France is pushing the EU to work out joint debt obligations to pay for increased military spending and is proposing the radical idea to its European counterparts, according to a confidential letter seen by POLITICO.
In the diplomatic note, which may provoke a flurry of criticism in some capitals – especially Berlin – Paris says the EU must “compensate for decades of underinvestment in its defence and defence industry”.
The letter, dated 14 March, was sent to several foreign ministries. The French government wants more countries to join it before it sends an official version to the EU’s chief diplomat, Josep Borrell. Until then, the letter could change.
The war in Ukraine and escalating geopolitical tensions in other hotspots around the world, combined with the prospect of Donald Trump’s return to the White House, have sharpened the focus on defence issues in Europe, which lags far behind Washington on military spending.
In the letter, France outlines ways in which the EU should increase funding, including issuing joint debt, an echo of the controversial instrument it used to finance its reconstruction programmes after World War II, which several of the bloc’s top politicians say will be a one-off.
France also proposes using profits from frozen Russian assets, allowing the European Investment Bank to lend to defence projects and “mobilising private savings by further developing the EU capital markets union”. The letter says:
“There are several avenues worth exploring, individually or combined to each other. War is back on our continent.”
France and other countries such as Estonia, which shares a land border with Russia, are pushing for defence bonds to stimulate industry – an idea opposed by Germany, the Netherlands and the Scandinavian countries. Berlin and The Hague have long been wary of the economic consequences of an EU joint debt issue. The letter adds:
“We acted with solidarity and put in place unprecedented instruments in response to the pandemic, which plunged the EU into the deepest recession since the Second World War.”
On Thursday, EU leaders will discuss the acceleration and intensification of military aid to Ukraine. Kyiv has been forced to retreat from some parts of the frontline due to a catastrophic shortage of ammunition. The latest draft statement to be released by the leaders at the end of their summit in Brussels this week also hints at an EU debt issue. The draft conclusions, also seen by POLITICO, say:
“The European Council invites the Council and the Commission to explore all options for mobilising funding and report back by June.”
