The European Union could move toward launching a new joint borrowing initiative aimed at boosting defense spending across the bloc, according to a senior analyst at the investment giant PIMCO. The plan may include not only loans but also grants to assist member states with limited fiscal flexibility.
Speaking at a conference in London, Nicola Mai, PIMCO’s lead analyst for European sovereign debt, said there is now a “greater than 50% probability” that the EU will implement such a program in the coming years, as reported by Digi24.
A New Framework for Collective Defense Spending
Currently, the EU is establishing a framework that would allow member states to spend up to €800 billion, primarily through revised fiscal rules meant to support higher national spending levels. Alongside that, Brussels is preparing a €150 billion loan program dedicated to defense — funds that would be raised through the issuance of EU-wide bonds.
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However, high national debt levels and persistent budget deficits in countries such as Italy and Spain could hinder their ability to increase military spending to the 3% of GDP target promoted by NATO. France, another key defense player, may face similar limitations.
In this context, a blended financing program that combines loans with direct grants could be a game-changer. Such a mechanism would allow lower-capacity economies to participate in collective European defense efforts amid increasing global instability.
Bridging the Gap Between Strategy and Spending
Mai emphasized that the introduction of grants would help ensure the EU’s strategic objectives are not held back by economic constraints. “In time, a program that includes European grants could be implemented. I believe it’s possible,” he said.
With Russia’s war in Ukraine, rising tensions in the Indo-Pacific, and growing pressure on NATO allies to meet spending targets, momentum is building for a more integrated European defense strategy — and the financial architecture to support it.
