EU finance ministers to discuss sharp increase in defense spending
Photo: EU to increase defense spending (Getty Images)
European Union finance ministers will discuss how to finance defense through new joint borrowing, existing EU funds, and a stronger role for the European Investment Bank. The meeting will last two days - March 10-11, according to Reuters.
In an invitation letter to the ministers, Andrzej Domanski, the Polish finance minister who chairs the EU meetings, said the talks would be held following the March 6 decision by EU leaders to explore these sources of funding.
European countries are rushing to increase defense spending and maintain support for Ukraine after US President Donald Trump froze US military aid to Kyiv and expressed doubts about Washington's commitment to European allies.
“Given the rapidly evolving security landscape, Europe must reflect deeply on the future of defence spending. A stable and predictable funding framework is essential to systematically develop European defence capabilities,” Domanski said in the letter.
The ministers will work on the European Commission's proposal to raise €150 billion secured by the EU budget to lend to governments for defense projects.
They will also discuss the use of EU cohesion funds to finance dual-use projects that benefit both civilians and the military.
Another topic will be the idea that the EIB, a bank owned by EU governments, should expand the scope of projects it can lend to and increase the amount of money available to help increase the amount of money available for European defense.
EU rules
The letter says that on March 11, the second day of the meeting, ministers will discuss how to change EU fiscal rules to allow for increased national spending.
To remove EU barriers, the Commission has proposed allowing all 27 EU governments to increase defense spending by 1.5% of GDP annually for 4 years without resorting to any disciplinary measures under the EU debt rules that underpin the euro.
Domanski said that ministers should discuss what exactly constitutes defense spending to expand the current definition, which currently only includes military equipment but not, for example, the hiring of soldiers to operate it.
The current rules also do not recognize the construction of munitions factories or the strengthening of roads and bridges to allow tanks to pass as defense spending, and many governments want to change this.
Ministers will also discuss how defense spending growth should be measured. Poland is proposing to use as a benchmark the levels of defense spending from 2021, the last year before Russia invaded Ukraine in February 2022.
Finally, ministers will discuss how long the additional fiscal freedom should last. While the European Commission has proposed four years, many governments, including Germany, argue that defense projects last 10 years or more and that they want a more permanent change in the rules than just a 4-year transitional measure.
European Commission President Ursula von der Leyen said that the EU is starting to implement a plan to rearm Europe and is launching the EUR 800 billion REARM Europe program to strengthen security.
