On Monday, EU leaders met in an informal meeting to lay the foundations for a plan that caters for today’s security architecture. It was clear from the outset that if Donald Trump is re-elected Europe’s security would weaken, if the USA threatened to not cover the military spending gap, which many EU-NATO member states freeloaded over the years.
Certainly, the European Commission has rolled a plan out on how to possibly fund this gap. Surely, they did not wait until President Trump was elected. However, two important points emerged before the informal EU leaders’ meeting. On the eve of the meeting, the President of the United States, Donald Trump, announced a series of commercial trade tariffs on Canada, Mexico and China, with the latter suffering a 10% trade tariff. However, with Mexico and Canada President Trump paused the imposition of trade tariffs for a month, agreeing with both countries to deploy military personnel, and increase spending to secure the borders. Meanwhile, in a press meeting, Donald Trump reiterated that the EU treated the USA very badly, because the latter would have to pay VAT on products purchased from the EU single market, while Europeans do not buy anything from the US, not even cars because they produce their own.
In the meantime, during the EU leaders’ informal meeting, press information was emerging about the idea to increase security and defence spending. From what I gathered, the EU will tap into more security and defence capacity building to cover civilian, non-military and military spending. In fact, last week, the EU Commission issued a communication explaining their intention to boost competitiveness in line with the Draghi report. Certainly, the idea is to refocus the EU Budget and redesign the Multiannual Financial Framework. The notion of using competitiveness is simple. The European Commission requires additional EU budget funds to be spent on security and defence. However, the Treaty is clear. The EU budget restricts the funding of military expenditures. Still, the Treaty can be by-passed under the competitiveness chapter to secure funding with the EIB.
Well, it is not necessarily a bad idea to reshape the MFF and reflect today’s needs. The traditional headings need to change from Cohesion Policy to Defence Spending. Surely, the former heading will suffer a reduction to redirect funds to Heading 5 Migration and Border Management and Heading 6 Security and Defence. Also, heading 1 in the MFF needs a good boost to foster innovation in the single market, as well as the digital transition. According to the Draghi report, only one third of the EU’s patents registered academically are commercially taken forward. Apparently, it is quite a struggle to encourage entrepreneurs to exploit patents, due to the complex regulatory barriers, which are stifling creativity and innovation.
What I am seeing here is a shift on how the EU is going to approach the next five years. Whereas in the preceding five years, the EU Commission pushed for a Green Deal, and to decarbonise the EU’s economy, the upcoming five years will surely focus on competitiveness as well as defence spending. If we take what is being proposed, in terms of venture capital, the EU is thinking of breaking what is hindering the market, which makes it difficult to scale up companies. For instance, the access of the share of venture capital for EU companies, it is just 5% compared to the 51% of the USA, and 40% of China. What I cannot fathom though, is the way the EU Commission will be convincing the biggest receivers of the Cohesion Policy, as well as agriculture funds, to give away part of the shares of the budget to security and defence.
Certainly, the EU will be coming up with new sources of revenue known as Own Resources when they present the MFF proposal. When in the preceding MFF, the EU Commission presented the NextGenerationEU Recovery Plan, the Own Resources ceiling was revised to cover the repayment of funds over a period, and in tandem introduced a new source of revenue based on non-recycled plastic packaging waste produced by member states. Hence, the introduction of the Beverage Container Refund Scheme, known by its acronym BCRS, in Malta, back in 2022.
However, if EU member states are to equally spend 5% of their GDP on defence, the question we need to ask is, what will neutral member states finance? For instance, in my preceding post as PSC Ambassador, I negotiated to not pay for lethal weapons under the EPF. We did agree to pay for defence, but not for lethal weapons. As I had the opportunity to write and anticipate in my preceding columns, Malta must cover the share of defence spending for Cyber Security Defence, Countering Hybrid Threats, Climate Defence, as well as upgrading its infrastructure, for some specific areas deemed as strategic and critical for the Maltese islands, against the backdrop of the concept of military mobility. Personally, I think we need to provide for a massive warehouse to store technological equipment and other civilian equipment using the Maltese islands, as an EU hub close to North Africa. We are in a perfect position to host it. Let me make this clear though, we can substitute the military part with the civilian part and still respect our neutrality.
Reading this article feels like watching the news and struggling to keep up with what’s happening. It was a chaotic week, and more of these occurrences are still yet to come. Trump already signalled what the EU will be doing with its DSA. And while we surely need to rethink Europe, and the way we do things, we mustn’t use the four years of President Trump as a pretext for Ursula von der Leyen’s dream to militarise the EU. It seems that von der Leyen is also ready to go to the length of relaxing the Euro’s governance rules pressing the emergency times button for member states to invest in security and defence. Yes, the EU must carry on with its decarbonisation strategy, become more independent, exploit the opportunity to pave the way for its strategic autonomy, but not replicate other military powers. If the EU moves towards this direction, and abandons its social programmes, then it is the beginning of the end of each member state’s stability. I still need to see what the proposal will include for affordable housing, as it was mentioned in the communication issued last week. However, there was only one sentence out of 30 pages.
Finally, the USA is about to secure a deal with Ukraine on bartering military aid with rare earths, which are desperately needed for the EU’s green transition. President Trump is quite transactional, and the EU must accelerate Ukraine’s EU membership.
