DÜSSELDORF, Germany — The general state debt spiral should be a constant feature in daily headlines. Its prominence should force policymakers into a radical fiscal turnaround. Yet while Germany is working under immense pressure to ban the AfD, forming alliances with left-wing extremists, and eroding the political culture, on the other side of the Atlantic, preparations are underway for the approaching storm.
We live in record-breaking times. In the first quarter of this year, global debt surged to a record high of $324 trillion. This milestone becomes significant when compared to global GDP, which currently hovers around $110 trillion. Governments worldwide now owe 100 percent of GDP — an alarming reality, as no modern state has ever managed to free itself from the ensuing fiscal bind once this threshold is reached. Debt levels of 80-90 percent mark the “point of no return.”
The Tipping Point of the Debt Spiral
At this scale, debt reaches a critical mass. It inevitably forces an escalating debt service burden that drains scarce capital from the private sector to finance bloated social funds, ultimately leading to the same scenario we faced 15 years ago during the last severe sovereign debt crisis. Back then, Greece’s impending default sent shockwaves across credit markets. Central banks intervened with trillions, and governments stepped in to rescue debt-laden pension funds and banks with taxpayers’ money.
Greece’s national debt stood at 143 percent at the onset of this crisis, and it is now about 155 percent — no debt consolidation has occurred. The southern European countries are, quite frankly, sinking into a swamp of debt. Italy, with 140 percent, Spain at 120 percent, and France’s budget deficit at 7 percent, leave much to be desired. On average, the EU’s debt-to-GDP ratio is now approaching 95 percent, closing in on the global benchmark of 100 percent.
Bond Vigilantes Lurk in the Markets
We must now prepare for the moment when a tipping point in bond markets triggers a series of sovereign defaults. This will occur when a growing crisis of confidence among investors, banks, and investment funds translates into a sell-off cascade in the bond markets.
Let’s keep an eye on interest rates: if they rise with high volatility and market volume, general unrest is on the horizon. We have already witnessed the emergence of “bond vigilantes” this year — critical bond investors who pull the plug when debt levels rise. On the day it was announced that Germany would borrow about a trillion euros over the next four years and issue corresponding bonds, the interest rates on German bonds surged by more than 40 basis points. (RELATED: The Euro’s Paper Empire: Germany’s Big Bond Gamble)
This was a quantum leap in typically sluggish bond markets, particularly for the highest-rated bonds, such as those issued by Germany (still considered a safe bet). And it served as an unmistakable warning shot from the bond vigilantes: “Up to here, and no further!” Under Chancellor Friedrich Merz’s fiscal policies, Germany’s national debt would rise from 63 percent to 95 percent. Germany would join the ranks of high-debt nations, without reason and without economic logic.
Friedrich Merz, who stumbled into office as a “fiscal expert,” would be responsible for the largest debt binge Germany has experienced since World War II. It would also be his doing if Germany’s already shaky fiscal consensus, previously undermined by the Ampel coalition government, completely collapsed. The principle of only incurring debts that can be controlled by a strong economy would disappear entirely.
The Economy in Crisis
As for the state of this economy, which has been in a perpetual recession for three years, it is well known: €65 billion in direct investments fled abroad last year alone, seeking refuge from Germany’s burgeoning welfare state and its increasing regulatory burden and tax appetite. A significant portion of these investments likely found their way to the United States — still viewed by global capital as the last bastion of economic freedom and entrepreneurial resilience. (RELATED: How Germany and the EU Slept Through Trump’s Watershed Moment)
These days, Germany is politically isolating itself. On the geopolitical front, no one cares that Berlin is raising the firewall against the AfD. The moral gymnastics of German politicians and media resonate mostly in Brussels, where the same agenda is followed and political opposition is harshly confronted, as seen in Romania and Hungary. (RELATED: Germany’s Suicide Pact with Green Ideology)
More important matters are at hand: for example, the trade dispute with the U.S. Just two days ago, India made a first move largely unnoticed in the media, offering the Trump administration to eliminate all tariffs on industrial metals and automobiles. New Delhi is seeking the first-mover advantage and positioning itself as a strategic partner of the U.S. in Asia. This could lead to industrial growth and domestic political stability — something worth building upon!
USA: Tax Cuts on the Horizon
Meanwhile, in the U.S., a major round of tax cuts is on the horizon. And it’s not just about the successful campaign slogan, “No Tax On Tips” (in the U.S., campaign promises are taken seriously). The U.S. government is working on a broad reform program aimed at shrinking the state and providing new opportunities for the private sector. Regulations are being rolled back, and unnecessary budget items are being eliminated — proof that America, unlike Europe, still holds the political will to fight Leviathan before it devours the republic.
The Department of Government Efficiency (DOGE) has already proven a success: the octopus-like media machine is being systematically dismantled, and propaganda vehicles such as USAID are being axed. (RELATED: The Trump Administration Sets Its Sights on the Parallel Government)
While Washington prepares for the approaching sovereign debt crisis and works on the revival of its own industry — and a debt crisis is inevitable given the dynamics of credit markets — Berlin is desperately searching for a lever to remove its only political competitor, the AfD, from the game.
It seems that Germany has sunk into a monothematic pit of ignorance. Whether it’s the collapse of the automotive industry, the burgeoning migration crisis, or the growing hyper-state with an extraordinary state share of 49.5 percent — nothing can free Berlin from its discursive AfD prison.
In Berlin’s ideological bubble, daily crises are ignored in favor of moral crusades — an ominous lesson for any free nation tempted to follow the same path.
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