The new European Commissioner for defence on Thursday reiterated his support for issuing common bonds to arm the continent, arguing that repaying the debt would be cheap for member states if part of their national defence budgets is pooled.
Andrius Kubilius, in his first appearance in front of the Security and Defence (SEDE) subcommittee since taking office on Sunday, said that “for the time being, we are not serious” when it comes to financing the EU’s defence.
To give a quick overview of the funding needs, the defence commissioner told MEPs that around €500 billion will be needed to build a common air defence shield - and another €200 billion over the next decade to upgrade infrastructure so that military equipment and troops can be easily mobilised across the EU.
The funds earmarked in the 2021-2027 period in the bloc’s multi-annual budget totalled roughly €10 billion.
To plug the gap, Kubilius opened the door to issuing “defence bonds”, akin to what was done during the COVID-19 pandemic to help the 27 economies stay afloat, but with one significant change: all national governments would have to frontload some money, which would make borrowing and repaying cheaper.
The former Lithuanian prime minister estimated that an additional 1 percentage point of GDP spent on defence by every 27 member state would amount to €200 billion per year.
NATO, of which 23 EU states are also a member, has a minimum spending threshold of 2%, a target some countries fail to reach. Discussions are however ongoing in the military alliance to up that threshold in a bid to urgently plug capabilities gaps that became glaring following Russia’s unprovoked aggression on Ukraine.
“If member states are (spending) 3%, which let’s hope they will start spending for defence, if they would give 0.1% to repay the debt, it would be around €20 billion and we can look into the possibility of organising such a way of borrowing, frontloading the money and the repayment,” Kubilius said.
Other ways to finance the “big bang” the European defence sector needs to undergo to prepare for both urgent military contingencies and long-term challenges on the world stage, according to Kubilius, would be to tap into cohesion funds.
"Cohesion funds are used in the development of industry in poor regions, (so) I would not separate so much the defence industry, which creates jobs, which creates competitiveness, from the goals of cohesion policy," Kubilius told MEPs.
A third avenue of financing, Kubilius, said, would be to repurpose money meant for other EU programmes but that has gone unused.
"There is a discussion about repurposing existing programmes, (using) money from the Recovery and Resilience Facility (RRF) or the cohesion funds (€392 billion)," the commissioner said, adding: "Let's look into that very seriously."