European Union nations are deep in discussions regarding a proposed €500 billion joint defence fund, marking a significant shift in the continent’s military financing strategy. The ambitious plan, which would utilise bond markets to boost defence spending, comes as European leaders prepare for the potential return of Donald Trump to the White House.
The initiative emerges as a direct response to Trump’s previous threats to withdraw US security guarantees from NATO allies who fail to meet spending requirements. The proposed financing vehicle would issue bonds backed by national guarantees from participating countries, rather than the EU as a whole, making it accessible to non-EU states including the UK and Norway.
Senior European officials indicate that while the exact borrowing target remains under negotiation, the fund would need to exceed €500 billion. The European Investment Bank would serve a technical role, managing the special purpose vehicle and overseeing treasury functions, though it remains restricted from directly funding arms investments.
Greek Prime Minister Kyriakos Mitsotakis, an early advocate for defence Eurobonds, notes a significant shift in sentiment among EU leaders. The initially lukewarm reception has evolved into what he describes as “a renewed sense of urgency” given Europe’s current security challenges and the prospect of Trump’s return to power.
The Netherlands, Finland, and Denmark have expressed broad support for the concept, while Germany’s position remains uncertain pending its February federal elections. The fund could support crucial joint defence projects, including common air defences proposed by Poland and Greece, estimated to cost €500 billion alone.
This unprecedented financial mechanism represents a departure from traditional EU defence funding approaches, reflecting growing concerns about European security autonomy. The voluntary nature of participation and inclusion of non-EU states demonstrates a pragmatic approach to defence cooperation, potentially reshaping the continent’s military capabilities landscape.
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