EU countries have been debating non-stop what to do about defence spending. Credit: European Commission
Spain has proposed to its European Union (EU) partners the creation of a new common financial instrument that non-EU countries could also participate in, providing grants and loans to fund European defence projects.
Economy Minister Carlos Cuerpo presented the proposal to his counterparts during the informal meeting of the EU Economic and Financial Ministers Council (Ecofin) held in Warsaw. The goal is to offer a “temporary solution” that allows for “quicker” funding of Europe’s defence efforts until this expenditure is fully integrated into the EU budget or longer-term options are found.
According to Spain’s Ministry of Economy, the proposal is based on the European Commission’s white paper and plans put forward by other countries to establish long-term multilateral mechanisms aimed at strengthening Europe’s security and defence capabilities.
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This instrument, which would take the form of a temporary special purpose vehicle and be open not only to EU member states but also to non-EU countries, would be funded by contributions from participating states—based on a formula yet to be determined—and these contributions could be voluntarily increased.
The funds would be used to provide grants and loans to finance large-scale European projects, as outlined by the Ministry of Economy. Additionally, the instrument would help close defence capability gaps through joint tenders and also support increased defence research, technology, and innovation.
Spain also proposes to complement this funding with other EU sources, such as common debt issuance, either through an existing programme or a new one, and the involvement of the European Stability Mechanism (ESM), the eurozone’s bailout fund.
According to the plan, the assets of Russian entities frozen by EU sanctions, valued at around €200 billion, could also be used. So far, only the extraordinary income generated by these assets is being used to assist Ukraine.
Brussels open to exploring Spain’s proposal European Economy Commissioner Valdis Dombrovskis said the European Commission “is ready to explore new options” to increase defence spending within the EU and noted that the Spanish proposal “fits well into the ongoing discussion” among the Twenty-Seven.
“From the Commission, we are ready to explore the next steps and how to go beyond the proposals already on the table,” he said at a press conference following the meeting of the Economic and Finance Ministers, which focused on boosting European defence financing.
The European Commission urged member states to request, before the end of this month, the activation of the clause that would allow them to diverge from EU fiscal rules to spend more on defence, aiming for approval by July so that they can make use of it.
Since the start of the war between Russia and Ukraine and the tariff escalation under Donald Trump, EU countries have been debating non-stop what to do about defence spending. This could be a way out.