How can European rearmament be financed?!
When it comes to financing European rearmament, the EU has a difficult balancing act to perform. On the one hand, the public finances of many members are in the red. Conversely, the threat from Russia and the prospect of an isolationist American retreat are too great for Europe to ignore.
Despite their various fiscal headaches, member states have been keeping their hands in their pockets since the all-out Russian invasion of Ukraine on February 24, 2022. According to the European Defense Agency (EDA), in 2024, EU-27 defense spending amounted to 326 billion euros, or 1.9% of EU GDP.
This represents an increase of 31% compared to 2021. "You have to create factories and you have to train people. So it doesn't happen overnight," says Philippe Perchoc, Director of IRSEM Europe, the European office of the Strategic Research Institute at Ecole Military.
Various solutions are on the table to finance the defense of the continent, among them joint production and purchases of weapons. But Guntram Wolff, a senior fellow at the Bruegel Institute, says shared spending should be the "starting point" to increase efficiency, cost effectiveness and cost reduction.
He assures that hypersonic missiles, air defense, satellites and drones "are really our money's worth if we work together in these areas". However, the specific needs of member states in terms of armaments sometimes hinder this form of cooperation.
Jan Joel Andersson, a senior analyst at the EU's Institute for Security Studies, says France, for example, needs "a nuclear deterrence capability". The researcher says that some expeditionary countries will prefer "lighter, easily transportable equipment" such as armored vehicles and artillery, "while other countries are prepared to fight an enemy or adversary here in Europe and therefore focus more in heavy tanks and heavy artillery."
One way to finance these efforts would be joint borrowing, also known as Eurobonds. "The idea of the EU borrowing more together is that many member countries have problems with their national finances and this would be a way of using the collective power of the EU as a borrower to make borrowing cheaper. ," explains Andersson. However, supporters of budgetary orthodoxy, such as Germany, are reluctant to borrow collectively.
Some leaders, such as French President Emmanuel Macron, are calling for "European shopping" in the name of strategic autonomy but others prefer to order elsewhere to cut costs or delivery times. "It's not that we should only buy Europeans; I don't think anyone has that in mind, but maybe we should re-evaluate the part of what is European in what we buy," said Philippe Perchoc, Director at IRSEM Europe.
"If it is produced outside Europe, we have no priority to consume it. We have signed a contract and if conditions change or something happens in the Indo-Pacific or Taiwan, the Europeans will not have priority. So you have to watch your back." However, the role of the EU has been and still is limited: protection remains the exclusive competence of the member states.
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