BRUSSELS, Jan 31 (Reuters) - Nineteen European Union countries, including France and Germany, are urging the European Investment Bank to increase lending to the defense industry as the EU seeks to bolster its military capabilities in preparation for potential threats, such as a future Russian attack.
This appeal, outlined in a joint letter, precedes forthcoming discussions among EU leaders concerning the future of the EU's defense sector, particularly in light of Russia's actions in Ukraine and calls from U.S. President Donald Trump for NATO members to enhance defense efforts.
Although the EIB, under EU government ownership, is currently restricted from financing ammunition, weapons, or military equipment production, a majority consensus is needed to lift these restrictions, which has raised concerns among some member states.
The EIB is permitted to finance dual-use technologies with military and civilian applications like satellites, drones, and radar systems.
The leaders of Finland, Belgium, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Romania, Slovakia, Spain, and Sweden jointly proposed in a letter to the European Council president and the bank leader that the EIB should reconsider its list of banned activities and contemplate issuing defense bonds.
The leaders emphasized the importance of consulting financial markets and rating agencies to assess the feasibility and potential impact on financing costs, according to the letter obtained by Reuters.
Certain EU member states, particularly neutral countries like Austria, Ireland, or Malta, are worried that supporting defense initiatives through the EIB may jeopardize its high credit rating and fail to address the core issue of securing long-term defense contracts.
Furthermore, concerns exist that expanding the EIB's investment scope to include ammunition and weaponry could deter investors, potentially affecting initiatives aimed at transitioning Europe to a carbon-neutral and digitized economy.
The EIB, a major player in funding Europe's transition towards a more sustainable economy, significantly increased financing for security projects last year to 1 billion euros ($1.04 billion) and plans to reach 2 billion by 2025. The European Commission estimates that the EU defense sector requires 500 billion euros over the next decade.
This call to action for the EIB was spearheaded by Finland, a country sharing a border with Russia, which is set to become a NATO member in 2023.
Finnish Prime Minister Petteri Orpo stressed the importance of enabling EIB funding for direct ammunition production, which is currently prohibited.
The EIB serves as the world's largest multilateral financial institution and lender, boasting a balance sheet exceeding 500 billion euros.
($1 = 0.9643 euros)