By Jan Strupczewski
BRUSSELS (Reuters) – European Union finance ministers will discuss on Monday how to pay for defence through new joint borrowing, existing EU funds and a greater role for the European Investment Bank, with a view to decisions in June, the Polish EU presidency said.
In an invitation letter to the ministers, Andrzej Domanski, the finance minister of Poland, which chairs EU meetings, said the talks would follow up on decisions by EU leaders last Thursday to explore these sources of financing.
European countries are hastening to boost defence spending and maintain support for Ukraine after U.S. President Donald Trump froze U.S. military aid to Kyiv and raised doubts about Washington’s commitment to European allies.
“Given the rapidly evolving security landscape, Europe must reflect deeply on the future of defence spending,” Domanski said in the letter.
“A stable and predictable funding framework is essential to systematically develop European defence capabilities,” he said.
The ministers will work on a European Commission proposal for the EU to raise 150 billion euros ($163 billion) against the security of the EU budget, for loans to governments for defence projects.
They will also discuss the use of EU cohesion funds to pay for dual-use projects that benefit both civilians and the army.
Another topic will be the idea that the EIB, a bank owned by EU governments, should broaden the scope of projects it can lend for and increase the amount of money available, to help boost the amount of money available for Europe’s defence.
The letter said that on Tuesday, the second day of the meeting, the ministers will discuss how to change EU fiscal rules to provide room for more national spending.
To remove EU barriers, the Commission has proposed to let all 27 EU governments increase defence spending by 1.5% of GDP each year for four years without triggering any disciplinary steps under the EU’s debt rules that underpin the euro.
Domanski said the ministers should therefore discuss what constitutes defence spending to broaden the existing definition which now only takes into account military hardware, but not, for example, the hiring of soldiers who could operate it.
The current rules also do not recognise the construction of ammunition factories, or the reinforcement of roads and bridges to enable the crossing of tanks, as defence expenditure and many governments want to change that.
The ministers will also talk on Tuesday how the increase in defence should be measured. Poland is proposing to use as a benchmark defence spending levels from 2021 – the last year before Russia invaded Ukraine in February 2022.
Finally the ministers will discuss how long the extra fiscal leeway should last. While the Commission proposed four years, many governments, including Germany, argue defence projects last 10 years or more and that they want a more permanent change in the rules than just a transition measure of four years.
($1 = 0.9207 euros)
(Reporting by Jan Strupczewski; Editing by Lincoln Feast.)
