EU Industry Slides into Recession Despite Subsidies

The EU has become a gigantic extraction and intervention corpus now entering an acceleration phase.

American  Thinker 

In response to the COVID lockdowns, the EU Commission officially issued its first Eurobond in 2020 under the label  "NextGenerationEU." Since then, hundreds of billions of euros have been poured into struggling sectors of the green transition to manipulate growth rates and keep the green crony economy afloat. Last month, this effect completely evaporated.

One of the EU Commission’s core competencies is to operate clandestinely and silently in the glaring public spotlight, creating facts regardless of consensus. This applied during Jean-Claude Juncker’s tenure and is even more true under his successor Ursula von der Leyen.

Years ago, Juncker succinctly outlined the EU Commission’s soft-totalitarian principle in an interview: a measure is decided, put out into the space, and one waits to see what happens; if there is no major uproar, it is simply advanced step by step until there is no turning back.
Anyone who feels untroubled by this statement has yet to realize how far the concentration of power in Brussels has already advanced.

Rule-Based Order

One of the many massive breaches of Brussels’ rules in recent years was the introduction of categorically forbidden communal debt. This had once been Germany’s condition for giving up the Deutsche Mark and joining the Euro. True to the Juncker motto, the EU bureaucracy shamelessly exploited the COVID lockdowns and organized the first NextGenerationEU joint bond issuance.

Of course, liability for these commission-initiated bonds lies with the member states. While an upper limit of 0.6 percent of the gross national income of all member states was agreed upon, it is clear that the German taxpayer, as the largest financier of Brussels’ climate-socialist central planning experiment, bears the primary risk -- “make it green,” no matter the cost.

Over €800 billion in fresh credit was subsequently raised, trickling down to member states year after year through programs like REACT-EU, Invest-EU, HORIZON Europe, or Resc-EU.

This mainly allowed chronically low-growth, heavily indebted southern states to stabilize their socialist governments in the face of rising opposition from conservative forces.

Subsidy Apparatus of the Brussels Technocracy

The subsidy infrastructure, split across numerous individual programs, follows exactly the ideological blueprint of the Brussels technocracy. Its goal is to embed the bureaucratic apparatus as a vehicle of power deep within member states administrations. Brussels is everywhere: Ubi Ursula, ibi imperium! 

The distribution of this immense credit volume practically necessitates growing administrative structures and public-sector jobs. The upcoming EU budget of over €2 trillion for 2028-2034 will ensure that these bureaucratic channels remain liquid, operating like well-stocked pipelines with fresh credit at taxpayers’ expense and rising inflation.

The initiators of NextGenerationEU, the minds behind von der Leyen’s Commission, quickly realized that the locked-down economies would accept any credit with open arms and endure literally any form of centrally planned economic directive.

The logical consequence was to tie the struggling states, particularly Italy and Spain, to the credit, coupled with Brussels’ investment conditions: wind energy, solar power, or social programs to overshadow mounting migration pressure -- Brussels sets the direction, and the vassal states follow, lacking alternatives.

Industrial Hubs Bear the Burden

Industrial hubs -- especially Germany’s automotive and machinery sectors -- pay a socially corrosive, unacceptable price for the green socialism experiment, whose mastermind, ironically, can be found in Berlin. The irony: Europe’s crisis once again stems from Germany, where creditworthiness was leveraged to fuel this economic frenzy. It is in Germany that NGOs run rampant at industry’s expense, gaining strength to entrench themselves elsewhere.

Until December, Brussels managed to artificially sustain the struggling economic hubs of Italy and Spain. Travelers through southern Spain witness the scale of cultural-aesthetic destruction: in Andalusia, wind farms sprout like weeds across farmland. Farmers face expropriation if they resist the green diktat -- Brussels carves a trail of devastation through paradisiacal landscapes, supported by accomplices at all political levels.

Yet the credit-fueled parasitic economy produced a special effect: Spain recorded high growth rates until December, allowing Prime Minister Pedro Sánchez, guided by favorable media, to repeatedly tout a Spanish growth miracle.

It mattered little that the green “artificial” economy generated no real value and that Spain suffers globally high youth unemployment. What counts is the media spectacle, the illusion of Iberian prosperity.

Italy shows a similar pattern: national debt exceeds 120 percent, new borrowing is high, and Giorgia Meloni’s government takes whatever Brussels offers on a silver platter -- what politician would refuse?

The statistical manipulation effect triggered by NextGenerationEU cannot be underestimated. Since 2020, states like Spain and Italy have received an artificial GDP boost equivalent to 10 percent of the GDP generated since then. This is not real value creation, but a purely statistical effect to justify useless state consumption, producing nothing beyond bureaucracy costs. Media coverage rarely mentions this; what matters is the perceptual effect on the population -- the illusion of growth while everything else crumbles.

Recession Hits the Eurozone

December finally brought some clarity to the Eurozone’s situation. German industrial indicators are alarming: the PMI (Purchasing Managers’ Index) fell to 47.7, deep in recessionary territory -- a trend unbroken since 2018. For Brussels’ central planners, even the artificially boosted southern economies are now hit: Spain’s PMI fell to 49.6 in December, Italy’s to 47.9 after years of positive figures.

The Eurozone’s overall value is 48.8. Europe is in open recession, despite -- or precisely because of -- ever-growing state impulses, new credit programs, and government interventions. Germany’s projected growth for 2026 is just 0.7 percent. With a state share above 50 percent and new borrowing at a nominal 5.5 percent, private industry is set to shrink over 4 percent -- an impending catastrophe.

Limits of Central Planning

Europe’s economic management has reached its limits. Every additional euro of state credit no longer produces any real growth, even statistically. On the contrary, the state as a market actor robs private businesses of the potential to invest in structures necessary to produce goods and services citizens actually demand.

The state has become a gigantic extraction and intervention corpus now entering an acceleration phase. Practitioners recognize what is wrong with the economy. Yet the political incentive structure of permanent subsidies and armies of public employees stifles even the smallest sprouts of constructive criticism.

No fertilizing impulses are expected from state economics either. Just yesterday, economic expert Achim Truger rejected a preemptive corporate tax relief scheduled for 2028 as a “stupid idea,” after having already recommended an inheritance tax hike on family businesses in December. State-endorsed pseudo-scientists have replaced genuine economic expertise, beholden to increasing statism.

Germany hardly has independent scholarship left where economists can openly discuss Eurozone problems. We face a monopoly on opinion, safeguarding a power apparatus that now deploys censorship mechanisms to silence critics. At its core, this accelerates the transfer of wealth from the private sector to the state and its hyper-bureaucracy -- until the private economy, the host of the extraction system, collapses under the toll.