MNI INTERVIEW: Germany Could Back EU Defence Borrowing- Wolff

An ambitious approach by the European Commission in its upcoming proposals for funding EU defence and security initiatives, including new joint borrowing initiatives, could win the support of states like Germany and Italy, a leading European Union economic policy adviser told MNI.

“Looking at the objective security situation – it’s a very dire one. I would certainly advocate for an ambitious initiative,” said Guntram Wolff, former CEO of Germany’s Council on Foreign Relations, ex director of the Bruegel think tank and a regular adviser to meetings of EU finance ministers and central bank governors.

The Commission is preparing a paper on defence funding to be presented at the EU’s June 27-28 summit, but is keeping a tight lid on its proposals until after the June 6-9 European parliamentary elections.

Wolff expects “differences of view on the level of ambition that can be put forward” within the Commission, but added that there was a strong case for a federal approach that could appeal to the EU’s biggest states.

France’s support for a strong EU defence initiative is well known, as is that of the front-line and Baltic states, but Wolff said such a plan might also win over both Germany and Italy.

GERMAN FUND USED UP

Germany’s special EUR100 billion fund for defence is already “largely used up,” he noted.

“It has plugged the biggest holes, but Germany is still far away from its self-proclaimed ambition of having the strongest land forces in Europe,” Wolff said. “Germany will need to invest more and so will some other countries.”

Since Germany remains saddled with its domestic debt brake, raising more European debt to fund a bigger defence effort could be “very helpful,” according to the adviser, adding that the same logic applies to many other states.

“National fiscal rules and national fiscal space are constrained, and so European debt makes a lot of sense at this stage.” (See MNI: EU Set To Consider New Agency To Fund Defence-Officials)

Nor does the prospect of a strong performance in this weekend’s elections by the right-wing ECR and a poor showing by the Socialist S+D Group necessarily dim the chances of leaders agreeing to a big increase in EU defence investment, he argued.

MELONI

Even right-wing Italian Prime Minister Giorgia Meloni, whose government faces an uphill task to reduce its budget deficit and public debt in the coming years, could be swayed, he said.

“Meloni may be quite supportive of a European defence agenda,” Wolff said, noting that she has shown herself to be pro-NATO and has pursued a pragmatic foreign policy.

Nonetheless, Wolff anticipates strong opposition from states which are more relaxed about the current confrontation with Russia, and pointed to a different dynamic to the South versus North differences which characterised the negotiation of the EU’s new fiscal regime.

“Countries like Finland, Estonia and others have a much stronger and clearer view of the necessity of cooperation on defence,” Wolff said, adding that he was hopeful that the end-June summit might make progress on this issue.

“I would take an ambitious approach if I was the Commission, then there is a chance that you come out with something reasonable,” he said, adding that should that fail, the potential return of Donald Trump to the White House next year would be certain to galvanise the EU’s defence ambitions.