Brussels proposes that the European Investment Bank finance the EU’s defense industry

The European Commission wants the European Investment Bank (EIB) to be able to finance the defense industries of the 27. Member States, which are expected to replenish their supplies once they make their own supplies available to Kiev.

The idea that Thierry Breton, Commissioner for Internal Market, will present to European defense ministers in Stockholm this Wednesday is a crucial step in the radical change of attitude that Europe has experienced since the start of the Russian offensive. The initiative ends the explicit right of veto imposed by the EU’s financial arm on the funding of weapons and ammunition for purely military purposes.

Breton will accompany EU High Representative for Foreign Affairs Josep Borrell at the Swedish meeting, where ministers will present an ambitious package of measures to speed up the delivery of equipment to Ukraine, namely the 155mm howitzers demanded by Kiev. and which, among other things, intends to allocate 1,000 million euros to reimburse, as planned, donations of this type of ammunition by the Twenty-Seven.

But, as the French Commissioner explained to a group of journalists in Brussels last Tuesday, member states will use only their own reserves – the most urgent step because it is the quickest – and will allow them to carry out their arms orders if you do this after you have made a “clear supply plan”. This requires the sector to be able to accelerate its production, which in turn requires medium and long-term financing guarantees, Breton recalls.

This is where the Internal Market Commissioner comes in, who will present several proposals to fund the defense industry – which he says should be put into “war economy mode” – so that it can increase its capabilities and remove “bottlenecks” . in the supply chain. One of the proposals is to facilitate the financing of loans to this sector and involve the EIB.

risky bet

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Although at first glance it makes sense to bet on the EU’s financial branch, which annually allocates billions for various projects on European territory, the possibility of calling on the EIB remains a risky bet: exactly one years ago, then with the war in Ukraine raging about a month ago, the Luxembourg company took a major turn by accepting a change in its rules that until then expressly banned the financing of arms and ammunition of any kind. But it didn’t go as far as Breton wants now.

The EIB’s new European Strategic Security Initiative, adopted in March 2022, has since made it possible to finance dual-use security and defense projects – military and civilian – and to this end the institution has committed €6 billion in weapons investments until 2027 because “according to its policy, the EIB cannot finance purely defensive investments. Designs must be dual-use and motivated primarily by their civil application, meaning that such designs have predominantly civil use.”

The Brussels proposal now seeks to break the latter taboo, which community sources insist is a political issue, as nothing in the EIB’s statutes prevents the European Bank from investing in defence. When the standard is introduced, the 15 companies in 11 EU countries that can make 155mm howitzers and the other three that can still make 152mm howitzers – a holdover from the Soviet era, but also in high demand in Kiev is – getting financing from the Bank of Luxembourg to increase its production.

To do this, however, Breton must convince the Member States, which are part of the EIB’s decision-making bodies. The question that the EU’s Internal Market Commissioner should try to avoid moving forward is what “military neutral” countries like Ireland or Austria will do, which have already made it clear that they do not participate in the supply or purchase of ammunition for Ukraine. . Hungary is also resisting.

“I will put a lot of pressure on the EIB’s governance, i.e. on the Member States”, because that would be an important “signal” at a time when “security for everyone in Europe is absolutely essential”, Breton stressed.

“It is imperative that the defense industry has easier access to finance,” said the French commissioner. “So, of course, we need to mobilize private resources, including from the EIB and the banks. It is imperative that the financial system contribute to the necessary efforts to prepare our industry for security challenges. It’s a very strategic thing right now,” he says.

In addition to promoting a change in the EIB, Breton will also show ministers the possibility of using an instrument less than a year old: the Common Procurement Act (EDIRPA) to strengthen Europe’s defense industry. The proposal for a regulation, adopted on July 19, “is intended to act as a short-term financial instrument to encourage the joint procurement of defense equipment by Member States”. It currently has €500 million from the EU budget, not counting enlargement.

Source: La Neta Neta

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