As governments increasingly see the need to put the continent on a war footing, the plan would offer a way out for Europe’s policymakers who are desperately trying to find cash down the back of the sofa. They know they have to pay for it; they just don’t want to.
Other options could see the ESM shift to respond to Russia’s aggression more broadly, four of the people said, such as by helping to pay for the reconstruction of Ukraine or by providing cheap loans to countries like the Baltic states which may find their borrowing costs rising.
Russia’s war in Ukraine — a country harboring EU membership ambitions — is grinding into a third year and Donald Trump’s potential return to the White House risks leaving Europe in the lurch, as he demands all NATO countries to hit the target of 2 percent of gross domestic product spent on defense.
But soaring debts in the bloc’s most powerful capitals, messy domestic politics, and tight spending rules enforced by the European Commission are limiting the bloc’s ability to cough up additional cash.
The bailout fund idea is still at an early stage. But it could potentially be more palatable to governments than other suggestions for funding defense which haven’t yet got off the ground — including finding money in the existing EU budget, using Russian assets immobilized since the start of the war, or collectively issuing joint debt, known as eurobonds.
France and the Baltic states are likely to be at the forefront of supporting the idea, officials say. But other capitals currently insist that it should remain an insurance fund for countries facing a crisis. In their view, it should not adapt to the EU’s changing priorities.
The eurozone’s 20 finance ministers would have to agree to any change.
