In the midst of calls for Europe to realize, competing ideas circulate on how to ensure that European nations can face Russia in a future possible war without any support. Although the idea of a resetting bank can appeal, it is less clear that there is new money for what is probably a very expensive business.
The European Commission recently unveiled 800 billion euros ($ 876 billion) REARM. The plan essentially involves imposing a huge hike in defense expenses for each Member State. Some 650 billion euros ($ 712 billion) of funds would come from each of the 27 members increasing defense expenditure on average by 1.5% of GDP in addition to current levels.
It is difficult to imagine that such an increase would be politically acceptable since many European governments are strongly indebted. For example, France should increase its military spending by almost $ 47 billion Each year when it is Debt already amounts to 113% of GDP. Likewise, Italy, the third EU defense power, is expected to increase the expenses by $ 34.7 billion each year with its current debt to 136% of GDP.
Thus, European countries rush to seek elegant means of stimulating defense expenses, including the imbalance sheet. An idea that recently emerged was to create a Rearmament (also known as a Defense Security and Resilience Bank). It would be designed to exploit private investment to support the development of defense capacities.
The commercial call for the establishment of a bank to provide investment financing for new defense projects and purchases seems powerful. As I pointed out previously, NATO is currently a narcotic $ 472 billion a year on equipment Only each year, of which $ 113.4 billion is spent by EU countries. Add a Réarm boost – if it materializes – and the EU figure could increase to 195.1 billion dollars.
A bank based on commercial principles could be useful for combating generalized sclerosis in defense purchases across Europe. This is not a unique problem in Europe, because the The Ministry of Defense also has trouble reporting Precisely for its $ 800 billion and annual expenses and 4 dollars of active dollars.
For European governments, the bank would contribute to further modify the risk of costs and overruns of defense entrepreneurs, while lifting the direct development costs of government balance sheets. But at best, it could control the costs in a spiral, rather than necessarily reducing costs or providing additional capacities.
The United Kingdom provides a perfect case study. On December 4, 2023, the National Audit Office produced an examination of the Ministry of Defense equipment plan for the next decade, concluding that it was unstoppable And faced its greatest budget deficit since the plan was introduced in 2012. Note here that the current plan was developed two years before the start of the Ukrainian war.
The costs of the equipment program increased by 27%, or 83.8 billion dollars, between 2022 and 2023, and which was based on the “most likely” spending scenario. In the “worst case”, the total increase in the cost will amount to almost $ 102 billion. Add other expenses of expected costs that the MOD reassures us can be absorbed by the savings of efficiency, the cost then derives from more than $ 133 billion.
In March 2024, the Committee of Parliamentary Public Accounts indicated that the Ministry of Defense had always been incapable or did not want to control costs and spiral delivery calendars of its 1,800 defense projects. The MOD has an unhappy assessment: whether it is an exaggerated overtaking of $ 550 million on the Warrior armored vehicle program, an overtaking of $ 3.2 billion on new aircraft carriers, or a 59% delay in delivery of the Challenger 3 tank.
By far, the largest field of budgetary pressure is in the nuclear program, which is currently excessive by 62%. There is a joint project of the United Kingdom to build a new class of submarines to counter the apparent threat of China as part of the Aukus program; Although the current generation of cleat-class fleet submarines in the United Kingdom has only been operational for 10 years.
We have a program to design a new nuclear warhead with the United States, as if 225 nuclear weapons were not enough. The “Dreadnought” submarine, to replace the SSBNS which carry the nuclear missiles of the United Kingdom, is currently seven years late. None of these massively expensive projects give us capacities that we do not already have. Although they undoubtedly strengthen the military-industrial supply chain of the United Kingdom, they do not make us more sure.
Meanwhile, the money to pay the soldiers, the sailors and the aerial staff was pinched, given the balloon costs of the equipment. Research suggested a 10% reduction In real terms in the costs of British military resources since 2010. The daily budget of last year (2024-25) to pay the guys and the tires on the front line of our defense, was Cut of $ 3.2 billion. Many staff are careful to know if they will have a House to live. Submarines Talk about the increase in the stress of longer deployments that have been motivated by the need to reduce costs.
By far the greatest threat confronted with European soldiers contemplating a future war with Russia is the density of force; The armies of Europe are just much smaller than those of Russia and Ukraine. It is still far from clear that the European rearmaire plan of $ 876 billion of $ 876 billion will offer much higher armies since the probable resistance to the expenses proposed increases.
For the moment, the United Kingdom, with Poland, seems most eager to push the idea of a Rearmament. Part of reason is the exclusion of Great Britain from the The commission plan within the framework of the REARM program to offer defense loans totaling $ 150 billion over four years. However, the two initiatives seem to serve different objectives: the proposed bank aims to support new investments in the development and supply of defense equipment, while generating a commercial return; The loan regime is an initiative led by the Commission to help states buy additional weapons supplies for Ukraine at low interest interest.
As always, by putting aside the major objectives and the declarations that have repercussions, there is a basic indecision in Europe around spending enormous sums for the defense, even if the United States seeks to reduce its commitment.
This feeling can worsen if the current pricing war turns into a global recession. For the moment, Euro Rearm and the rearmament bank led by the United Kingdom simply seem to mix money under the European defense monopoly.
