How to pay for military rearmament against Putin and Trump in the phase of fiscal discipline

,Threat War may not be imminent, but it’s not impossible, The dangers of war should not be exaggerated, but we should be prepared for them.” With this knock he justified Ursula von der Leyen The first European Defense Industrial Strategy, which will be approved next Tuesday.

In an increasingly hostile environment where Vladimir Putin claims nuclear weapons and Donald Trump The President announced that she would ignore the security of Europe if she wins re-election in November “Turboboost” Community Defense Within a maximum period of five years.

In concrete terms, the Community Executive will propose Encouraging arms production in the EU using a joint purchasing model Similar to what has been used successfully by Member States with vaccines and gas. And Mobilizing the community budget as a guarantee For industry.

(Von der Leyen calls for “raising” European defense over 5 years: “War is not impossible”)

However, the rearmament strategy promoted by von der Leyen has two major obstacles that make its deployment difficult, at least in the short term. Aside, european military industryBurdened by many years of underinvestment in which Europe enjoyed the peace dividend, it does not have sufficient capacity, not only to respond to the needs of member states, but also to provide Ukraine with the weapons it needs to resist the Kremlin. Not even to supply.

Some shortcomings have been highlighted by the ammunition problem. In March 2022, the EU promised the government Volodymyr Zelensky Which will deliver at least one million artillery shells within a year. However, so far the Europeans have succeeded in delivering only 330,000 rounds of ammunition. Head of European Diplomacy, josep borrellThe total for the entire month of March is expected to reach 524,000, just 52% of the target.

The low production capacity of European industry has forced Community leaders to look for alternative solutions. czech president petr pavel They claim to have discovered 800,000 artillery shells in non-EU countries, which could be shipped to Ukraine in the short term if the allies could get financing. The total cost of the purchase is estimated at around 1.5 billion euros.

that’s exactly the right question Who and how pays for the EU’s military rearmament is the second hurdle, and most importantly, of the European Defense Industrial Strategy. In 2023, only 10 of the 25 European NATO countries reached the target of investing 2% of GDP in defence, mostly on the east coast. France has announced it will reach 2% this year, while Germany announced a special fund of €100 billion to modernize its military after the start of the Ukrainian war. For its part, Spain spends barely 1.26% and does not plan to achieve 2% until 2029.

The need to rapidly increase military spending also matches this Reactivation of EU fiscal discipline rules this year (Suspended since the outbreak of the pandemic) Although they have been improved, the room for maneuver for governments is limited. Member states with particularly high levels of public debt, such as Spain, France or Italy, were forced to consolidate their public accounts.

For Danish Prime Minister, Socialist Mette FrederiksenAppearing in all pools as a candidate for the presidency of the European Council after the European Parliament elections in June, the solution to increasing investment in defense is to cut social spending while avoiding tax cuts. “We have to admit that we have not devoted enough money to our defense and security,” he warned in a recent interview. financial Times, Since the fall of the Berlin Wall, Europe has prospered because of the peace gains.

If increasing defense spending at the national level creates dilemmas that are difficult to resolve, there is no consensus even at the European level on how to meet the challenge. Borel’s proposal to make 5 billion annual fund for military aid to Ukraine Despite Kiev’s urgent needs, it has been blockaded for months. European leaders want to complete a deal in March, but it is unclear whether they will be able to achieve it.

Aside Germany wants its bilateral contributions to be exempted To the Zelensky government, which, according to complaints, is far better than France, Italy or Spain. On the other hand, France, Greece and Cyprus demand that European money is only used to buy weapons in the EU, which may limit the effectiveness of the fund according to the remaining partners. Furthermore, Hungary continues to veto the final tranche of €500 million from the European Peacekeeping Support Fund (which raised €6.1 billion to support the Ukrainian military between 2022 and 2024).

Given the lack of resources for investment in defence, the Prime Minister of Estonia, Kaja KailashHas proposed a plan to issue 100 billion euros in Eurobonds. A joint European loan, following the example of the Next Generation Fund, which would be entirely allocated to promoting the Community military industry. Callas’ initiative is supported by the French President, Emmanuel MacronBut faced opposition from the Chancellor Olaf ScholzFor which Eurobond is prohibited.

Another option being considered in Brussels is to reinforce the role in defense of the European Investment Bank (EIB), the EU’s armed financial arm which it has directed since January. nadia calvino, The EIB’s mandate allows it to invest in dual-use military and civilian technologies (such as drones), but Does not include arms, ammunition or military infrastructure,

Some countries like France or Finland want to amend it to include weapons, but other countries like Germany, Austria or Ireland are opposing it. calvino bet Make the most of the possibilities offered by the current mandate: The EIB has a financing program of €8,000 million until 2027 in security and defense (which includes R&D, cyber security or critical infrastructure protection), of which only €2,000 million has been consumed.

The latest initiative in the search for funds was taken up this week by the chair of the Commission herself. Von der Leyen posing Use the profits generated from the assets of the Central Bank of Russia Funding for arms shipments to Ukraine since the beginning of the war (amounting to about 3 billion euros per year) has been frozen in Belgium.

“There can be no better use of that money than to make Ukraine and all of Europe a safer place to live,” von der Leyen said in a speech to the European Parliament last Wednesday. But the president’s plan also raises doubts in France or Germany and in Kiev, whose government fears it would delay the arrival of aid.