As NATO member states struggle to meet their defense spending targets, and war rages on Europe's eastern front, Officials are struggling To agree on a plan to support hundreds of billions of dollars to strengthen defenses.
Eight countries from NATO It did not meet its defense spending target of 2% in 2024. With many member states suffering from chronically strained budgets, calls to achieve these targets are not being quickly answered.
The European Commission estimates that about 500 billion euros, equivalent to $524 billion in investments, are needed in the next decade to defend Europe against emerging threats.
It is not possible to use the European Union budget to finance defense directly, and some European officials and NATO experts propose creating a global defense bank to distribute the funds needed for military modernization.
The Defense, Security and Resilience Bank (DSR) issues AAA-rated bonds to cash-strapped countries to develop their defences, and provides guarantees to commercial banks to extend credit to defense suppliers.
European officials are having difficulty agreeing on a plan to provide hundreds of billions of dollars to strengthen defenses. (U.S. Army photo by Spc. Ryan Barr)
“This is not a substitute for increasing defense spending in each of these countries. I think it should be a complementary tool,” Jedremas Jeglińskas, head of the Lithuanian parliament's national security committee and a former NATO official, told Fox News Digital.
His comments mirror those of incoming President Trump, who has long threatened to pull the United States out of NATO over the number of countries that have not met the 2% target for defense spending.
“I think we have to also look at it as an opportunity for the United States as well,” Jeglinskas added. “I understand Donald Trump's skepticism towards the World Bank and then the IMF and the IFC and other institutions. I think too much capital has been deployed and too much investment made by these banks or the real impact is, at best, questionable, so I think That we have to have very clear KPIs.
The US defense budget of $824 billion in 2023 is equivalent to half of the total defense spending of all NATO member states combined of $1.47 trillion.
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Trump's return to the White House, coupled with the US seeking to refocus on China, has Europeans wondering whether the US will have less appetite for defending Europe in the coming years.
More EU defense and foreign ministers have floated the idea of issuing joint debt through bonds to finance military projects.
But some countries Like Germany They expressed concerns about maintaining their sovereignty and the disproportionate financial burden on some countries.
The idea of a DSR bank is explained at length in A New Atlantic Council report By fellow defenseman Rob Murray.
The European Union budget may not be used to finance defense directly. (Ukrainian Defense Ministry press service via AP, file)
“For allies in both the Euro-Atlantic and Indo-Pacific regions, the Bank can go beyond providing low-interest loans for defense modernization to facilitating equipment leasing, currency hedging, and supporting critical infrastructure and reconstruction efforts in conflict areas. Like Ukraine.” Murray wrote.
“An additional critical function of DSR Bank is to underwrite risks for commercial banks, enabling them to provide financing to defense companies across the supply chain.”
The aim will be to provide financing to small and medium-sized defense companies that often struggle to access funds.
“By providing loans with extended maturities, the Bank will provide sustainable and predictable financing for defense modernization,” Jeglinskas wrote in a recent op-ed. “Its governance structures will align financing with collective security objectives, such as modernizing arsenals and investing in emerging technologies.” For the Financial Times.
The Defense, Security and Resilience Bank (DSR) issues AAA-rated bonds to cash-strapped countries to modernize their defences. (Alexandra Pierre/Getty Images)
Asked how the DSR Bank could convince countries to agree on defense financing priorities, Jeglinskas likened the idea to the UK-led Joint Expeditionary Force, a military alliance that includes Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, the Netherlands, Norway and Turkey. Sweden.
Jeglinskas noted that there are 33 trillion euros of European assets under management across the continent.
“There's really no political will, no risk appetite to take it anywhere except the bond markets where it lives now,” he said. “But many countries need to build up the initial capital and then, using the sovereign rating to get to AAA in the capital markets, raise that money from the bond markets and start financing defense programs.”
The European Investment Bank has provided long-term loans and guarantees to projects in European countries that are consistent with EU policy objectives.
“But even as they struggle to kind of shift their mandate toward more dual-use technologies, that is still not allowed in their funding package,” Jeglinskas said.
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“Of course, every other bank in Europe is looking to the European Investment Bank for their signal. That signal doesn't exist yet. So, that's the point. We need to create some kind of mechanism, and this kind of global defense bank will be one of the tools we can use.” “To mobilize capital and really direct it toward defense, so it really creates another multilateral lending institution.”
