Following on from their counterparts from the euro area countries (see EUROPE 13581/2), on Tuesday 18 February the European finance ministers continued their discussions on how to mobilise - without changing - the European fiscal rules in order to create room for manoeuvre enabling Member States to invest massively in the defence sector.
It is now clear that we need to “radically accelerate” our work on how Member States should increase their military spending to ensure their own security and continue aid to Ukraine, said the Polish minister Andrzej Domański. He felt that “all options (were) on the table”, although the idea of activating an “escape clause” in the revised Stability and Growth Pact was gaining momentum.
The European Commissioner for the Economy, Valdis Dombrovskis, confirmed that the Commission was working on concrete proposals including the activation of escape clauses, the precise details of which will be unveiled “in the coming weeks”. Even if these clauses are activated for a temporary period of time, the increased defence effort will take “several years”, he predicted.
Mr Domański mentioned a specific proposal from the Polish Presidency of the EU Council to “keep the fiscal rules as they are, but to precisely describe them in the code of conduct” so that Member States know what types of investments they can embark on without these having a negative impact on their public deficit or debt. He cited the acquisition of “equipment, jets, tanks and munition”.
The Polish Presidency’s interpretation of the rules actually goes beyond lethal equipment. “In view of the security challenges, the interpretation of the increase in defence investment should be broad”, say the Polish authorities in a document sent to national experts with a view to preparing the code of conduct mentioned by Mr Domański. In their view, this should include “not only the purchase of military equipment, but also capital support for arms and ammunition factories (...), investment in infrastructure used by the army or for infrastructure used for civilian and military purposes, such as the construction of shelters in residential buildings or civil defence spending”.
See the Polish note: https://aeur.eu/f/fk1
Mr Domański said that technical work would be stepped up, starting with an initial meeting on Wednesday. The aim is to continue discussions at ministerial level on Tuesday 11 March and finalise discussions in May. The informal ministerial meeting in Warsaw in April will be another important milestone in these discussions.
European funding. Alongside this, discussions are taking place on the mobilisation of European funding to support Member States’ efforts in the defence sector.
“We are assessing what can also be done at EU level”, said Mr Dombrovskis. Specific proposals will be unveiled when the Commission presents its white paper on the future of defence.
Mr Domański pointed out that savings of up to “€40 billion” would be possible if lethal equipment were purchased jointly at European level. He acknowledged that not all Member States are on the same page regarding the possibility of a common loan dedicated to the defence sector. Following on from the Dutch minister on Monday, the Swedish minister Elisabeth Svantesson expressed her opposition to any joint debt, preferring national approaches.
NGEU funds 2.0. For her part, the socialist Portuguese minister Margarida Marques, who negotiated the revision of the Stability Pact when she was a member of the European Parliament, advocated activating the pact’s general escape clause, combined with the creation of a European defence fund financed by a common loan.
“The issue of defence is not a national problem, but a European one. We need to activate the general escape clause at EU level and create investment capacity” to invest in “public goods”, she told Agence Europe. While the EU may not have fallen into recession due to an external macroeconomic shock, “the activation of the general escape clause applies to extraordinary situations”, she pointed out. She went on to explain that, when the European legislator created the national escape clause, it was aware of the “fragility” in which countries could find themselves as a result of their exposure to the financial markets.
According to Ms Marques, one way of convincing Hungary about the creation of a fiscal capacity would be to explain that the EU’s ambition is to strengthen its “strategic autonomy”, rather than focusing attention on support for Ukraine. However, the former MEP did not rule out the possibility of an “intergovernmental solution” as a “way out” in the event of persistent deadlock. (Original version in French by Mathieu Bion)