EU executive wants EIB to start funding defence projects

Brussels — The European Commission called on the European Investment Bank (EIB) on Tuesday to change its policy this year to enable it to fund defence projects, as Europe seeks to urgently increase defence production to prepare for potential Russian aggression.

Defence and military spending is now explicitly excluded from the list of activities that can be financed by the EIB, which is owned by the 27 governments of the EU.

“The commission ... invite(s) the EIB Group’s governing bodies... to adapt defence-related exclusions from the EIB Group’s lending policies. This would allow the EIB to support production of military equipment and more generally the European defence industry,” the commission said.

The call is part of a broader commission proposal to ramp up defence production in the EU after Russia’s invasion of Ukraine in 2022 highlighted Europe’s lack of preparation for a potential military conflict with Moscow.

“Europe ... is ...in danger. The Russian war of aggression has brought a great sense of urgency to step up our defence industrial capacity,” EU foreign policy chief Josep Borrell told a news conference.

With a balance sheet total of €544.6bn, the bank is the world’s biggest multilateral financial institution by assets and the biggest multilateral lender, with disbursed and promised loans of €562bn in 2022 compared with the World Bank’s $171bn.

It is a leading player in funding Europe’s ambitious transition towards a net-zero climate target and a more digitised economy, but its rules explicitly say that it cannot fund the production of ammunition and weapons or infrastructure for military use.

“Modifying ... lending policies, in particular that of the EIB Group, is thus necessary and a major priority to ensure that the defence sector has access to and can fully benefit from EU financial instruments,” the commission said.

“Such a modification will also have positive cascading effects, by giving a significant positive signal to the financial market and private banks,” it said.

Reuters