Latest news with #GuntramWolff
Reuters
13-05-2025
- Business
- Reuters
Europe's self-defence is battle on multiple fronts: podcast
Follow on Apple or Spotify. Listen on the Reuters app. Leaders are scrambling to shore up defences against Russia while also becoming less dependent on the US. In this episode of The Big View podcast, Bruegel Senior Fellow Guntram Wolff talks about the need for a joint European body to make the increase in spending more effective. Follow @peter_tl on X (The host is a Reuters Breakingviews columnist. The opinions expressed are his own.) Further Reading Record backlogs signal defence industry fragility Why a defence boss could boost Europe's revival EU's defence fund is more toy gun than bazooka Russia's economy would struggle to cope with peace The economics of war and peace in Ukraine: podcast Visit the Thomson Reuters Privacy Statement, opens new tab for information on our privacy and data protection practices. You may also visit opens new tab to opt-out of targeted advertising.
Yahoo
07-05-2025
- Business
- Yahoo
Poland proffers common defense financing as panacea for arming Europe
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Generate Key Takeaways WARSAW, Poland — As European nations seek more self-reliance in weapon procurement, a new intergovernmental initiative dubbed the European Defence Mechanism (EDM) could pave the way for closer integration of the continent's fragmented defense industries, according to a recent report by Brussels-based think tank Bruegel. The study was commissioned by Poland, a European Union member state which holds the rotating presidency of the bloc's council for the first six months of 2025. The report was presented to the EU's Ministers for Economic and Financial Affairs at an April meeting in Polish capital Warsaw, involving 27 governments in the ensuing debate. One of its key findings is that better-integrated European defense markets could both stimulate competition and make it easier for new defense companies to launch products. Combining integrated markets and scaled-up procurement could facilitate halving unit costs, according to the think tank. By pooling demand for military gear and enforcing common standards, European partners can achieve reduced costs, but also incentivize the continent's industry players to grow, Guntram Wolff, a senior fellow at Bruegel and a co-author of the report, told Defense News. 'We need to work on a European defense funding mechanism for a deeper integration of markets across the European Economic Area. If we don't to that, we will have fragmented markets with national producers supplying to small domestic markets, and the economic cost is going to be very high for individual products,' Wolff said. 'Expensive products, such as modern fighter jets, will not be developed by individual countries,' he added. At the same time, future discussions on the EDM will be shaped by institutional and political challenges, Wolff said. This is because certain EU member states have constitutional constraints that could stop them from participating in similar mechanisms, and some governments do not want to engage in defense cooperation with other EU partners. 'It is a political question whether to include non-EU countries in this proposed mechanism, one that would need to be answered by the governments of EU member states,' the researcher said. 'Countries such as the UK and Norway, or even Turkey and, outside Europe, Canada could decide that they want to engage their defense industries in this form of cooperation.' A spokesperson for the Polish Ministry of National Defence told Defense News that the ongoing talks on the EDM are led by the country's Ministry of Finance, indicating that the discussions are mostly related to the financial aspects of the proposed mechanism. 'Together with EU finance ministers, we discussed what I believe is the most pressing issue right now in Europe: security and defense financing,' Andrzej Domański, Poland's Deputy Prime Minister and Finance Minister, said in a statement released by the Polish presidency. 'We welcome the ReArm Europe Plan, the most ambitious defense plan so far presented by the European Commission, with an up to €150 billion [$170.5 billion] loan mechanism and a greater flexibility in EU fiscal rules.' Since Russia launched a war against Ukraine in February 2022, Poland has boosted defense spending to expand its military and arm it with modern weapons. For 2025, the country's government aims to allocate a total of PLN 186.6 billion ($49.6 billion) to defense. With the country's military expenditure expected to reach an estimated 4.7 percent of its gross domestic product this year, Poland has established itself as one of the alliance's top spenders. In response to the new foreign policy course in Washington, officials in Warsaw have doubled down on Poland's commitment to defense cooperation with the United States. A large share of the nation's defense budget finances major purchases of weapons from Washington, including the ongoing programs to acquire F-35 fighters jets , Boeing AH-64D copters , M1A2 Abrams SEPv3 tanks , and Patriot air defense batteries , among others. At the same time, Polish Prime Minister Donald Tusk has declared his Cabinet aims to tighten defense cooperation with EU partners, as well as key European allies such as the U.K. and Turkey, securing weapons and military technology from these countries.
Euronews
05-03-2025
- Business
- Euronews
How can the EU unlock up to €800bn for its ‘rearmament plan'?
