The European Union (EU) is discussing the possibility of establishing a €500 billion defense fund to boost military spending and respond to mounting pressure from President-elect Donald Trump.
"We’ve spent $350 billion supporting Ukraine, while Europe has only spent $100 billion. Why isn’t Europe contributing as much as we are?" Trump remarked in an interview on December 8. "Europe needs to balance with the United States."
When asked if the U.S. might withdraw from NATO should European member states fail to meet "fair" financial commitments, Trump responded, "Certainly."
Trump’s statement has sparked concerns among European NATO members, as he has previously warned that the U.S. would not defend members failing to meet the alliance's 2% GDP defense spending commitment. These threats have prompted Europe to explore more decisive defense spending options. Senior EU officials are now considering a mechanism to raise funds through the issuance of bonds guaranteed by participating nations.
This proposed framework could also include non-EU nations like the UK and Norway, according to sources involved in the negotiations reported by the Financial Times. While no specific amount has been agreed upon, the fund is expected to require over €500 billion ($528 billion). Since the fund could involve non-EU nations, EU budgetary restrictions on spending might not apply. Neutral states such as Austria, Malta, Ireland, and Cyprus may opt out rather than veto the plan.
Countries like the Netherlands, Finland, and Denmark are broadly supportive of the initiative. Germany’s position remains unclear and will likely depend on the outcome of its February 2025 federal election. "Discussions are progressing," a senior EU diplomat stated. "But Berlin's stance is still uncertain."
European Commission President Ursula von der Leyen has indicated that €500 billion is the minimum required over the next decade to address the continent's security needs. EU Commissioner for Defense Andrius Kubilius has suggested that the fund could support collaborative projects such as air defense initiatives proposed by Poland and Greece.
The European Investment Bank (EIB) is expected to play a technical role, managing the fund and operating within capital markets, sources say. However, current EIB policies do not permit direct funding for military investments.
Greek Prime Minister Kyriakos Mitsotakis noted a shift in EU leaders' attitudes compared to earlier this year. In March, his proposal for a Eurobond initiative to finance EU defense received tepid responses. Now, he senses a "renewed urgency" due to Europe's security challenges and Trump’s return.
"There is growing consensus on increasing defense spending, and perhaps it’s time to establish a shared mechanism to finance collective projects," Mitsotakis said. "Germany and France stand to benefit the most from increased European defense spending." Italy and Spain also play significant roles in this sector.
Polish Deputy Finance Minister Pawel Karbownik emphasized that Europe has no choice but to invest more in defense. "We must be capable of self-defense in the worst-case scenario," Karbownik stated.
"Trump’s second term is a catalyst for the EU to act more decisively, both for Ukraine and its own security and defense," Mujtaba Rahman, an analyst at Eurasia Group, observed.
Brussels hopes that increasing funding for weapons procurement will encourage long-term investments by defense contractors. However, several issues regarding the fund's use remain unresolved.
"We’re not opposed to spending more on defense," one official involved in the talks explained. "But it’s crucial to prioritize and define exactly what this money will be used for."
Pierre Haroche, associate professor of European and international politics at the Catholic University of Lille, France, highlighted two additional options for Europe to address security challenges besides increasing defense spending.
"Europe could focus on joint procurement to acquire expensive strategic capabilities currently reliant on the U.S., such as military satellites, airborne reconnaissance, and ballistic missile defense systems," Haroche told Euractiv.
This approach requires strong cooperation among European nations but typically involves medium-term projects that cannot immediately address urgent needs related to the conflict in Ukraine.
The final option is to concentrate on consumable equipment and munitions, such as artillery shells, UAVs, and missiles. This strategy could simultaneously bolster Ukraine's defenses against Russia and enhance Europe’s reliability as NATO's backbone on the continent.
(Sources: FT, Euractiv)
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