(Bloomberg) -- The European Union’s defense chief floated a new joint borrowing mechanism for military spending as part of the bloc’s plan to seek some €500 billion ($527 billion) for security over the next decade.
Andrius Kubilius, the EU’s new defense commissioner, told European lawmakers that joint spending, to be disbursed as loans to member states, could stand in as “front-loading,” then reimbursed as members meet a North Atlantic Treaty Organization target to spend 2% of gross domestic product on defense.
The proposal was among a range of options. Kubilius is tasked with putting forward funding options in a white paper to be presented within 100 days after the new European Commission took office on Dec. 1. The €500 billion figure is based on estimates put forward by Commission President Ursula von der Leyen.
“If we would be able to convince and to agree with member states that we are organizing some front-loading” of funds, Kubilius told the European Parliament in Brussels on Thursday, the borrowing would then be “repaid by national defense spending looking into the future.”
Kubilius listed some EU and NATO members — including Italy, Spain and Belgium — that haven’t yet met the military alliance’s target.
The commissioner, a former prime minister of Lithuania, cited calculations put forward by former European Central Bank President Mario Draghi in this year’s landmark report on the bloc’s competitiveness. Those figures calculate that if all of the bloc’s NATO members were to reach the 2% of GDP benchmark, the additional funding would amount to €60 billion annually.
The defense chief added that if NATO’s spending target were boosted to 3%, that would translate into another €200 billion a year. The military alliance has been discussing a new, higher spending target, without giving specific numbers or a timeline yet.
In a separate proposal, he said the EU could consider further scrutiny and bloc-wide requirements to verify “agreed defense-policy reforms.”
Kubilius is under pressure to break out of a funding squeeze as he seeks financing for the bloc’s military sector ahead of the EU’s next seven-year budget, which will apply from 2028.
Germany, the EU’s biggest economy, has been among members opposed to joint borrowing, even after Draghi’s report, which included a call for common credit. But with Russia’s war raging in Ukraine, a number of governments that had opposed joint borrowing have begun to nudge.
Former Finnish President Sauli Niinisto, who delivered a report to von der Leyen recently on the EU’s readiness to respond to crises, mentioned that a missile shield could be financed by joint borrowing. Danish Prime Minister Mette Frederiksen, among the “frugal” nations, has also expressed more openness to funding from joint debt.
--With assistance from Jorge Valero.
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