Finland supports joint defense financing by EU countries: what it means for Europe and Ukraine

Finnish Prime Minister Petteri Orpo recently supported the idea of ​​joint financing of defense by EU countries, especially in the eastern regions. He considers it important for the security of Europe. Previously, Finland was skeptical of crowdfunding due to fears of moral hazard and excessive dependence. However, Russian aggression forced some EU countries to reconsider their positions and support new European mechanisms to strengthen the defense capability of the Eurozone.

This is important for Ukraine, because it shows that Europe is ready to work together to protect its eastern borders. For Ukraine, this means more stability and security. And also – a chance to get more support: military, economic, technical.

For Finland, which previously did not support the idea of ​​joint debts, this is a real turning point. This approach helps strengthen the defense of the Baltic states, Poland and other neighboring regions, creating an additional barrier against Russian aggression. Currently, even those countries that have always been against joint financing, in particular, Germany and Denmark, are changing their positions. The war in Ukraine made them understand: we need to act together. Collective security has become a priority.

Why did Finland and other “thrifty” countries previously oppose joint borrowing

This initiative is an example of the implementation of the theory of collective action. The latter explains how groups of people or states cooperate to achieve common goals, but also face a kind of “freedom” (when some participants take advantage of shared resources without contributing).

Finland and other “thrifty” neighbors – the Netherlands, Austria, Sweden and Denmark – have always advocated strict financial discipline within the European Union. They fear that if joint borrowing is allowed in the EU, countries that are less responsible with their budgets will begin to spend more, hoping for help from others.

Citizens of these countries also do not want their taxes to go to support countries with high debts or weak economies. Because of this, their politicians are very wary of the idea of ​​joint financial programs and often oppose it.

Although the position of Finland and other “frugal” countries sometimes makes it difficult to find a consensus in the EU, it reminds us of the importance of responsible use of funds. They show that even in difficult times, you can find a way to help others without violating the principles of financial discipline.

In the European Union, the idea of ​​joint borrowing causes different attitudes. Some countries support this idea because it allows them to solve economic problems together, but there are also those who are skeptical, fearing risks and losing control over their money.

France, Italy, Spain and Portugal support joint borrowing. They believe that this is a good way to help all EU countries cope with crises faster, for example, after a pandemic or during the war in Ukraine. French President Emmanuel Macron says that this is how the EU becomes stronger and more united.

At the same time, Germany and the Netherlands are cautious about it. They fear that some countries may begin to spend too much, counting on the help of others. For example, they do not want EU debts to grow due to irresponsible actions of individual states.

Hungary is also opposed. Its Prime Minister Viktor Orban does not want money for common needs to be collected through the EU. He says that each country should decide for itself how much and whom to help.

How the new defense joint borrowing mechanism will work

A new mechanism created by the EU allows member countries to jointly purchase military equipment and weapons. This initiative takes place within the framework of the program EDIRPA (European Defense Industry Reinforcement), which is coordinated by the European Commission.

First of all, the program is designed to eliminate the shortage of military resources that arose in Europe due to the transfer of weapons to Ukraine. For example, Lithuania, Poland and Estonia, helping the Armed Forces, reduced their stocks of artillery and ammunition. Thanks to EDIRPA, these countries can jointly purchase the necessary equipment, which lowers costs and speeds up delivery.

In addition, the program stimulates cooperation between countries. For example, Germany, the Netherlands and France plan to buy air defense systems together. This avoids competition between countries and achieves savings due to the scale of the deals.

Another important aspect of EDIRPA is the support of the European defense industry. Previously, many EU countries depended on imports of military equipment, especially from the USA. Thus, Poland purchased American HIMARS systems and F-35 fighters. The program encourages the production of such systems in Europe in order to reduce dependence on external suppliers and increase the strategic autonomy of the EU.

EDIRPA also simplifies joint procurement procedures and creates new financing mechanisms for member countries. For example, financial support is provided for the smaller countries of Slovenia and Croatia, which have limited defense budgets but need modern equipment to ensure security. Joint procurement is coordinated by the European Commission: it selects projects, allocates funding and manages the process. A group of member countries participates in each project, defines its needs, develops procurement strategies and coordinates their implementation.

Preference is given to projects that solve common security challenges for several EU states. They involve several nations, which helps integrate the European defense industry and improves the ability of the armed forces to work together. A significant part of the funding goes to the purchase of weapons to support Ukraine, in particular air defense systems and ammunition.

The total budget of EDIRPA is EUR 300 million, which is distributed among projects. Joint procurement helps to reduce costs for each country, providing savings and increasing the efficiency of the use of budget funds. It also strengthens the European defense industry and improves its competitiveness on the international market.

