Brussels Is Borrowing, the ECB Is Raising Rates, and 2027 Is Going to Be Excellent

Inflation rose to 3.3% in August, energy inflation hit 14.3%, so it raised its key rates.

Its deposit rate is now 2.50%. The purpose is to suppress demand and stop the energy shock spreading into wages and general prices.

The ECB’s baseline assumes this works reasonably well, with inflation falling to 2.5% in 2027 while growth improves to 1.4%. Or more ;D

There is just one problem.

European manufacturing has already been under pressure for years from expensive energy, weak productivity growth, Chinese competition and investment leakage.

Volkswagen has already negotiated tens of thousands of job cuts. Mercedes warned only days ago that two German plants could ultimately close unless domestic production costs fall. European chemical producer Ineos has just mothballed three plants while explicitly citing the enormous gas-price gap between Europe and the United States. This doesn't help ANY EU member.

And now, in light of the Middle East situation Trump is thinking about cutting the Diesel deliveries to Europe.

America first, as it should be.

Even Russia wants to have this chapter closed. Well, we all know what has been happening in Ukraine since 2014. Without moralizing, the Russian "special military operation" was not something which happened without provocation.The peace deal has been talked over in a couple of weeks, but then Biden and Boris Johnson happened. Capital is tired. People on both sides are tired. Brussels pushes on.

European values won't be threatened by the reality!

At times, Brussel’s fixation on Putin has the energy of a spurned teenage lover.

Brussels will get its own money. Either way, because people still aren't that interested in how this club is being run. The important citizen responsibility is to decide if the new banknotes picture birds or faces.

Packaging taxes, green taxes, CO2 taxes, whatever.

For the 2028-2034 budget, the Commission is proposing further own resources including ETS revenues, CBAM revenues, e-waste and tobacco-related revenues, partly to finance the NextGenerationEU repayment.

Even better, they will take yet another loan which incidentally, lands on the shoulders of all European taxpayers. On the top of the debt our governments are already stacking. Let's package this as "cohesion" and send some billions to Ukraine. Or Uganda. Or Gaza.

Who knows what charms or abilities (like sending cash through the continent) lift Zelensky into good graces of the EU Commission. Who knows if Ukrainians and Russians wanna go kill each other on the battlefield.

Brussels' NextGenerationEU loan is going to be serviceable in 2028 (which means we need to start paying back or restructuring the debt - under changed conditions).

2027 will need to be an absolutely booming year for Europe - for Brussels to be able to get away with this.

Alternatively, war economy could solve this as well.

People who die don't ask stupid questions.