EU Commission to Issue ‘Sovereign EU-Bonds and EU-Bills’

The dreaded and treasonous coup by Brussels is here: with the EU Commission issuing securities, dedicated taxation--and the emergence of a full-fledged tyranny--are coming soon

Every now and then, we need to revisit ‘old’ pieces to figure out how far off my musings were. Today is such a day, and we’ll be talking about the EU and the Commission’s desire to become ‘more’.

EU Commission, ECB Push for Centralised Super-State Before the End of Year

We need to do so because yesterday, on 7 Oct. 2024, something rather odd caught my eye—it was a news item of the EU Commission that announced their creation of a what is called a ‘repo facility’.

Today’s piece, then, is about what a ‘repo facility’ is, what the EU Commission has announced, and its likely consequences (emphases mine).

What is a ‘REPO facility’?

Before we dive into the weeds, here’s a definition of such a ‘repo facility’ courtesy of Wikipedia:

A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two parties, buys them back shortly afterwards, usually the following day, at a slightly higher price.

Investopedia offers an even shorter definition:

A repurchase agreement is a contract to sell securities, usually government bonds, and repurchase them back shortly after at a slightly higher price.

So, far, so good—what are repos good for?

Repos are typically used to raise short-term capital. They are also commonly used in central bank open market operations…

The party selling the security and agreeing to repurchase it later is involved in a repo. Meanwhile, the party buying the security and agreeing to sell it back is engaged in a reverse repurchase agreement or reverse repo.

The language around repos gets abstract, even dry, very fast, but the daily work of finance is done through and with these (mostly) overnight flows. It’s a crucial issue for anyone interested in the market to watch since it’s about nothing less than the liquidity of the capital markets that run our economy.

Ah, now we know: this is an essential thing to keep an eye on because it greases the wheels of the economy.

Technically, a repurchase agreement is quite comparable to a secured loan, Wikipedia furthermore points to a key aspect of such repos:

Although the transaction is similar to a loan, and its economic effect is similar to a loan, the terminology differs from that applying to loans: the seller legally repurchases the securities from the buyer at the end of the loan term. However, a key aspect of repos is that they are legally recognised as a single transaction (important in the event of counterparty insolvency) and not as a disposal and a repurchase for tax purposes. By structuring the transaction as a sale, a repo provides significant protections to lenders from the normal operation of U.S. bankruptcy laws, such as the automatic stay and avoidance provisions.

So, basically, a repo is a vehicle for raising short-term capital with additional bells and whistles (increased bankruptcy protection) that’s essential for the functioning of the economy at-large.

With these parameters established, let’s now look at the EU Commission’s announcement.

‘Commission launches EU Repurchase Agreement, thereby becoming a sovereign-style issuer on EU capital markets’

That is, it shall be noted, the EU Commission’s language

It might not come as a surprise to you, but the EU Commission is arrogating the privileges (no constitutions, no laws or rights) of ‘a sovereign-style issuer’.

In the US context, it took both the Federal Reserve Act of 1913 and the US entering the First World War before such repo arrangements were used from 1917 onwards.

Here’s what the EU Commission declared yesterday:

Today the Commission launches its EU Repurchase Agreement (Repo) facility, a form of short-term issuance of EU securities available on-demand to EU primary dealers, to further strengthen the role of EU bonds and, consequently, improve the overall efficiency and fluidity of the EU bonds market.

If you’re scratching your heads over the term ‘primary dealers’, this comprises a list of—at the moment 37—to be too fail banks with all the usual suspects. On that website, we also read that ‘the Commission will seek to work with banks active in supporting bond issuance and placements in order to successfully place its EU-Bonds and EU-Bills’.

Oh, look at that: the EU Commission—which has no income in terms of taxes and whose ‘budget’ derives from member-states’ contributions (and which the Ukraine policy blew a gigantic hole into due, which led to spendthrift Von der Leyen effectively running out of money before the end of her five-year term)—will now issue ‘EU-Bonds and EU-Bills’.

Here’s what this means, according to Investopedia:

Government bonds pay bondholders periodic interest payments called coupon payments. Government bonds issued and backed by national governments are often considered low-risk investments. Government bonds issued by a federal government are also known as sovereign debt.

In addition to ‘EU-Bonds’, the Commission apparently also desires to issue ‘EU-Bills’, which, I presume, are the functional equivalent of US Treasury Bills:

A Treasury bill (T-bill) is a short-term U.S. government debt obligation backed by the U.S. Department of the Treasury. Terms range from four to 52 weeks.

With these two key terms defined, we can safely state its implications:

The EU Commission has just declared its de facto sovereign authority.