The first projects under the new mechanism are already underway received funding. Nine countries jointly purchased Mistral air defense systems, others – medium-range IRIS-T SLM systems. Patria 6×6 armored personnel carriers were purchased for Finland, Latvia, Estonia and Denmark. EU countries are also replenishing stocks of 155-mm ammunition for defense.

The impact of joint defense financing on the EU’s ability to withstand threats and dependence on the US

Joint defense financing in the EU can significantly strengthen the ability of countries to defend themselves, especially on the eastern borders. It will also help Europe to be more independent in military matters, although it will not yet succeed in completely replacing NATO.

Financing of defense projects through such mechanisms as the European Defense Fund and PESCO (Permanent Structural Cooperation), allows the EU to reduce its dependence on NATO and, in particular, the USA. EC gets the opportunity to focus on its own interests and needs, which do not always completely coincide with the priorities of the Alliance.

The EU is gradually becoming less dependent on NATO and the USA, because it is starting to rely more on its own resources. Joint defense programs provide an opportunity to decide for yourself what to direct forces to, in particular, to protect the eastern borders. So Europe can focus on its main threats.

However, NATO remains the key guarantor of security. The alliance has a powerful military structure, resources and nuclear weapons of the US, which makes it indispensable. Joint initiatives of the EU only complement NATO, but do not replace it.

Among the problems slowing down these changes is the reluctance of some states to increase defense spending, in addition, Poland and the Baltic states consider the presence of the USA and NATO in their territories mandatory. Of course, the creation of an independent defense system takes a long time, and Europe is not yet ready for full autonomy.

Joint borrowing in the EU can be a useful tool for solving major challenges, economic crises or strengthening defense. At the same time, this will affect the bloc’s debt level, its economic stability and attractiveness for investors.

When the EU borrows money, it shares responsibility among all member states. This means that each country is responsible for the common debt, even if the funds are used only in individual states. Because of this, the bloc’s overall debt level will rise, which could cause tensions, especially among countries accustomed to strict financial discipline.

However, the EU has a high credit rating, so it can borrow money at low interest rates. This reduces debt servicing costs and allows more efficient use of resources.

Joint borrowing can support the EU economy in difficult times. For example, the money can be quickly directed to recovery after a crisis or to help countries that need it most. This helps reduce inequality between member states and make the bloc’s economy more stable. However, there is a risk that some countries will begin to care less about their finances, hoping for help from the common budget. This can create problems for the entire block.

An EU that acts together looks credible and attractive to investors. EU loans are often perceived as a safe investment because all member states stand behind them. But if debts grow too quickly, it could cast doubt on the bloc’s ability to pay them back, making borrowing more expensive.

Examples of successful use of joint borrowing in the EU

A successful example of the successful use of joint borrowing in the European Union is the NextGenerationEU program. The latter was created to overcome the economic consequences of the COVID-19 pandemic and became a clear proof that the EU can pool resources to solve serious problems and at the same time build a stronger foundation for the future.

The program, worth 750 billion euros, was financed through joint borrowing on international markets. The money was aimed at stabilizing the economy, as well as at projects that will help make Europe stronger in the future. Among other things, investments in environmental initiatives – renewable energy, development of digital technologies and modernization of infrastructure, assistance to countries, in particular, Italy or Spain, which suffered great losses due to the pandemic.

Money was raised through the common debt of the EU, which made it possible to obtain favorable conditions on international markets. It worked because all EU countries acted together, which made it possible to collect a large amount and distribute it among the most affected. Countries received money only on the condition that they use it for important reforms, for example, for the green transition or digitalization. Money was spent not only on solving immediate problems, but also on projects that strengthen the economy in the long term. The EU was able to attract funds at low interest rates, which reduced the financial burden on countries.

The NextGenerationEU program has shown that joint borrowing can be a powerful tool for overcoming crises. For the progressive community, it is obvious that joint actions of countries help to respond to challenges faster and more effectively, it is important to establish clear rules so that money is used correctly. Among the important insights of this case is the following: investments in the future such as green technologies or digitalization make the economy more sustainable.

…The topic of joint borrowing is a source of controversy in many countries, especially in “frugal” ones. In Finland, for example, this issue polarizes society and the political landscape. Conservatives and Eurosceptics criticize the government, accusing it of putting EU interests ahead of national ones. Citizens who do not support the idea of ​​a common debt begin to doubt the feasibility of deeper European integration, which strengthens Eurosceptic sentiments. At the same time, such successful programs as NextGenerationEU show the benefits of joint actions, which strengthens the position of pro-European parties and politicians. Participation in joint borrowing often raises questions about the line between national autonomy and European solidarity, influencing domestic budget policy.

Tetyana Viktorova