The dispute over the financing of the EU's 150 billion-euro arms plan threatens to derail it even before the launch. The countries of confederate and northern Europe disagree on the key issue: whether the costs are to be covered jointly by the EU or individually by the associate States.
The SAFE plan, which is part of a wider €800 billion ReArm Europe initiative, provides for the anticipation of borrowing cheaply for joint arms purchases. Although the funds would come from national loans, they would be secured by the EU budget in the event of the insolvency of the State concerned. However, the work for repayment would stay with each country.
Initially, the plan had broad support, but the confederate countries – mainly France, Spain and Italy – began to withdraw. Due to the advanced levels of debt, they request the issuance of common EU bonds. specified a mechanics would mean that all 27 associate States share financial responsibility.
— These countries have serious doubts about the anticipation of further debt at this level," said 1 EU diplomat.
However, the thought of common debt is powerfully opposed to alleged sparing states – Germany, the Netherlands and the Nordic countries. They feel that there is no reason for them to take the hazard jointly for others erstwhile they are able to finance themselves cheaply. Even the guaranteeing of the EU budget for national credits is controversial in these countries, but common bonds are an insurmountable limit for them.
Italian Prime Minister Giorgia Meloni critically assessed the European Commission's plan, pointing out that it is almost exclusively based on national debt. It besides calls for an extended time for the decision to activate the alleged fiscal exit clause, which allows associate States to temporarily exceed the deficit limits and usage the fund.
Spain abstains from the decision, waiting for a possible change of strategy and France has already refused to participate, explaining its concerns about the failure of credit ratings in debt exceeding 110% of GDP.
Germany, on the another hand, activates the clause to finance its own plan to modernise defence and infrastructure worth a trillion euros, but categorically reject the thought of common debt. The dispute in this case even led to tensions within the European People's organization – between the German CDU and the Spanish People's organization – after the party's message contained a evidence supporting the common bonds. The CDU later assured that it did not know how specified a evidence got there.
The uncertainty surrounding the plan is increasing. No state wants to be the first to formally apply for funds, due to the fact that it could be perceived as a sign of weakness by financial markets. But without joint action, it will be hard to avoid speculation and rising debt costs.
As 1 of the EU diplomats put it: “If everyone does not apply at the same time, the marketplace will set limits to how much can be spent.
