Brussels has proposed using the EU budget to indirectly support weapons production, an unprecedented move provoked by Russia’s war against Ukraine to provide cash to an industry it has previously been barred from funding.
Providing weapons to help Ukraine’s defence since February 2022 has emptied Europe’s armouries and defence stocks and strained the continent’s limited arms production capacities, prompting Brussels to take a series of groundbreaking steps to maintain supplies to Kyiv.
Under a plan released on Wednesday, the European Commission has proposed providing €500mn to finance capacity expansion by arms factories producing ammunition and missiles, to replenish stocks and ensure continued support for Ukraine.
The commission would also allow member states to supplement that money by repurposing cash provided by the EU under so-called cohesion funds. These EU programmes are designed to promote links between poorer parts of the bloc and to help countries recover from the Covid-19 pandemic.
Both proposals are likely to be controversial with member states who either believe it breaches EU laws banning funding for defence purposes, or demand strict rules on what cohesion and recovery funds can be spent on. EU members Austria, Ireland and Malta are neutral states.
The proposal needs approval from the European parliament and member states to be implemented. “It is commission creative thinking,” said one EU diplomat.
The plan follows a move last year to use a pool of EU member state cash to directly finance weapons for use in the war, and the recent creation of a €1bn fund to finance joint procurement of more arms for Ukraine. Both crossed previous red lines for the bloc.
But the proposed move to redeploy money from the EU’s common budget would be the most controversial shift. The EU’s governing treaty prohibits “expenditure arising from operations having military or defence implications”.
“Our analysis is that it is totally compatible with the treaty,” the EU’s industry commissioner Thierry Breton said while announcing the proposals. “Yes, investing in our defence will allow us to defend our democracy. And this is what we need to say to our fellow citizens.”
“The Treaty explicitly excludes funding for weaponry,” another diplomat said. “It all sounds good, but there are some big question marks around whether it would work.”
A commission spokesperson did not immediately respond to a request for comment seeking details on how such funding would not contravene the treaty.
Breton said governments could justify spending cohesion money on arms factories if their expansion brought “skills and employment” back to deprived regions, while more weapons production would “increase resilience” of economies, which was one of the targets for the pandemic recovery money.
“The security paradigm and architecture of the union have, of course, drastically, dramatically changed . . . And we need to take this into consideration,” Breton added. “We cannot be naive . . . it’s our responsibility to make sure that we do whatever we can to continue to protect ourselves together.”