(Bloomberg) — Germany is pushing European Union leaders to drop language on joint defense spending, a stance that’s triggering resistance from other member states that believe extra resources are needed to ramp up the bloc’s capabilities.
EU leaders are poised to agree at a summit in Brussels on a strategic agenda for the next five years, which includes the goals of strengthening security and defense. But Chancellor Olaf Scholz is standing by Germany’s reservations over more joint spending to cover the bloc’s capability gaps at a time when its domestic budget is strained.
At the EU summit that started Thursday, leaders were taken aback that, in the midst of the ongoing war Ukraine, Germany and the Netherlands were balking over a call to make headway on financing options to boost spending instead of discussing how to scale up and hasten a defense buildup. according to a person familiar with the discussions.
During a heated discussion, some leaders including from Denmark and Poland pointed out that it was a good thing that neither Russia nor Ukrainian President Volodymyr Zelenskiy were in the room to hear them debate whether the EU should finance more defense spending, said people with knowledge of the talks, who were granted anonymity to describe private discussions.
Scholz can count on support from the Netherlands’s outgoing prime minister, Mark Rutte, in a push to block any progress on financing. Both have been fighting against additional European resources, including joint debt, before other options are exhausted.
The stance by Rutte, who will become the next NATO secretary general, to delay progress on financing is shocking given his next job, according to one EU diplomat. The Hague, however, wants a clear assessment of needs, an improvement in the internal market for defense, better procurement and to facilitate access to private capital before using European funds.
Germany’s opposition won’t put an end to discussions about how to boost the bloc’s defense readiness and capabilities in the face of Russia’s invasion on Ukraine and rising geopolitical risks, according to EU diplomats.
Following the leaders’ exchange on Thursday, the leaders were set to agree on asking the bloc’s executive arm to present options for public and private funding to strengthen the defense industry and address critical gaps.
“We need to spend more and coordinate on defense initiatives within the EU and with NATO, which remains the foundation of collective defense, combining our capabilities to protect, deter and defend our people and our territory,” the prime ministers of Estonia, Latvia, Lithuania and Poland wrote in a letter to European Council President Charles Michel and European Commission President Ursula von der Leyen before the summit.
France and Italy are among the EU nations that have called for some kind of joint borrowing.
Resolving the financing issue will be one of the biggest challenges the EU will face during the next commission’s tenure. Von der Leyen, who is expected to be nominated for a second term, already gave up on her plan to present a report this week on financing options to strengthen the bloc’s defense capabilities and instead is set to present an oral update on what projects they could jointly cover.
Von der Leyen told leaders on Thursday that the bloc will need to spend around an additional €500 billion ($535 billion) on defense and security in the coming decade to address the current and projected threats, the people said. She mentioned joint borrowing as a possible option to fill the gap.
Germany doesn’t want to see any new statements on defense and funding beyond what was agreed at the previous EU leaders’ summit in March, arguing there aren’t any new developments that would merit a change for the time being, according to another person familiar with the issue.
The budget debate is particularly sensitive in Germany at the moment, with Scholz’s ruling coalition negotiating bitterly about how to set spending priorities in next year’s federal budget with tax revenues coming in weaker than expected.
For the EU’s eastern countries, an assessment of needs is seen as a key step. Funds available under the EU budget aren’t enough given the projected costs — Poland has put a €2.5 billion price tag on strengthening its 700-kilometer (435-mile) border with Belarus.
“We need a defense initiative to protect Europeans today and in the years to come,” the four eastern leaders said in the letter. “Building a defense infrastructure system along the EU external border with Russia and Belarus will address the dire and urgent need to secure the EU from military and hybrid threats.”
–With assistance from Michael Nienaber.
(Updates with details from meeting starting in fourth paragraph)
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