An informal Ecofin meeting, comprising the finance ministers of the European Union, will take place in Warsaw under the EU Council presidency held by Poland. The primary focus of this gathering is to discuss enhancing investment opportunities and financing Europe’s defense and security amidst geopolitical tensions.
Portugal will be represented by its Finance Minister, Joaquim Miranda Sarmento, at this meeting, where a report by the economic think tank Bruegel, commissioned by the Polish EU presidency, will be reviewed. The report advocates for the establishment of a common European mechanism.
The document argues for the creation of a new European Defense Mechanism, an intergovernmental institution similar to the European Stability Mechanism established for financial assistance during the previous crisis. This mechanism aims to create a unified market in the industry, fund large-scale projects, and include partners outside the EU, such as the United Kingdom.
Bruegel estimates that the EU may need to spend 250 billion euros annually, equivalent to 3.5% of its Gross Domestic Product (GDP), to ensure its security in response to the Russian invasion of Ukraine.
Poland, positioned at the forefront of the conflict, has been advocating for the creation of a European bank-like entity to finance this military investment.
The European Commission has requested that by the end of April, member states activate the national safeguard clause within community budgetary rules to enable defense spending without risking an Excessive Deficit Procedure (EDP).
Though not officially on the agenda of this informal meeting, this topic may be addressed, given the pressure from Brussels on member countries.
This is part of an 800 billion-euro defense plan for the EU, which includes activating the national safeguard clause to avoid EDP (to increase public defense spending up to a maximum of 1.5% of GDP annually, resulting in 650 billion euros over four years) and a new European credit instrument for extraordinary circumstances (totaling 150 billion euros, similar to the favorable loan conditions created during the COVID-19 pandemic to prevent unemployment).
Other aspects of the plan involve reallocating funds from other sources (such as the Cohesion funds for civilian and military projects), funds from the European Investment Bank (which is expected to adopt more flexible rules for such investments), and private capital.
Between 2021 and 2024, EU member states increased their defense spending by over 30%, reaching 326 billion euros, roughly 1.9% of the EU’s GDP.
Portugal invested approximately 1.55% of its GDP in defense last year.
The government announced Thursday its intention to advance the target of allocating 2% of GDP to security expenditures, initially set for 2029, though a new timeline has not yet been decided.
