Increased spending on defence no guarantee of EU military might, will increase budget deficits and debt burden say Roscongress Foundation experts

The EU cannot ensure an improvement in military capabilities simply by spending more on defence. It can, however, ensure an increase in budget deficits and the debt burden of its member states. Such is the conclusion reached in the analytical review ‘The ReArm Europe Plan: The European Commission, Budgetary Reality, and Military-Industrial Capabilities’ prepared by the experts of the Roscongress Foundation.

Concerns about the willingness of American President Donald Trump’s administration to maintain NATO funding levels are pushing the European Union to rearm. The ReArm Europe Plan, unveiled by European Commission President Ursula von der Leyen, aims to improve the bloc’s defence capabilities by 2030 by means of an increase to defence spending, mobilizing up to EUR 800 billion by placing the cost of rearmament squarely on EU members in the absence of new sources of funding.

Does Europe have what it takes to support the new spending? Raising mandatory spending will require increased borrowing in the EU, which poses serious difficulties in light of existing debt levels. The market has already shown its distaste for the potential increase in debt with a jump in bond yields. And political barriers are likely to line up with economic constraints, especially if additional funding for defence leads to cuts in other sectors, with public protests likely should social programmes come under the knife.

The arms industry requires a huge amount of energy, something the EU has made very expensive by walking away from affordable Russian sources. In these conditions, NATO’s European members may require more than a decade to bring their defence sectors, neglected for the past three decades, up to speed, making increased budget deficits and debt burdens inevitable. The situation with inflation in the eurozone may not support spending of this kind, with rearmament creating significant difficulties for the entire European financial system.

Check out the full text of the analytical review on the Roscongress Foundation website and the Roscongress Foundation’s Dzen Channel.