The European Union’s leaders have been repeatedly warning of the possibility of a Russian attack in the next three to five years. The EU’s foreign policy chief, Kaja Kallas, has also stated that Russia could attack the EU in the near future.
The topic of military preparedness was on the agenda at the European Council meeting on March 6 and again on March 20, with the same rhetoric and contradictions. The European Commission had previously proposed a plan, titled “Europe’s Resilience” which was later changed to “Prepared for 2030” due to opposition from Italy and Spain, whose governments have different political leanings.
The EU’s defense commissioner, Andrius Kubilius, published a white paper on March 19, outlining the military needs and institutional framework for the responses. This commotion reflects the war-like ambitions in Brussels and many capitals, as well as the problems and disagreements that these ambitions face.
Two main points of contention within the 27-member EU are: should the procurement of defense goods prioritize the European industry and with what criteria and exceptions? And how will the enormous expenses be financed?
The last question remains unanswered, as the sums involved are enormous. According to Brussels, €800 billion will be needed in the coming years. Some even consider this figure too low.
The EU has revived the “Capital Markets Union” and renamed it the “Savings and Investment Union.” The idea is to standardize the financial markets of member states, centralize their supervision and relax regulation. This could encourage large investors to contribute to the war efforts; some estimate this could amount to €470 billion. In reality, the project is an old one and there are no signs it will be successful.
Meanwhile, the President of the European Commission has detailed her proposal of €800 billion: Brussels would borrow €150 billion and offer loans to willing member states at favorable interest rates. Berlin is hesitant, as Germany can already profit from low interest rates on the markets.
Paris and some southern European countries, on the other hand, are pushing for a more ambitious perspective, where the 27 EU member states would jointly take out credits, similar to the €750 billion stimulus program after COVID-19 and use the framework to provide subsidies (not repayable loans) to member states. Some countries, normally cautious about joint debt, such as the Nordic countries, would not object.
The Netherlands, however, strongly rejects this idea. Ursula von der Leyen reminds that soon, the repayment of the €750 billion from 2020 will begin and contrary to the previous promises, no new funds have been found to finance these payments.
In addition to the €150 billion mentioned by the Commission, it also proposes to relax the rules for combating excessive deficits of member states. These must currently adhere to the rule limiting the budget deficit to 3% of GDP. The capitals might now be allowed to exclude part of their military spending from the deficit calculation and thus avoid penalties. This flexibility would encourage states to increase their defense budgets, freeing up €650 billion, according to Brussels – a figure that enables the Commission to reach its proposed €800 billion.
However, this proposal would reduce the risk of sanctions but would also prompt states to take out credits and some of them are already heavily indebted. This is particularly true for France. Therefore, the hesitation from Paris, while Berlin is advocating for a stronger relaxation of the Stability Pact – a reversal of the usual positions. The German parliament, consisting of the previous members and not the newly elected, has recently relaxed the national constitutional debt limit.
Emmanuel Macron is facing a political problem, as there are only three ways to increase the military budget, aiming to reach €100 billion per year by 2030, triple the 2017 level. The first option is to reallocate funds from other areas. The movement in this direction is already underway, but has its limits, as it is not easy to further cut already strained budgets for education, health, or justice. Some suggest further reforming the pension system, but this has already led to an outcry.
The second option is to take out credits. The French economy minister plans to establish a fund, where citizens would be asked to invest their savings, at an as-yet-unknown interest rate. In the best case, however, the mobilized amounts would hardly reach half a billion euros, a drop in the bucket.
The third option is the classic increase in debt on the financial markets. However, the French debt is already at an unsustainable level – at least according to the successive governments, the supporting media and of course Brussels. And “the markets” could lose trust and thus drive up the interest rates for French bonds and the repayment costs.
There is a third way: taxation. In his March 5 speech, the French President explicitly ruled out this option. This commitment, in the light of the martial tone announcing that the country is “at war” deserves analysis. It is reminiscent of Winston Churchill’s first parliamentary speech on May 13, 1940, where he told the Britons, now in the war against Nazi Germany, that he could only offer “blood, toil, tears and sweat.”
Can one imagine him adding: “But I promise you, no new taxes”? This promise from the Élysée Palace can initially be explained by a political stance: Emmanuel Macron has made the tax cut, primarily for the wealthy, a hallmark of his presidency. Any retreat in this regard would unsettle the fragile parliamentary support he still has.
Above all, there is an obvious fact that concerns the public mood. Certainly, the massive and sustained propaganda, aiming to assert the existence of a “Russian threat” has likely gathered points. But probably in a more superficial way than its authors had hoped. It is one thing to portray the Kremlin as a war-monger and Kiev as a one-sided victim; another is to impose new and heavy sacrifices on the citizens.