How Military Interests Trump European Security
By Dr Dan Steinbock
The collision of an aging population, escalating climate damages, and massive remilitarization is set to present an unprecedented, compounding threat to the future well-being of Europeans.
On August 27, 2026, European Commission (EC) President Ursula von der Leyen gave a speech in Paris noting that roughly €10 trillion ($11.6 trillion) sits idle in household bank deposits across the EU. She lamented that a significant amount of European savings was flowing overseas instead of supporting domestic companies.
What was left unsaid was that those overseas investments have allowed Europe to participate in the kind of emerging-markets’ growth that no longer prevails in the Old Continent. Without such investments and offshore revenues, Europe would have faced even deeper stagnation after the 2008 crisis, during the early 2010s debt crisis and the 2020s pandemic depression.
Setting aside these inconvenient facts, von der Leyen’s controversial proposal seeks to unlock up to €470 billion ($546 billion) in additional investment by integrating the EU’s fragmented capital markets into a new, unified Savings and Investment Union (SIU).
The stated objective is to invest these savings into local European companies, to scale up domestic businesses and boost the bloc’s economic competitiveness. In this view, rearmament and defense would not be beneficiaries.
But then things get a bit murky.
Rearming Europe, destabilizing Europeans
In her August speech, EC President von der Leyen did not break down or earmark specific exact figures for defense or rearmament out of the €470 billion. Moreover, that massive sum is not completely separate from or in addition to the €800 billion ($929 billion) defense target. There is overlap.
On September 2, just days after Paris, von der Leyen outlined her “Rearm Europe” plan to mobilize €800 billion for “defense and readiness.” One of the primary pillars of this plan is mobilizing private capital through – surprise, surprise! – the Savings and Investment Union (SIU).
While the bulk of the €470 billion is seen to support the general economy (digitalization, energy, infrastructure), a massive portion is being guided toward strategic sectors and defense companies to meet the broader €800 billion target.
The massive pivot toward military and corporate competitiveness leaves staggering opportunity costs for public and private capital. Every euro directed toward upgrading military technologies and weapons production is a euro not spent on accelerating the green transition, leaving a public funding gap of over €100 billion per year for climate goals.
Critics argue that moving “idle” bank deposits into market-driven investments via securitization means shifting financial risk to ordinary citizens. If these corporate/military investments fail or underperform, the opportunity cost is the financial security of household savings.
It’s a slippery slope.
How big finance and big defense reap benefits
With the overarching “Rearm Europe” initiative targeting €800 billion by 2030, defense analysts project that the military-industrial sector could absorb between 30% to 45% of the newly unlocked SIU capital liquidity over the next four years. This absorption is heavily driven by the EU’s newly authorized pan-European “flagship” military programs—such as the European Air Shield, the Eastern Flank Watch, and joint drone initiatives.
According to the International Monetary Fund (IMF) and BBVA Research, short-term defense spending multipliers vary around 1.4 to 1.6. This means that every euro injected into the military sector can generate moderate short-term domestic growth, if the money stays in Europe.
But there are the caveats.
First, the multiplier estimate may prove excessively optimistic in light of historical precedents.
Second, EU defense procurement acts as a heavy industrial lever. Theoretically, a 1% increase in trend-GDP spending on defense drives a corresponding 2% surge in total imports across member borders, spreading economic activity, but it also fuels massive debt burdens. And this colossal leverage is likely to hit EU citizens with massive force at a historical moment when they can least afford it.
Third, defense multipliers are no Keynesian multipliers. The former benefit mainly the military-industrial complex; the latter support broad-based consumption, universal infrastructure and direct social safety net transfers.
The “Rearm Europe” framework’s primary beneficiaries are likely to be defense contractors and heavy industry, highly skilled modern warfare assets (drones, cybersecurity, munitions) and particularly the corporate shareholders. These perks will not spill over the diversified market economy, total labor and many SMEs which tend to create most jobs.
Interest conflicts and moral hazards
EC President von der Leyen’s aggressive push for EU militarization has frequently been scrutinized due to her political background, past institutional controversies, and ongoing friction regarding defense transparency.
Before her tenure as Commission President, von der Leyen served as Germany’s Defense Minister (2013–2019). Thanks to the “Advisor Affair” (Berateraffäre), her time there was marred by a major parliamentary inquiry into public procurement breaches, including the management of military contracts.
Eventually, she admitted to the administrative mistakes but denied personal liability or nepotism. The investigation hit a dead end when it was revealed that all text messages and data on her official ministry phones had been completely wiped before investigators could audit them.
