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(Bloomberg) — As the war in Ukraine enters its third year, European Union finance chiefs are grappling with how to finance growing defense spending needs.
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“We need to consider how we can use the EIB to finance Europe’s challenges,” Belgian Finance Minister Vincent van Peteghem told reporters on Friday.
“The green transition is of course one thing, the digital transition is of course one thing, and strategic autonomy and competitiveness are important,” he said at the start of a two-day meeting with EU officials in Ghent. Stated.
“However, in the current world situation, defense and security issues are equally important,” he said. “So we need to look there to see what our opportunities and possibilities are.”
The EU is aiming to revitalize its defense industry after years of underspending following the Cold War. Some officials have suggested that joint borrowing could be used to do this, while the use of the European Investment Bank has also been proposed.
joint bond
Spain’s Economy Minister Carlos Cuerpo said in an interview with Bloomberg TV that common financial instruments should be used to improve Europe’s competitiveness and strengthen its security.
“When we talk about defense, there is an important element: the EU’s defense industry and, of course, developing European defense,” Cuerpo said. “As well as elements of common issuance, we may also use EU institutions to finance these projects.”
The proposal was rejected by German Finance Minister Christian Lindner, who said he saw no need for such a measure.
Paschal Donohoe, chairman of the Eurozone Finance Ministers’ Council, confirmed that defense funding will for the time being be carried out by each EU government.
“What is happening now is that each country is making an even stronger and greater contribution at national level to its own defense and to the defense of Europe,” he said. “Other options will be considered as to how EU security can be strengthened, but for now all efforts being undertaken by member states at national level will continue.”
EIB support
The EIB has previously said it will not bow to pressure for defense investment, and the Sustainable Finance Platform, the EU Executive’s main advisory body, has recommended that defense assets not be included in the EU. Interventions can also be difficult. Social taxonomy.
Investors may also reject changes to the EIB’s investment profile, with Austrian Finance Minister Magnus Brunner highlighting the threat to EU lenders’ credit ratings.
“I’m very skeptical. I don’t think changing the EIB’s powers is a good approach,” he said. “I understand the need for defense investment, but with the EIB this makes no sense. I am very skeptical because I think it will damage the EIB’s rating and prestige.”
Germany’s finance ministry has also said the EIB’s AAA rating is a priority, but Lindner said on Friday that broadening the approach makes sense for Luxembourg-based financial institutions.
“The German government strongly supports the EIB in future also facilitating financing in the fields of defence, armaments and security,” he said. “The idea that investing in armaments might not be socially appropriate or desirable is from another era.”
–With assistance from Rodrigo Orihuela and Tom McKenzie.
(Updates about Lindner from 8th paragraph)
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