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As NATO member states struggle to meet their defense spending targets and fierce wars on Europe’s Eastern Front, Officials are struggling to agree on a plan that would provide hundreds of billions of dollars to support defense.
Eight NATO countries are not meeting their defense spending target of 2% by 2024, and as many member states struggle with chronically strained budgets, Calls to achieve those goals were not quickly heeded.
The European Commission estimates that around 500 billion euros, equivalent to an investment of $524 billion, will be needed over the next decade. To protect Europe from ever-evolving threats.
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The EU budget cannot directly fund national defence. And some European officials and NATO experts are proposing that the global defense bank allocate funds for military modernization.
The Defense, Security and Resilience (DSR) Bank issues AAA-rated bonds to financially distressed countries to enhance their defense. And it will provide guarantees for commercial banks to offer loans to defense suppliers.
European officials are struggling to agree on a plan to fund hundreds of billions of dollars to strengthen defence. (U.S. Army photo by Spc. Ryan Parr)
“This is not a substitute for increasing defense spending in each of these countries. I think it should be a supplementary tool,” Gidrimas Jeglinskas, chairman of the National Security Committee in the Lithuanian parliament and a former NATO official, told Fox News Digital.
His words echo those of incoming President Trump. It has long threatened to pull the United States out of NATO as many countries miss the 2% target for defense spending.
“I think we have to look at it as an opportunity for the United States as well,” Jeglinskas added. “I understand Donald Trump’s skepticism of the World Bank and IMF (International Monetary Fund) and IFC (International Finance Corporation) and other institutions. “I think there’s a lot of capital spending and a lot of investment that these banks or institutions are doing. The real impact is questionable. So I think we need to have clear KPIs. We need to build protections.”
The US defense budget of $824 billion in 2023 is equal to half of the total defense spending of NATO member countries, totaling $1.47 trillion.
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An increasing number of EU defense chiefs and foreign ministers floated the idea of issuing joint debt through bonds to finance military projects.
But some countries, such as Germany, have expressed concerns about maintaining their sovereignty and the disproportionate financial burden on some countries.
The concept of DSR banking has been explained at length in form A. New Atlantic Council report By teammate Rob Murray
The EU budget cannot directly fund national defence. (Press service of the Ministry of Defense of Ukraine via AP, file)
“For our partners across the Euro-Atlantic and Indo-Pacific regions, Banks can do more than offer low-interest loans for modernizing national defense. to facilitating equipment rental Currency risk protection and supporting critical infrastructure and rebuilding efforts in conflict zones such as Ukraine,” Murray wrote.
“An additional important function of DSR banks is to provide risk insurance to commercial banks. This allows them to expand financing to defense companies across the supply chain.”
The goal is to offer capital to small and medium-sized defense companies that often have difficulty accessing capital.
“By granting loans with a maturity period The Bank will offer predictable and sustainable funding for defense modernization. The governance structure will align financing with overall security goals, such as arsenal upgrades and investments in emerging technologies,” Jeglinskas wrote in a recent op-ed for Financial. Times
The Defense, Security and Resilience (DSR) Bank issues AAA-rated bonds to financially distressed countries to enhance their defense. (Picture Alexandra Bayer/Getty)
When asked how DSR Bank will enable countries to How can we agree on defense funding priorities? Jeglinskas likens the idea to a joint expeditionary force led by the UK. It is a military alliance consisting of Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, the Netherlands, Norway and Sweden.
Jeglinskas said there are €33 trillion worth of European assets under management across the continent.
“There is no political will. There is no risk of moving them anywhere. Beyond the bond market where they are resting right now,” he said, “but many countries need to build that initial capital. Then by using the sovereign rating to reach AAA in the equity market, hoping to raise that money from the bond market. and begin funding national defense projects.”
The European Investment Bank provides long-term loans and guarantees to European country projects in line with EU policy goals.
“But even they are struggling with shifting their mandate to more dual-use technology. But it is still not allowed in their funding package,” Jeglinskas said.
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“Of course, every other bank in Europe is looking at their EIB signal, that signal hasn’t happened yet. That’s the point. We need to create some mechanisms. And that kind of global defense bank will. One of the tools we can use is to mobilize funds and focus them on true prevention. So it really creates another multilateral lending institution.”
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