Germany’s ‘No’ to defense Eurobonds: Proposes ‘funding joint projects with EU budget’

Brussels – No Eurobonds, no common debt to boost defense industry: Germany emphatically reiterates its ‘nein’ to the ventilated hypothesis of guarantees as an alternative to the loans the European Commission designed under the ‘Rearm Europe’ plan for Europe’s rearmament. “I am skeptical of Eurobonds as such,” German Finance Minister Jörg Kukies cut short as he arrived in Brussels for the work of the Eurogroup. “What Germany is open to when there are projects of common European interest is financing through the European budget,” he explains. So ‘yes’ to joint procurement or European loans to be paid back, but nothing more.

“The idea of creating debt and distributing it among 27 countries does not convince us,” continues the German finance minister, who, in so saying, closes the door on any idea of new forms of programs along the lines of the post-pandemic recovery program, NextGenerationEU, which saw the European Union mutualize debt to restart after the pandemic crisis.

Germany then also urges caution regarding government spending to stimulate heavy industry. “Changing the rules can be done, but we need the right definitions” on what is meant by defense spending, Kukies continues. So, it is necessary to carefully study the EU executive’s proposal to suspend internal stability pact rules for four years to ensure debt sustainability.

 Economy Commissioner Valdis Dombrovskis confirms the plan to proceed according to the intentions made public. Governments are allowed to spend up to 1.5 percent of GDP more “every year, for the next four years,” starting with 2025 until 2028, without adversely affecting them under the macroeconomic imbalance procedures, starting with the excessive deficit procedure.

It is possible to talk about anything around the table of EU economic ministers, but this does not mean that everything has to be accepted. On the contrary, the Dutch finance minister, Eelco Heinen, also rejects the idea of Eurobonds for defense through joint debt securities. At the same time, France seems to like the idea of joint procurement and buying with European money. However, French Finance Minister Eric Lombard stresses, “The money should go to buy European products needed to meet European needs.” A move against Donald Trump and the US defense industry.

Italy came to the table with the desire to participate in the debate. According to sources from the Italian ministry of Economy, minister Giancarlo Giorgetti, put forward a proposal aimed at avoiding an increase in public debt to support defense. What Italy is proposing is therefore a European coordination regarding common projects, and a commitment to intercept private capital.