On Tuesday 4 March, two days before the Special European Council of EU leaders, the President of the European Commission, Ursula von der Leyen, unveiled her proposals for increasing the defence capabilities of the EU27 in a plan entitled ‘Rearming Europe’. The aim is to allow the Member States to spend more thanks to various types of flexibility in relation to European rules, but above all thanks to new joint borrowing of €150 billion.
The actions put forward are necessary given the “grave nature of the threats that we face”, but also to continue to increase support for Ukraine, Mrs von der Leyen stated on Tuesday 4 March.
Joint borrowing. Some Member States had already mentioned this option, which has recently become increasingly credible: that of a new instrument to provide €150 billion in loans to Member States. With this money, Member States would purchase the following equipment as a priority: - air and missile defence; - artillery systems; - missiles and ammunition; - drones and anti-drone systems.
According to a senior Commission official, this is the most credible solution at this stage and one that can be rapidly adopted by the Council by qualified majority. “We expect a significant number of Member States will be interested in taking up this loan”, added this source.
The President of the Commission is also proposing joint purchasing to reduce costs and increase the interoperability of equipment.
MFF. The second option proposed by Ms von der Leyen is to redirect existing funds within the current Multiannual Financial Framework (MFF). This would involve drawing on Cohesion Fund programmes.
The Commission also suggests broadening the scope of the ‘STEP’ platform (see EUROPE 13345/16) to include “technologies relevant to the defence sector”.
Other proposals are being made to the EU27 to exploit the full potential of the EU budget. Member States will, for example, be able to remove restrictions on supporting large companies in the defence sector.
Safeguard clause in the fiscal rules. This proposal was expected: the Commission wants to activate the ‘escape clause’ in the Stability and Growth Pact, which allows deviations from the spending path in certain circumstances, such as major and unusual events beyond the control of Member States. “The Commission considers that these conditions have been met”, explained an European official.
However, it proposes a controlled use of the safeguard: additional defence spending will be capped at 1.5% of GDP per year. According to the Commission, such an increase in spending over a four-year period could free up as much as €650 billion.
There will be no specific conditions attached to the clause, such as European purchases.
The EIB is further opening the way for defence projects. In her letter to EU leaders, the President of the Commission talks about extending the remit of the European Investment Bank (EIB). Its president, Nadia Calviño, has responded positively to this appeal, which has already been made in the past.
In a letter to the members of the European Council dated 4 March, Ms Calviño confirms the intention to adjust the eligibility criteria for projects financed by the EIB “to be aligned with the new policy priorities of the EU”, while not compromising the EIB’s operations and financial position.
Beyond the EIB, other channels will have to be mobilised to increase private investment, and this will involve the Savings and Investment Union promoted by the President of the Commission.
Taken together, the various actions proposed could mobilise up to €800 billion, according to the European Commission.
To see Ursula von der Leyen’s letter, go to https://aeur.eu/f/fq9 (Original version in French by Léa Marchal)