The European Union continues to move towards rearmament. The European Commission settles the accounts for one of the great priorities of the next legislature in a continent at war: the military. For the first time, the Defense item – fundamentally, the arms industry – will have its own chapter in the community budgets, as Cohesion – the flagship of European solidarity – and the Common Agricultural Policy (CAP), two nuclear elements, now have. that they will undergo structural reforms that will unleash a fierce battle, community sources warn. A specific community allocation for defense, which seeks to jointly fill arsenals and develop large projects for the European military industry, will represent a historic change; It will consolidate the metamorphosis towards which an EU is already moving, which is shielding itself to face a turbulent moment of unprecedented threats.
The battle for the new seven-year financial framework is beginning to take shape, which will lay the foundations for the next great enlargement to the east, with a Ukraine at war against the Russian aggressor knocking at the door, a new world with an increasingly more protectionist, an assertive China and an EU that has woken up to its own fragility around its military dependence (on Washington) and on minerals and materials from suppliers (on Beijing) for the green and digital transition. And to all this is added a population that ages without replacement.
The fight for common funds and how to distribute them will be tough. Most member states agree that money is needed for rearmament, and a specific chapter that helps feed the first European Defense Strategy, which plans joint purchases, compatible arsenals and emergency warehouses. But the question is where they will get the funds from. Social democratic voices have already stressed that it cannot be cut from other allocations to relocate to defense, and countries like Italy or Spain are concerned that the new allocation will be at the cost of losing agricultural and cohesion funds.
“Cohesion policy cannot be sacrificed in this context,” says the commissioner in charge of that portfolio, Elisa Ferreira, who, however, will not continue in the new community Executive to be designed after the European elections of June 6 to 9 . The Portuguese firm strongly defends the cohesion policy, but the majority of sources consulted, however, already see that it will be reformed. Also, funds for agriculture. A report by a group of experts for the European Commission a few weeks ago already proposed reforming cohesion policy and assimilating it to the recovery fund system, that is, linking these solidarity funds to economic reforms. “Cohesion policy must reject ‘one-size-fits-all’ approaches and become more place- and people-based,” the document says.
Clash between partners
Preserving the CAP and the flagship of European solidarity enshrined in the cohesion funds has been a priority objective of partners such as Spain, Italy or France, compared to frugal countries, such as Sweden or the Netherlands, which have been considering scissoring them for years. Now, however, for Paris it no longer seems such a strict red line, since it has a very powerful defense industry and believes that its companies and its research and development policy could benefit and elevate its role in the EU. “If everything is done well, it is simply a matter of incorporating a new element into the priority axis and rebalancing the balance,” says a senior European diplomat.
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The fact that there is now no specific chapter for defense in the community budget does not mean that European funds are not dedicated to military issues, but they are fundamentally included in the innovation items for industry. Also, within the structural funds, for military mobility: adapting railways or roads, for example. Furthermore, Member States can request cohesion funds to reinforce civil infrastructure, even if it is for military purposes.
There are two ways to include defense in the new multiannual financial framework: redistribute the funds provided by the Member States, giving less, for example, to the CAP or redistributing part of the structural funds to defense issues; or expand the budget and have the partners put in more money. The EU budget is now limited to just over 1% of the combined GDP of the Twenty-Seven. In 2019, that percentage was temporarily doubled to create the recovery fund, bringing the budget to two billion euros.
Eurobonds for defense
“The most important thing is that the defense strategy can only be successful if it is well funded,” says Sophia Besch, a researcher at the Carnegie Institute. “EU budget negotiations are notoriously difficult, with each government pursuing its own strategic priorities and interests. It will be difficult, for example, to persuade partners facing farmer protests to cut the CAP in favor of defence; or convince countries without large defense companies that they will benefit from EU initiatives,” continues Besch, who signs a dense analysis of the new European rearmament strategy.
The new European Commission will have to present the first draft of the budget structure, for the period 2028-2034, next year. But the debate is already heated. Russia’s war against Ukraine is advancing into its third year and member states are seeking, in addition to supplying Ukraine, to replenish and modernize their own arsenals, and voices are increasing that propose creative and blunt solutions to do so.
The Prime Minister of Estonia, Kaja Kallas, has proposed issuing Eurobonds, that is, joint European debt through the European Commission, an idea that has been supported, among others, by the French President, Emmanuel Macron. The Commissioner for the Internal Market, Thierry Breton, who is in charge of the defense industry, has even put a figure on the table: 100 billion euros. But there is no unanimity, Germany and the Netherlands, for example, are not very receptive to the idea and for now it is just one more recipe on the table to be analyzed. Another formula is to create a fund ad hoc outside the European budget, with plenty of money and the ability to issue debt, such as the European Stability Mechanism (ESM).
In March, the Twenty-seven commissioned the Community Executive to make proposals and economic formulas to address the new defense priorities. The President of the Commission, Ursula von der Leyen, is expected to present them at the meeting of Heads of State and Government at the end of June.
But in another ocean leap, Brussels wants to control not only funds for the defense industry, but also for weapons. Community treaties prohibit the purchase of weapons on behalf of the EU budget. For this reason, purchases of defense material for Ukraine have been made through an intergovernmental fund (the European Peace Fund). The Community Executive wants that to change, it believes that this would speed up the processes and avoid long negotiations between the Twenty-Seven; It would also give the Commission more power. So it has asked European legal services to analyze the loopholes and possibilities within the treaties, according to a senior community source. Meanwhile, in Brussels they continue to do the math to see how to face joint rearmament.
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