EU Officials Eye Bailout Fund as Source of ‘Cheap Loans to Buy Weapons’ - Report

The European Union has been fixated on how to continue fueling the ongoing NATO conflict against Russia in Ukraine while at the same time kick-starting its own defense industry. However, despite numerous options floated, scraping together the funds needed has remained a highly divisive issue for the bloc.

Dipping into the European Union's emergency bailout fund is being floated as a means of investing in the bloc’s defense ambitions, Politico reported, citing sources.

Warmongering EU officials have been eyeing the nest egg of around €422 billion set aside in the European Stability Mechanism (ESM) for rescuing floundering economies, hoping to repurpose it, the report said.

The cash could reportedly be used as a potential source of “cheap loans to buy weapons.”

The EU’s weapons stockpiles have been bled dry by NATO’s proxy war against Russia in Ukraine. Coupled with the mounting debt and domestic policy challenges of individual member states, it is small wonder some favor the idea of refashioning the ESM into a so-called “ defense tool.”

In other options floated, the publication said, the ESM could ostensibly be used to “cover the reconstruction of Ukraine,” or to offer cheap loans to countries like the Baltic States.

The European Stability Mechanism is an intergovernmental organization established by member states of the euro area back in 2012 in the wake of the financial and sovereign debt crisis. Its goal was to help preserve financial stability by providing financial assistance to member states facing acute financing problems.

Pouring money into militarization

The European Commission is allocating nearly €2 billion (about $2.2 bln) to strengthen the readiness of the EU's defense industry. The funds are intended to improve ammunition production and facilitate joint procurement among member states,… pic.twitter.com/1IXUmzpGdt

— Sputnik (@SputnikInt) March 19, 2024

However, the bailout fund option, believed to still be at an early stage, is likely to fuel further dissent within the bloc, whose members are already squabbling over military and weapons spending on Ukraine aid.

Previous suggestions for funding defense have fueled deep disagreements. Other options floated for funding defense have ranged from digging deeper into EU budget coffers and issuing joint Eurobonds, to using illegally frozen Russian assets. However, none of them have made headway amid deep disagreements within the bloc.

France and the Baltic States might support such an idea, cited EU officials reportedly acknowledged. Lately, French President Emmanuel Macron has been on a roll, churning out inflammatory statements on sending “NATO troops to Ukraine,” while also talking tough about a "stronger Europe.”

But the unnamed EU officials also pointed out that other members have been arguing for the need to preserve the fund intact to serve its original goal – that of offering a lifeline for financially struggling member states. This is all the more so since EU national budgets have increasingly become cash-strapped over pressure to pump more money to support Ukraine.

Previously, the ESM has been used to distribute loans to a tune of around €300 billion to Greece, Ireland, Portugal, and Cyprus.

NATO has also been increasingly impelling its members to meet its defense spending target of at least two percent of national GDP. The publication underscored the mounting EU fears that a potential return of former US President Donald Trump to the White House could add to the bloc’s woes. Trump has repeatedly threatened to withdraw US support for NATO allies unless other member states hike up their defense budgets. Recently, it was reported that the Republican frontrunner in the presidential election is considering pushing the alliance’s members to increase defense spending to three percent of GDP.

All of the Eurozone's 20 finance ministers would have to agree to such a repurposing of the ESM.