The EU has officially entered its "rearmament era" and is now ready to step up its efforts to support Ukraine in the short term and ensure its strategic autonomy to defend itself in the long term. On Thursday, during a special meeting of EU leaders in Brussels, the 27 heads of state and government will discuss the five-point response plan, dubbed "REARM Europe", proposed by the EU Commission on Tuesday. The plan aims to mobilise around €800 billion over the next four years, the bulk of which will come from member states increasing their national spending on defence and security. 'If member states would increase their defence spending by 1.5% of GDP on average (which is the cap established by the Commission in additional defence spending per year), this could create fiscal space of close to €650 billion over a period of four years,' von der Leyen told reporters on Tuesday. The remaining €150 billion would come from a new defence instrument, allowing the Commission to borrow from capital markets to issue bonds and lend to member states. This plan mirrors how the EU raised funds for the COVID-19 recovery with the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE) , though this time, the funds would be distributed as loans rather than grants, based on national procurement plans for defence products throughout the decade. 'We're talking about [funding] pan-European capabilities domains like for example, air and missile defence, the artillery systems, missiles and ammunition, drones and anti-drone systems, but also to address other needs from cyber to military mobility," the Commission president said. The new instrument will be an off-budget instrument, implying joint borrowing that would eventually have to be repaid. 'In the short term, I don't think we have an alternative to some debt funding. We will have to have the debt funding to ensure that there is tax smoothing, that there's spending smoothing and to actually get political majorities,' Guntram Wolff, senior fellow at the economic think-tank Bruegel, told Euronews. 'But it should be clear that it cannot be a permanent solution,' Wolff added. A key pillar of von der Leyen's rearmament plan is giving member states more fiscal leeway to increase defence spending by activating the so-called national escape clause of the Stability and Growth Pact, as announced at the Munich Security Conference last month. The pact, adopted last year, imposes strict fiscal rules requiring member states to keep debt below 60% of GDP and deficits under 3%. Countries such as Poland and the Baltic states have long pushed for looser rules to allow higher defence spending without penalty. The escape clause can be triggered under exceptional circumstances that "lead to a major impact on public finances," though von der Leyen did not specify how spending by highly indebted countries like France and Spain would be controlled. Additional defence expenditure of up to 1.5% of GDP will be exempted from the EU's spending limits for four years, but beyond that, increased defence spending must fit within national budgets. 'We need to see European efforts beyond the EU. If the EU takes this step alongside the UK and Norway, we will have greater leverage in defence procurement and support for Ukraine,' Maria Martisiute, policy analyst at the European Policy Centre, told Euronews. Plan C, D, E: more private capital and a flexible EIB mandate and EU budget The Commission has also proposed three additional measures: mobilising more private capital, adapting the European Investment Bank's (EIB) mandate, and incentivising defence-related investments in the EU budget. In the short term, the EU is encouraging member states to redirect funds from cohesion policy programmes—which aim to bridge economic disparities between EU regions—to defence and security. Unlocking the full potential of the Capital Markets Union will also be "indispensable" for von der Leyen's plan. "We need to ensure that the billions of savings from Europeans are invested in markets inside the EU," she told member states in a letter sent on Tuesday morning. The bloc is not short of capital: European households save €1.4 trillion a year, compared with €800 billion in the US - but €300 billion of Europeans' savings flow into markets outside the EU every year. To address this, the Commission will present by 19 March a communication on a European Savings and Investment Union to incentivise risk capital and promote seamless capital flows across the EU. The final pillar of the plan is to broaden the mandate of the European Investment Bank (EIB). The EIB has already changed its policy on financing dual-use companies - i.e. those with less than 50% of their revenues coming from defence-related activities - and is currently examining how to extend its scope of financing while safeguarding its lending capacity. 'In a time of rising defence expenditures, that's quite a constraint because many dual use companies cannot be funded by the EIB (...), so I think that there is scope to change the mandate of the EIB and use the EIB as a vehicle to fund companies that have a severe gap in in their funding from private banks and from capital markets,' Wolff said. Are there other proposals to improve Europe's defence capabilities? The Commission's proposals respond to a Europe facing "a clear and present danger on a scale that none of us have seen in our adult lifetime." However, additional long-term options could include boosting defence spending in the next EU budget or creating a "rearmament bank." The current Multiannual Financial Framework (2021-2027) allocated only €15 billion (1.2% of the MFF) to security and defence. EU-funded initiatives include the Act in Support of Ammunition Production (ASAP), the European Defence Fund (EDF), and EDIRPA. The Commission has also proposed the European Defence Industry Programme (EDIP) for post-2025 to enhance capabilities. Yet the EU's financial watchdog has warned that EDIP lacks the budget to meet its objectives. At least €500 billion will be needed over the next decade to close key capability gaps. Commissioner Andrius Kubilius has suggested allocating nearly €100 billion for defence investment in the next Multiannual Financial Framework (2028-2034). Negotiations on the next MFF will begin this summer, but those funds will not be available in the short term. Meanwhile, the EU is in discussions with non-EU countries such as the US and UK to establish a "rearmament bank" to significantly boost defence spending. This new bank would not impact national borrowing capacity, as it would issue triple-A bonds backed by shareholder nations. This would enable rapid investment in defence procurement and technology without adding to public debt.