Distressingly, von der Leyen’s management style has carried over into her European Commission leadership, mirroring controversies like “Pfizergate” where multibillion-euro contracts were negotiated through private messaging.
A legal complaint of a prominent German member of the European Parliament alleges that she withheld critical details, emails, and call logs concerning a “strategic dialogue” and closed-door dinners held with weapons manufacturing executives following the 2024 European elections.
There is abundant criticism across European political elites against von der Leyen’s strategic objectives and management style. So, what are the powerful political interests that effectively support both, despite controversies associated with each?
The proposed banking and financial reforms align the European Commission closely with institutional banking interests, creating new financial channels and incentives for major investment firms. Similarly, the defense plans create long-term, multi-billion-euro windfalls for major European military contractors (Rheinmetall, Leonardo, and Thales), cementing her alliance with the continent’s military-industrial complex.
The net effects feature half a dozen converging adverse headwinds.
The coming headwinds
Europe is entering a demographic bottleneck that fundamentally undermines the tax base required to support its traditional welfare states. By 2030, the EU’s old-age dependency ratio will climb rapidly, leaving fewer than three working-age adults for every retiree.
This dependency ratio shock will foster a major welfare squeeze. The demographic shift automatically drives up public expenditures on pensions and healthcare by an estimated 1.5% to 2.5% of GDP block-wide.
A shrinking domestic workforce slows organic GDP growth reinforcing productivity stagnation. Concurrently, public welfare allocations are eroding in real terms due to structural inflation and high sovereign debt.
Burdened by a corrosive wellbeing impact, Europeans face a double penalty: delayed retirement ages alongside reduced public healthcare access and lower real pension values. That will force individuals to rely even more on private savings or face systemic elderly poverty.
Since those plans dismantle welfare and security, which are critical to young Europeans who are already tackling historical unemployment and the existential entry-job reductions of AI, young middle-class Europeans find themselves ever closer to poverty traps in the Brave New Europe.
If private capital from the €470 billion SIU is drawn away from green tech, the future cost of climate adaptation skyrockets. Governments will eventually be forced to issue massive amounts of emergency debt to repair climate damages. Hence, the fiscal penalty loop.
In turn, delaying green infrastructure investments to prioritize immediate military production creates a highly destructive long-term fiscal trap known as the climate delay debt penalty. Every euro diverted from the green transition accelerates the frequency of extreme weather events (severe droughts, agricultural failures, and infrastructure-destroying floods).
None of this is too reassuring in the aftermath of the extreme climate events of summer 2026 in Europe.
The demise of Europe
Economists project that unmitigated climate change will slice up to 7% off the EU’s GDP by 2050.
When private household deposits are redirected into defense debt, and public budgets are forced to balance aging workforces against geopolitical threats, the European citizen becomes the ultimate shock absorber.
Surreally, as Europe is “rearmed,” human insecurity seems to become intolerable in the region.
The end result is a highly volatile landscape characterized by persistent austerity, degraded ecosystems, higher costs of living, and a shrinking social safety net – transforming Europe from a global beacon of social welfare into a highly constrained, defensive security state.
What the critics ask is, “Is that the European future we want?”
Dr Dan Steinbock, an expert of the multipolar world, is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net/
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Regrettable as it is, Europe, threatened by the muSScovite and Yankee empires has no alternative BUT expand her military as fast as possible.
… delayed retirement ages alongside reduced public healthcare access and lower real pension values. That will force individuals to rely even more on private savings or face systemic elderly poverty.
But that’s the beauty of militarisation! You design, build and stock the weaponry, and then realise it’s a waste if it isn’t used, and the resultant wars reduce the population dramatically. Might have to conscript only the oldies to balance things out properly, but surely you can see the upside?
Disagree and no such thing as ‘Europe, maybe the EU under attack from fossil Atlas Koch & Russia.
Rearming? Maybe inspired by Putin and Trump?
Andrew Smith declares “Disagree” then gives nothing of substance in support of this courageous stand.
“maybe the EU under attack from fossil Atlas Koch & Russia.”
The details in support of that are…impressive?
“Rearming? Maybe inspired by Putin…”
Is that the Putin who pleaded to become part of a security agreement that would provide security for the whole of Europe?
Or is it the Putin who patiently waited for the European signatories to the Minsk agreements to uphold their obligations, only to find out too late that that they were deliberately stalling and turning a blind eye to allow Ukraine to continue murdering its own citizens in the Donbass?
Andrew Smith regularly fulminates about non-Europeans being critical of European affairs.
