EU countries discuss a voluntary €500 billion defence fund
09 December 2024
European countries are talking about pooling their money to beef up their defence. As first reported by the Financial Times, EU member states are considering creating a €500 billion fund to buy weapons and fund joint military projects, which would be a first for the EU. The financial tool would make military support to Ukraine more consistent and NATO less dependent on the US in the upcoming Trump year presidency.
To get this money, they're considering borrowing from the bond markets. The plan is to set up a special financial tool to borrow money on behalf of the countries that participate voluntarily in the initiative. This is a big deal because traditionally frugal countries like Germany, the Netherlands, and Denmark, who are usually opposed to taking on common EU debt, may support this idea.
This tool would also be open to countries outside the EU, like the UK and Norway, while military-neutral member states, such as Austria, Cyprus, Ireland, and Malta, could opt out without vetoing the plan.
 | Lorenzo Di Stasi The proposed defence fund aligns with the president of the European Commission von der Leyen's call for EU leaders to prioritise defence investment over the next decade. While the European Defence Agency estimates that EU countries will already raise their combined defence spending to €326 billion in 2024 – equivalent to a record of 1.9% of gross domestic product – capping a 10th year of growth in military investment, it is not yet clear how this new intergovernmental military fund could be used. One idea could be to support the purchase of common air defence systems that Poland and Greece have proposed, which alone would cost €500 billion, according to EU defence commissioner Andrius Kubilius. In the long run, experts from the think tank Centre for European Policy Studies recommend establishing a joint debt to fund €6 billion per year for the defence industrial strategy. If member states agree to this plan, it could serve as the backbone for grants designed to strengthen the Union's defence production capacity. This would complement existing incentives for joint research, development, production, and procurement for military capabilities. |
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