Hence, we return to the Commission’s account of what happened:

Following EU bonds’ exponential growth in the secondary market trading in recent years, the launch of the Repo facility will also make the Commission become a sovereign-style issuer on EU capital markets [their words, not mine]. 

Through the [repo] facility, the EU offers its primary dealers the possibility to source specific EU bonds on a temporary basis, supporting their capacity to post firm public quotes. The [repo] facility allows investors to be more confident in the terms on which they can trade EU bonds in the secondary market.

A ‘secondary market’ is the place—virtually any kind of exchange or the like where primary dealers then (horse) trade with these bonds and bills. This will likely also include (re)packaging of these ‘EU-Bonds and EU-Bills’—making them into so-called derivatives.

Moreover, primary dealers will also use such ‘EU-Bonds and EU-Bills’ as part of their assets (although they are debt obligations), which will further reinforce the cartel-like structure of high finance. In other words: the ‘systemically relevant’ banks will become even more ‘too big to fail’.

There is also a bit of information about the particulars of the EU repo facility:

The first EU repo transactions will be executed today on the Eurex Repo web-based trading system and will be cleared via Eurex Clearing. 

Repo facilities are commonly used by sovereign issuers to support the market activity of their primary dealers [they are, in other words, a massive gov’t intervention that favours one kind of market (sic) participants—the EU ‘primary dealers’—over everybody else]. The EU Repo facility operates in line with standard practices of peer sovereign issuers [hence the importance of esp. what the US Federal Reserve does]. The launch of the Repo facility marks the implementation of the final measure announced by the Commission in December 2022 to support the EU bonds market. The Commission has now all the tools that it needs to manage successfully a busy period of issuance to end-2026 with the support of its valued Primary Dealer Network.

To mark the launch of the Facility, Commissioner for Budget and Administration, Johannes Hahn, together with the President of the Deutsche Bundesbank, Joachim Nagel, will lead a ‘Ring the Bell Ceremony' at 17:00 CEST on the trading floor of the Frankfurt Stock Exchange, in Germany. 

I’ll briefly comment on the magnitude of what the EU Commission just announced before we turn to its implications.

• The EU Commission has a kind of ‘budget’ consisting of the contributions of member-states that are allocated for the duration of a five-year term. Apart from these appropriations, the EU Commission had no money to spend.

• The announcement to issue ‘EU-Bonds and EU-Bills’ renders the EU Commission a de facto ‘sovereign issuer’, which means that this is the backdoor through which ‘Brussels’ can raise funds from their ‘primary dealers’ and spend without either a written constitution or the authority to tax the EU population directly.

What About the Implications?

If, at this point, you’re asking yourself who’s underwriting these ‘EU-Bonds and EU-Bills’, there are but two options:

• The EU Commission has securitised its five-year budget and/or otherwise put ‘something™’ aside to secure these ‘EU-Bonds and EU-Bills’.

• The next EU Treaty or whatever backroom shenanigans—I’m looking at you, Protocol 14 of the Lisbon Treaty (which permits changes to these structures in the absence of any new treaties or the like, according to one of its primary architects, the late Wolfgang Schäuble)—will impose direct EU taxation to secure the ability of the EU Commission of paying interest on these repo deals.

Either way, what I think this means is that the EU Commission is now effectively a self-declared ‘sovereign’ that will will, at some point in the near future, impose taxation on the EU populations.

Note, moreover, the absence of the European Central Bank (ECB) in these shenanigans.

I do think this is done on purpose because the ECB, while a strange hybrid in terms of its charter—it issues the Euro but not all EU member-states are in the Eurozone—, specifically says nothing about joint debt issuance (precisely because of these hybrid qualities).

Here’s the ‘factsheet’ that accompanies the press release:

All of these EU Commission debt instruments are routed through the Deutsche Bundesbank and its Luxembourg-based subsidiary Clearstream, a ‘bank for banks’.

Yes, the Bundesbank is part of the ECB/Eurozone Ecosystem, but I do suspect that the EU Commission is doing these ‘EU-Bonds and EU-Bills’ via the Bundesbank and its subsidiary Clearstream because it’s ‘more convenient’ to do so via the ECB (which, I suspect, may also lack the legal [sic] authority to issue such repo obligations).

I have sadly neither the time to go through the reams of EU ‘law’ (sic) nor do I wish to unnecessarily grow this piece by leaps and bounds. I have asked the ‘competent’ (sic) EU Commission offices via email for comment, and when and if I receive an answer, I shall further get into these weeds.

