The EU executive proposed in early March a five-point plan to rearm and reach defence readiness by 2030. In an exclusive interview, EU defence commissioner Andrius Kubilius told Euronews he expects member states to make use of options proposed in the plan instead of issuing more joint debt.
The EU is not yet ready to issue so-called Eurobonds to ramp up much-needed defence capabilities to deter any potential military aggression against the bloc, EU Commissioner for defence and space Andrius Kubilius has told Euronews in an interview.
“Eurobonds means that the European Union will have a bigger debt, which will need to be serviced again by all the member states, and now we have in some ways a challenge on how to repay the existing debt,” the former Lithuanian prime minister said.
“Preparation to discuss the next Multiannual Financial Framework (long-term EU budget) exactly shows that if we shall not find another solution, then quite a big part of the next MFF will be spent to repay pandemic debt,” he added.
The EU’s long-term budget represents 1% of the bloc’s GDP (around €1.2 trillion) — and the EU’s debt repayments from grants issued in response to the Covid-19 pandemic are expected to run to between €25 billion and €30 billion annually, or to up to 20% of the bloc’s annual cash pot.
Kubilius said he expects member states to use the instruments and options already proposed under the “rearm Europe” plan – now rebranded as ‘Readiness 2030’ – as the bloc has not yet decided how to repay the debt incurred for pandemic-related recovery funds.
“Whatever instrument you are using, loans or bonds (grants), at the end somebody will need to pay those amounts of money, so that’s why we should not go for bonds before we shall get those answers,” the Commissioner argued.
“For the next four years, in some kind of idealistic scenario, member states will start to spend 3.5% of GDP, so it will be €2.4 trillion spent on defence. The question is: will it cover all the needs, or we shall need to have additional funding?” he said, adding that they expect to have a clear view of what the real needs are by June.
In early March, EU Commission President Ursula von der Leyen presented a plan to mobilise up to €800 billion over the next four years, which heavily relies on member states increasing their national spending on defence.
The five-point roadmap gives member states the fiscal space to raise their defence spending up to 3.5% GDP (which would result in €650 billion) and includes proposals to mobilise more private capital, adapt the European Investment Bank’s (EIB) mandate, and incentivise defence-related investments in the common budget.
The remaining €150 billion would come from a new financial loan instrument called “SAFE”, which allows the Commission to borrow on the capital markets to issue bonds and lend to member states.
For such an instrument, the EU executive is promoting the purchase of European defence products, with a requirement that at least 65% of the value of simpler products such as missiles, small drones and ammunition be purchased within the EU, EEA-EFTA countries or Ukraine.
The remaining 35% could come from outside these countries, and those who sign a security and defence agreement with the bloc could opt to be included in the 65%.
Kubilius said that the European industry is currently demanding much more European investment to develop the bloc’s industry as a strategic asset. “That’s why we have those very clear requirements,” he stressed.
“We want to incentivise member states to spend more money on European production, with possibilities to have partnership agreements with other countries like Great Britain, Canada, which would then bring those countries up to the same level as European countries,” the Lithuanian commissioner said.
For the other €650 billion of the €800 billion “rearm Europe” plan, member states will be free to import from whichever country they choose.
Defence spending should only include… defence
The EU is trying to give its member states more fiscal leeway to increase defence spending – but first, they have to agree on what counts as defence spending.
So far, the definition has been very narrow, referring mainly to tanks, planes and guns, and excluding, for example, the costs of training, hiring and paying crews.
In recent weeks, countries such as Spain and Italy have argued that the definition should be broadened to include spending on counter-terrorism, climate change and other security investments.
“The threats on Southern Europe are somewhat different from those in Eastern Europe. In our case, they are related to cybersecurity, hybrid threats: what we need to do is improve our cybersecurity capabilities, counterterrorism efforts, security in the Mediterranean, satellite connections, quantum computing, AI, and their implications for national security,” the Spanish prime minister said last week in Brussels.
The defence commissioner said that there is indeed a need for additional spending on preparedness, climate change and so on, but that it should be done in a separate way from defence spending.
“We need to fight against climate change. We need to fight for social protection, things which are also very important, but let’s do job by job. Defence is defence,” Kubilius said.
Assessments by NATO and several other EU countries suggest that Russia will be ready to attack one of the member states within three to ten years.
Russia currently produces far more than Europe, with Russian defence production in 2024 alone estimated at 1,550 tanks, 5,700 armoured vehicles and 450 artillery pieces of all types.
“In order to deter the possibility of aggression, we need to produce real weapons, but again, it should not be in some way viewed as some kind of competition with other tasks,” he concluded.
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