The European Union’s decision, four years ago, to issue common debt, worth approximately 750 billion eurosto finance the investments from the Recovery and Resilience Fund, it was a milestone.
Until the outbreak of coronavirus pandemic, joint EU bond issuance was a taboo subject for Northern countries, Germany being the first.
The “road” after 2020 is open
In 2020, however, with the pandemic strongly casting its shadow over the European economy, the then Chancellor of Germany agreed to the creation of Recovery Fund, breaking this taboo.
For many, this decision paved the way for similar measures in the future.
However, the reactions that exist to the issuance of common bonds for the finance greater defense needsat a time of threats to the EU’s security, they show that obstacles remain on this path.
“Controversies” about defense bonds
The debate on defense obligations was triggered by the realization that the EU needs major spending and investment for its security, as the war in Ukraine continues into its third year and countries bordering Russia feel directly threatened by it.
An additional parameter is the role of the USA in the security of Europe, which is expected to be significantly reduced if Donald Trump wins the presidential election in November.
An indication of how far behind the EU has fallen in defense spending is the statement by European Commission President Ursula von der Leyen at Thursday’s summit.
According to diplomatic sources cited by Reuters, the head of the Commission said that from 1999 to 2021 these costs increased by 600% in China and 300% in Russia (where they increased even more dramatically after the invasion of Ukraine), while in the EU they increased by only 20%.
Von der Leyen also said, according to the same sources, that the EU will need around €500 billion for its defence over the next 10 years.
This is undoubtedly a large amount that, as in the case of the Recovery Fund, could not be covered by national budgetsespecially for countries that do not have the necessary fiscal space.
To respond to this need, the issue of joint obligations was raised, while other options were proposed, such as covering some costs from the EU budget and financing investments in the defense industry from the European Investment Bank (EIB), a process that appears to be ongoing , as evidenced by the conclusions of Thursday’s Summit.
“The European Council welcomes the Security and Defence Plan adopted by the EIB Group and calls for its swift implementation. It calls on the EIB to further assess and adjust, as appropriate, its lending policy to the defence industry, while ensuring its financing capacity,” the joint statement said.
Kyriakos Mitsotakis is in favor of defending titles
Defense obligations were not mentioned in the announcement since, as Prime Minister Kyriakos Mitsotakis stated, no agreement was reached, but the Commission was invited to present a detailed report on financing options.
“(The European Council) also had a first discussion on options for mobilising financing for European defence… It calls on the Commission and the High Representative to present elaborate options, to be discussed by the Council, for public and private financing that will strengthen the defence technological and industrial base and address critical capability gaps,” the statement noted.
Kyriakos Mitsotakis has been in favor of defense bonds, while other Southern countries are also in favor of this measure, which traditionally favors the assumption of joint debts.
French President Emmanuel Macron mentioned defense ties at the March summit, which also discussed strengthening EU defense cooperation and capabilities.
Proponents of the measure include Belgian Prime Minister Alexander de Croix, as well as Eastern European countries that border Russia, such as Poland and Baltic countries – Lithuania, Latvia and Estonia – who, in a joint statement on Wednesday, asked Brussels for help in reinforcing its borders with Belarus and Russia, which constitute the European Union’s eastern border but are also the target of what they considered to be “unprecedented” hybrid attacks on name of Moscow and Minsk.
“The scale and cost of this joint venture require concrete action from the EU to support it politically and financially,” the leaders of the four countries said.
the “no”
On the other hand, opponents of the issuance of defense bonds appear so far, according to a Bloomberg report, Germany, Austria, the Netherlands, Finland, Denmark and Sweden.
German Social Democratic Chancellor Olaf Scholz, although as Finance Minister in Merkel’s government in 2020 he approved the issuance of common debt for the Recovery Fund, appears today is not willing to agree to a corresponding measure, as the current Minister of Finance, the liberal Christian Lindner, disagrees.
However, the battle for defense titles is just beginning, as the Prime Minister stated after the conclusion of the European Council.
“Obviously, there is no agreement that we are discussing today on joint financing of European defence spending. But it is something that cannot be ruled out in the future. I will continue to insist on this. We cannot say that we need to strengthen Europe’s defence capability and ignore the fact that this cannot be done with national budgets alone. I would like to remind you that even before the creation of the recovery fund there were strong reactions from many Member States, who at some point were committed to getting to this point. So I think we are at the beginning of that process. But I think that joint defence cooperation at various levels, for many of our colleagues in the European Council, is ultimately a one-way street,” said Kyriakos Mitsotakis.
AMP Source