Armament: European Investment Bank: Militarization of the EU’s main bank

Armament: European Investment Bank: Militarization of the EU’s main bank

Headquarters of the European Investment Bank in Luxembourg

Photo: IMAGO/Zoonar/Heinz-Dieter Falkenstein

The EU states should invest in armaments projects in the future “more, better, together and in Europe”. This is what it says in the first “European Industrial Strategy for Defense”, which was recently proposed by the European Commission. Joint arms projects, increased national defense budgets, the supply of weapons and ammunition to Ukraine – the financial challenges facing the European Union and its member states are increasing.

At the same time, public budgets are being financially challenged by economic weakness, rising interest rates, demographics and green and digital transformation. Given this costly situation, EU governments are looking for new sources of finance outside of regular budgets. The topic gained momentum at the meeting of the 27 EU heads of state and government in Brussels two weeks ago. The governments of 14 EU states, including France, Italy and Poland, had previously demanded in a letter to EU Council President Charles Michel that the European Investment Bank (EIB) in Luxembourg must bring its financing “in line with the new priorities.” Federal Chancellor Olaf Scholz (SPD) also signed the letter.

The “new priorities” mean that the EU will also strive for a common defense policy in the future. This is still a long way off in Brussels practice, but the restructuring of the EIB could be a big step in this direction. The investment bank, which conducts economic policy through lending on behalf of the European Union, is the largest multilateral financing institution in the world with total assets of over half a trillion euros. Last year it granted new financing worth 87.9 billion euros. According to its self-image, the EIB is “one of the most important donors for climate protection”. At the same time, around half of their funds go to so-called cohesion regions, meaning economically less developed areas, primarily in Central and Eastern Europe.

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So far, the bank’s mandate prohibits financing military projects. It is expressly forbidden to invest in ammunition, weapons and “central military and police infrastructure”. The European Parliament gave the impetus for the renovation. At the end of February, MEPs called on the EIB leadership to lift its restrictions on financing the defense industry. The EU’s billion-dollar house bank should increase its security-related investments. “Parliament calls on the EIB to increase its support for the European defense industry,” says the resolution, which was adopted by a large majority. In a supplementary motion submitted by the liberal Renew group, this becomes clear: the Luxembourg credit institution is asked to revise its criteria for the eligibility of investments “so that ammunition and military equipment are no longer excluded from financing by the EIB.”

Olaf Scholz and the other letter writers also rely on a generous interpretation of the EU treaty passed in 2012. The tasks of the development bank are described in Article 309 of the “Treaty on the Functioning of the European Union”: In addition to cohesion, these are projects to promote the internal market and “projects of common interest for several Member States which, because of their scope or nature, are incompatible with the in “The resources available to the individual member states cannot be fully financed” – a rubber-stamp paragraph.

In order to exploit this for armaments projects, a simple majority of EU states would probably be sufficient. This would mean avoiding an official change in the EIB’s mandate, which would only be possible with a treaty change: this would have to be decided unanimously by all 27 member states, which seems unlikely. Hungary or Slovakia are likely to refuse for political reasons. And the Austrian Finance Minister Magnus Brunner (ÖVP) is already concerned about the EIB’s so-called ESG rating – a seal of quality for sustainable investments that many institutional investors base their investment decisions on. Lending for defense projects could lead to a downgrade of the EIB and thus make refinancing more expensive. In other words, raising money on the financial market would become more expensive for them, which would also have a negative impact on their own lending. According to Handelsblatt, a change in strategy is also controversial within the bank itself. A decision on a possible mandate extension is expected at the EU finance ministers’ meeting in June.

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