Europe’s war economy: How the EU plans to exploit Ukraine conflict for financial and strategic gain

• The European Union is leveraging the Ukraine conflict to reshape its economic and geopolitical landscape, prioritizing “strategic independence” from the United States. This involves substantial investments in defense, energy and innovation, driven by a desire to centralize power in Brussels and stimulate economic growth through increased defense spending.
• The EU plans to inject €700 billion into its economies, primarily through a defense package aimed at enhancing military capabilities. This funding will be facilitated through joint EU bonds, bypassing traditional fiscal rules and potentially leading to deeper financial integration among member states.
• The EU’s strategy mirrors historical precedents of using conflict to drive economic expansion. By prolonging the Ukraine war, the EU aims to create jobs in defense and energy sectors, but this approach risks devaluing the euro, inflating asset bubbles and disadvantaging small businesses.
• The EU’s reluctance to pursue peace in Ukraine is driven by political and financial interests rather than a genuine concern for Ukrainian sovereignty. By framing the conflict as an existential threat, EU leaders justify their spending plans and centralize power, while undermining U.S. efforts to broker peace and risking further regional destabilization.
• The EU’s war economy strategy is a high-stakes gamble that could lead to inflation, economic distortion and social inequality. It prioritizes short-term political gains over long-term economic stability and sustainability, potentially sacrificing Europe’s future for the ambitions of its political and financial elite.

The European Union, facing a looming defeat in Ukraine, is now turning the conflict into an opportunity to reshape its economic and geopolitical future. Rather than seeking peace, the EU’s political and financial elite appear determined to prolong the war to justify unprecedented spending on defense, energy and innovation. This strategy, cloaked in the rhetoric of “strategic independence” from the United States, reveals a cynical exploitation of war to drive economic growth and centralize power in Brussels.

A war economy in the making

The EU’s plan hinges on using the Ukraine conflict as a pretext to inject massive amounts of money into its struggling economies. As Friedrich Merz, Germany’s future chancellor, declared after his electoral victory on Feb. 23: “It will be an absolute priority for me to strengthen Europe as soon as possible so much that it gradually really achieves independence from the United States.” This vision of strategic autonomy requires vast investments, particularly in defense, where Europe lags behind the U.S. and China.

To fund this ambition, the EU is considering a €700 billion ($758.3 billion) defense package, as confirmed by French President Emmanuel Macron on March 2, 2025. “We will give a mandate to the European Commission to define our capacity needs for a common defense,” Macron stated. “This massive funding will probably reach hundreds of billions of euros.” Such spending would be financed through joint EU bonds, a move that would centralize financial control and deepen integration among member states.

The EU’s fiscal rules, which limit budget deficits to 3% of GDP and public debt to 60% of GDP, are seen as obstacles to this plan. By invoking an “escape clause” for “exceptional” circumstances—such as the defense of Ukraine—the EU elite aims to bypass these constraints. As Bloomberg noted, “under this plan, EU nations would be exempt from debt and deficit limits when financing military expenditures.” This marks a seismic shift in EU financial policy, one that prioritizes short-term economic stimulus over long-term fiscal responsibility.

The cynical calculus of war

The EU’s strategy mirrors the U.S. playbook of using war to drive economic growth. Historically, governments have turned to conflict to justify massive spending and stimulate industries. From World War I to the Cold War, militarism has been a tool for economic expansion, often at the expense of long-term stability. As John T. Flynn argued in his seminal work, As We Go Marching, such Keynesian militarist spending plans have repeatedly led to inflation, malinvestment and economic distortion.

The EU’s plan is no different. By prolonging the Ukraine conflict, the EU elite can justify pumping hundreds of billions into the economy, creating jobs in the defense and energy sectors while masking systemic unemployment caused by decades of state intervention. This approach, however, comes at a cost. As Austrian economists warn, such spending will devalue the euro, inflate asset bubbles and leave small businesses—the backbone of Europe’s economy—struggling to compete.

Moreover, the EU’s reliance on joint bonds raises concerns about financial centralization. As the Draghi Report of September 2024 noted, “the EU should move towards regular issuance of common safe assets to enable joint investment projects among Member States and to help integrate capital markets.” This push for a unified bond market, while beneficial for large corporations and governments, risks further eroding national sovereignty and deepening economic disparities within the EU.

Europe’s denial of peace

The EU’s reluctance to end the Ukraine conflict is not driven by concern for Kyiv’s sovereignty but by a desire to exploit the war for financial and political gain. As Danish Prime Minister Mette Frederiksen bluntly stated during a visit to Ukraine: “I don’t think [Putin] wants peace in Ukraine. I understand that many people think that a peaceful solution or a ceasefire sounds like a good idea, but we risk that peace in Ukraine is actually more dangerous than the war that is happening now.”

Such statements reveal the EU’s true motives. By demonizing Russia and framing the conflict as an existential threat, the EU elite can justify their spending spree and centralize power in Brussels. This strategy also serves to undermine U.S. efforts to broker peace. As Polish Foreign Minister Radoslaw Sikorsky remarked at the Munich Security Conference in February 2025, the war is a “classical colonial war” that could last “less than 10 years if we are lucky.”

The EU’s stance is not only cynical but also dangerous. By prolonging the conflict, Europe risks further destabilizing the region and alienating its allies. As the U.S. pushes for a negotiated settlement, the EU’s insistence on continued hostilities threatens to fracture the transatlantic alliance and isolate Europe on the global stage.

A dangerous gamble

The EU’s plan to exploit the Ukraine conflict for economic and strategic gain is a gamble with high stakes. While it may provide short-term economic stimulus and bolster the careers of EU politicians, the long-term consequences could be catastrophic. Inflation, malinvestment and economic distortion will undermine Europe’s competitiveness and exacerbate social inequalities.

Moreover, the EU’s reliance on war to drive its economy reveals a troubling lack of vision. Rather than addressing the structural problems that plague Europe—such as excessive regulation, bureaucratic inefficiency and declining innovation—the EU elite are opting for a quick fix that prioritizes political control over economic sustainability.

As the world watches Europe’s descent into militarism and financial centralization, one thing is clear: the EU’s war economy is not a path to peace or prosperity. It is a dangerous gamble that risks sacrificing the future of Europe for the short-term gains of its political and financial elite.

The question now is whether European citizens will recognize this cynical exploitation of war and demand a return to sound economic principles—or whether they will allow their leaders to march them down a path of economic and geopolitical ruin.

Sources include:

Mises.org

Substack.com

Bloomberg.com