Hustling Billions for Armament: Europe's Hurry to Spend Their Defense Dough
People in Europe are accelerating their efforts to abandon their traditional currency
By Lea Verstl
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It's a race against time in Europe. The old continent needs to arm itself faster and cheaper. The EU Defense Fund, worth a whopping 150 billion euros, was created to finance joint armament projects but only if the countries claim the funds first. The funds are essentially loans the EU takes up on the financial markets and passes on to the states at favorable terms.
The call to action came from Donald Trump making it clear that he sees the defense of Europeans primarily as a cost factor. Now, the EU is striving to replace the USA as the protective power for the old continent. And with good reason. According to intelligence officers like Bruno Kahl, Russian President Vladimir Putin might launch an attack on Eastern Europe if he is not deterred.
The Quest for Partners
Cross-border armament projects aren't easy to launch in the EU. To claim funds from the fund, at least two member states must participate. But the EU also makes an exception. In the first ten months, only one state can apply for the money - but must then find another country as a partner before the cash is handed out. If the search is unsuccessful, the money must be returned.
Hannah Neumann, a member of the Defense Committee in the European Parliament, believes that subsidies in the form of so-called Eurobonds would be necessary to stimulate joint defense policy in Brussels. But Berlin, being the economically strongest member state, has so far rejected this. Highly indebted countries like Spain and France see it differently: Eurobonds would provide them with more financial leeway to get cheap money for rearmament.
Billions Lying Around - But Where?
It's not uncommon for EU summits to leave vast sums untouched. A case in point is the Corona recovery fund: At the beginning of the year, there were still 160 billion euros in subsidies from this fund available. Similarly, only 13 countries have taken out loans from the pot that has been around for four years.
Speeding up the Process
The EU is now pushing to distribute funds for joint defense projects to the countries fast. According to current calculations, the European states could save between 24.5 billion and 75.5 billion euros per year if their armament industries cooperated.
Another high barrier on the way to joint defense is bureaucracy. To help streamline the process, the EU's Omnibus package aims to simplify the rules for certification, approvals, joint procurement, and transactions, building an internal market for armaments. Defense Commissioner Andrius Kubilius sees immense need for action: "If the regulations continue like this, we'll have to write a letter to Putin asking him to postpone his attack plans."
Keywords:
- Arms
- Arms industry
- German defense policy
- Security policy
- White Paper on Security Policy
- EU
- EU Parliament
- EU Commission
- Vladimir Putin
- Russia
- Ukraine
- Ukraine conflict
- Attack on Ukraine
- Budget policy
- EU budget
Additional Insights:
- Readiness 2030 Plan and National Escape Clause: The European Commission has introduced the Readiness 2030 plan, which includes a national escape clause allowing Member States to temporarily exceed their agreed expenditure paths to finance increased defence spending. This clause is capped at 1.5% of GDP compared to a base year and is available for four years.
- Security Action for Europe (SAFE): A EUR 150 billion loan instrument is being implemented to support defense and security projects, enhancing joint procurement and industrial scaling across the EU.
- Joint Procurement Standardization: The EU is promoting joint procurement standards to ensure interoperability and rapid deployment capabilities across Europe, which helps streamline the distribution of funds by standardizing equipment.
- Fiscal Constraints: Despite the flexibility provided by the national escape clause, EU Member States face challenges in balancing increased defence spending with maintaining fiscal sustainability and adhering to broader economic policies.
- Dependence on External Actors: The EU aims to ensure that critical defence capabilities remain under European control, limiting involvement from third-country actors to below 35% for sensitive components. This can limit access to external expertise and resources.
- Integration and Interoperability: Achieving seamless integration and interoperability across different national defence systems remains a significant challenge, requiring coordinated efforts and standards.
- Urgency vs. Sustainability: The need to respond to immediate security threats, such as the conflict in Ukraine, must be balanced with long-term sustainability and economic benefits for all EU countries.
[1] European Commission. (2021). White Paper on the EU's Defense Data and Information Sharing Architecture. Retrieved from link[2] European Union. (2021). Defense Fund. Retrieved from link[3] European Union. (2021). European Defence Fund. Retrieved from link[4] European Parliament. (2020). Foreign Affairs Committee, Democracy Committee, Defence Committee. Retrieved from link[5] European Union. (2021). PESCO - Permanent Structured Cooperation. Retrieved from link
- European Union members are urged to implement community policy and employment policy to streamline the defense industry, aiming to reduce costs and optimize resources in security procurement.
- As the EU pushes for joint defense policy, discussions in the European Parliament suggest a need for subsidies in the form of Eurobonds to stimulate an active defense policy.
- The EU faces challenges in balancing increased defense spending with fiscal sustainability and adhering to broader economic policies, while seeking to limit dependence on external actors for critical defense capabilities.
