EIB for the military? Bank plays a central role in EU wanting more defense investment

Brussels – More defence, in the sense of a shift from civilian to military investments: The reasoning about the new course of the European Union, grappling with a suddenly more unstable and less secure world, is also beginning to invest the role of the European Investment Bank (EIB). The Luxembourg-based institution, run by the member states that are its shareholders, is seen as the possible key to jumpstarting an industry that is not taking off and whose production capabilities must be improved, especially in light of the Russian invasion of Ukraine. Weapons and ammunition are not spoken of, at least not openly. But the indications coming in seem to lead in that direction.

Attending the EIB’s annual forum, the President of the European Council, Charles Michel, insisted on the “need to invest more and better in our security and defence.” An appeal to a very specific audience, so far committed to civilian support operations. Even the special defence facility launched in May 2022, the Strategic European Security Initiative, to which the group initially allocated €6 billion and then increased its scope to €8 billion in June 2023 in the wake of the changed international environment and “the growing need for financing in the sector,” as stated in the announcement, is nonetheless geared toward technology and research for purely civilian purposes. EIB managers have long excluded the possibility of financing fields such as munitions, luxury, tobacco, and most fossil fuels. However, the shareholders are the member states and can force a change in strategy.

Although, on closer inspection, the change of course has already taken place to some extent. For based on this initiative, funding can be sought for “military mobility” and research in dual-use civil-military technologies. A first step, which should be neither the only one nor, much less, the last, because, Michel points out, “the defence is a pillar of our European sovereignty.” The EIB group financing military production? “Since the beginning of Russia’s war against Ukraine, we have broken countless taboos,” recalls the president of the European Council.

Eleven unprecedented sanctions packages, the sending of military assets to a third country (Ukraine), and then the recognition of government spending on defence as a criterion for avoiding excessive deficit procedures in the proposed new Stability Pact: all unthinkable until a few months ago, all twelve-star taboos dropped in the wake of the changed international environment.

Breaking another one might not be a problem. This would be a political decision, with the governments of the EU member states being shareholders in the European Investment Bank. Such a step, however, could affect the Bank’s credit rating, and that is the concern within the body. For this same reason, it was determined, in the wake of the Coronavirus emergency, that the special €25 billion pan-European guarantee fund should be managed by the EIB and not set up internally, as originally assumed in the early days of the health crisis.

“We need to ensure peace by making our economies more innovative and competitive,” Michel says. “This is a topic we are discussing with the leaders of the European Council, in the framework of our strategic agenda that will define our priorities for the years to come, including the role of the EIB and the different EU institutions in supporting defence investment.” More defence, then. To be translated in the military sense of the expression.