🇪🇺🇺🇦👇important contribution. Start of debate forcing itself onto #EU agenda when Leaders meet for 'Growth summit' in Versailles next week.
Personally I have no doubt a "doubling-down" on EU #borrowing capacity in time will be necessary -- but not necessarily as proposed.
Personally I have no doubt a "doubling-down" on EU #borrowing capacity in time will be necessary -- but not necessarily as proposed.
https://twitter.com/benjaminhaddad/status/1499692663196561411
As a quick take, I think @benjaminhaddad @maxbergmann's proposal:
- lacks ambition in the most adverse scenario (1⃣) (obvious)
- faces question about EU borrowing priority in world we are waking up to tomorrow (2⃣);
- requires discussion of European defence fundamentals (3⃣).
- lacks ambition in the most adverse scenario (1⃣) (obvious)
- faces question about EU borrowing priority in world we are waking up to tomorrow (2⃣);
- requires discussion of European defence fundamentals (3⃣).
1⃣ Worst-case: rest of Europe gets pulled into war w/ Russia. What nobody wishes, is not inconceivable.
We are then talking about something entirely different in scale in terms of mobilising resources across society, including issuance of war debt, to finance the effort.
We are then talking about something entirely different in scale in terms of mobilising resources across society, including issuance of war debt, to finance the effort.
2⃣ Even in more benign scenario, we argue in coming piece w/ @thinktankrico that Europe's economy will develop #wartime-type attributes.
Sanctions are form of conflict w/ tremendous consequences, incl. spiralling financing costs, resource scarcity & difficult allocation decisions
Sanctions are form of conflict w/ tremendous consequences, incl. spiralling financing costs, resource scarcity & difficult allocation decisions
- GDP shock (EU Commission yet to give figures but we hear it's grim)
- financial volatility & flight-to-safety
- energy crisis w/ soaring prices, possible rationing (@Tagliapietra_S argues cut in demand 15%) & imp. outlays to replenish storage for winter (his estimate €70bn)
- financial volatility & flight-to-safety
- energy crisis w/ soaring prices, possible rationing (@Tagliapietra_S argues cut in demand 15%) & imp. outlays to replenish storage for winter (his estimate €70bn)
- global commodities crunch, driving inflation but requiring also broader reflection on supply chain resilience
- displacements: 1,3 million 🇺🇦 refugees already, could be 10x that (OECD cost of €10,000 per refugee/year is conservative)
- displacements: 1,3 million 🇺🇦 refugees already, could be 10x that (OECD cost of €10,000 per refugee/year is conservative)
- in parallel, need to finance green transition, industrial & technological investments. No, cannot stop: energy transition is necessary path (COM estimate yearly investment gap €520bn)
- while being attentive to distribution of social cost & vital domestic consumer demands.
- while being attentive to distribution of social cost & vital domestic consumer demands.
Conclusion: #defence is far from only additional expenditure EU leaders now need to deal with and finance.
🇩🇪 can shoulder nationally. Others have margin in RRF to absorb initial shock. 🇮🇹has taken full amount & might need help to keep borrowing costs down
ec.europa.eu/commission/pre…
🇩🇪 can shoulder nationally. Others have margin in RRF to absorb initial shock. 🇮🇹has taken full amount & might need help to keep borrowing costs down
ec.europa.eu/commission/pre…
Beyond borrowing costs, the argument for EU #solidarity is absolutely compelling.
▶️Consensus in deciding sanctions and course of action.
▶️Solidarity in facing consequences of serious crisis, hitting all Europeans, yet asymmetrically.
▶️Consensus in deciding sanctions and course of action.
▶️Solidarity in facing consequences of serious crisis, hitting all Europeans, yet asymmetrically.
3⃣ That said, case for EU borrowing & investment mechanism in defence is also convincing.
Undeniable spending gap (🇵🇱PM claims that European defence expenditures must double).
In defence, matters hugely also #how you spend. Today Europe gets very little bang for the buck.
Undeniable spending gap (🇵🇱PM claims that European defence expenditures must double).
In defence, matters hugely also #how you spend. Today Europe gets very little bang for the buck.
Military spending cannot be taken as a straightforward indicator of military capability.
EU countries' defence budgets are roughly 3x that of Russia. Problem: in Europe the "whole is considerably less than sum of its parts" as K. Rogoff recently put it.
project-syndicate.org/commentary/sus…
EU countries' defence budgets are roughly 3x that of Russia. Problem: in Europe the "whole is considerably less than sum of its parts" as K. Rogoff recently put it.
project-syndicate.org/commentary/sus…
To illustrate, total armed forces personnel in EU totals more than 1,4 million.
Still, as #StrategicCompass discussions on creation of Rapid Deployment Capacity highlight, EU is not clear on how to muster a - standing - rapid reaction force of 5000 (sic).
Still, as #StrategicCompass discussions on creation of Rapid Deployment Capacity highlight, EU is not clear on how to muster a - standing - rapid reaction force of 5000 (sic).
Of the €200bn annual expenditure, European collaborative defence spending was as little as €4bn in 2020 (EDA figures) !
Duplication is the norm.
Duplication is the norm.
Authors therefore right to point to #RRF-type model because its kernel is that money is conditioned on national spending aligning w/ EU common priorities.
Already, basic idea behind European Defence Fund, #PESCO and #CARD but happens at small scale and difficult to implement.
Already, basic idea behind European Defence Fund, #PESCO and #CARD but happens at small scale and difficult to implement.
Massive scale-up to launch common armament programmes & procurement of key enablers financed w/ EU borrowing would be the "EU #Zeitenwende".
Would require serious arm-twisting by Leaders of national defence planners.
Would require serious arm-twisting by Leaders of national defence planners.
Difficult debates ahead on what can be done within current Treaties (Art. 41-2) & institutions, not to mention NATO.
In immediate term, the off-budget European Peace Facility should take on financing of MS committing forces ready for EU operations.
In immediate term, the off-budget European Peace Facility should take on financing of MS committing forces ready for EU operations.
#Funfact: reflections on debt mutualisation to boost defence spending go some way back. Current defence commissioner @ThierryBreton pushed such ideas in 2016 already...
ifrap.org/sites/default/…
Nothing is more powerful than an idea whose time has come. Shame it takes a war.
[END]
ifrap.org/sites/default/…
Nothing is more powerful than an idea whose time has come. Shame it takes a war.
[END]
Others w/ more expertise on specific parts or all of this
@thinktankrico @NvOndarza @MESandbu @Ce_Moll @FabianZuleeg @remkorteweg @GeorginaEWright @COdendahl @SonyKapoor @Mij_Europe @BrigidLaffan @DanielFiott @rdanielkelemen @JoeLitobarski @Shahinvallee @jaemmanouilidis @ricbdc
@thinktankrico @NvOndarza @MESandbu @Ce_Moll @FabianZuleeg @remkorteweg @GeorginaEWright @COdendahl @SonyKapoor @Mij_Europe @BrigidLaffan @DanielFiott @rdanielkelemen @JoeLitobarski @Shahinvallee @jaemmanouilidis @ricbdc
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