European Union finance chiefs have begun deliberations on a new joint defence initiative that could enable increased military investment without overburdening national debt. The proposal involves the creation of a centralised fund — tentatively named the European Defence Mechanism (EDM) — which would procure and hold military equipment on behalf of EU countries, with member states paying usage fees rather than shouldering full purchase costs themselves.
This concept, introduced by the Brussels-based think tank Bruegel, aims to offer a viable solution for heavily indebted nations seeking to enhance their defence capabilities amid growing security concerns — particularly the possibility of future Russian aggression and diminishing reliance on U.S. protection.
"It’s a promising starting point for meaningful debate," remarked Portuguese Finance Minister Joaquim Miranda Sarmento, echoing the cautious optimism shared by several other EU finance leaders. Many agreed that the model could be implemented with relative ease, drawing on the structural framework of the existing European Stability Mechanism — the eurozone’s bailout institution.
Despite broad interest, Sarmento acknowledged that critical questions remain, especially regarding the fund's mandate, financing structure, and the scope of its military role. Issues surrounding market leverage, member contributions, and operational logistics will require detailed negotiation.
Currently, the EU is already pursuing an ambitious defence boost — an €800 billion initiative over four years — by relaxing fiscal rules for defence outlays and enabling joint borrowing backed by the EU budget. However, such strategies risk inflating national debt, a point of concern for fiscally constrained nations. The Bruegel plan seeks to avoid this by keeping borrowing and spending tied to the EDM’s balance sheet, rather than that of individual member states.
The EDM would be founded through an intergovernmental treaty and equipped with both paid-in and callable capital to support market borrowing. It could also open its doors to non-EU partners, such as the UK, Norway, or Ukraine. Crucially, because the fund itself would own any assets purchased, its liabilities wouldn’t affect national debt tallies.
Beyond easing fiscal pressure, the EDM would aim to harmonise Europe’s fragmented defence market, which currently suffers from inefficiencies due to duplication — including multiple models of tanks, howitzers, and armored vehicles across EU countries. This patchwork drives up costs, limits interoperability, and hampers scale.
Sarmento stressed the need to explore "new instruments" to bolster Europe’s collective defence, particularly in critical areas often underwritten by the U.S., such as command systems, intelligence infrastructure, and cutting-edge weapons development. The EDM could focus on these "strategic enablers" — big-ticket items like fifth- and sixth-generation fighter aircraft, missile systems, air defence, heavy-lift air transport, maritime logistics, and even nuclear deterrence.
Bruegel’s proposal asserts that the EU could significantly reduce its dependency on American military support by 2030 — but only if procurement is consolidated and a competitive, inclusive European defence market emerges, with key players like the UK contributing industrial muscle.