By Jan Strupczewski

VERSAILLES (France) – European Union leaders are expected to prepare for unexpected expenditures in the wake of the conflict in Ukraine. However, they will not mention any new EU debt issuance. Draft summit conclusions revealed that.

The leaders of 27 member EU nations meet at Versailles near Paris to discuss increased defense spending following Moscow’s invasion in Ukraine. They also discussed Kyiv’s attempt to join the EU and how to make Europe more independent from global food, energy and microchip suppliers.

After the COVID-19 epidemic, which led to a large increase in public debt throughout the EU, governments announced that they would gradually reduce the financial support required to sustain economies during lockdowns.

Russia’s invasion in Ukraine forced the EU into a rethinking of its strategy. The EU expected to spend more on defense and invest in renewable sources of electricity to help shift from Russian gas, coal and oil.

The draft summit conclusion stated that “Our national fiscal policy will have to consider the total investment requirements and reflect the changing geopolitical environment.”

The conclusions stated that “We will follow sound fiscal policies which ensure the sustainability of debt for every Member State,” and incentivize investments that promote growth, key to our 2030 goals.

JOINT DEBT

France and other countries want new EU bonds to be jointly issued. This will help offset Russian energy imports as well as the negative effects of the sanctions placed on Moscow over Ukraine. It also helps with the drive for greater independence from international food and microchip supplier.

Germany, the Netherlands, and other countries strongly opposed such an action, arguing that many euros remain in the EU recovery fund of 800 billion Euros. The bloc also has the ability to borrow together to help finance many of these challenges.

The EU Fund has disbursed only 74.9 billion Euros, as the national governments are required to plan projects for the loans and grants.

A eurozone official stated, “We have other tools (than the new joint debt), so let’s make use of them first.”

According to the draft conclusions, EU leaders wanted to make it possible to finance future challenges by using public money to draw private capital.

They stated that they would use the European Investment Bank Group’s budget and potential to stimulate private investment, with higher risk financing for innovation and entrepreneurship.