As Poland prepares to take the helm of the European Union’s presidency in January 2024, the country’s Finance Minister Andrzej Domanski has outlined a strategy for boosting common EU financing for defence. With heightened security needs largely stemming from the ongoing war in Ukraine, Domanski believes that safety is a shared European responsibility requiring collective action.
Estimated Defence Funding Needs
The European Commission has projected that enhancing the EU’s defence capabilities could cost around 500 billion euros ($525 billion) over the next decade. This sizable investment is not merely about the funds; it also necessitates collaboration among member nations to ensure efficient use of resources.
Proposed Financing Models
Discussions around funding options are still in their infancy, but two primary avenues are being explored:
- Long-term EU Budget: This approach would use the EU’s long-term financial framework to secure new borrowing, similar to the post-COVID recovery fund.
- Special Purpose Vehicle (SPV): A model akin to the European Stability Mechanism, allowing the EU to borrow against paid-in capital, which could include non-EU nations like Britain and Norway.
Challenges and Concerns
Creating a joint financing model brings significant challenges, particularly legal hurdles concerning collective debt within the EU. Germany has indicated strong reservations towards joint borrowing, unless it’s justified by an emergency like the COVID-19 pandemic.
Nevertheless, Domanski expressed optimism, noting that there’s broad support among finance ministers for a more unified approach to defence spending. He remarked, “From my talks with other ministers of finance, there is a broad support for the view that we need to do way more as Europe.”
Future Discussions
The shape of future financing discussions will become clearer following the early March release of a report by EU Defence Commissioner Andrius Kubilius, which will outline European defence priorities. As Europe grapples with security issues, the finance ministers’ upcoming talks in April in Warsaw may yield significant proposals.