EU countries urge investment bank to up defence funding

EU countries urge investment bank to up defence funding
by AFP Staff Writers
Brussels, Belgium (AFP) Jan 31, 2025

A majority of EU countries have called on the bloc's lending arm to increase funding for defence, as leaders prepare for talks Monday on boosting Europe's military might faced with the threat from Russia.

A letter circulated Friday, signed by 19 of the 27 European Union members, including France and Germany, urged the European Investment Bank (EIB) to loosen its rules on what it can fund and up the amount of money available.

"In light of the ongoing security challenges facing Europe, including Russia's war of aggression against Ukraine, it is crucial that we take decisive action to strengthen Europe's overall defence readiness and capabilities and its defence industrial base," the letter, dated Thursday, read.

The European Union has been clambering to produce more weapons in a bid to continue the flow of arms and ammunition to Kyiv and strengthen its own defences.

US President Donald Trump has demanded NATO members increase defence expenditure to five percent of GDP -- more than double the alliance's current minimum level of two percent.

"By expanding funding mechanisms and employing all available means, we can address the urgent need to grow Europe's defense industrial and technological base," said the letter initiated by Finland, which shares a long border with Russia.

The EIB is the world's biggest multilateral public lender and has ploughed in billions of euros to help Ukraine after Russia's 2022 invasion.

Following a similar call last year, the Luxembourg-based bank amended its rules on the financing of dual-use goods to allow money to flow towards projects with a predominantly military rather than civilian purpose.

But the lender is still unable to directly fund the production of arms and ammunition -- something that helps it preserve an excellent rating, allowing it to borrow cheaply but which the signatories would like to change.

The signing countries also urged the bank to discuss the possibility of "specific and earmarked debt issuance" for funding security and defence projects.

The letter was also signed by Belgium, Croatia, Cyprus, Czechia, Denmark, Estonia, Greece, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Romania, Slovakia, Spain and Sweden.

Poland, though at the forefront of calls to ramp up EU defence spending, refrained from signing in line with its role of neutral arbiter as holder of the bloc's rotating presidency.

The EIB welcomed the letter, with a spokesperson saying the lender doubled "financing for security and defence projects in 2024" and plans "to double it again this year to a record high" of two billion euros out of a planned total of 95 billion.

As the EU's 27 members are shareholders of the EIB, the letter was above all an opportunity to show that Europe is looking for "new sources of funding" for its defences, said a diplomat.

It also served to prepare Monday's extraordinary meeting in Brussels, that will bring together EU leaders along with British Prime Minister Keir Starmer and NATO Secretary General Mark Rutte.