to Zeise, Skidelsky writes that military Keynesianism is the only form of Keynesianism that conservatives accept, noting that Keynesian politics originated not in peace, but in war.
Zeise states, “Rearmament and war eliminated unemployment in the US and Great Britain. During the Second World War, economic growth was 17% annually,” and argues that the typical form of post-war Keynesianism was also “military Keynesianism.” Between 1950 and 1970, US military spending constituted half of the federal government’s budget, and in the US case, this involved not just rearmament but “conducting active wars,” particularly in Korea and Vietnam.
Zeise points out that Skidelsky’s comments were triggered by the new German government and the removal of the constitutional debt brake introduced in 2009 to prevent Keynesian economic policies. He recalls that on the day this decision was made with the former Federal Assembly composition, jW termed it “armament Keynesianism.”
The jW author notes that Johann Wadephul, a CDU Foreign Minister, advocated for allocating 5% of the gross domestic product to military expenditures, as requested by then-US President Donald Trump. He also highlights that SPD Finance Minister Lars Klingbeil, despite describing himself as an “investment minister,” has not specified which infrastructure projects from the 500 billion euro special fund will be realized through government contracts.
On the other hand, unlike the debt authorization for armaments, each project in the infrastructure fund will be examined to determine if it constitutes an “additional” investment. No steps will be taken in this direction until the 2025 budget and the law establishing the “special infrastructure fund” are drafted in June.
Thus, according to Zeise, “Keynesian growth stimulus” through public procurement will not occur outside the defense sector. As Klingbeil and the coalition agreement state, this will be “subject to financing.”
Therefore, according to Zeise, Klingbeil and Merz only mentioned “investment incentives.” This allows companies to amortize 30% of their investments made within the current year for tax purposes, thereby increasing their post-tax profits.
In the current situation, such expansionary investments only serve to increase capacity in the arms sector. Consequently, Zeise believes Germany has arrived at a pre-Keynesian “military Keynesianism,” tolerated by “conservatives” and “stripped of civilian elements.”
Europe
Post-Brexit reset falters as France targets UK defense firms

Despite a post-Brexit reset, France is attempting to exclude British arms companies from the EU’s defense industry program.
A diplomatic source told The Telegraph that Paris is trying to limit member states wishing to purchase weapons under this program to those manufactured predominantly within the bloc.
The European Defence Industry Programme (EDIP) is being touted by the European Commission as the most significant overhaul of the continent’s industrial base. Under the program, EU funds will be channeled into joint procurement projects and the production of weapons, ammunition, and other military equipment.
The EDIP, which has been in preparation for six months, is part of a broader race to spend €800 billion on defense by the end of the decade.
French diplomats have insisted that this vehicle should only be used to support companies based in the EU, Norway, and Ukraine. This would mean that member states seeking to make purchases under the program would be limited to technologies where at least 85% of their components are produced within the bloc.
This demand means the United Kingdom, which recently signed a major defense and security agreement with Brussels, would be excluded from most projects financed by the EU budget. London would also be barred from joint procurement projects under the EDIP program.
An EU diplomat told The Telegraph, “Just a month ago, we solemnly declared that a new page had been turned in our relations with the United Kingdom and that a new era had begun. But at the first opportunity to put those words into action, we closed the book.”
There are also concerns that France’s hardline stance could lead to potential EU funding cuts for factories producing Patriot surface-to-air missile defense systems because they are based on US technology.
This decision comes at a time when NATO’s European allies and Canada have been warned that they need to increase their air defense systems by 400% to counter a potential Russian attack.
“It seems self-defeating not to invest in the only available air defense system just because it’s American-made,” the diplomat added.
French President Emmanuel Macron has been insistent that EU defense plans should be used to strengthen the continent’s own industry rather than allowing funds to be invested in foreign companies. Many EU countries, such as the Netherlands, Romania, and Greece, base their defense strategies on purchasing American systems like the Patriot air defense batteries.
To address these concerns, discussions are underway to allow technology transfers from defense companies outside the EU to those within the bloc. However, insiders suggest this mechanism will get bogged down in bureaucracy, making it practically impossible to secure funding.
Europe
Poland considers partial border controls with Germany

