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Britain this week will join EU leaders in staggering talks on establishing defense financing agreements throughout Europe, as the continent fights to improve its militaryman amid the fear of a US security blanket.
Chancellor in the UK Rachel Reeves will hold talks with other European finance ministers at a G20 meeting in Cape Town this week after the war in Ukraine enters its fourth year.
“It can be a fund or a bank. For example, there is the concept of the Bank of Rearmation, which we are also considering, ”said Polish Finance Minister Andrzej Domanski.
Domanski told The Financial Times that discussions had been with the United Kingdom for months, adding: “Without the UK, Europe’s defense is hard to imagine.”
The United Kingdom Treasury confirmed that Reeves would “increase defense financing proposals with its European counterparts” at the G20, but said the talks were at an early stage.
Donald Trump has demanded that European NATO allies increase protection costs to 5 percent of GDP, from an existing 2 percent target that some still fail, or risk losing US protection.
The rapid re-engagement of the US president with Russia, a country that most European countries see as an existential threat, has sparked frantic discussions on how to collectively strengthen Europe’s defensive skills and reduce confidence in US troops and weapons.
On Sunday, Germany’s future Chancellor Friedrich Merz stated that Germany had to radically recover its security arrangements and end a decades in Washington, saying Trump was “mainly indifferent” for Europe’s fate and continent necessary to “achieve independence”.
European defense collective expenses were widely discussed during a phone call this weekend between European Commission President Ursula von Der Leyen and the Prime Minister of the United Kingdom, Keir Starmer, and a special call between von der Leyen and Prime Minister Jonas Gahr Strain, according to one person informed in it discussions.
European countries are seeking ways to enhance protection skills at a time of strongly limited national budgets. By using national guarantees, a bank would allow countries to increase costs without increasing their balances.
UK is seeking ways to increase protection costs from 2.3 percent of GDP to 2.5 percent, costing at least £ 5bn per year, when its ability to increase costs is limited to its fiscal rules self-imposed.
Among the proposals is one of the General Sir Nick Carter, the former British army chapter, who has suggested a “reassessment bank” to enter the European savings pool, modeled on the European Bank for Reconstruction and Development – the lender set up After autumn of the iron curtain to support Central and Eastern Europe.
“The treasure is interested in him,” said one person involved in discussions with the Reeves’ team. However, treasury officials said there were many models of multilateral funding at the table and that Reeves had an open mind in the next steps.
Experts said a benefit to Carter’s “Reconstruction Bank” Reeves was that it would facilitate the impact of additional protection costs on fiscal rules.
Andy King, a former UK official who is now in Flint Global, a consultancy, said such a bank had the potential to collect “important sources for protection without materially affecting fiscal rules”. He added: “This is not a certain result: the detail would matter to the structure of the entity and how it used its borrowing capacity.”
Meeting EU leaders at the end of March will discuss the usual protection needs, and Poland’s goal would be to progress to the financing needs at an EU finance ministers collected in April, ahead of a decision of leaders in June.
The European Commission said this month would partially set up EU fiscal rules to allow countries to invest in defense, an action that would allow countries to borrow without suffering sanctions.
Von der Leyen has also opened the door to “ordinary European funding” in ordinary protection projects, and is expected to detail financing options in March.
