European Union finance ministers began talks on creating a joint defense fund that would buy and own defense equipment and charge members for its use as a way to spend more on defense without burdening national budgets with additional debt.
According to Reuters, the fund, called the European Defense Mechanism, was proposed by the Bruegel think tank in a document for ministerial discussions as a way to address the problem of how highly indebted countries can pay for expensive military equipment.
It is part of a broader European effort to prepare for a potential attack from Russia, as EU governments realize they can no longer rely entirely on the United States for their security.
“This is a good starting point for discussion,” said Portuguese Finance Minister Joaquim Miranda Sarmiento.
Several other EU countries have also expressed initial support, noting that the creation of such a fund could be technically relatively straightforward, as it would be based on the model of the eurozone’s bailout fund, the European Stability Mechanism.
“We will still have some questions about the mandate, funding, contributions, and market leverage. There are some questions about financing, as well as about the military aspect,” Sarmiento said.
The EU is already seeking to increase military spending by €800 billion over the next four years by relaxing its fiscal rules on defense investment and by jointly borrowing for large defense projects from the EU budget.
But these options increase public debt, a concern for many heavily indebted countries, while the Bruegel Center would provide a way to keep some defense investment out of national budgets.
The fund would be established under an intergovernmental agreement and would have a substantial paid-in capital that would allow it to borrow on the market.
Members from non-EU countries, such as the UK, Ukraine, or Norway, could join the fund. Since the fund would own the equipment it purchases, the debts incurred to pay for it would remain in the fund’s accounts, not in national accounts.
The fund would also help to create a single European market for defense equipment to reduce costs and pool resources.
The fund could focus on “strategic” assets”—the expensive military infrastructure and equipment that armies need to fight, which are now often provided by the United States.
The document on the fund states that Europe has a chance to reduce its military dependence on the United States by 2030 only if it maximizes procurement and creates a common European defense market with the UK as the main industrial defense player to increase competition.
