Brussels, 23 January 2025
The need for joint investment in military capabilities by European Union countries has been clear since the early days of Russia’s war against Ukraine. President Donald Trump’s return and his criticism of NATO have given new impetus to discussions about increased coordination of EU defence policy. Defence and security are the top priorities for Poland as holder of the presidency of the Council of the EU in the first half of 2025, while the Commissioner for Defence and Space, Andrius Kubilius, is drafting a report on European defence, set for publication in early 2025.
Nonetheless, shifting defence policy even partially to EU level requires overcoming substantial political obstacles, as countries will have to give up part of their sovereignty in this area. Not all member states see this transfer of sovereignty as necessary, some because they have a better relationship with Russia, others because of a policy of military neutrality.
Despite the political hurdles to collective defence, there is strong public backing for an EU defence strategy in most member states, including for common armed forces, provided it reduces waste caused by defence capability fragmentation. Given current security threats, even traditionally sceptical countries – such as the Nordics and Baltics – are gradually reconsidering their opposition to joint debt issuance in support for such schemes. Countries that are typically suspicious of EU defence cooperation, viewing it as competition to NATO, are warming up to the idea.
A European Defence Compact among the willing would be the most practical means to integrate defence policy. To make it happen, EU governments must recognise that collective defence, even within NATO, has become a European public good.
A common fund could underpin a four-pillar framework to integrate national and EU defence policy:
- Flexible interpretation of the EU’s fiscal rules to facilitate national defence investments, treating them as a common European priority;
- Collective arms procurement to exploit economies of scale and scope while ensuring greater technical harmonisation of national defence systems;
- Direct transfers and loans to member states to enhance and modernise armed forces involved in collective defence;
- Centralised investments, including the establishment and operation of joint forces such as a European air defence system and, in the longer run, a shared nuclear deterrent.
In the short term, European Defence Compact funding would come from common debt issuance, with the European Commission estimating that additional defence spending over the next decade should amount to at least €500 billion. There would be hurdles to overcome before the fund could be operational, however.
On the technical front, the main challenge is the system of financial guarantees underpinning the issuance of common debt. A model similar to SURE (the EU employment support instrument introduced during the COVID-19 pandemic), which aggregates national guarantees, would be preferable in the short term. This structure would allow a ‘coalition of the willing’ to quickly establish a defence fund, bypassing the need for unanimity among EU governments and enabling action before the next EU budget cycle starts in 2028.
In terms of decision-making, an intergovernmental framework would be preferable to ‘enhanced cooperation’, an EU rule under which a minimum of nine countries can pursue further integration or cooperation in a specific field. The EU Treaty imposes significant constraints on agreements between smaller groups of EU countries. It permits three types of enhanced cooperation: permanent structured cooperation in specific defence projects, authorised by a qualified majority vote of EU countries; joint missions relating to common security and defence policy in the humanitarian field; and cooperation via the European Defence Agency, which offers a framework for EU countries to increase their military capabilities.
Once enough countries have joined an enhanced cooperation structure, an attempt could be made to bring the framework under the EU umbrella.
The combination of national guarantees for joint borrowing and a coalition-based decision-making process could also facilitate the participation of Europe’s strongest military power, the United Kingdom. In the face of mounting geopolitical risks, rapid agreement on a European Defence Compact would send a strong message within Europe and across the Atlantic about the continent’s ability to take charge of its own security.