The creation of a European financial instrument of EUR 100 billion, which can finance European requirements beyond national budgets, will be recommended by the Prime Minister to the informal European Council. “Europe must spend more on its defence” is entitled Prime Minister Kyriakos Mitsotakis’ article in the “Financial Times”. CORVERSE “The combination of Russia’s offensive war against Ukraine, the instability in the Middle East and the wider global power shifts means that Europe must take greater responsibility for its security,” the prime minister initially points out in his article in the British economic newspaper. “The European Commission estimates additional investment of EUR 500 billion in the defence sector is needed over the next decade. This is not just a necessity, but also an opportunity to ensure European strategic autonomy, for which I have long taken part. But to do this requires collective action on two fronts: Firstly, we need a sustainable financing model for increased defence spending. And secondly, we must transform the European defence industry,” he stresses. “As far as financing is concerned, the problem is that, in the new European financial framework, any significant increase in defence expenditure is likely to trigger the so-called excessive deficit procedures (SDPs), designed to move the budgets of a state within certain limits. This is ineffective and potentially very expensive,” he notes. CORVERSE “There is, however, a simple way to overcome this difficulty: defence expenditure should be excluded from budgetary targets in advance. This will allow Member States to spend more on defence while maintaining fiscal credibility and favourable market conditions,” Kyriakos Mitsotakis notes and adds: “By giving Member States this financial margin we will increase our capabilities in the fields of defence and security. But that will not be enough, because from one point on markets may add an additional cost to the yields of our state bonds. In addition to increased budgetary costs, this could act as a discouraging factor for defence spending and lead to disproportionate burden sharing among EU Member States.” “The inclusion of security and defence in the list of strategic priorities of the European Investment Bank will help. However, this alone will only cover a small part of our investment needs. For this reason, based on the positive experience with the EU’s Market Recovery and Resistant Mechanism, I propose the creation of a new European tool, of at least EUR 100 billion, to finance our collective defence needs.” ‘However, the increase in defence spending must be accompanied by an increase in efficiency. As both recent Draghi and Letta reports say, the European defence industry remains fragmented, does not have the necessary size and needs further consolidation and expertise to create centres of excellence. ‘The development of complex new generation defence systems requires investments that exceed the capabilities of any individual Member State. That is why, last May, together with Polish Prime Minister Donald Tusk, I tabled an ambitious proposal to create a European air defense shield, as a credible deterrent against potential attacks.” “The announcement and financing of such a major European initiative, which will soon be followed by other flagship projects, will have a direct impact on four areas”. “First, it would allow Member States and the EU as a whole to face key weaknesses in their defence capabilities. Secondly, it would strengthen Europe’s technological and industrial base. Thirdly, it would clearly increase Europe’s contribution to NATO and strengthen transatlantic cooperation. Finally, and perhaps most importantly, it would send an indisputable message that Europe is united and determined, a global power that must be taken seriously.” “The fact that the President of the European Commission Ursula von der Leyen included the idea of flagship projects by a European Defence Union in the political guidelines for its second term is welcome. The same applies to the forthcoming White Paper on the future of European defence, as well as the ‘strategic for readiness’. Both will help to create the conditions for the creation of a European Defence Union.” ‘This is important because one of the key assumptions behind the greatest European strategic autonomy should be that the territorial integrity of each Member State is inextricably linked to the integrity of all other Member States and the EU as a whole. That is why we must strengthen the credibility and operational value of mutual defence clauses (42.7 TEU) and solidarity (222 TFEU) in the EU Treaties’. “As a first-line Member State, both EU and NATO, and as a country facing unique and immediate security challenges, especially in the Eastern Mediterranean, Greece has long understood the crucial importance of defence investment. But these security challenges are no longer of a regional nature. The geopolitical issue for Europe was never higher. If our Union is to remain a pillar of peace and stability, we must have a strong, unified and credible deterrent capacity. There is no time to lose,” the Prime Minister concludes in his article.
Kyriakos Mitsotakis in Financial Times: Europe must spend more on its defence
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in Policy