Spain’s Finance Minister, Carlos Cuerpo, has called for the European Union to consider issuing common debt as a solution to financing increased defense spending across the bloc. His remarks, made during a Eurozone finance ministers meeting on Monday, highlight the growing urgency for Europe to address defense budget shortfalls, particularly in the wake of shifting U.S. policies under the Biden administration.
Speaking with POLITICO, Cuerpo emphasized that the European Union’s current proposal to relax fiscal rules for more defense spending is insufficient to meet the bloc’s pressing security needs. Instead, he advocated for the EU to explore common debt issuance, a strategy he described as a “no-brainer” for funding vital public goods, including defense and infrastructure like electricity interconnectors.
This proposal reflects Spain’s stance on continuing the momentum of initiatives like the EU’s €650 billion Next Generation EU recovery fund, which was financed through common borrowing following the COVID-19 pandemic.
The call for joint debt comes at a time when the EU faces an evolving challenge to its security architecture, especially after U.S. President Donald Trump’s sudden policy shift, signaling a potential reduction in American military presence in Europe. In June 2024, the European Commission estimated that an additional €500 billion in defense investment would be required over the next decade to bolster the EU’s defense capabilities.
Despite the urgency, the proposal of common borrowing remains highly contentious, particularly in Northern Europe, where fiscally conservative governments are wary of such measures. Dutch Finance Minister Eelco Heinen expressed firm opposition to the idea, emphasizing the necessity of budget cuts to offset any increase in defense spending, warning that “the money is not free.”
Conversely, Southern European countries with already high levels of debt, such as Italy and France, argue that common debt is essential to ramp up defense investments without breaching EU fiscal regulations. Over the weekend, German politician Friedrich Merz, the leading candidate for Chancellor in the upcoming elections, also signaled support for exploring joint borrowing options.
The defense dilemma facing EU countries is becoming increasingly urgent as they seek to ramp up defense investments in a financially sustainable manner. Ursula von der Leyen, President of the European Commission, proposed invoking an emergency clause to exempt military spending from the EU’s stringent budget deficit limits. However, Cuerpo expressed reservations, suggesting that simply extending existing fiscal rules, which already allow some flexibility for defense spending, would not sufficiently free up the resources needed for significant investment.
While Cuerpo acknowledged that adjustments to fiscal rules alone would not solve the defense funding gap, he proposed expanding the European Investment Bank’s role in financing defense projects, attracting private sector capital, and tapping into the European Stability Mechanism — the EU’s financial safety net used to aid struggling economies during the eurozone crisis.
Currently, Spain allocates just 1.28 percent of its GDP to defense, the lowest ratio among NATO members. However, the Spanish government aims to reach NATO’s target of 2 percent of GDP by 2029. Cuerpo highlighted Spain’s efforts to significantly increase defense spending in recent years, citing the country’s commitment to growing its defense investments in absolute terms.
As the EU grapples with its defense budget dilemmas, Cuerpo’s proposal underscores a key debate: how to balance financial constraints with the need for a robust and responsive defense strategy in an increasingly uncertain global security environment.
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