Russia’s war in Ukraine is rekindling an old debt debate in Brussels

Munich, GERMANY — Should we borrow from global markets as a unified entity and raise new debt together?

That’s the question hanging over the shoulders of EU officials as they pledge to spend more on defense amid Russia’s onslaught on Ukraine.

This debate is not new — and it is historically complex.

For many years, EU states that have traditionally been more conservative about how they spend their money have been reluctant to tap capital markets along with the rest of the bloc. They feared that eventually their fiscal prudence would be compromised by other nations with looser ideas about how to spend cash.

However, in 2020, the 27 members of the European Union decided that the best way to deal with the economic and emergency effects of the Covid-19 pandemic was to increase the debt together.

Now almost four years later, some EU officials say what they did during the pandemic is a good plan to fund their new defense plans.

But others disagree.

“This is not the magic solution, but it could really help accelerate and expand our industrial capacity. And that’s really what’s at stake today,” Alexander de Croix, Belgium’s prime minister, told CNBC on the sidelines Friday. of the Munich Security Conference, on what the rise in new debt could mean for Europe’s defense plans.

Estonian Prime Minister Kaja Kallas said in a interview with Bloomberg that joint bonds would be a good way to boost the bloc’s defense capabilities.

But Germany’s finance minister, Christian Lindner, was very clear during a debate at the Munich Security Conference this weekend: “In Brussels, it is polite [of] a place to look for problems [and] to always present the same solution, mutual debt”.

See also  More military infrastructure to support Lithuanian and allied forces

Instead, Lindner suggested that the EU should develop a single market for defense products, as well as promote integration in the sector and seek joint procurement of military goods.

Dutch Prime Minister Mark Rutte was also very clear that he would not support common debt at EU level.

He said that to fund new defense spending, “you either raise it nationally or you increase it [it] through [the EU’s] own resources, which has some political as well as structural disadvantages”.

“Ultimately, money comes from the people through taxation and I would say let’s do it nationally,” he told MSC.

The question of how to increase defense spending across the region is particularly important at this time. EU leaders are feeling pressure to do more amid security threats from Russia and an uncertain outcome from the upcoming US election.

Former US President Donald Trump caused an uproar in several European capitals earlier this month when he said he would not come to the rescue of NATO allies who did not respect 2% of GDP in defense spending in the event of an attack by Russia.

His remarks were seen as potentially meaning the US may no longer be a reliable partner abiding by NATO’s Article 5 which says an attack on one member is an attack on all.

Many European NATO countries have missed this spending target for many years, citing economic crises and historical reasons. However, according to NATO figures, 18 of the defense alliance’s 31 members are now on track to honor that commitment this year.

See also  [DEAL!] - JIER Tactical Combat Gear with Heavy Duty Adjustable Belt

The threat to Russia’s security, while not imminent, is refocusing the minds of many European leaders on spending more on defense.

Danish officials have warned that Russia could attack a NATO country in three to five years. German officials have proposed a similar timetable.

Speaking on a CNBC-moderated panel in Munich, German Defense Minister Boris Pistorius said that “2% can only be the beginning. Maybe – probably we will need more – in the coming years.”

Read the original at Defence247.gr

Related Posts