Without Europe, the US has difficulty financing its growing national debt. It is a forgotten economic weapon, according to economics professor Niku Määttänen. The US is dependent on Europe – even if its president, Donald Trump, does not want to say it outright. In the past, it has often been said that China has an economic hold on the US in the form of a large holding of US government bonds. However, compared to China, Europe owns a significantly larger share of the US national debt. In total, European countries own over $2,700 billion of US national debt, while China owns only $760 billion. The only difference is, of course, that Europe is not a single country and therefore needs to make joint decisions to exploit this hold. If European politicians were to advise banks and institutions to stop buying US government bonds or even sell their holdings, it would have devastating consequences for the US economy. The interest rates on these government loans would skyrocket. However, economics professor Niku Määttänen at the University of Helsinki says that it is not so easy to use this means of pressure, as it would also mean losses for European investors. – The moment a country or investor starts dumping US government bonds, the value of these securities plummets. Therefore, economists have not seen this as a realistic scenario so far. As long as there are other investors around the world who are willing to buy US government bonds, the effect of a European sale would also be limited. Although most people have so far dismissed this idea, the situation has actually changed, says Määttänen. – The US national debt has continued to grow, and economists are starting to question whether the US can really manage its debt. If confidence in US economic policy and the independence of the central bank begins to wane, this could in itself lead to higher interest rates on US government bonds and increased risk for investors. The US is no longer seen as such a safe haven for investors. This is something that European politicians can benefit from. – I don’t see that Europe can directly use the US national debt as a weapon for pressure, but I do believe that Trump’s economic policy can achieve the same effect. Elon Musk addressed the cabinet the other week about the economic problems facing the US. The US is paying more in interest on its national debt than the entire US defense budget, he said. This is a warning sign that usually indicates a great power is in decline. Why does Europe continue to buy US government bonds despite the Trump administration so openly acknowledging the problems? – It’s the money that speaks. You get a sufficiently good return on the investment and no one seriously believes that the US economy will collapse, says Niku Määttänen. Elon Musk used the interest rate as a way to highlight the necessity of saving on public spending. But Niku Määttänen condemns Elon Musk’s savings ministry as a way to reverse the debt. The US cannot save itself from its economic predicament. He believes that the US will ultimately be forced to raise taxes. As the US national debt grows, it could lead to increased demand for other safe investment alternatives. European countries with strong public finances, such as Germany, Sweden, Norway and Switzerland, could benefit from increased demand for government bonds. – There may be some good coming out of this, but given today's geopolitical uncertainty, it feels like small consolation.