Officials are struggling to agree on a plan for hundreds of billions of dollars to strengthen their defenses as NATO members struggle to meet defense spending targets and war rages on Europe’s eastern front.
Eight NATO countries failed to meet their 2% defense spending target for 2024. And with many member states struggling with chronically tight budgets, calls to meet these targets are not quickly being heeded.
The European Commission estimates that around 500 billion euros (equivalent to investments worth $524 billion) will be needed over the next 10 years to protect Europe from evolving threats.
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The EU budget cannot be used to directly fund defense, and some European officials and NATO experts have proposed a global defense bank to fund military modernization.
Defense, Security and Resilience (DSR) Bank issues bonds backed by AAA ratings to help financially-challenged countries strengthen their defences, and provides guarantees for commercial banks to provide loans to defense suppliers. I plan to.
European officials are struggling to agree on a plan to increase defenses by hundreds of billions of dollars. (U.S. Army photo by Special Forces Ryan Parr)
Giedrymas Jeglinskas, chairman of the Lithuanian parliament’s national security committee and a former NATO official, told Fox News Digital: “This is not a replacement for countries to increase their defense spending. It should be a supplementary measure. I think so,” he said.
His comments echo those of President-elect Donald Trump, who has long threatened to pull the U.S. out of NATO because many countries are failing to meet their 2% defense spending goal.
“I think we have to look at it as an opportunity for the United States as well,” Jeglinskas added. “I understand Donald Trump’s skepticism about the World Bank and the IMF and IFC and other institutions. I think we’ve put in a lot of capital and made a lot of investments.”So we think we need to set very clear KPIs (key performance indicators). ”
The US defense budget of $824 billion in 2023 is equivalent to half of the total defense spending of NATO member countries of $1.47 trillion.
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Mr. Trump’s return to the White House, coupled with the United States’ push to refocus on China, has European countries wondering whether the United States will lose its desire to protect Europe in the coming years.
More EU defense and foreign ministers are proposing the idea of issuing collective debt through bonds to finance military projects.
However, some countries, such as Germany, have expressed concerns about maintaining their sovereignty and placing a disproportionate financial burden on some countries.
The DSR bank idea is detailed in a new Atlantic Council report by defense researcher Rob Murray.
The EU budget cannot be used to directly fund defence. (Ukraine Ministry of Defense Press Service, via AP, File)
“For allies in both the Euro-Atlantic and Indo-Pacific regions, the bank not only provides low-interest loans for defense modernization, but also facilitates equipment leases and currency hedging, supports critical infrastructure, and provides assistance in conflict zones such as Ukraine. ” Murray wrote.
“A further important function of DSR Bank will be to underwrite the risks of commercial banks and enable them to extend financing to defense companies across the supply chain.”
The goal is to provide financing to small and medium-sized defense companies that often struggle to obtain financing.
“By providing loans with extended maturities, banks provide predictable and sustainable financing for defense modernization. It will align funding with collective security goals,” Jeglinskas wrote in a recent op-ed. To the Financial Times.
The Defense, Security and Resilience (DSR) Bank will issue bonds backed by AAA ratings to help financially-strapped countries shore up their defences. (Alexandra Baier/Getty Images)
Asked how DSR Bank would get countries to agree on defense funding priorities, Mr Jeglinskas said the idea would be extended to the UK-led Joint Expeditionary Force (Denmark, Estonia, Finland, Iceland and Latvia). , Lithuania, the Netherlands, Norway, and Sweden.
Jeglinskas pointed out that 33 trillion euros of European assets are managed across the continent.
“The reality is there’s no political will or risk appetite to move them outside of the bond market, which is where they’re currently resting,” he said. “But some countries need to build up initial capital, use their sovereign rating to get AAA, preferably in the capital markets, and then take that money from the bond market and start funding their defense programs. ”
The European Investment Bank provides long-term financing and guarantees for projects in European countries that are in line with EU policy objectives.
“But even they are struggling with shifting missions to more dual-use technologies, which are still not allowed in funding packages,” Jeglinskas said.
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“Of course, all the other banks in Europe are looking to the EIB for a signal. That signal doesn’t exist yet. So that’s what matters. We need to build some mechanism. There will be such a global defense bank.”This is one of the tools that can be used to mobilize capital and actually direct it toward defense, and actually create new multilateral lending institutions. I will do it. ”
