New arms race

The U.S. and European nations are funneling military aid into Ukraine. [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( For many, Russia’s invasion of Ukraine was unthinkable until it happened. Now the war is prompting a broader re-assessment of military capabilities and investment. Moscow’s actions are shifting the debate in Europe, where governments for years found little appetite among voters to spend more on defense. French President Emmanuel Macron famously branded NATO “brain dead” and implied it was not fit for purpose in the modern era. Key Reading: - [Military Spending Passes $2 Trillion as Europe Boosts Defenses]( - [China, Russia Seek Weapons to Hit U.S. Satellites, Pentagon Says]( - [Pentagon’s $773 Billion Budget Focuses on Nuclear Arms, R&D]( - [NATO Entry or Not, Finnish Finance Chief Vows Defense Focus]( But now Finland and Sweden are pondering applying to join the defense alliance. The U.S. and European nations are funneling military aid into Ukraine, including anti-tank and anti-aircraft missiles, and requesting that defense contractors speed up production. Even if the fighting in Ukraine slows soon, we are in a new era of tension between Russia and NATO states. Vladimir Putin will bristle at any move to expand NATO’s membership. The military alliance is bolstering its eastern flank with troops and equipment. That’s likely to see greater leeway for governments to spend more, and fast. The Stockholm International Peace Research Institute says global military outlays surpassed $2 trillion in 2021 for the first time, and look set to rise further. Many eastern European nations still rely on antiquated Soviet-era equipment. While other NATO states can support them on that, for an effective deterrent for Russia in the longer term, a broader upgrade is needed. Equally, in the race to beef up their armies, governments will need to work out where to focus resources, particularly on newer-generation equipment as warfare technology advances rapidly. Putin famously embarked on a costly multi-year push to modernize his military, and its failures on the ground in Ukraine raise questions about whether it was worth it. Other countries can take lessons from Russia’s experience: Money doesn’t guarantee a better outcome. — [Rosalind Mathieson]( A Ukrainian soldier holds an anti-tank launcher northeast of Kyiv. Photographer: Aris Messinis/AFP/Getty Images Sign up [here]( for the Special Daily Brief: Russia’s Invasion of Ukraine and share this newsletter with others too. They can sign up [here](. Global Headlines Second chance | Macron has an opportunity to convince the French public that his pro-business, pro-European vision can work after voters gave the 44-year-old centrist a second term as president. His [challenge]( will be to heal widespread rifts in a deeply polarized country after far-right challenger Marine Le Pen took more than 40% of the vote. Macron pledged to work for an answer to the “anger and disagreement.” Weakening Russia | The U.S. [wants]( to see Russian forces ground down so they can’t attempt a repeat of the Ukraine war, Defense Secretary Lloyd Austin said during a visit to Kyiv with Secretary of State Antony Blinken. The U.S. pledged $713 million in military financing for Ukraine and 15 allies. Russian attacks continued on Mariupol’s Azovstal steel plant, where some 2,000 Ukrainian fighters are holding out. - U.S. diplomats will [return]( to Ukraine as early as this week, starting with day trips into the western city of Lviv and eventually resuming a presence in Kyiv, a senior State Department official said. - An official Ukrainian government Twitter account issued an [apology]( after showing a picture of Japan’s wartime Emperor Hirohito alongside Adolf Hitler and Benito Mussolini in a social media video about the defeat of fascism. Lockdown alert | Fears about the economic toll of China’s strict Covid Zero policy [intensified](, as news that lockdowns were spreading to Beijing sent stocks, commodities and the yuan tumbling. A Covid-19 flareup that shut down much of Shanghai appeared to worsen over the weekend. China ordered mandatory tests in a district of Beijing and shut down some areas of the capital of more than 20 million people. - The financial hub of Shanghai is [installing]( green chain-link barriers outside residential buildings, businesses and bars to stop people from circulating outside. A photo of workers sealing off retail shops by installing fencing, posted to the Weibo social media platform. Source: Weibo Best of Bloomberg Opinion - [Macron’s Win Is an Opportunity for France and EU: Lionel Laurent]( - [Can Brazil Find an Answer for Fake News?: Clara F. Marques]( - [U.S. Era of of Free-Lunch Politics Is Over: Matthew Yglesias]( Coal boom | Demand for coal is soaring across the globe, due in large part to Russia’s invasion of Ukraine. [Will Wade]( and [Stephen Stapczynski]( explain why the world’s addiction to the [dirtiest]( fossil fuel, which many thought would soon be on the way out, is now stronger than ever. - Europe’s spat with Russia over payment terms could soon lead to [cuts]( in supplies of natural gas. Explainers you can use - [Why Croatia Sees Joining the Euro as Path to Security]( - [What Florida’s Action Against Disney Means]( - [The Rich, Black Soil That Fed a Growing China Is Washing Away]( Victorious upstart | Slovenia’s nationalist leader Janez Jansa was defeated by an unexpectedly wide margin in yesterday’s elections by a newly formed protest party. [Jan Bratanic]( outlines how the win by former executive Robert Golob’s Freedom Movement [rids]( the European Union of a leader who challenged its values concerning the rule of law and is a bad result for another EU rebel, Hungarian Prime Minister Viktor Orban. Bloomberg TV and Radio air Balance of Power with [David Westin]( weekdays from 12 to 1 p.m. ET, with a second hour on Bloomberg Radio from 1 to 2 p.m. ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - Australian Prime Minister Scott Morrison said a Chinese military base in the Solomon Islands would be a [“red line”]( for his government, and Japan dispatched an envoy to the Pacific nation after it signed a security agreement with Beijing. - Lawmakers in El Salvador granted President Nayib Bukele another 30 days of emergency powers, after a [crackdown]( that he says has enabled the arrest of 16,000 alleged gang members. - North Korea appears to have delayed a military [parade]( to mark the anniversary today of the founding of its army, putting off an event where it could showcase weapons to threaten the U.S. and its allies. - U.K. Prime Minister Boris Johnson will likely get little [respite]( from mounting calls for his resignation over “partygate,” according to news reports. - Pakistan asked the International Monetary Fund to [extend]( its loan program for a year and boost the $6 billion in funding as a new government stepped in this month. And finally ... The war in Ukraine is accelerating an economic and political [crisis]( in Tunisia, the birthplace of the Arab Spring. [Souhail Karam]( and [Jihen Laghmari]( report on how Tunisian President Kais Saied is facing increasing public anger over inflation that’s near a record high, while 40% unemployment among under-25s in the North African nation threatens to spark a new exodus of migrants across the Mediterranean to Europe. A banner featuring Kais Saied outside a store in Tunis on April 8. Photographer: Chedly Ben Ibrahim/Bloomberg Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022