“The Commission is prepared to explore new forms and options,” stated the European Commissioner for the Economy, Valdis Dombrovskis.
In a press conference following the informal meeting of EU finance ministers held in Warsaw under the Polish presidency of the Council, Dombrovskis was questioned about proposals presented after the European Commission had unveiled an 800 billion euros plan for EU rearmament.
These proposals include a new European defense mechanism for joint acquisitions and large-scale project financing, and a new temporary financial instrument, suggested by the economic think tank Bruegel and the Spanish government, respectively.
“From the Commission’s side, we are available to begin these discussions and see how we can go beyond the existing initiatives,” reiterated Valdis Dombrovskis.
He emphasized the importance of finding ways for democracies with similar values to the EU, such as the UK or Norway, to engage in strengthening European defense.
Nevertheless, Dombrovskis urged European finance ministers not to let this diminish the pace of implementing the current initiatives to avoid an “asymmetric impact of existing security threats,” which particularly affects countries on the front line of the Ukraine war.
The European Commission has called for member states to activate the national safeguard clause within community budgetary rules by the end of April. This would allow spending on defense without the risk of triggering an Excessive Deficit Procedure (EDP).
This is part of the 800 billion euros defense plan for the EU, which involves activating the national safeguard clause to avoid EDP (allowing for a public defense expenditure increase of up to 1.5% of GDP per year, resulting in 650 billion euros over four years) and the establishment of a new European credit instrument under extraordinary circumstances (totaling 150 billion euros, similar to favorable loan conditions introduced during COVID-19 to prevent unemployment).
The additional facets of the plan involve reallocating funds from other budgets (such as Cohesion Funds for civil and military projects), investments from the European Investment Bank (which is expected to adopt more flexible rules for these investments), and private capital.
Following the plan’s presentation, Bruegel proposed a new European Defense Mechanism, an intergovernmental institution akin to the European Stability Mechanism created for financial assistance, intending to create a single market for industry, fund large-scale projects, and include partners outside the EU (such as the UK).
During the informal Ecofin meeting, Spain proposed a temporary solution for quicker funding of the European defense effort until the Brussels plan is fully implemented or other long-term options are found. This could be open to both the EU and partner countries and would be funded by voluntary contributions from participants.
