On Friday, European Union leaders will lay the groundwork for any unforeseen expenditure related to the Ukraine conflict. However, according to draft summit conclusions, they will avoid addressing any new joint EU debt issue. Leaders from the EU’s 27 member states are meeting in Versailles, near Paris; they will discuss increased defense spending in the aftermath of Russia’s invasion of Ukraine, Kyiv’s bid to join the bloc, and ways to make Europe more strategically independent of global suppliers in energy, microchips, and food.
EU Concerns Over Debt
The COVID-19 pandemic resulted in a significant increase in public debt across the EU; governments sought to progressively reduce the emergency budgetary support required to keep economies afloat during the lockdowns. However, due to a projected high increase in defense expenditure and investment in renewable energy sources to move away from Russian gas, oil, and coal, the EU has had to reconsider that policy considering Russia’s invasion of Ukraine. The draft summit conclusions said, “Our national economic policies will need to take into consideration overall investment demands and reflect the current geopolitical environment.”
“We will pursue good fiscal policies that assure debt sustainability for each Member State,” the conclusions stated, “particularly by incentivizing growth-enhancing investments that are critical for our 2030 targets.” Some nations, such as France, seek extra EU debt to assist ease the transition away from Russian energy supplies, the impact of sanctions imposed on Moscow over Ukraine, and the desire for greater autonomy from global food and electronics suppliers.
However, Germany, the Netherlands, and others are vehemently were against such a move; they claim that there is still enough unspent money in the EU’s 800-billion-euro recovery fund. The group is currently borrowing from the fund to collectively address many of the issues.
Only 74 billion euros of the total EU money has been distributed so far since national governments must prepare projects supported with grants and ultra-low-interest loans. “Let’s utilize other mechanisms first,” one eurozone official remarked.
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