Gantry 5

 

Rearming Europe: Military Keynesianism as a vector for an acceleration of the economic and social crisis

Bulletin N°56 avril 2025  On March 12, the European Parliament adopted a resolution 1 called: "White Paper on the Future of European Defence". This document, analyzing the evolution of the global situation and the EU's place in this process, is supposed to give political substance to the plan unveiled, fifteen days after the presentation of the "ReArm EU" investment plan 2 by the European Commission to invest massively in the arms industries 3 .  Note that the term "ReArm EU" is now abandoned in favor of the more neutral and less warlike term "Preparation 2030" in order to face criticism from the Spanish and Italian governments.
The European Parliament's resolution is based on the observation of a profound geopolitical change on a global scale and a fragmentation of the world. Very quickly in its unfolding, the text asserts that the security of Europe is linked to Ukraine's capacity to resist Russia and acknowledges the change in US policy: " whereas recent statements by members of the US administration, combined with the strong pressure exerted on Ukraine by US leaders, demonstrate a change in US foreign policy, with the Trump administration proposing the normalization of ties with Russia, and whereas it is increasingly evident that Europe must strengthen its security and defense to be able to help Ukraine defend itself. " However, if Russia is described as the common enemy of the EU; the assessment of a China becoming a dominant power is underlined and makes it, like the United States, a systemic enemy of the EU: " whereas, driven by the ambition to become a global superpower, China undermines the rules-based international order by increasingly pursuing an assertive foreign policy and hostile economic and competitive policies...China poses a risk to regional and global security, as well as to the economic interests of the Union. " In this document, the situation in Africa is described as dangerous for the EU: " whereas the consequences of wars, terrorism, instability, insecurity, poverty and climate change at work in the Sahel, North-East Africa and Libya pose serious risks to the security of the European Union; whereas instability and insecurity in the southern neighbourhood and the Sahel are closely linked and remain a permanent danger for the Union's management of its external borders. "Far from Africa, the Arctic is a major geopolitical issue in the eyes of the EU: "the Arctic region is becoming increasingly important in terms of economic development and transport, while facing challenges related to climate change and militarization, as well as those resulting from the intensification of geopolitical competition and migration ." Thus, beyond the question of Ukraine, the text places the EU, an imperialist alliance, in the fierce competition between capitalist powers in all parts of the globe. The desire for rearmament is assumed to guarantee the security of the EU against Russia,but also in order to equip itself with the means necessary for the projection of armies for military interventions on all continents in order to ensure its presence and its interests there.
With the objectives set, the enormous resources required to ensure this strategy require greater political unity among EU countries, which is not the case and therefore poses a governance problem in the decisions to be taken. What then about the unanimity rule? And large-scale financial measures, leading to a relaxation of the rules on state indebtedness: the famous 3% of GDP and the even stricter one that Germany has imposed on itself in the name of budgetary rigor. The future chancellor has already indicated that this rule will be relaxed.
To meet all these requirements, the European Commission has unveiled its plan " to boost the Union's defense industry and ensure the continent's security. " In its eyes, this involves investing more, faster, and better. Thus, by 2030, it would involve mobilizing 800 billion euros to face Russian aggression: " According to certain intelligence services, Russia is even ready to 'test' EU member states within three to five years ." This plan is divided into two parts: 150 billion in the form of loans made available to willing states and 650 billion from national budgets. France, for its part, has set itself the goal of doubling its military budget to reach 100 billion euros by 2030. In addition, the European Investment Bank could provide loans to states. The Commission accompanied its announcement with a commitment that 65% of the components purchased with the €150 billion loan would be of European origin. This leaves a nice windfall for the US military-industrial complex, especially since the states' own commitments (the €650 billion) are not subject to any constraints and highlight the weakness of the EU's industrial capabilities, particularly in the field of electronic components.
