EU and UK are talking about European defense funding, worrying we will return

Free unlock edited abstracts

FT’s editor Roula Khalaf chose her favorite stories in this weekly newsletter.

The UK will join EU leaders this week in groundbreaking negotiations on the establishment of European-wide defense funding arrangements as the continent works to strengthen its military power in the absence of a blanket of disappearing on the disappearing U.S. security.

British Prime Minister Rachel Reeves will hold talks with other European finance ministers at a residence meeting in Cape Town this week as Ukraine’s war enters its fourth year.

“It could be a fund or a bank. For example, we are also considering the concept of rebuilding the bank.

Domanski told the Financial Times that there had been months of discussion with the UK, adding: “Without Britain, it would be hard to imagine a defense against Europe.”

The UK Treasury confirmed that Reeves would “raise defense financing proposals with European counterparts” on the G20, but said the talks were in the early stages.

Donald Trump asked European NATO allies to increase defense spending to 5% of GDP, a target that some people still haven’t reached, or may lose protection.

The rapid re-engagement of the U.S. president with Russia, a country that most European countries see as an existential threat, sparking wild discussions on how to collectively enhance European defense capabilities and reduce dependence on U.S. military and weapons.

On Sunday, Germany’s incoming principal Friedrich Merz announced that Germany must fundamentally re-form its security arrangements and end its long-term dependence on Washington, saying Trump’s fate on Europe and The fate required for Europe to “achieve independence” is “basically indifferent.”

European Commission President Ursula von der Leyen and British Prime Minister Keir Starmer had extensive discussions during a conference call this weekend, Von der A separate appeal between Leyen and Norwegian Prime Minister Jonas Gahrstøre. discuss.

European countries are looking for ways to improve defense capabilities when national budgets are strictly restricted. By leveraging state guarantees, banks will allow countries to increase their spending without increasing their balance sheets in advance.

The UK is seeking ways to increase defence spending from 2.3% to 2.5% of GDP, paying at least £500 million a year, and its ability to enhance spending is severely limited by its self-imposed fiscal rules.

One of the proposals came from General Nick Carter, former head of the British army. Iron Curtain to support Central and Eastern Europe.

“The Treasury is interested in this,” said a person who discussed with Reeves. However, Treasury officials said there are many multilateral financing models on the table and Reeves is open to the next step.

Experts say the benefit of Carter’s “recurrency banking” Reeves is that it will mitigate the impact of additional defense spending on fiscal rules.

Andy King, a former British official at consulting firm Flint Global, said such banks have the potential to “raise resources for defence without substantial impact on fiscal rules.” “It’s not a certain result: Details are important in the structure of an entity and how it can leverage its lending capabilities,” he added.

The EU Leaders’ Meeting in late March will discuss common defensive needs, and Poland aims to make progress at the EU Finance Ministers’ gathering in April ahead of the leaders’ decision in June.

The European Commission said it will partially lift EU fiscal rules this month to allow countries to invest in defense, a move that will allow countries to borrow without sanctions.

Von der Leyen also opened the door to “co-European financing” for ordinary defense projects and is expected to introduce funding options in detail in March.