Discussions are gathering pace in the European Union on how to increase defense spending, with joint financing becoming a realistic option for a growing list of leaders, according to people familiar with the matter.
“In the face of this emergency, I think it is time to take historic decisions,” French Minister for European Affairs Benjamin Haddad said in an interview with Bloomberg. “And indeed, the question of eurobonds, for instance, is one of the mechanisms that we should be talking about.”
Protecting Ukraine and expanding their own militaries could cost the continent’s major powers an additional $3.1 trillion over the next 10 years, according to a Bloomberg Economics analysis. NATO planners estimate the alliance will need to spend as much as 3.7% of GDP on defense, Bloomberg reported earlier. Just 23 out of the 32 North Atlantic Treaty Organization countries met the 2% spending target as of last year.
“This is a once-in-a-generation moment for the collective security for our own continent,” Starmer told reporters in Paris. “Today’s informal meeting of European leaders was a vital first step in responding to that.”
Funding options being discussed include triggering an escape clause to the EU’s fiscal rules to allow countries to boost funding without running afoul of the bloc’s regulations. European Commission President Ursula von der Leyen proposed activating that mechanism for defense investments last week in a speech at the Munich Security Conference.
German Foreign Minister Annalena Baerbock signaled over the weekend that a significant plan for building strong defenses is in the works, saying “similar to the euro or the corona crisis, there is now a financial package for security in Europe.”
“That will come in the near future,” she said, without giving additional details.
Officials say that new spending plans won’t be unveiled until after the German election on Sunday in order to avoid stirring up controversy before the vote. Germany and the Netherlands have traditionally been against joint borrowing.
Poland’s Tusk told reporters after the meeting that he received assurances that “many” billions of euros of outstanding European funds will be re-purposed for defense, “which can be mobilized immediately.”
European Central Bank President Christine Lagarde has also been supportive of increasing the bloc’s fiscal capacity to finance common goods like security, saying last year: “common financing is desirable, whether by way of an increased fiscal capacity or by way of joint debt.”
Lithuanian Defense Minister Dovile Sakaliene said there’s been a big shift in perception among European allies on EU budget rules and joint borrowing after the past four days in Brussels and Munich.
“Regarding joint European instruments, solidarity instruments like we used during pandemics or like we used for the green course — these need to be set up immediately,” Sakaliene said in an interview with Bloomberg TV Monday. “I think everybody or almost everybody is on board.”
Denmark has traditionally maintained a cautious stance toward joint EU debt issuance as it’s advocated fiscal responsibility and preference for individual member states managing their own debts. But during Russia’s war in Ukraine, the Danish government has increasingly opened up for using such measures, and Denmark along with other countries are now pushing to ease the EU budget ...