The effects of this rearmament policy, if they endanger the real means of national defense 4 , will weigh heavily on the workers 5 and give wings to the capitalists for whom it is a godsend in terms of profits. This is why the government is leading an aggressive campaign of fear of war but also of seduction to show that there is a way to reindustrialize France, create jobs and emerge from the economic, social and political crisis.
Would military Keynesianism be virtuous or, on the contrary, would it be the vector of a deepening of this crisis?
Public spending par excellence, the purchase of military equipment by the State contributes, according to naive Keynesian views, to supporting economic activity and therefore growth. The current French government has already adopted a 2024-30 military programming law of an unprecedented scale of €413 billion. France's GDP amounts to €2.9 trillion and the turnover of the French arms industry is around thirty billion. So, overall, if this public spending has an effect on growth, it will have to be sought in the second decimal place of the growth rate.
Progressive Keynesians have pointed out that military spending certainly has a crowding-out effect on other public spending related to health, education, and more generally, the well-being of populations. In fact, with current budgetary constraints, which justify all social regressions, it's a safe bet that the trait thus denounced will be accentuated. And it's already in the speeches since—isn't it?—there's no question of resuming the debate on pensions when the urgent need is to (re)arm the country.
Another aspect of the problem for France: the country is the third-largest arms exporter behind the United States and Russia. If the government buys more weapons, these exports (a little under €20 billion) will likely be smaller, especially since the sector is characterized by a high production capacity utilization rate (so the margins for increasing production are low). But if France sells fewer weapons, its manufacturing trade balance will suffer, especially since the arms industry imports a large quantity of inputs (from metals to electronics). This will certainly not improve the balance of payments and external debt.
As for the effect of the European (re)armament plan in terms of industrialization, remains to be proven. It is true that the French arms industry sector is broken down into large entities (Nexter, Naval Group, Thales, Dassault Aviation) and a multitude of SMEs/mid-sized establishments (around 4,000), often specialized in niches (optics, electronics, munitions, etc.) and playing a key role in the territories. These companies are integrated into the Defense Industrial and Technological Base (BITD) with some obligations to respect, which does not include the obligation to operate on French territory. For the time being, the development of the sector's activity is facing a shortage of qualified workers. Competition to attract engineers and technicians is expected to become more fierce... Here, as generally, it is inconceivable to have an industrial policy that does not rely on an effort in upstream training. And the latest French budgetary arbitrations for higher education and research do not go in this direction.
Once the arsenals are full, public debt will have ballooned, which is good news for financial capitalism. The ideological use of public debt is also well known: it will once again be a matter of highlighting the costs of an overly expensive social system.
From a sectoral perspective, it is clear that European calls for (re)armament are good business for certain capitalists in a sector that is not very competitive. This is all the more so since the European arms industry has seen some mergers between firms, in particular the merger of Nexter (formerly Giat) with a German arms company. Certainly, the sector's profitability – already at a good level – should benefit from this European fever. And let's have no doubt that the US arms industry will also be part of the party, NATO oblige!
There is no convincing evidence to suggest that arms purchases by European states would have a dynamic effect on economic growth. Public and national deficits will certainly widen, and in fact, the European Commission is considering considering public debt net of that linked to the military effort to judge the orthodoxy of national budgetary policies. But ultimately, everything will have to be repaid, and it is quite predictable that small savers will not be the first to be served. Especially since they will have to balance increased tax pressure and ever-deteriorating public services, except, of course, that of national defense.
In conclusion, the spending of European states, particularly France, will have a small impact on growth, a huge impact on public spending, and will make capital happy. It is also expected that spending projections will be disproportionate to available industrial capacity, including in terms of skilled workers.
The European Union, it seems, lacking a coherent and obviously popular political content, is changing according to internal tensions in the capital's objectives: thus, out goes the energy transition and green capitalism, now in comes the green-grey capitalism that will in no way resolve the current crisis. And it even adds to it by injuncting workers to join the sacred (European) Union.