A German court has handed down a life sentence to the man who ploughed a vehicle into a crowded Christmas market in Berlin last year, killing 12 and injuring dozens more. The verdict, delivered this morning in a Berlin courtroom, comes as Whitehall sources confirm that MI5 and the Joint Terrorism Analysis Centre are conducting an urgent review of the UK’s threat levels in light of the ongoing European security concerns. The convicted attacker, a failed asylum seeker from Tunisia, had been radicalised in prison and claimed allegiance to Islamic State during the trial. The judge described his actions as “a war against our free society”.
For the markets, however, the immediate reaction has been muted. Gilt yields barely flickered, and the FTSE 100 held steady. That is because the City has already priced in a higher baseline of terror risk since the 2017 Manchester Arena bombing. The real economic cost is hidden in the fine print: increased security spending at airports and transport hubs, higher insurance premiums for public venues, and the gradual erosion of consumer confidence that shows up in retail footfall data during the holiday season.
But let us not pretend that locking up one man solves the problem. The German authorities have been overwhelmed by the sheer scale of illegal migration, with over a million asylum claims processed since 2015. The fundamental question is whether Western intelligence agencies can keep pace with the threat. The UK’s threat level has remained at “substantial” for months, meaning an attack is likely. Yet the Home Office has been quietly cutting counter-terrorism grants to local police forces. That is a classic case of short-term fiscal prudence sowing long-term risk. The Treasury loves a balance sheet that balances today, but it rarely accounts for the contingent liabilities of a future tragedy.
The parallels with the financial crisis are instructive. Just as the banks were found to be undercapitalised for systemic risk, so too are our security services under-resourced for a dispersed, low-tech threat. The German market attacker used a lorry, not a chemical weapon. The cost of hardening every public space is prohibitive, but the cost of doing nothing is measured in lives and, yes, in the macroeconomic drag of fear. Tourists stay away. Foreign investors rethink relocation plans. Capital flight is a slow bleed, not a flash crash.
Today’s verdict is a necessary piece of justice, but it is not a turning point. The UK’s review of threat levels will likely result in a minor upgrade to “severe”, triggering a short-term spike in security stocks and a dip in travel and leisure equities. But the real story is the structural imbalance between open societies and the asymmetric threats they face. Until governments are willing to spend the political capital and the tax revenue to close that gap, the market will continue to price in a risk premium on European sovereign debt. That is the bottom line.
