EU's €800 Billion for Defense Is Bond Tantrum in the Making
The brunt of the EU’s plan to rearm will fall on the shoulders of bond markets. That means sharply higher borrowing costs.
Ursula von der Leyen, president of the European Commission, gives a press conference on the "defence package" in Brussels on March 4.
Photographer: NICOLAS TUCAT/AFPThe crumbling transatlantic alliance is undermining the assumptions that have underpinned European financial markets since the creation of the common currency. The result will be a sustained and permanent rise in euro borrowing costs, along with the surge in debt.
As the privilege of super-low German yields cedes to the new order, every other euro nation's borrowing costs will be pulled higher, along with the European Union's itself. The mighty German bund has been losing its benchmark shine as its yields surge under speculation of heavy borrowing that took on new meaning as Germany proposed scrapping constitutional fiscal limits to help Europe rearm itself.