Is debt justified to increase defence investments?
First it was vaccines, then gas and now the EU will make joint purchases of defence equipment. This latest emergency is due to Russia’s war in Ukraine and the prospect of less investment by the US in Europe's protection. Is the new financial instrument Security Action for Europe up to the challenge?
READ MORE : http://www.euronews.com/2025/06/10/is-debt-justified-to-increase-defence-investments
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First it was vaccines, then gas and now the EU will make joint purchases of defence equipment. This latest emergency is due to Russia’s war in Ukraine and the prospect of less investment by the US in Europe's protection. Is the new financial instrument Security Action for Europe up to the challenge?
READ MORE : http://www.euronews.com/2025/06/10/is-debt-justified-to-increase-defence-investments
Subscribe to our channel. Euronews is available on Dailymotion in 12 languages
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NewsTranscript
00:00First it was vaccines, then gas, and now the EU will make joint purchases of defense equipment.
00:20The latest emergency is due to Russians' evasion of Ukraine and possible weakening of U.S. protection in Europe.
00:27To raise the necessary funds, the EU created a new financial instrument.
00:31It's called SAFE, short for Security Action for Europe, and we'll explain it in this EU decode.
00:38SAFE will have 150 billion euro, which the EU will borrow on the financial markets.
00:44It is one of the pillars of the Readiness 2030 plan, which aims to mobilize 800 billion euro for defense investment by the end of the decade.
00:53The aim is to increase the production capacity of air and anti-missile defense, artillery systems, missiles and ammunition, drones and anti-drone systems,
01:04protection of critical infrastructure, including space, military mobility, cyber, artificial intelligence and electronic warfare.
01:13Each one of the 27 member states will be able to borrow from this fund and they can enter into partnerships with other member states.
01:20We'll talk more about those partnerships later, but for now let's hear what Europeans think about more investment in defense.
01:28Jedes Land braucht ein Minimum an Entwicklung, auch auf Rüstungsebene.
01:33Wenn es aber darum geht, jetzt wieder so ein Wettrüsten zu initiieren, dann bin ich nicht dafür.
01:38Ich bin sehr für eine gemeinsame europäische Verteidigungsanstrengung,
01:42aber die einzelnen Budgets kann man auch in den nationalstaaten lassen.
01:47Und vor allem muss man dafür keine Schulden aufnehmen.
01:49Ich glaube, dass es noch nicht mehr Priorität gibt, auch in Italien, auch in Europa.
01:56Ich glaube, ich bin sehr, ich bin d'accord.
01:59Warum?
02:00Weil wir, praktisch, wir müssen nur aufzuhren uns.
02:06Und wir haben das Gefängnis in den Händen.
02:08Euro News defense reporter Alice Tidy has covered this regulation.
02:15What is the situation with regard to military equipment production in the EU
02:20and how can the fund play a role?
02:23So Russia's war in Ukraine and the EU's bid to support Kyiv
02:26has really highlighted the dependencies and the deficiencies of the EU defense industrial base
02:31and how ill-prepared we were should we be forced into a conventional war.
02:36SAFE is about firing up European weapons manufacturing lines
02:40by getting member states to buy strategically and together
02:43so that the industry becomes less fragmented and quicker to produce
02:49and our armies, more crucially, become more interoperable.
02:53And of course, also it's about putting prices down.
02:56Which countries are showing interest in this fund
02:58and how does it relate to the fiscal deficit limits
03:02imposed by the Stability and Growth Pact?
03:05So many of the member states who have lower credit ratings
03:08than the Commission may very well be interested in using SAFE.
03:11This is the case of Latvia, for instance,
03:13which has said it wants to use the funds.
03:15The EU rules planned for deficits to not exceed 3% of GDP for each member state.
03:21But this plan is saying,
03:23we're going to allow you to exceed that amount by 1.5% annually,
03:27provided that 1.5% extra spending is only on defence.
03:32About more than half of member states have requested the activation with the Commission.
03:38Usually, these regulations are approved by the Council,
03:42which represents the member states,
03:43and by the European Parliament.
03:45Why this time MEPs were excluded from the process and how did they react?
03:51So, the Commission decided to invoke Article 122 of the treaty.
03:56This can only be invoked in case of severe difficulties in obtaining certain items
04:01or if a member state is seriously threatened with severe difficulties
04:06caused by natural disaster or by exceptional occurrences beyond its control.
04:10The Legal Affairs Committee of the Parliament decided, however,
04:13that this was not the right strategy or the right legal basis for this legislation.
04:20And on their recommendation, Roberta Mazzola, the President of the European Parliament,
04:25wrote to her counterpart in the Commission, Ursula von der Leyen,
04:28saying that they would sue if they didn't change tack.
04:32To receive loans, governments have to meet certain conditions.
04:3565% of the value of each piece of military equipment
04:39must be produced in one of the EU-27 member states,
04:43Ukraine and the members of the European Free Trade Association,
04:47Iceland, Liechtenstein and Norway.
04:50The remaining 35% can also come from any third country around the world.
04:55In the common public procurement part,
04:57EU-candidate countries such as the Western Balkans
05:00and third countries that have bilateral security and defense partnerships
05:04like Japan, South Korea and the United Kingdom can participate.
05:08Our guest is German MEP, Marie-Agnes Strach-Zimmermann,
05:13from Renew Group, who chairs the European Parliament, Security and Defense Committee.
05:19This financial instrument, SAFE, is based on more debt
05:23to be paid off by governments over 45 years.
05:28Is this justified and above all enough to boost European arms production?
05:34So it's a possibility for countries to find money to buy military equipment.
05:43It's not only tanks or rockets.
05:45It's also the question to buy very important things, hybrid war, cyber war.
05:54So it's the beginning.
05:55And I think it's a very good sign.
05:57And what happens afterwards, we will see.
05:59We will still be dependent on imports or partnerships with other countries,
06:06be it Norway, Japan or Korea.
06:08Do you think this is the way to do the transition?
06:11I wouldn't say first Europe, but it's important if you talk to my colleagues all over the countries.
06:18You know, military equipment, it's not only a question of security.
06:21Military equipment, it's also a kind of dual use.
06:25It's a kind to develop technological, really huge things.
06:32And this is also important for civil things.
06:34So yes, we have to support and we have to boost Europe.
06:36United States President Trump is demanding higher contributions to NATO,
06:41which will be difficult for some member states.
06:45The European Union has now this program, Rearm Europe 2030.
06:48Will it be enough to convince the United States to keep its support for Europeans' defense?
06:55There is one big player.
06:57And this is China.
06:58China is an observer.
07:00China will see, are they just talking about freedom and peace?
07:06Or are they really ready to defend their freedom and peace?
07:10If Ukraine lost this war, if we are not able to pay more, to do more,
07:14then it's easy to say for China, come on, they are just talking.
07:17And so I think that we have to work together all over the world, not only here and there.
07:25And I'm optimistic that the President of the United States will realize what we are now starting to do.
07:32In addition to this financial instrument, the EU has plans to raise more money.
07:37The European Commission proposed to use the cohesion funds intended for regional development.
07:42The European Investment Bank will also try to mobilize private money for the first time for this area.
07:49It remains to be seen whether the European Union will have the financial capacity to face the new security challenges.