Brussels (Brussels Morning Newspaper) – European Union countries’ finance ministers began talks over a joint defence fund that would purchase and own defence gear and charge members a fee for its service, as a method to spend more on defence without loading national accounts with more debt, Reuters reported.
The European Defence Mechanism fund was suggested by the Bruegel think tank in a report for ministerial discussions to tackle worries about how countries with high debt can afford expensive military equipment.
The new fund aims to foster a unified European market for defence equipment, reducing costs and consolidating resources. Currently, Defence procurement and production within the 27-nation EU is extremely fragmented, featuring at least seven varieties of tanks, nine types of self-propelled howitzers, and seven models of infantry fighting vehicles. This fragmentation raises costs, diminishes interoperability, and obstructs economies of scale.
Will Europe finally unite its defence procurement market?
This initiative is part of a wider European strategy to prepare for a possible attack from Russia, as EU governments recognise their diminishing reliance on the United States for security.
“It’s a good starting point for discussion,”
Portuguese Finance Minister Joaquim Miranda Sarmento said.
A number of other EU countries also showed preliminary support, mentioning that establishing such a fund might be technically straightforward since it would follow the model of the euro zone bailout fund, known as the European Stability Mechanism.
“We’ll still have several issues in terms of the mandate, the finance, the contributions, the leverage in the market. There are several issues on the financing, but also on the military aspect,”
Sarmento said.
Experts indicate that the EU is already aiming to increase military spending by 800 billion euros over the next four years by relaxing its fiscal rules on defence investment and collectively borrowing for significant defence projects from the EU budget.
However, these options lead to increased national debt, which concerns many heavily indebted nations. In contrast, the Bruegel proposal offers a method to keep a portion of defence investment off national accounts.
How might the new fund reshape EU military strategy?
The fund will be created through an intergovernmental treaty and will feature significant paid-in and callable capital, enabling it to tap into market borrowing. The European Defence Mechanism (EDM) may welcome members from outside the EU, including Britain, Ukraine, and Norway. Since the fund will retain ownership of the equipment it purchases, the associated debt will remain on the EDM’s books rather than being recorded on national accounts.
“We have to consider the possibility of creating new instruments … to reinforce the defence capacities of Europe,”
Sarmento said.
The fund might concentrate on “strategic enablers” – the expensive military infrastructure and equipment necessary for army operations – usually supplied by the United States.
These include joint command and control systems, satellite-based intelligence and communication, the development of costly new weapon systems such as fifth- or sixth-generation fighter jets, integrated weapon systems required by multiple countries like strategic air defence, large-scale strategic air transport, maritime logistics, missiles, and nuclear deterrence.
The Bruegel paper on the EDM stated that Europe could decrease its military reliance on the U.S. by 2030, but only if it extensively pooled procurement and established a unified European defence market. This initiative would also involve Britain as a key industrial defence player to enhance competition.
