The idea has also arisen in Parliament to redirect the undrawn loans of the stimulus instrument to new purposes.
European as early as this week’s summit in Versailles in Paris, the Union’s decision-makers will have to discuss how to finance all the costs of the war in Ukraine.
Once again, it is up to the Member States to take on debt together, as they did when they agreed on a joint recovery in the wake of the interest rate pandemic.
EU countries need to increase defense spending, and they want to reduce Europe’s dependence on energy from Russia as soon as possible. On top of that, Europe is open to Ukrainian refugees, who have already moved to the Union for more than two million, and the number is growing all the time.
Read more: EU energy plan unveiled: Gas companies forced to keep adequate gas stocks and member states allowed to tax giants’ huge profits
In addition to energy, the prices of other key raw materials are rising, and the EU may need to provide more assistance to farmers, for example.
The news agency Bloomberg considers it possible that EU leaders will already have a proposal for a new joint borrowing from the market at the summit.
Read more: Bloomberg: EU plans massive joint borrowing for energy and defense projects
An informal summit will be held on Thursday and Friday in Versailles, Paris. The Prime Minister from Finland is present Sanna Marin (sd).
In Finland the common EU debt to finance the recovery raised much opposition. The € 750 billion recovery package is intended to finance, in particular, the green transition and digitalisation, and to reform the EU economy in the wake of the pandemic.
The package was meant to be a one-time. Decision-makers in the southern EU in particular have consistently pointed out that the EU could continue to follow the same pattern in the future.
The idea has arisen in the EU Parliament that the unused part of the recovery package could be channeled into the investment needed now. Part of the stimulus package is credit that countries have not raised as expected. It is estimated that a total of € 220 billion would be decoupled if the rules of the recovery plan were made more flexible.
Parliament has also calculated that the EU’s annual budget would have an unused reserve of EUR 4.2 billion for this year, which could be channeled into common spending.
According to Bloomberg, one option for a new joint debt arrangement would be to follow the example of the € 100 billion loan program (Sure) in the first interest rate spring, from which member states could choose to apply for a loan to support employment measures.
There are also ideas in Parliament for an arrangement like Sure, but with loans in addition to loans, such as the Next Generation EU stimulus package.
Common In addition to debt, the EU is launching a debate on whether the debt rules of the EU’s Growth and Stability Pact should be made flexible so that national defense and other strategic investments are not taken into account.
Due to the pandemic, the rules were set aside until the end of this year, but it is starting to look like they won’t be back for long.
According to the rules, a member’s budget deficit must not exceed 3% of its gross domestic product and its public debt must not be less than 60% of the member’s gross domestic product.
The new Dutch Minister of Finance Sigrid Kaag said in the Financial Times on Sunday that shifting defense spending or green investment outside the debt rules carries significant risks, including from the point of view of over-indebtedness.
Kaag is also not warming up for the EU to take on a common debt again. According to him, now it is not advisable to force decisions whose consequences are permanent.
The Netherlands is one of the EU’s “snags” that have emphasized the debt sustainability of member states and the fact that debt rules can be modified, but they should exist. Finland has followed the same lines.
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