Geopolitical changes are forcing many countries to scale up defence spending across the world, not least in Europe with the threat of the Russia-Ukraine conflict and now Israel-Iran on their doorstep.
Having cut direct funding to NATO in 2019 from 22% of the overall budget to around 16%, US President Donald Trump has further advocated for European NATO countries to increase their defence spending to 5% of GDP in order to spread the load around more evenly.
Increased EU defence spending helped by borrowing
In February this year, EU Commission President Ursula von der Leyen proposed leveraging an emergency clause to allow member states to increase defence spending to fund its ‘Readiness 2030’ strategy, previously known as the ‘ReArm Europe’ initiative.
With an aim to raise €800 billion over four years to meet the costs of an ever-increasing threat of global conflict, the breakdown looks to be €650 billion raised by EU countries and a €150 billion loan instrument. All funded by the taxpayer.
Taxpayers have no control over how their cash is spent
Not only are EU residents held to spurious spending obligations (that’s the spending of their own tax receipts, btw) imposed by politicians, as well as having very little choice over how their money is spent, they are now about to have their private savings leveraged under a new EU facility that nobody voted for called the Savings and Investments Union (SIU).
The EU has further emboldened itself with the power to control private money under the guise of redirecting €10 trillion of privately held wealth into “productive investments to enhance economic competitiveness” – a role it seems to believe it is able to do better than the private investor with their own money.
Now could be time to review EU-based investments
Investors with accounts in the EU should be very wary. The EU will no doubt sugar-coat the return on investment this initiative will enable by explaining how they are meeting their defence targets, tackling climate change and funding technological advancements. However with the increased push for a central bank digital currency in the EU, coupled with the open strategy of relieving people of their wealth to meet spurious, open-ended targets, it may very well be the time to review your portfolio.
Note: This is the opinion of this columnist and should in no way be considered impartial investment advice.
