EU’s 500 billion euro ambition to respond to pressure from Mr. Trump

“We spent 350 billion USD to support Ukraine, while Europe only spent 100 billion USD. Why doesn’t Europe spend as much as us?” US President-elect Donald Trump said in an interview on the 8th. /12. “Europe should balance with the US.”

When asked if NATO member countries in Europe do not meet the “fair” financial requirements set by Mr. Trump, will the US withdraw from NATO, the President-elect replied: “Definitely Already”.

This statement by Mr. Trump made NATO countries in Europe worried, because he warned that the US would not protect members who do not spend on defense according to the committed level of 2% of GDP.

Those threats also prompted Europe to consider more aggressive defense spending options. Senior European officials are focusing on establishing a mechanism to raise capital through the issuance of bonds guaranteed by the participating countries.

This model will include non-EU countries, such as the UK and Norway, sources involved in the negotiations told Reuters. Financial Times. The parties have not yet agreed on a specific amount, but it is said to need more than 500 billion euros ($528 billion).

According to sources, because the scope of the fund extends beyond the EU, the union’s restrictions on how the money can be spent will not apply. Militarily neutral countries such as Austria, Malta, Ireland and Cyprus can choose not to participate in the plan, instead of having to veto it.

The Netherlands, Finland and Denmark generally support the initiative. Germany’s stance is not clear and depends on the results of the federal election in February 2025. “The discussion process is progressing,” a senior EU diplomatic official said. “But it’s still unclear how Berlin sees the problem.”

According to European Commission President Ursula von der Leyen, 500 billion euros is the minimum level needed for the next decade to meet the continent’s security needs. According to EU commissioner for defense Andrius Kubilius, this money can be spent on joint projects, such as the air defense project proposed by Poland and Greece.

The European Investment Bank (EIB) will be offered a technical role, helping with fund management and operations in capital markets, sources said. However, the EIB’s current policy does not allow the bank to directly finance armed investment.

Greek Prime Minister Kyriakos Mitsotakis said EU leaders have changed their stance compared to the beginning of the year. Mr. Mitsotakis in March proposed the common Eurobond initiative for EU defense, but “received only a lukewarm response”. Now, he feels a “new urgency” due to the security challenges facing Europe and the return of Mr. Trump.

“Consensus on increasing defense spending is growing, and perhaps it is time to establish a common mechanism to finance projects, for the collective benefit,” Mr. Mitsotakis said. “Germany and France are the clearest beneficiaries of Europe’s increased spending on defense.” Italy and Spain are also “big players” in this field.

Polish Deputy Finance Minister Pawel Karbownik said that Europe has no other choice but to increase investment in defense. “We need to be able to protect ourselves in the worst-case scenario,” Mr. Karbownik said.

“Mr. Trump in his second term is a catalyst for the EU to do more for Ukraine as well as for its own security and defense,” said Mujtaba Rahman, an analyst at Eurasia Group.

Brussels hopes increased funding for weapons procurement projects will spur defense contractors to make long-term investments. However, there are still many issues related to how the fund is used that need to be resolved.

“We are not opposed to spending more money on defense,” said an official participating in the discussion. “But priority needs to be given to determining exactly what this money will be spent on.”

Pierre Haroche, associate professor of European and international politics, Lille Catholic University, France, said that in addition to increasing defense spending, Europe has two other options to respond to security challenges.

“Europe can focus on joint procurement to own expensive strategic capabilities that rely on the US, such as military satellites, aerial reconnaissance, ballistic missile defense systems,” Mr. Haroche said. with Euractiv.

This approach requires European members to commit to close cooperation. But such projects are often medium-term and cannot meet urgent short-term needs related to the war in Ukraine.

The final choice is to focus on consumable equipment and weapons such as artillery shells, UAVs, and missiles. This option can both support Ukraine in dealing with Russia and help NATO pillars in Europe have more reliable defense capabilities.