We do need to look at some of the puff lingo employed; here’s a bit more from the ‘factsheet’, specifically the section explaining how the repo stuff works:

The EU will create the requested bonds for each trade and cancel them upon conclusion of the transaction so that the volume of outstanding bonds returns to their previous level. The facility will hence not impact the Commission’s planned execution of EU-Bond issuances in accordance with legislative mandates. The evolution of the outstanding amounts of EU-Bonds, taking into account the repo volumes, will be published as per usual practice by the Luxembourg Stock Exchange…

The transaction will be cleared via Eurex Clearing as central counterparty (CCP) where Deutsche Bundesbank will represent the EU in its capacity as General Clearing Member (GCM). Transactions will be settled via Deutsche Bundesbank’s settlement account structure.

The EU has also equipped itself with the means to undertake reverse repo transactions so that it can optimise the return on the cash received as collateral from the Primary Dealer. Under the reverse repo transaction the Commission will invest in tradable securities for the duration of the repo transaction

If you wish to go down some rabbit holes with me, here is a compilation of documents relating to the EU Commissions ‘Annual Borrowing Decision’. For the time being, I shall mention that the most relevant document, entitled ‘Governance decision on borrowing and debt management operations under the diversified funding strategy and related lending operations’, which was issued on 12 Dec. 2023, includes but one mention of the term ‘tax’ (and it does so with respect to the claim that the EU Commission will uphold all its ‘standards on transparency’ and the like).

Bottom Lines

The EU Commission, in other words, is henceforth going to act as a ‘sovereign-style’ issuer of debt obligations to fund whatever the EU Commission seems fit.

We note, in passing, that the EU Commission does so via the Deutsche Bundesbank and Clearstream, as opposed to using the European Central Bank.

Nowhere in the released documents does the EU Commission refer its abilities to tax the EU populations (although I doubt that these obligations, which have been floated every now and then in the past months, are far behind) to actually service these ‘EU-Bonds and EU-Bills’.

It is highly likely that the EU Commission will now go on a spending spree to out-do member-states’ governments and therefore create the conditions for the ex-post merger of the EU into one gigantic pseudo-federal entity.

Taxes will soon have to be imposed to enable the EU Commission to service these debts (and interest payments), which I envision to occur in the following way:

• The EU Commission now issues ‘EU-Bonds and EU-Bills’, and to honour (sic) these obligations, the Commission will eventually go to the member-states telling them that they need to fork over ‘more’ funds lest ‘the EU’ will go bankrupt.

• Grudgingly, member-states will consent, most likely under enormous pressure during a financial meltdown or the like (perhaps on the heels of ‘new’ developments on the eastern front vs. Russia).

• Once set-up as an ‘emergency measure’, the EU Commission will then seek to ‘streamline’ these vehicles and ‘suggest’ that it will be easier and involve way less red tape if the EU Commission will tax EU residents directly.

• This will be sold as a kind of ‘regular’ business-as-usual measure, which also means that none of the other EU institutions—such as the Council (with all the heads-of-gov’ts) or the ‘Parliament’ (what a joke)—being affected; this will lead to the creation of a direct way of taxing EU residents to finance the EU Commission’s debt and spending obligations.

And, voilà, there you go: ‘Brussels’ will supersede all constitutions and legislative bodies within a few years by having created the conditions that ‘necessitate’ further ‘integration’.

Historically, this is a quite momentous announcement, in particular as the power of the purse is the sine qua non of representative assemblies.

In the wake of the so-called Glorious Revolution of 1688, there occurred what P.G.M. Dickson called The Financial Revolution (1967): the Anglo-British parliament was able to extract the Bill of Rights (1689) in exchange for the crown’s desire to secure government bonds issued by the Bank of England with lawful and regular taxation appropriated by parliament. (Dickson’s study is best read in combination with John Brewer’s The Sinews of Power, published in 1989.)

Virtually the same mechanism—the close relationship of taxation and representation—was at the heart of what became known as the American Revolution (‘no taxation without representation’). These issues also played a huge, if not overarching role in the drawn-out struggle over the creation of a central bank in the US until the Federal Reserve Act of 1913.

Now, we’re seeing comparable moves by the EU Commission, although the notion of EU residents having any ‘rights’ or the EU Parliament providing oversight by claiming the power of the purse is nowhere to be found in these documents.

The EU Commission has taken the first big step towards becoming the head of a new entity that follows the same path of all other central banking-warfare states in history.

Until and unless the people of the EU member-states awaken and reclaim their rights as sovereign individuals under their own constitutions.

I won’t hold my breath with regard to member-states’ politicians efforts to uphold the constitutions and laws they are technically bound by. I suspect all of the to side with the EU Commission on this one.

7 Oct. 2024 is a definitive turning point in European history.

The question before its peoples is this: tyranny or freedom.