The expert warns of the consequences of the growth of defense expenditure: “Finns can get used to new savings”

Retired Ministry of Finance Financial Market Department and former Senior Researcher of the International Monetary Fund IMF Peter Nyberg warns of the cost of strengthening the EU defense.

He reminds on his blogthat increasing defense expenditure must be financed either by increasing debt, raising taxes and/or cutting other budget menu.

“Weapons production increases employment, but not the provision of civilian products or services important to the standard of citizens. The resulting inflation will weaken citizens’ future real income, ”Nyberg sums up.

The European Central Bank ECB has already warned the new rise of inflation. ECB member of the board of directors Isabel Schnabel anticipated on Saturday with a German In an interview with Handelsblattthat inflation is permanent about the central bank’s two percent targets.

EU countries have been pushed to increase the share of defense expenditure in GDP. Public debate is currently talking about the level of 3-5 % of GDP.

Peter Nyberg counts the European Union Institute for Security Studies a recent report On the basis of that about EUR 520-860 billion would be used annually for defense. He concretized the amount by reminding us that last year, the EU countries used an average of 1.9 % of GDP, or EUR 326 billion.

“However, estimates of the need for increasing equipment are very uncertain and likely to be undersized. Annual cost fees would still be added to the annual cost if it was a debt to be equipped. Fighting new weapons systems may require yet invented but probably expensive combat methods, ”Nyberg points out.

He adds that if the increase in defense expenditure in Europe would generate an international spiral of equipment, the cost estimates would be even higher.

Nyberg also predicts that European equipment will inevitably also be inevitably included in the nuclear weapons with operating systems. At that time, he would then be ahead of the birth of the European Federal Federal Federal Federal Federal Care, or the acquisition of individual countries in a couple of decades.

Nyberg emphasizes that high and growing indebtedness is already a problem for several Union Member States.

“Few governments can tighten taxation and reduce their civilian expenses by several percentage of GDP, that is, at least some of the new equipment with additional debt,” he anticipates.

The ECB has already been warned of additional indebtedness. CEO of the Central Bank of Central Banking Fabio Panetta linked at the end of Januarythat EU countries should urgently consider lowering government debts and not planning new defense investments with additional debt.

“The production of military equipment does not help to increase the growth potential of any country. Economic development comes from productive investments, not weapons, ”Panetetta said.

Peter Nyberg also estimates that potential new co-debt and joint projects would be used in particular by large and most indebted EU countries.

“It is also not expected that institutions important for the new armed industry should be established in the vulnerable EU border areas. Still, the countries of the border region, including Finland, are still to be involved in their costs, ”he says.

On this basis, Nyberg predicts that public expenditure and indebtedness will increase in the EU, but the standard of living of citizens will not increase. His prognosis is gloomy for some of the EU border countries, such as Finland.

“Additional investments and employment are focused on the key parts of the Union, but border areas that are particularly affected by increased risks may be content with the funding of the projects. There are many efforts to promote joint funding and the federal state to cover such non -balances. In any case, the money and financial policy manure in the armed Europe will be significantly reduced in the near future. Finns will be able to get used to new state spending cure for many years. ”