More billions for defense? A change in Brussels can transfer money to the military industry – a significant opportunity for Finland

Financial Times – magazine, Brussels intends to release billions of euros for defense and security.

This would be the cohesion funds of the current budget period (2021–2027), i.e. funds of approximately 392 billion euros, which are intended to reduce economic inequality in EU countries.

Cohesion funds are about a third of the entire EU budget. Only about five percent of them have been used so far, but the biggest beneficiaries, such as Poland, Italy and Spain, have used even less.

Under current rules, cohesion funds cannot be used to purchase defense equipment or directly finance the military, but investments in dual-use products such as drones are allowed.

According to FT, EU countries will be told in the coming weeks that they can start allocating cohesion funds more flexibly than at present to support defense industry and military mobility projects, such as strengthening roads and bridges so that heavy tanks can cross them.

Central to the Commission’s new interpretation is that cohesion funds can be used for the defense industry if they promote regional development and military mobility.

In practice, the new flexibilities include, according to FT, allowing funding to boost the production of weapons and ammunition in member countries. Instead, the ban on using EU funds directly for the purchase of weapons would still remain.

“Alternatives are being explored”

On Tuesday, Kauppalehti asked a high-ranking official of the Commission whether the facilitation of the use of cohesion funds reported by FT is true.

“We are exploring all options,” the commission official replied.

Instead, the current EU Cohesion Commissioner Elisa Ferreira refuted the FT’s news on Tuesday in X. According to him, such ideas have not been discussed and he is not aware of any such plans.

Hard torque

According to three Finnish MEPs interviewed by Kauppalehti, the redirection of unused cohesion funds is possible, but it means a very fierce struggle both in the EU countries and in Brussels.

“Redirecting cohesion funds would mean a setback in regional politics, so without a tough debate the matter will not progress”, SDP meppi Eero Heinäluoma evaluate.

Also a member of the coalition Aura Salla and the Euro representative of the leftist union Merja Kyllönen are on the same lines.

“It’s not easy, but if there is a consensus among the EU countries, then of course it can be done,” says Kyllönen.

Euro representative of the Greens Ville Niinistön According to

“Sacrificing regional development for defense procurement can also weaken the EU’s credibility as a guarantor of socially equal development,” says Niinistö.

Finland’s benefit

According to Niinistö, the benefit or harm from the reuse of cohesion funds would be “very limited” for Finland.

Häinaluoma is on the same lines. According to him, the reallocation of money is not a “miracle drug, because the regional development funds that Finland receives are very small”.

Heinäluoma reminds that in Finland there is a need to increase rather than decrease the support for regional development, because due to the Russian war of aggression, there is a need to respond to the development problems of Eastern Finland in particular.

Kyllönen estimates that Finland has every opportunity to benefit from the redirection of cohesion funds, as long as there is “national ambition and clear priorities”.

“The risk is that if the funding distribution model is not renewed at the same time, Finland’s share will remain unnecessarily small,” says Kyllönen.

The future commission will play a key role in reforming the use of cohesion funds.

According to Kyllönen, the security of Finland and the EU as a whole would benefit if the share of the countries on the eastern border is emphasized when the money distribution principles are renewed.

He hopes that the Government will quickly analyze how cohesion money would best improve overall security in Finland.

One stream

The new commission, which will probably start its work in December, is supposed to focus on strengthening European security and defense on a broad front. In this whole, the possible use of cohesion money is only one stream.

According to the Commission, an investment debt of 500 billion euros has arisen for the EU’s defense, which should be covered in ten years.

On Friday in Budapest, EU leaders obliged the Commission to “immediately” provide a detailed plan to finance the European defense industry from private and public sources.

In addition, the president Sauli Niinistön in the recent preparedness report given to the Commission, it is stated that 20 percent of the EU budget should be used in the coming years to strengthen European security.

Currently, the EU’s multi-year budget is well over a thousand billion euros, in which case a fifth of the EU budget would mean hundreds of billions of new investments in security and defense. In practice, the change would require redirecting funding from the EU’s various financial instruments.

Negotiations on the EU’s next budget framework (2028–2034) will begin next year and are expected to be completed by July.

“The EU needs to look at the entire current budget and develop its own funds instead of being the first to look for new debt,” says Heinäluoma.

Finnish MEPs Heinäluoma, Salla and Kyllönen consider it important that the lending capacity of the European Investment Bank be increased. It would act as a way to encourage private money to flow into defense industry investments.

“The European Investment Bank’s mandate must be changed as soon as possible so that it can also lend lethal weapons,” says Salla.

Niinistö hopes that the EU will direct more money to speed up joint procurements from the EU countries’ defense industry. In addition, he stresses the strengthening of transnational cooperation in the EU’s defense industry and new innovation money.

“It could also act as a lever to speed up investments in the defense industry of the private sector,” says Niinistö.

Although the reorientation of cohesion funds will not necessarily create a panacea for Finland, “it will be a miracle or an outright failure if the defense industry does not become a significant sector for Finland” when the EU and the European NATO countries start to strengthen their defense.

This is what an industry influencer who knows the Finnish defense industry well said recently in background discussions.