Paris Summit on Ukraine: Joint Defence Bonds or a Defence Escape Clause?

Amidst the high-profile attendance at the Paris summit on Ukraine, one participant stood out for all the wrong reasons. Giorgia Meloni, the Italian prime minister, arrived late in a Maserati, donning a white coat and a posture that suggested her disdain for the venue and its host, Emmanuel Macron.

Two Key Policy Proposals for European Defence

Despite Meloni’s petulance, most summit attendees focused on two significant ideas to strengthen Europe’s military capabilities post-war: joint defence bonds or a defence escape clause. These strategies, although different, aim to boost member states’ investment in defence.

Ukrainian soldiers at the frontlines would benefit less directly from these initiatives. However, they lay the groundwork for increased European defence spending, reflecting the end of Europe’s heavy dependence on US security support.

The EU Defence Escape Clause

At the Munich Security Conference, Ursula von der Leyen, the European Commission president, announced her intent to activate a defence escape clause within the bloc’s fiscal rules. This move aims to significantly boost defence investments across EU member states.

The escape clause for defence spending, possibly effective for multiple years, has gained support from EU finance ministers in Poland and the backing of German Chancellor Olaf Scholz. Scholz has expressed a desire for an exemption for increased German defence spending under Germany’s stringent debt brake clause.

Italian Finance Minister Giancarlo Giorgetti has already hailed the escape clause as a win for Italy. Given Italy’s high public debt and slow economic growth, this clause could allow breathing room for increased defence spending as a proportion of GDP.

Challenges and Criticisms

However, analyst Luigi Scazzieri from the Centre of European Reform questions the real impact of the escape clause. Many EU states already breach debt rules and might not need permission from the EU to increase defence spending. Poland, for instance, has seen substantial increases in defence spending but maintains low debt and strong economic growth.

Scazzieri believes that while the escape clause offers some help, joint defence bonds hold far greater potential for raising substantial funds. The primary hurdle? Germany’s historical opposition to the EU issuing joint debt, which all members could be liable for.

The Breakthrough During the Pandemic

The taboo around EU joint borrowing was broken during the pandemic when member states agreed to a €800bn facility providing grants and low-interest loans to individual EU countries. This initiative was spurred by former Italian Prime Minister Mario Draghi.

One of the earlier opponents to joint EU debt was Dutch Prime Minister Mark Rutte, who is now NATO Secretary General. This shift demonstrates the evolving stance within European leadership.

Complexities of Joint Defence Bonds

Realizing the benefits of joint defence bonds could be complex. Bonds might be issued by the EU or through a special funding vehicle that allows UK participation, circumventing the need for Hungarian approval. Cyprus, Malta, Ireland, and Austria might still oppose EU-wide defence bonds.

A special defence vehicle, if used, would issue bonds with national guarantees rather than an EU-wide liability. This could pave the way for creating “coalitions of the willing,” essential to involving non-EU states like the UK in significant defence initiatives.

UK’s Role in Future Defence Plans

The UK, though not an EU member, has shown willingness to engage in security agreements with the bloc. It remains unclear if these voluntary inter-governmental plans for bonds would form part of a high-level security pact.

Previous versions of such bonds, revealed by the Financial Times, could aim to raise €500bn. In interviews at the Munich Security Conference, German Foreign Minister Annalena Baerbock mentioned a €700bn security package following German elections. Though it’s unclear whether she refers to these bonds or exaggerates, the urgency of these discussions has intensified.

The Need for Unprecedented Collaboration

The debate underscores the need for unprecedented collaboration across Europe. Strong leadership from key nations, like Germany and France, is crucial to overcome historical opposition to joint EU spending.

For Italy and its prime minister Giorgia Meloni, participating more actively in these discussions could be in their best interest. Her friendship with US President Donald Trump and estrangement from French President Emmanuel Macron should not hinder Italy’s ability to champion European security.

Conclusion

The Paris summit on Ukraine marks a turning point in European defence policy, highlighting the shift away from relying solely on US security support. While the defence escape clause presents a practical but limited solution, joint defence bonds offer a more promising path to unlock necessary financial resources.

Despite historical opposition, especially from Germany, recent events and policy shifts open new possibilities for European collaboration. It remains to be seen how effectively these strategies will be implemented, but the urgency of the discussions signals a significant effort to secure European sovereignty in matters of defence.

Call to Action

We invite you to share your thoughts on these proposals. How do you believe Europe can best increase its defence spending? Will joint bonds or escape clauses prove more effective? Join the conversation and let us know what you think!