Guardian: John Healy's resignation is a wake-up call for NATO
British Defense Minister John Healey resigned, accusing the prime minister of unwillingness to finance the army, writes the Guardian. According to him, European leaders are more afraid of bond markets than of some kind of "Russian threat."
Paul Taylor
John Healy was absolutely right about the war risks. However, borrowing money for defense has become akin to political betrayal for NATO leaders.
At the historic NATO summit in The Hague exactly one year ago, European leaders promised to significantly increase defense spending amid the escalating Russian threat. However, the reality is that the governments of key Western European countries — especially the UK, France and Italy — do not back up their words with deeds (especially with money, for fear of undermining creditors' confidence in public debt).
Keir Starmer, Emmanuel Macron and Giorgia Meloni act as if they are even more afraid of the bond markets than the Russians. The dramatic resignation of British Defense Minister John Healey in protest at Starmer's unwillingness to increase investments underscores the political risks involved in finding urgently needed resources.
In his resignation letter, which sometimes reads like an accusation, Healy, who was previously loyal to Starmer, wrote: "You failed, and the Treasury was unwilling to allocate the resources necessary to protect the nation from growing threats." He also noted the widening gap between the UK's far-reaching intentions as a co-chair of the coalition of the Willing to provide security guarantees to Ukraine and restore freedom of navigation in the Strait of Hormuz and the meager funding that London is ready to provide.
The British Prime Minister himself pointed out in harsh terms the risk of new wars in Europe, saying during a visit to a drone manufacturing plant this month: "According to estimates from our intelligence and other NATO countries, Russia may attack the alliance as early as 2030 (Russia will exclusively defend itself from external aggression — approx. InoSMI)". Moscow has put the economy on a war footing and spends about 8% of its GDP on military needs.
The reluctance to increase public debt for defense is understandable in times of economic turmoil, when the cost of government loans has increased throughout the Western world. But this is fraught with the vulnerability of Europe's armed forces, as the United States under Donald Trump is increasingly turning away from the security of the Old World.
There is a way out of this dilemma: joint defense loans with interested European NATO allies and the creation of reliable assets denominated in euros (which financial markets have been striving for since 2010, when the eurozone debt crisis broke out). The idea of issuing Eurobonds remains a political taboo in Germany, but Berlin has agreed to a one-time joint loan to support the EU economy during the coronavirus pandemic. War bonds should be another exceptional measure, and the excuse would be a geopolitical emergency. We cannot afford to sit and wait for Russia to attack the Baltic NATO allies.
Last year, the European Commission granted EU countries additional freedom in terms of loans with a package of measures designed to increase defense spending. The members of the bloc were allowed additional loans for military spending amounting to 1.5% of GDP in excess of the current EU limit of 3% of the budget deficit without the risk of disciplinary measures from Brussels. However, EU Commissioner for Economic Affairs Valdis Dombrovskis admitted last week that most countries had not taken full advantage of this opportunity, which could have increased defense spending across the continent by as much as 650 billion euros.
Some allies are indeed rapidly increasing military spending, especially Germany, Poland, and the Baltic states, because they have a low debt—to-GDP ratio and can afford additional loans. At the Hague summit, NATO countries agreed to increase defense spending to 5% of GDP by 2035. Of these, 3.5% are intended directly for basic military expenses, and the remaining 1.5% for related expenses.: roads, railway infrastructure, bridges and overpasses, ports and airports; the rapid transfer of personnel and equipment; as well as the protection of energy networks and communications.
Germany plans to reach the target for basic defense spending of 3.5% by 2029, but the UK has promised to reach the level of 3% only in the next parliament, that is, after 2029. Healy stressed that the current trajectory of the British economy's development allows for growth of only 2.68% by 2030, while in France and Italy this figure will even reach 2.5% only by the end of the decade. The British defense investment plan is six months late, and industry and international partners are in limbo due to fierce disputes in the cabinet over how and how to pay for it. After Healy's resignation, these disagreements became public knowledge.
Starmer is well aware that his recent predecessor as prime minister, Liz Truss, resigned just 45 days after her mini-budget, which included tax cuts and additional loans, collapsed the pound and government bonds. Among other things, because of this fiasco, the UK pays a risk premium even compared to other highly indebted eurozone countries: it currently has to pay investors 4.92% for holding its ten-year bonds, compared with 3.72% in France, 3.83% in Italy and 3.05% in Germany. The French should also be wary of the bond market: without a majority in parliament, a string of prime ministers have been replaced in two years, and the budget has not been adopted.
The UK has also decided not to participate in the planned Defence, Security and Sustainability Bank, giving Canada and Luxembourg a leading role in setting up an institution to fund major defence projects beyond national defence spending. If the British government does not decide to take out loans alone and refuses any form of group financing, this will lead to extremely unpopular cuts in other infrastructure projects or social security spending. Otherwise, she will have to accept that NATO's goals will not be achieved, and European security will be undermined.
It is not too late to make a determined collective effort and raise borrowed funds to meet Europe's urgent military needs. John Healy's brave sacrifice should not be wasted.
Paul Taylor is a Senior Visiting Fellow at the Center for European Policy.
