For Ukraine weapons: France desires to interrupt Europe's debt taboo | EUROtoday

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Dhe German Chancellor replied casually. Almost as if he wasn't actually taking it severely. Should the EU, Olaf Scholz was requested in Brussels a couple of days in the past, tackle joint debt to purchase weapons for Ukraine? France, Estonia and another international locations had referred to as for this. Scholz laughed and stated: “We’re not really fans of ideas like that.”

The conflict in Ukraine has been raging for greater than two years. And the EU desires to proceed supporting the nation. As lengthy and as intensively as essential, says a press release from the 27 heads of state and authorities. They wish to procure weapons and ammunition for Kiev.

But it’s nonetheless unclear the place the cash will come from. There are a number of concepts circulating, however none are making any important progress. Sometimes there are authorized issues, generally political ones.

French President Emmanuel Macron and Estonian Prime Minister Kaja Kallas need Eurobonds. According to their plan, the EU states ought to tackle debt collectively as a way to buy navy tools for Ukraine. Italy, Spain, Portugal and Greece help this – international locations that additionally repeatedly advocate the difficulty of European authorities bonds.

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Other nations communicate of a taboo, together with Germany, Austria, Denmark, Sweden, Finland and the Netherlands. They concern that they’ll find yourself bearing the best burden.

Kallas proposed “defense bonds” on the finish of final yr, citing a sum of 100 billion euros. EU Council President Charles Michel, a Belgian, even spoke of 600 billion euros throughout an look earlier than the European Defense Agency. A nightmare for Germany and its comrades-in-arms, recognized in Brussels jargon because the “frugal”.

“New European debt pots are not the right way to finance higher defense spending,” says Markus Ferber, CSU MEP and financial coverage spokesman for the EPP group within the European Parliament. Such a step would endanger monetary stability within the eurozone. “You can’t solve all problems with new debt,” says Ferber. “But you can create a lot of new problems with new debts.”

Reconstruction fund as a mannequin

Ferber additionally doubts France's motives. “Macron is not interested in strengthening Europe's defense capacity, but rather in shifting French government spending to the European level,” the CSU politician is satisfied.

There is already a blueprint for what Macron, Kallas and Michel are demanding: the European Union's 800 billion euro reconstruction fund. It is meant to alleviate the results of the corona pandemic, advance the vitality transition and speed up digitalization. About half of the pot consists of grants and the opposite half of loans.

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The “Next Gen EU” debt plan was approved under the aegis of EU Commission President Ursula von der Leyen

For the reconstruction fund, the EU took on a considerable amount of debt for the primary time and is taken into account historic. At the beginning in July 2020, Council President Michel spoke of a “Copernican turnaround”. About an period wherein the nations of Europe borrow collectively and develop nearer collectively.

In the meantime, the euphoria had subsided considerably. Because the enterprise is costing the EU states rather more cash than deliberate. The Commission underestimated the rise in rates of interest in 2022 and 2023.

Germany and the opposite thrifts agreed to the reconstruction fund on one situation: that it ends in 2026. In addition, they stated, it needed to stay a one-off train. Scholz's group considered shared debt as a instrument to mitigate the financial penalties of a serious shock – the pandemic. Not as a brand new regular.

But now there are additional shocks. The conflict in Ukraine. Russia's aggressive habits in the direction of the West. The prospect of Donald Trump returning to the White House – an American president who threatened to go away NATO. Trump lately weakened this risk, however the feeling stays: Europe should have the ability to defend itself. And that, Macron and his allies consider, can solely be financed with shared debt.

Why the EU is hesitant about Russian property

There are different concepts as to how the EU may get cash to acquire weapons for Ukraine and to replenish its personal shares – that are incomplete after deliveries to the nation thus far. One is using curiosity earnings from the frozen property of the Russian Central Bank amounting to 210 billion euros.

But right here too the worldwide group is hesitant. It is “too early” to decide on the difficulty, stated Belgian Prime Minister Alexander De Croo, whose nation holds the EU Council Presidency, after final week’s summit.

Several European governments have authorized issues. The EU has by no means touched the property of third international locations – and fears that if it does so now, it may lose its status as a haven of stability within the monetary world.

Another thought is for the European Investment Bank (EIB) to finance arms procurement. There is help for this proposal within the German authorities. But the financial institution's statues prohibit such a factor.

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It can solely assist relating to dual-use items – i.e. merchandise that can be utilized for each civil and navy functions, for instance satellites. The EIB sees itself as a “climate bank” and primarily funds clear applied sciences. The shift to a “gun bank” could be radical, which is why many politicians shrink back from altering the principles.

“We are critical of the inclusion of the European Investment Bank for defense spending,” says Rasmus Andresen, MEP for the Greens and member of the EU Parliament’s Budget Committee. “It must be ensured that the new tasks do not have an impact on the rest of the portfolio.”