Here was an opportunity for him to do his thing, to strut his stuff, to go to town, to showcase his inside knowledge, but we got nothing.
… turning a blind eye to allow Ukraine to continue murdering its own citizens in the Donbass?
So his solution is to invade and murder exponentially more? Interesting logic.
So his solution is to invade and murder exponentially more? Interesting logic.
So leefe’s solution to armed aggression that is technically a war crime, is to stand by and watch it happen.
Interesting logic.
The same logic, I should add, that the liberal democracies follow as they stand by and watch the Gaza genocide.
Uhm ….. I am a little slow in economics. However, it appears to me that when a country allows accumulated savings to be invested elsewhere the population of that country loses out on public infrastructure investments.
I am reminded that back in the Cambrian, banks were encouraged/ required to invest their profits in government infrastructure projects for the benefit of the population. Somehow the bankers have manipulated this requirement out of existence.
I am reminded that in 1916 the Indian-Pacific Railway (IPR) was built when then feral Treasurer King O’Malley used the sovereign capability of the then Commonwealth Bank to issue a special run of bank notes that were only used to pay the workers on the IPR, and immediately recalled from the domestic banking system and destroyed. This is how public infrastructure projects can cost the country nothing ….. but there are no profits for the avaricious bankers.
NEC has raised an excellent point.
Here’s an extract from New Zealand economics analyst Colin Maxwell’s article on the flaws in modern banking.
https://sovereignista.com/2024/02/29/banking-2-0/
On the superiority of public banking :–
One of the most stunning examples was the Commonwealth Bank of Australia which Ellen Brown details in her awesome book ‘The Public Bank Solution‘. Of course, history informs us of the tragedy that this incredible model didn’t last – it actually became a victim of its own astonishing success, and it was destroyed by the combined might of the parasitic global central banking cartel.
While the US was setting up its privately owned central bank, for the Federal Reserve, to become a parasite on the productive economy of most of the world, Australia was at the exact same time taking the bold step of establishing a PBS bank that issued credit for the sole benefit of – wait for it – Australians!
The huge irony is that Denison Miller, the bank’s first Governor, was allowed to try this model only because he was considered by the other existing bankers of the day to be one of their own thieving ilk, and that therefore they would be able to keep this new bank in line.
In essence, Miller understood how the commercial banks thieved from the nation at large and he set about creating this new model that could very rapidly revive a struggling economy and create long-term wealth for the entire Australian society. The first branch opened in Melbourne in July 1912 and Miller was the only employee.
Somehow he had persuaded the Treasury to advance him £10,000 as seeding money – the first and last time this version of the CBA was lent any money. Of course, this money didn’t even exist – it was simply created as a ledger entry.
Miller subsequently promised that the CBA would at all times be the people’s bank. It slowly dawned on the private bankers, who were so intent on having to guard against the socialisation of their own banks, that they completely underestimated the power of an orthodox banker who simply mobilised the resources of the entire country to enable the CBA to quickly grow into one of the greatest banking models the world had ever seen.
The bank began advancing massive sums of money simply on the credit of the Australian Nation. An early example was the Melbourne Board of Works which went to the market for money to redeem existing loans and to raise new capital – normally they relied on loans from the viper’s nest residing in The City of London. Instead, this time they approached Dennison Miller and were loaned £3 million at 4% – this was an enormous sum at that time.
In 1914 during WW1, citizens started rushing into their banks to withdraw their funds – Miller quickly put a stop to these bank runs by simply declaring that the CBA would support any banks in difficulty – that was the end of the panic immediately. It was a dramatic demonstration of the power of the Govt to stabilise the financial system without relying on any other parties.
In just 2 years from the creation of this bank, Miller was basically in control of financing Australia’s war effort and ZERO money was borrowed from overseas. It was the first bank in Australia to receive a Federal Govt guarantee and offered both savings and general transactional services. By 1912 it took over the State Savings Bank of Tasmania, and by the following year, it had branches in all 6 states.
In 1920 it began acquiring central bank powers and took over the responsibility of issuing Australian bank notes from the Dept of the Treasury. In 1924 a board was appointed with 6 members as the new governing body. During WW2 emergency legislation was passed and the CBA was granted almost full central bank powers.
The CBA was a remarkable success, but was subsequently seen to be threatening the hegemony of the City of London thieves. Prior to the establishment of the CBA, London capital had always dominated the Australian financial system.
This was the colonial model of the time – ie financial colonialism, where the colonies were granted the right to “govern” themselves – provided they obeyed the financial rules of the COL (City of London) – shame about this acronym!.
