Will the European Union start financing arms production?

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Military_Material/PixabayThe idea that Thierry Breton, Commissioner for the EU’s internal market, will present today in Stockholm to European defense ministers, is a decisive step in the radical change of mentality that has taken place in the EU since the beginning of the Russian offensive. The initiative marks the end of the veto on financing weapons and ammunition for purely military purposes. Breton is accompanying the EU’s High Representative for Foreign Affairs and Security Policy Josep Borrell, who is expected to present to ministers an ambitious package of measures to speed up the supply of weapons to Ukraine – especially howitzers demanded by Kiev. The EU also plans to allocate a billion euros to compensate member states that have already donated ammunition to Ukraine. However, as explained by the French commissioner, joint procurement at European level is necessary to replenish member states’ reserves and maintain support for Kiev. To this end, the Union should develop a “transparent replenishment schedule”. This means an acceleration of production by the defense industry, which in turn requires guarantees of financing in the medium and long term, Breton explained. increase your capabilities and solve bottlenecks in your supply chain. One of his proposals is to facilitate the financing of loans for this industry and involve the European Investment Bank in this.

A risky proposition

The new European Strategic Security Initiative, approved by the EIB in March 2022, enabled the financing of dual-use items, i.e. those that can be used for military and civilian purposes. The European Investment Bank has decided to allocate EUR 6 billion to implement this strategy by 2027. Brussels’ proposal now provides for breaking the last taboo, which is investing in weapons. Proponents of Breton’s proposal argue that the ban is political, not legal, as the EIB’s statute does not prohibit a European bank from investing in defence. Supporting the initiative of the Commissioner for the Internal Market means that the 15 companies located in 11 EU countries that can produce 155 mm howitzers and the other three that still produce 152 mm howitzers will be able to receive funding and thus increase production. To do this, Breton however, it will have to convince the Member States that make up the EIB’s decision-making bodies. The most problematic will be “militarily neutral” countries, such as Ireland or Austria, which have already made it clear that they will not participate in the supply or purchase of ammunition for Ukraine. Hungary is also resisting. “I’m going to put a lot of pressure to the EIB Board, that is, the Member States,” as this would be an important “signal” at a time when “security is absolutely crucial for everyone in Europe,” Breton underlined. The EIB, Breton is also to propose the use of an instrument not even a year old, i.e. the Act to Strengthen the European Defense Industry through Joint Procurement (EDIRPA). The said regulation is intended to “act as a short-term financial instrument to encourage the joint acquisition of defense equipment by Member States.” Currently, it has EUR 500 million from the EU budget, although its expansion is not excluded.

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