800 billion for defense: easier said than done

The March 20 European Council was supposed to be the culmination of the shared conviction to move in the desired direction after the “ten days that shook the world” a few weeks ago, starting with Zelenski’s ouster from the Oval Office, the change of pace of American policy on Ukraine and beyond, and continuing with the ambitious ReArm Europe proposal, immediately sealed by Germany’s spectacular decision bring to an end, with some institutional tricks, the Constitutional public spending cap and announce a 1 trillion investment plan, half of which for defense.

However, on closer inspection, Ursula von der Leyen’s “announcement effect” risks not being supported by enthusiastic adherence to the initial plan, so much so that the heads of state and government have taken adequate time to reflect, in a context made complex by Russian-American negotiations bypassing the heads of European countries, including Ukraine, and the threat of trade tariffs.

The first to falter was the very name of the plan to earmark 800 billion over four years for additional military spending to move closer to the new GDP-based targets that Donald Trump is loudly demanding, which the June NATO summit should decide on.

From the outset, ReArm Europe was not the most fitting acronym for the European Commission to come up with, so much so that it was prudently decided to rename it to the anonymous Readiness 2030, whatever that may mean.

However, the most apparent difficulties immediately emerged regarding the substance, as the German move made clear. Thanks to the “general escape clause,” meaning the suspension of the Stability Pact, the bulk of the money will have to come from member states (those who can afford it): those, for example, with a debt-to-GDP ratio of less than 60 percent and were able to bring themselves into compliance domestically in 48 hours. However, it will be more difficult for those whose debt ratio is over 130% of GDP.

There are then the 150 billion in loans promised by Ursula von der Leyen based on guarantees offered by the EU budget. But again, new loans would burden national budgets because the frugals, led by Germany, reject any assumption of defense bonds or loans as in the case of the Recovery Fund.

In short, it is a dichotomy where the heavily indebted countries of the South view with suspicion a plan that, at least for now, has a strong German accent.