In response to Berlin’s repatriation of migrants who have crossed the border “illegally,” Polish Prime Minister Donald Tusk announced that it is “very probable” Poland will implement “partial controls” at its border with Germany.
Speaking in parliament yesterday before a vote of confidence in his government, Tusk also stated that the Polish government is seeking support from other European Union countries to restrict or end visa-free travel for Georgian citizens, whom it holds responsible for a wave of crime.
Under normal circumstances, no controls are conducted at the border between Poland and Germany, as both countries are part of Europe’s Schengen free-travel area. However, in 2023, Germany reintroduced controls on its side of the border to prevent the illegal entry of migrants.
This move drew criticism from Poland due to the additional burden placed on people crossing the border and Germany’s repatriation of thousands of migrants without the right of entry.
Poland’s main opposition party, the national-conservative Law and Justice (PiS), staged protests against Germany’s repatriation of migrants. The party accuses the Tusk government of being too lenient on this issue, although such repatriations also occurred when PiS was in power.
Speaking in parliament on Wednesday, Tusk stated that they had informed Chancellor Friedrich Merz’s new government that “on the Polish side, we will control very critically and very thoroughly any attempts to send any migrants to Poland.”
According to Polsat News, Tusk said, “I have informed not only the Germans but also other neighboring countries that if the situation and pressure at the border escalate, I will not hesitate to make the decision to introduce temporary controls.”
“It is very likely that such partial controls will be introduced at the German border this summer,” Tusk said, without providing details on what these would entail or exactly when they would be implemented.
Tusk acknowledged that such measures would create difficulties for Poles living near the border, especially those who reside on one side and work on the other, and he stated that the government would do its best to minimize their hardship.
In March of this year, Tusk announced that Poland would cease to comply with the EU’s Dublin Regulation, which permits the return of asylum seekers to the member state where they first applied for protection. However, his government has yet to take action in this regard.
In his speech to parliament on Wednesday, Tusk also announced that he is working to “form the necessary majority” among EU member states to limit or even completely suspend visa-free travel for Georgian citizens to the EU.
According to Radio Zet, the prime minister said, “One-third of Georgians want to share our values… But I am in favor of restricting visa-free travel with countries that do not meet the standards.”
Earlier this year, the Tusk government took strong measures against what it claimed was an increase in “imported crime,” particularly crimes committed by migrants from Georgia.
Europe
Brussels prepares to sanction two Chinese banks over Russia ties

The European Union plans to add two Chinese banks to its sanctions list due to their commercial ties with Russia.
According to information from Bloomberg, based on European Commission documents, this step is being considered as part of the EU’s 18th sanctions package against Russia. The European Commission presented the 18th sanctions package on Tuesday. Sources indicate that two regional banks operating in Chinese provinces bordering Russia are expected to be blacklisted.
These regional banks became a key channel for payments between Russia and China after the US tightened its financial sanctions late last year, threatening secondary measures against all credit institutions transacting with Russia.
Following Russian President Vladimir Putin’s visit to Beijing in May of last year, a payment network was established, involving at least six regional Chinese banks.
According to the European Commission document, these banks are accused of providing crypto services that help Russia evade sanctions, in addition to facilitating payments and export financing. Under the sanctions regime, the banks in question will be completely cut off from the European Union’s financial system.
As part of the EU’s 18th sanctions package, more than 30 individuals and legal entities are also planned to be added to the list.
Furthermore, there are discussions about removing another 22 Russian banks from the SWIFT system and blacklisting 77 tankers belonging to the “shadow fleet.” These measures aim to further restrict Russia’s financial and logistical capabilities.
The European Commission is proposing a ban on restarting the Nord Stream natural gas pipeline and a reduction of the price cap on Russian oil from $60 to $45 per barrel. According to the announced plan, shipments above this price will be excluded from European insurance coverage, and European tanker companies will be prohibited from transporting such oil. These steps are expected to further reduce Russia’s energy revenues.
In a statement yesterday, German Chancellor Friedrich Merz indicated that the new sanctions package will likely be approved next week. Merz stated, “Russia poses a security threat on both sides of the Atlantic,” adding that the US Congress is also working on new measures.
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