Bienkowska proposes joint defense bonds after Brexit

BRUSSELS: The European Union’s commissioner for industry will propose later this month that EU states issue joint bonds to expand the European defense industry, as part of the response to Britain’s decision to leave the bloc.

Greater EU cooperation on defence has been frequently proposed but never materialised. The individual EU countries jealously guard their national defence industries, and Britain in particular opposed such proposals.

With Britain’s decision to quit the EU, ideas for creating and paying for - closer security and defence ties are reemerging. Among them is a joint, permanent command headquarters for EU civilian and military missions.

“Our defence budgets are shrinking ... If you look at Russia increasing its defence budget by 97 percent and China by 160 percent, while the EU’s has fallen 9 percent, it is really frightening,” Industry Commissioner Elzbieta Bienkowska said in an interview. “We are considering pooling national budgets to fund common defence projects and issuing joint EU bonds,” she said, adding she would present the proposal to 27 EU defence ministers on Sept. 27 in Bratislava, when they meet without Britain. “Britain never expressed support, there was always resistance. But with Brexit we found interest, we have the momentum. The mood is quite different,” Bienkowska told Reuters yesterday.

Bienkowska, who is in charge of the industrial part of the EU’s new defence and security strategy, wants to create a European Defence Fund that could finance development of technology that the 27 states agreed they all need. She said the funding could initially come from a new line in the existing European Fund for Strategic Investment (EFSI) specifically for development of defence projects.

The EFSI was set up last year as a three-year scheme to finance infrastructure, energy, research and development in the EU. It works by leveraging 15 times its own 21 billion euros with private investor money. Brussels wants to increase the fund and extend it, although member states have yet to endorse that.

Bienkowska said EFSI could start funding defence projects next year but did not have a date for joint defence bonds. Germany has in the past opposed issuing common EU debt.