By Jan Strupczewski

BRUSSELS, (Reuters) – The European Union will debate in a few days whether to borrow additional money to address the problems created by Russia’s invasion in Ukraine. This was stated on Tuesday by Paolo Gentiloni, European Economic Commissioner.

France and Italy want the EU and NATO to be able to collectively borrow money to pay for increased defense spending, as well as to reduce Europe’s dependency on Russia.

Gentiloni stated that proposals of this type were presented in the recent weeks by European leaders. He spoke via videolink at an Oxford University seminar.

Germany, Austria, Germany and others oppose new borrowing.

In order to avoid sharp differences in economic development among euro-zone countries due to the pandemic and governments that are already in deep debt, the 800 billion fund was created last year. Governments with low debt cannot borrow as much money to finance their economic recovery.

France claims that Ukraine’s war is like the pandemic and an exogenous shock. It will impact EU countries in different ways, increasing the chance of economic divergences.

“Will concern over increasing differences between member states, particularly in the euro zone, lead to a new decision about a common tool?” Gentiloni stated that it was too early to know for certain.

“I believe that the real conversation will be in a few more weeks, when we will have an even clearer picture of the economic consequences of this crisis. However, I believe that this cannot be taken off the table,” said he.

In May, the European Commission will present economic projections to 27 member countries. This information will be used as a starting point for further discussion.

Gentiloni however stated that because of the huge investment needed by Ukraine’s war, it was possible for the EU to alter its fiscal rules.

He stated that “boosting our defense capabilities will require substantial investments in our technological and industrial base.”

Gentiloni stated that financing them would require more support from fiscal rules, and possibly new tools at European level.

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