On bonds and war -The Economist:

‘“History teaches that wars begin when governments believe the price of aggression is cheap,” argued President Ronald Reagan in 1984. He oversaw a vast increase in America’s defence budget that the Soviet Union could try to counter only by wrecking its economy. By the end of the decade the “evil empire” was collapsing.
Today Europe is confronted by a similar external threat in the form of an aggressive Russia that is determined to destroy Ukraine and break the unity of nato. To stop it, Ukraine needs to be supplied with enough money and materiel to defend itself, keep its economy afloat and impose a punishing cost on Russia. Ukraine’s backers also need to signal credibly that they will support the country for as long as it takes to make it clear to Vladimir Putin that he cannot win a long war.’

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‘The task is daunting. We calculate that Ukraine will need approximately $389bn in cash and arms over the four years from 2026 to 2029 (for consistency we are using dollars and constant prices throughout), mainly from Europe. That is almost double the roughly $206bn that Europe has supplied since just before the war started in February 2022. Over the same period America gave about $133bn in cash and weapons. Put another way, the cost of supporting Ukraine without America to the remaining members of nato will need to increase from about 0.2% of gdp to 0.4%. Whether Europe rises to this challenge will be a test of its aspirations to “strategic autonomy”, by which it means it can act in its own foreign-policy interests without depending on America (or China).
Ukraine’s government currently has a direct defence budget of about $65bn a year. It also spends another $73bn a year on all other government services and outlays, according to Dragon Capital, an investment firm in Kyiv. The government raises close to $90bn in revenues domestically, leaving it with an annual budget deficit of about $50bn. In addition it relies on donated weapons, such as American rockets and European air-defence systems, which are valued at some $40bn this year, according to data from the Ukrainian defence ministry shared with The Economist.’

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‘Where is this to come from? The eu has budgeted to provide $15bn by 2027. Non-European partners other than America will probably give Ukraine $2bn a year, as will domestic buyers of government bonds, who are encouraged by regulation and capital controls to hold them. The imf is expected to provide about $10bn. Although the programme would be small, it “is the anchor that allows others to contribute”, says Kostiantyn Kucherenko of Dragon Capital, referring to how the fund’s economic oversight can provide confidence.
There are two initial pots of money the eu could use to fill the remaining gap. The first is its own budget. Although the current one has been tapped out, the European Commission wants to provide Ukraine with $117bn in the next seven-year cycle, starting in 2028. Doing so would need big savings elsewhere. A more realistic estimate is $30bn a year in 2028 and 2029.
The second pot is a so-called “reparations loan” that would be made using $163bn-worth of Russian state assets frozen in European (mostly Belgian) accounts. The recent conversion of Friedrich Merz, Germany’s chancellor, to this cause helped energise efforts to pursue it.’

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‘Mark Rutte, nato’s secretary-general, says that Europe is on track to produce 2m rounds of artillery ammunition annually by the end of the year. In some cases Europe might also funnel its money towards the production of American arms on European soil. Raytheon, which makes Patriot missiles, collaborates with mbda Deutschland to produce the interceptors in Germany. Feeding Ukraine from that production line could serve as a happy compromise.’

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‘Those problems will probably be resolved through what the eu does best: compromise that leaves everyone a bit unhappy. Few doubt that the “reparations loan” will happen, Belgian resistance or not, because it is the only game in town to fund Ukraine in the coming year or two. When that runs out, the obvious solution would be joint European borrowing along the lines of the bloc’s €800bn post-pandemic recovery fund. Yet German officials fear that eu bonds would undermine fiscal discipline in Europe and would also be vulnerable to vetoes wielded by Russia-friendly leaders in the eu. “The main problem is not the Bundestag but [Hungary’s] Viktor Orban,” says one.
Still, the continent knows what must be done, and is finding the backbone to do it. “Europe now looks switched on, and takes the Russian threat seriously,” says Vladyslav Rashkovan, who represents Ukraine alongside 15 other countries on the imf’s executive board. “This is now about Europe, not just Ukraine.”’

Read the article here.

Ah, war and peace is just a matter of money. Make peace great again, by making war too expensive for the enemy.

Outspend the enemy.

Also, it’s still the same old same after 1945, Europe pays reluctantly, the lesser people mut do the fighting.
We might as well go back to slavery. Or use robots. Drones?

Drones versus drones, instead of drones versus people.

In the meantime, the real condition of Ukraine, corruption, exhaustion et cetera, is just an afterthought.