The European Union is set to discuss the divisive issue of issuing Eurobonds to finance efforts to bolster the bloc’s defence capacities as 27 leaders meet in Brussels on Thursday. This proposal, supported by French President Emmanuel Macron and Estonian Prime Minister Kaja Kallas, aims to test member states’ willingness to jointly issue debt for defense purposes.
While some, like a senior diplomat from a northern EU country, advocate for a market-based approach and private investments in defense, others see the necessity of launching the debate about potential defense bonds. With Russia engaged in a war economy, the EU must consider its own preparedness for conflict.
However, the proposal faces opposition from the ‘frugal five’ countries – Austria, Denmark, Finland, the Netherlands, and Sweden – who fear joint debt issuance could penalize richer nations. The EU’s previous agreement to issue common debt for pandemic recovery through Next Generation EU has faced increased borrowing costs.
An alternative proposal involves amending the European Investment Bank’s mandate to fund investments in military equipment and infrastructure, championed by 14 member states including France and Germany. Additionally, the Czech Republic plans to deliver artillery shells to Ukraine to aid in resisting the Russian offensive.
During the summit, leaders will also decide on opening accession talks with Bosnia and Herzegovina and adopting frameworks for talks with Ukraine and Moldova. The EU is also expected to call for a humanitarian ceasefire in Gaza amidst ongoing conflict.
The outcome of the discussions on defense bonds and other defense financing initiatives remains uncertain, as member states grapple with differing opinions on fiscal responsibility and defense spending.
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