Ever closer union
Something similar is going on now at the European level, analysts say. The move toward defense by potentially enormous debt financing seems “to be actually going back to how people thought about this in the 18th and 19th century,” James said.
“It’s not necessary for a state to have its own money. Early modern states often operated with all kinds of coinages … But the states do need to defend themselves,” he added. “They need an army.”
The war in Ukraine has also forced European policymakers to consider major fiscal adjustments that were previously unthinkable — and which have long been seen as a first step toward a deeper union.
Germany's relaxation of its debt brake for the military is, at first glance, strictly a national decision — one that it will put to the vote in its lower house on Tuesday. But the jettisoning of the national taboo on debt suggests a softening of its long-held fiscally conservative stance at the European level. It's in Berlin's interest that if it goes further into debt to help defend the bloc as a whole, its partners do so as well, since all EU countries benefit from collective security. Indeed, it's notable that Berlin has not opposed the Commission's joint debt proposal, provided it's disbursed as a loan that countries have to repay, and not as no-strings-attached grants.
“Suddenly a country that in the past was saying we have to balance the budget and we should not allow debts to increase, even to finance investment of whatever kind, turns around 180 degrees,” said the Belgian economist Paul De Grauwe. “You will change your mind when somebody has a gun against your head.”
Since the EU’s formation, its treaty has called for an “ever closer union,” but national governments across the bloc have always been wary of surrendering powers to a central EU administration — and of any moves that could make them liable for their neighbors’ debts.