As such the Old Lady of Threadneedle Street (The Bank of England) presided over the financial dynasty of the empire.
Australia was a debtor nation until WW1 when it suddenly demonstrated its ability to independently finance its war effort. It also used the CBA to finance its own shipping line which was poised to smash the City’s shipping monopoly – the old bitch from Threadneedle Street was not amused.
Miller calmly told the big bankers at a dinner in London that Australia could meet any demand, simply because it had the capital of the entire country behind it.
When he arrived home in Aus he was asked by a deputation of the unemployed for a loan of £350 million for productive purposes – he advanced the money immediately, and news of this caused panic within the COL, as they realised that if other countries adopted this model their entire financial edifice could collapse.
The COL immediately set about devising a plan that would enable overseas national institutions to be drawn into its squid-like network. The plan was to centralise all banking throughout the empire over to the supervision of the Bank of England – it would become the super banker’s bank.
The horrible old lady got her way and as such the modern parasitic and hegemonic central banking model was born.
@ Steve: Thank you for your kind words and fine examples of how the banker thieves are ruining our country.
So leefe’s solution to armed aggression that is technically a war crime, is to stand by and watch it happen.
Except that Putin did invade and that has resulted in exponentially more deaths, and I never said anything about alternatives at all, much less that the only one is to sit back and watch it happen.
That was a particularly poor attempt at a gotcha, Steve. Do better next time.
Leefe — “That was a particularly poor attempt at a gotcha”
There’s no point in deflecting, you got yourself into this mess all on your own.
Did you actually read your response before posting?
You’ve said nothing of substance.
As in “Except that Putin did invade and that resulted in exponentially more deaths,..”
No-one disputes that, so it says nothing.
It’s a fill-in to look as though you are saying something.
A fill-in to cover the fact that you have nothing to say.
“I never said anything about alternatives at all,”
And that’s the problem.
You are making no attempt to look at the big picture.
As a result, because you have offered nothing of substance, and because you apparently care nothing about the Ukraine government shelling its own citizens to whom it had given a signed undertaking to work out the details of autonomy within Ukraine, you are taking the same position as the liberal democracies as they sit back and watch the Gaza genocide.
Oh Steve, you really worry me sometimes. For a moderately intelligent person, you can have so much difficulty learning. No-one has to follow your rules to comment here. No-one has to give solutions to problems in order to justify saying anything.
Your justification of Putin’s aggression had a glaring gap of logic and I pointed it out. End of. It’s always so obvious when you know you’ve been caught out because you manufacture intentions and/or inferences and/or meanings that were never there.
You’ve managed to admit that my statement was correct; good, that’s progress. There’s no need to go any further. No need to attack because you don’t like either what I said or its accuracy.
I repeat: do better next time (if you can). And enjoy your weekend.
Well well.
leefe has had three opportunities to make a difference.
Three opportunities to say something of substance.
Three opportunities to refer to the thousands of Ukrainians killed by their own government.
Three opportunities to refer to the European powers who could have stopped the violence in Ukraine in 2014 with one phone call.
Three opportunities to refer to France and Germany acting to prolong the violence.
Three opportunities to refer to Russia pleading for years for a security arrangement that would protect all of Europe from aggression.
But what did we get?
“No-one has to give solutions to problems in order to justify saying anything.”
When one’s only comment puts one squarely in the camp of those cheering the Gaza genocide, I believe that requires justification.
To me von der Leyen (along with the rapacious bankers) represent a continuum of the very worst elitist, greedy and paranoid thinking of the various western aristocratic imperia since the Rome I era.
It ignores, and does not act on behalf of its (or any) ordinary citizens, but is continually trapped by its own usury, hoarding, lack of humanity, ecological disdain, cultural supremacy and enslavement of those that might otherwise bring nourishment and happiness to all the world’s tables. And based upon its perception of success, continues with sophistry and propaganda.
It’s no wonder the ‘West’ and its self-destructive ideology and models are dragging it to ruination. Today, very much before our eyes.
The EU went from an economic powerhouse that rivalled the USA, only a couple of decades ago, to this. That’s not the people’s doing, that has to be the leadership.
Whether or not the USA had some hand in the EU’s economic decay, or it couldn’t compete industrially with China, it’s the EU leadership that should be held responsible.
Wouldn’t Van De Leyen have been a part of that leadership?
China continually advocates for living in harmony, mutually benefitial deals, and countries not interfering in other countries’ internal affairs. Whether or not China adheres to those principles themselves aside, the EU and Russia’s relations seem to be the antithesis of these principles – how’s that working out?