EU warms to boosting defense funding to secure eastern flank

BRUSSELS — The European Commission signaled openness to new ways of funding defense support for Eastern Europe to reinforce NATO’s borders amid Russian aggression.

Speaking after a meeting of EU finance ministers in Warsaw at the weekend, Economy Commissioner Valdis Dombrovskis said the Commission was willing to consider options that go “beyond what is already on the table,” and did not rule out subsidies for countries on the bloc’s vulnerable eastern edge.

The move comes amid growing frustration among Eastern and Central European governments, which are bearing the financial brunt of Europe’s military build-up.

An EU diplomat from a small eastern country told POLITICO that even if countries at the border with Russia upped their defense spending by 20 percent, it wouldn’t be enough to secure Europe due to the smaller size of their respective economies. “We need everyone [to increase defense spending],” said the diplomat, who was granted anonymity to speak freely.

Dombrovskis agreed that countries bordering Russia and Belarus were facing major risks and likely needed further support. He said he backed the exploration of a new intergovernmental fund, originally floated by the Bruegel think tank last week, that would allow both EU and non-EU countries to pool money for rearming the continent.

The proposal has also raised the possibility of the Commission participating as a direct shareholder in the fund.

Dombrovskis said the fund could help to engage countries outside the EU and bypass the need for unanimous agreement by potentially skirting some of the EU’s stricter budget rules.

The pitch is gaining traction in frontline states like Poland and the Baltics, which have significantly ramped up defense spending since Russia’s invasion of Ukraine.

But other major players like Germany are not keen to back the project and countries like Spain — eager to avoid adding debt — are advocating for new jointly issued EU bonds, similar to those used during the Covid-19 crisis.

At the Warsaw meeting, Spain’s Economy Minister Carlos Cuerpo proposed a special-purpose vehicle that would provide both grants and loans for pan-European defense projects. He framed the idea as a show of solidarity with Ukraine and the Eastern front.

Poland, meanwhile, drew a sharp comparison with the pandemic: “It’s clear that right now, it’s Eastern and Central European countries that have the highest defense needs,” said Polish Finance Minister Andrzej Domański.

Dombrovskis said the proposal will be discussed in the upcoming negotiations about the EU budget.

Still, proposals to offer grants will likely face stiff resistance, especially from fiscally conservative nations like the Netherlands, which has historically opposed large-scale grant transfers between member states.

For now, the Commission appears to be keeping its options open. But as negotiations over the EU’s next long-term budget get underway, the tension between solidarity and self-interest is once again on display.