MNI: Feb Summit To Discuss How To Fund EU Defence Boost
MNI (BRUSSELS) - European Union member states will discuss options for boosting defence including jointly-issued defence bonds, a special purpose vehicle, and government guarantees at a special summit called by European Council President Antonio Costa for Feb 3, officials told MNI.
The purpose of the informal retreat will be to scope out an "emerging consensus" on how to fund what is increasingly recognised as an inevitable increase in defence spending from an average of just over 2% of GDP, and how much of that would come from joint funding rather than from national budgets, the sources said. That consensus will then be used to guide the Commission's White Paper on defence, to be released in March.
While U.S. President-elect Donald Trump has called for European nations to boost spending to 5% of GDP, European officials expect a compromise number around 3% to emerge from a NATO meeting in The Hague in June.
Sources said southern EU states are still pushing for military spending to be more clearly excluded from the bloc’s new fiscal rules, which currently make no allowances for spending on defence when assessing whether to launch excessive deficit procedures. Those few states which still have fiscal space, like Germany and Netherlands, are also likely to come under pressure to increase their national defence spending at the summit in The Hague.
JOINT-FUNDING
Officials setting the EU’s next long-term budget will also have to decide whether any jointly-funded boost to defence comes from the bloc’s budget itself or via defence bonds or some kind of off-balance sheet or special-purpose vehicle based on national guarantees. (See MNI INTERVIEW: EU Defence Boost Likely To Be Off-Budget)
"On this debate there is an evolution of positions," said one official, noting support from Denmark and other northern states' support for the SPV solution.
"Germany and the Dutch are the only countries still saying no," the source added, adding that the advent of Trump will help EU positions to converge further.
"It is not impossible that all options will need to be part of the solution."
In the short term the EU is working under the constraint of its 2021-2027 budget. Negotiations on the next seven-year multiannual financial framework will begin this spring.
"Under the current MFF the maximum we can do is repurpose existing budget programmes,” one official said.
Short-term options also include finding ways to leverage private financing for EU defence industries, which would complement efforts to take forward the Letta and Draghi Report recommendations to boost the global competitiveness of the bloc’s industry, financed by a completed Capital Markets Union.