Nineteen European Union nations, including France and Germany, are urging the European Investment Bank (EIB) to increase its lending to the defense sector as the EU, comprising 27 member states, explores ways to enhance its military capabilities in light of potential future threats from Russia. This appeal, articulated in a joint letter, precedes discussions among EU leaders on the future of the defense sector, set against the backdrop of Russia’s invasion of Ukraine and U.S. President Donald Trump’s calls for NATO allies to boost defense spending.
Currently, the EIB, which is owned by EU governments, is prohibited from financing the production of ammunition, weapons, or military equipment. To lift this restriction, a majority of member states must agree, although some countries have expressed reservations. The bank is permitted to finance dual-use products that serve both civilian and military purposes, such as satellites, drones, and radar systems.
In their letter to the president of the European Council and the head of the EIB, Finland, Belgium, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Romania, Slovakia, Spain, and Sweden suggested that the EIB reassess its list of excluded activities and consider the issuance of defense bonds. They emphasized that any changes should be made in consultation with financial markets and rating agencies to evaluate the feasibility and potential impact on the financing costs of existing EIB bonds.
Some EU nations, particularly neutral countries like Austria, Ireland, and Malta, are concerned that financing defense could jeopardize the EIB’s top credit rating and may not address the underlying issue, which they argue is a lack of long-term contracts rather than insufficient funding. The EIB plays a crucial role in financing Europe’s ambitious transition to a net-zero carbon and more digitized economy, and some countries fear that including ammunition and weapons in its investment portfolio could deter investors.
Last year, the EIB doubled its financing for security projects to 1 billion euros and aims to increase this to 2 billion euros by 2025. The European Commission estimates that the EU defense sector will require 500 billion euros over the next decade. The initiative to engage the EIB was spearheaded by Finland, which shares a 1,340 km border with Russia and joined NATO in 2023. Finnish Prime Minister Petteri Orpo stated that it is crucial for EIB funding to be available for ammunition production, which is currently not permitted.
The EIB stands as the world’s largest multilateral financial institution, with a balance sheet exceeding 500 billion euros.
