EU will discuss a joint fund for the purchase of defense equipment, which Ukraine will be able to join - Reuters
Kyiv • UNN
EU finance ministers will discuss the creation of a joint EDM fund to purchase defense equipment. The fund will be able to include countries such as Great Britain, Ukraine and Norway.
This week, EU finance ministers will discuss the creation of a joint intergovernmental defense fund that would purchase and own defense equipment, as well as charge members for its use, according to a document prepared for the ministers' discussions, and countries such as Great Britain, Ukraine and Norway will be able to join the fund, Reuters reports, UNN writes.
Details
The document, developed by the Bruegel research center, was commissioned by Poland, which chairs the EU, and could generate significant defense funding without raising the level of national public debt, which worries many highly indebted countries, the publication writes.
The document, as stated, is part of the discussion in the EU on how to finance preparations against a potential attack from Russia, against the background of European governments realizing that they can no longer fully rely on the United States for their security.
The EU is already planning to increase military spending by 800 billion euros ($876.40 billion) over the next four years by easing fiscal restrictions on defense investments and joint borrowing for large defense projects.
The defense fund, which will be discussed on Saturday at an informal meeting of EU finance ministers in Warsaw, will complement the financial initiatives already announced, the publication writes.
The fund, called the European Defense Mechanism (EDM), will be created under an intergovernmental agreement and will have the ability to borrow on the market.
"The EDM, which can also issue loans, will accept members from outside the European Union, such as Great Britain, Ukraine or Norway," the publication reads.
An additional advantage of the Bruegel idea, as stated, will also be the promotion of a single European defense equipment market to reduce costs and pool resources.
Defence procurement and production in the 27-nation EU is highly fragmented with at least seven different types of tanks, nine types of self-propelled howitzers and seven different types of infantry fighting vehicles, which increases costs, reduces interoperability and hinders economies of scale.
The Bruegel proposal states that the fund could focus on "strategic mechanisms" - expensive military infrastructure and equipment needed to operate the army and which are now often provided by the United States.
These include combined command and control systems, satellite intelligence and communications, the development of new expensive weapons systems such as fifth- or sixth-generation fighters, integrated weapons systems needed by many countries such as strategic air defense, strategic large-scale air transport and naval logistics, missiles and nuclear deterrence.
"The European Defense Mechanism... will serve as an exclusive procurement agency in certain areas, will plan, finance and potentially possess strategic assets, and will be legally obliged to comply with the rules of the single defense market within the jurisdiction of its members," the Bruegel proposal reads.
The Bruegel Center said that Europe will have a chance to reduce its military dependence on the United States by 2030 only if it maximizes the pooling of procurement and creates a common European defense market, including Great Britain as a major industrial defense player to increase competition.
To boost the European defense industry, the EDM will only purchase from contractors from EDM countries or consortia with a defined minimum degree of participation from contractors headquartered in EDM countries.
The majority of the EDM board may waive this rule to accommodate circumstances where the desired military capability cannot be acquired in an EDM country or only at a much higher price, the publication writes.
It is important for EU countries with high debt that the EDM will allow them to keep their public debt from increasing, because, as the owner of defense assets, the debt obligations taken on to acquire these assets will remain on the EDM's balance sheet and not on national accounts. This is important for countries such as Italy, Spain, Greece, Belgium, Portugal or France, the publication points out.
The Bruegel Center said that, by providing loans to its members, the EDM can apply a standard rate and a subsidized rate for "frontline states" with contributions from a trust fund that is periodically replenished by all members. Frontline states are countries with a common border with Russia or Belarus, high levels of national military spending, or both.