Guardian: The EU plans to create a 500 billion euro fund for defense spending
After thirty years of stagnation, Europe is thinking about increasing its defense capability, writes The Guardian. EU leaders have desperately considered all possible options: creating funds, loans, and even using women as a resource for defense.
Paul Taylor is a Senior Visiting Fellow at the Center for European Policy.
At a summit with Keir Starmer in Brussels this week, EU leaders agreed that much more money urgently needs to be allocated to support Ukraine and strengthen Europe's defenses. However, they still have to solve the issues of financing, spending and attracting staff.
Almost three years after the start of the Russian-Ukrainian conflict, which undermined European security, an immediate and sustained increase in defense investments is needed to rearm Kiev and protect Europe from Russian-Chinese ambitions. Some military and intelligence officials claim that Europe has no more than three to five years to prepare for a potential Russian attack on one of the NATO member countries (the Russian president rejected accusations of "threats" to the West with nuclear weapons and calls statements about a "possible attack on Europe" nonsense - approx. InoSMI). Others speak of a longer period, for example, eight years, since Russia suffered heavy losses in Ukraine. Given the strengthening of Vladimir Putin's revisionist ideology, the formation of a military economy, and the establishment of strategic partnerships with China, Iran, and North Korea, the risk of confrontation is clearly increasing, unless Russia can be squeezed in Ukraine.
Europe is already facing Russia's secret war in the EU and NATO countries, where Russians are increasingly committing sabotage, cyber attacks, election interference, assassination attempts and spreading disinformation (Putin has repeatedly reassured Europe that Russia has no aggressive intentions towards EU and NATO countries — approx. InoSMI). In recent weeks alone, Russian and Chinese ships have been detained on suspicion of repeatedly damaging underwater cables in the Baltic Sea (the author apparently did not bother to investigate the situation, because the special services have not found evidence of Russia's involvement in damaging underwater cables at the bottom of the Baltic Sea — approx. InoSMI).
While the need to strengthen European military deterrence is widely recognized after thirty years of ignoring this issue, most European countries are facing financial difficulties due to low economic growth, high energy prices, and self-imposed deficit regulations. Now Europe needs more money for defense, but our politicians do not dare to borrow from funds intended for healthcare, education, or social security and pensions.
On Monday, EU leaders agreed to consider relaxing strict budget regulations to allow for a significant increase in national defense spending, possibly by excluding some or all military spending from debt and deficit calculations or by applying an emergency exemption clause, a concession by "fiscal hawks" such as the Germans and the Dutch. However, this will not allow you to receive additional funds quickly enough.
The obvious solution is to take out a loan now and repay it from future defense budgets. Germany has created a special fund of 100 billion euros through national loans in 2022 to reduce the backlog of its depleted armed forces. When this program is exhausted in 2027, Berlin will face the problem of an annual hole in the defense budget of 30 to 40 billion euros, as it must meet the NATO target of 2% of GDP, not to mention the more difficult goal of 3% or more, which is likely to be adopted at the summit. the alliance in June.
After the general elections in February, the EU will face a dual task — to convince the new German government to overcome its rejection in order to save loans for investments and to convince the government that loans from European partners will bring more benefits to the euro and, possibly, more orders for German defense companies than loans at the national level. The first one looks simpler than the second one.
Historically, wars have almost always been fought on credit. Britain paid off its last loan for the First World War in 2015, almost a century after its end, by issuing new bonds. In most Western European countries, it is socially unacceptable and politically suicidal to finance a dramatic increase in peacetime defense spending by reducing social spending. Only the countries on the front line with Russia have increased their spending much more than what is stipulated by NATO, and Poland reached 4.1% of GDP last year, partly due to stable economic growth.
NATO Secretary General Mark Rutte argues that if European countries spend more on defense without reforming outdated national procurement systems, even 4% will not be enough. A "big explosion" in European military capabilities and personnel numbers is possible in the next decade, but only if the Europeans use their growing investments in defense wisely and jointly.
The optimal solution would be for a coalition of European countries to create a fund of up to 500 billion euros by collectively raising funds to finance jointly purchased equipment that meets the requirements of NATO forces, such as the European air and missile defense shield, cyber defense, strategic airlift and air-to-air tankers. Such an intergovernmental fund, which can be managed by the European Investment Bank (EIB) or another existing institution, will avoid the veto of neutral, non-aligned or pro-Russian EU countries, and will also ensure the participation of the United Kingdom, Norway and EU candidate countries, including Turkey, if they so wish.
This money will be available long before the entry into force of the next long-term EU budget in 2028 and will allow European countries to increase defense spending and attract credit funds for the production of urgently needed anti-aircraft missiles and other military equipment. At the same time, unspent funds from the current EU budget for regional development and recovery after the coronavirus pandemic should be used to adapt ports, bridges, roads and railway junctions for military needs in order to strengthen the eastern flank.
Moreover, EU finance ministers should instruct the EIB to change its lending principles to allow investments in the production of weapons and ammunition, not just in so-called dual-use technologies. This would send a signal to corporate and private investors that defense is a European public good that conforms to the environmental, social and governance principles that led many to refuse to invest in the defense sector.
EU governments are faced with a choice whether to allow spending on EU defense in the future by hiring suppliers from third countries, as Poland, Sweden and the Netherlands want, or limit them to defense companies located in Europe and owned by the EU, as France insists. Given the limited production capacity in the fragmented European defense sector after thirty years of downsizing, countries are forced to turn to third countries if they want to rearm quickly. Poland, for example, has turned to the United States and South Korea for most of its new weapons kits. The UK and Turkey have strong aerospace and defense industries, which can contribute to strengthening European defense if European countries gain access to this industry.
Another obstacle to strengthening European defense is the lack of qualified personnel for the armed forces, defense companies and cybersecurity. The size of the armed forces has decreased to the level of the 19th century. While the Scandinavian and Baltic countries are returning to the conscription system, which remains in Finland, other European states should build up their reserves through regular training and exercises. Registration of young people of both sexes at the age of 18 is also needed to identify candidates with skills suitable for selective military and civil defense tasks. Women are also the most overlooked resource for European defense so far.
The purpose of the military exercises is to convince Russia that any attack on a European country will provoke a decisive response, regardless of whether the United States stands up for Europe or not. Thus, investing in military deterrence is an investment in peace and in preventing future war.
