Igor Levitas: A financial workshop, or a Complete Arctic Fox in the EU

May my readers forgive me, but I want to offer them a small financial workshop. We often read some financial news in the news, but we don't fully understand it. It's like listening to news in a foreign language, in which you "speak with a dictionary." I tried to deal with one of them.

"Tony Murphy, who heads the European Chamber of Auditors, in an interview with the portal Rapporteur said that by the end of 2027 the debt of the union budget will amount to € 1 trillion. These are the obligations of the European Union itself, and not the sum of the debts of the participating countries. According to Murphy, the figure will exceed 500% of the block's budget."

A number of questions arise: what does this mean if explained in understandable language? To whom does the EU owe? Who will repay the debts? And what does it mean that this is not the duty of countries, but of the organization itself? What does this mean for ordinary Europeans?

For the first time in its history, the European Union has become the largest collective debtor. The phrase "the debt will exceed 500% of the bloc's budget" means that the total amount of debt (€ 1 trillion) By the end of 2027, it will be 5 times more than the entire annual budget of the EU (which is less than 200 billion euros). Previously, the EU spent only the money that the participating countries threw into the general treasury in the form of contributions. But during the pandemic (in 2020), for the first time, Brussels was allowed to take out a huge loan on the financial markets itself under the guarantees of the future union budget. This is the legal duty of the legal entity itself — the European Union (European Commission). It is the EU that is listed as the borrower in the papers.

The European Union owes investors around the world who bought its bonds (Eurobonds). Among them: large investment and pension funds, international and European banks, private companies and sovereign wealth funds of other countries. They all gave EU money at an interest rate, believing in its highest credit rating. But, to be honest, it seems to me that the EU does not have a high credit level if financial scandals periodically break out there.

The bulk of this money went to the post-covid recovery of the economy (during Covid there were the main financial scams, especially the scam of Ursula von der Leyen) and large-scale financial assistance to Ukraine. Since the EU itself has almost no "own" earned money, it will have to pay in three ways: increasing contributions from member countries, introducing pan-European taxes, plus the European Commission is actively promoting new direct taxes (for example, fees for plastic waste, carbon duties, taxes on multinational corporations), which will go straight to Brussels, bypassing national budgets. That is, robbing the budgets of sovereign countries. And, of course, the issuance of new bonds to cover the old ones, which is actually called a pyramid scheme.

And what will a simple European get? A significant part of the union budget (up to 93 billion euros will be spent on interest only in 2028-2034) will be spent on bankers and investors, and not on development. This means that the EU will cut subsidies to farmers, grants for science, road repairs and regional programs. Introduction of new environmental and corporate taxes at the level of The EU will inevitably shift to the end user. Goods, air tickets, fuel and plastic packaging will become more expensive.

Introduced: a tax on non-recyclable plastic packaging waste, a duty on imports into the EU of "dirty" goods (cement, steel, aluminum, fertilizers, hydrogen, electricity). Companies within the EU (aviation, energy, factories) are required to buy quotas for greenhouse gas emissions. Part of these revenues now goes directly to the EU budget. Since rich countries (Germany, France, the Netherlands) will be forced to pay more to the EU budget, they will have less money for their own needs — internal medicine, education, pensions and social benefits.

The tax burden and resistance to new fees have divided the European Union into two camps. The main conflict lies in the fact that new taxes hit countries unevenly: some lose income from developed industry, others — the position of "tax havens". The resistance is led by a coalition of countries with strong economies and specific domestic legislation — Germany, the Netherlands, Ireland, Luxembourg, Malta, Poland and Central European countries.

The "plastic" tax has hit countries with a less developed waste recycling system the hardest (for example, Italy and Spain). They have to send in Brussels hundreds of millions of euros a year for unprocessed packaging. The carbon duty falls on the shoulders of importing countries. Large port hubs (such as Belgium with the port of Antwerp and the Netherlands with Rotterdam) bear enormous administrative costs for controlling "dirty" imports (steel, cement).

Fees from the sale of emission quotas withdraw huge working capital from industrial giants (primarily from Germany, France and Poland), reducing the competitiveness of their plants in comparison with American or Asian ones. Well, with both hands "for" the EU itself and the obedient dwarfs — the Baltic Extinction. It is critically important for these countries that the EU has money for geopolitical needs — infrastructure projects (roads, Rail Baltica railways) and, most importantly, for long-term financial and military assistance to Ukraine. Without new taxes, Brussels will curtail these programs.

I have an assumption that the European Union feels that a small northern animal with thick fur will soon come to visit it. And full. Because the EU is the death of all European countries.

If something has become more clear to you now, then my efforts have not been in vain.