This week, the Ministers of Finance of the European Union will gather to discuss an important issue - the creation of a joint intergovernmental defense fund, which will allow to buy and own defense equipment, in particular to prepare for a potential threat from Russia. This mechanism can also include the United Kingdom and Ukraine as participants.
The initiative presented by the Polish chairmanship in the EU was developed by the Bruegel analytical center. The purpose of this fund is to provide the necessary funding for defense without increasing public debt, which is an important topic for countries with high debt. The document is part of discussions aimed at reducing the US military dependence and strengthening Europe's defense capacity. According to European governments, you can no longer rely on the US on security issues, so your own European initiative is required. The EU has already planned to increase the military expenses by 800 billion euros over the next four years. This will be done by weakening fiscal restrictions on defense investments and joint borrowings for large defense projects secured by the EU budget.
The Defense Fund, which will be discussed at the meeting of EU Finance Ministers on April 12 in Warsaw, will be a supplement to the already announced financial initiatives. It, known as the European Defense Mechanism (EDM), will be based on an intergovernmental agreement and will have significant capital for market borrowings. This mechanism may also include non -EU countries, such as the United Kingdom, Ukraine or Norway, which is associated with another important advantage of EDM - the creation of a single European market for defense equipment. This will reduce costs, increase operational compatibility and ensure efficient savings at the expense of scale. Today, defense purchases and production in the EU are fragmented, with various types of weapons and equipment, which creates additional costs and problems with compatibility. The Bruegel Center believes that by 2030, Europe needs to combine purchases and create a single defense market, which will also include the United Kingdom, which is an important player in the defense market.
Another important feature of EDM is that it will support the European defense industry, purchasing products only from contractors from the member countries. In addition, for "frontier states" - countries with a common border with Russia or Belarus, as well as with high levels of national military expenditures - EDM can apply subsidized credit rates, financeing them through the trust fund.
