The European Union will announce plans as soon as this week to jointly issue bonds on a potentially large scale to finance energy and defense spending as it deals with the fallout from Ukraine’s invasion of Ukraine. Russia.
His proposal could come after EU leaders hold an emergency summit in Versailles, France, starting on Thursday, according to officials familiar with the preparations. Officials are still working out the details of how the debt sale works and how much money they plan to raise.
The unusual move comes just a year after the EU launched an emergency package of 1.8 million euros backed by common debt to finance member states’ efforts to respond to the pandemic. Now, the bloc faces a huge financial need as it begins to reform its military and energy infrastructure in the wake of the Russian attack.
“We must find new tools to deal with the new problems this crisis presents us with,” Paolo Gentiloni, the EU’s Commissioner for Economic Affairs, said Monday evening to lawmakers. France in Strasbourg, France. He added that he thought EU leaders would give political direction on next moves at the summit.
A spokesman for the committee declined to comment on specifics but said officials continue to monitor the situation and stand ready to respond to a changing situation.
The plan would involve the European Commission, the bloc’s governing body, issuing bonds and then transferring the proceeds to member states in the form of concessional loans to finance spending in the EU. area, according to officials who asked to remain anonymous because the plans are private.
Some officials said one option is to structure it like the bloc’s SURE program, which refers to a scheme used to fund post-pandemic jobs support initiatives, whereby Member States repay concessional loans provided by the commission.
The invasion has forced the bloc to rethink its most basic energy needs, as more than 40 percent of the EU’s gas imports and a quarter of its oil come from Russia. On Monday, Moscow threatened to cut off gas supplies to Europe through the Nord Stream 1 pipeline. But as the EU transitions away from Russian gas, it will have to switch to other, more expensive sources.
While the bloc could still increase imports of liquefied natural gas from countries like the United States, such purchases would be more expensive. And refilling storage at an average level will be challenging given skyrocketing prices: The price tag could reach 70 billion euros compared with 10 billion euros in previous years, according to a report by the consultancy. Bruegel is based in Belgium.
The EU has also had to rethink its strategy, as it often relies on US protection through its commitments in the NATO alliance.
Germany has made history and has pledged to increase military spending, of which Europe’s largest economy will spend 100 billion euros to modernize its military. German Chancellor Olaf Scholz said from now on Germany would achieve NATO’s goal of allocating at least 2 percent of gross domestic product to defense, he told lawmakers in Berlin, a goal which the country has consistently failed to achieve.
According to a Jefferies research note, if non-US members of the North Atlantic Treaty Organization manage to reach the 2pc threshold, they will need to increase their defense budgets by 25pc.
https://www.independent.ie/business/world/eu-to-tap-bond-markets-for-massive-war-fund-41423278.html EU taps bond market for massive war fund