Poland will prioritise EU defence financing during presidency<br>
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<b>EU defence spending needs seen at 500 bln euros <br>
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over 10 years</b><br>
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<strong><u>Two financing options: EU budget <br>
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or special purpose vehicle</u></strong><br>
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<b><u>By Jan Strupczewski</u></b><br>
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BRUSSELS, Dec 11 (Reuters) - Poland will make joint European Union financing for defence its priority <br>
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during its six-month presidency of the 27-nation bloc, arguing that security is a common European good, Poland's Finance Minister Andrzej Domanski <br>
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said on Wednesday.<br>
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The European Commission has estimated the cost of boosting <br>
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the EU's defence capabilities at 500 billion euros ($525 billion) or more over the next 10 years.<br>
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<strong>EU finance ministers will discuss possible financing models in April <br>
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in Warsaw, Domanski said.</strong><br>
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"I believe that security is a common good, therefore we need a common solution. There must be a European solution," Domanski said before Poland takes charge in January.<br>
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Without saying how much money was needed, he noted that large projects, like a European air <br>
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defence system, were not only about money but also about cooperation between nations.<br>
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He also stressed the need for more efficiency,<br>
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pointing to Europe's 12 different tank systems as "insane".<br>
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Any joint financing model would most likely entail new joint EU <br>
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borrowing, a highly controversial idea in Europe's largest economy Germany <br>
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which faces legal obstacles to joint debt.<br>
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Diplomats say legal issues can only be bypassed if new borrowing were a one-off response to an emergency,<br>
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like after COVID-19.<br>
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<u><strong>POSSIBLE OPTIONS</strong></u><br>
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Diplomats said talks were along two main strands:<br>
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one that would involve the EU's long-term budget as security <br>
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for new borrowing, following the model for the EU's post-COVID 800 billion euro recovery fund.<br>
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The other option is a special purpose vehicle <br>
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with paid-in capital that would borrow against that capital, modelled on the euro zone bailout fund, the European Stability Mechanism (ESM), which can lend up <br>
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to 500 billion euros.<br>
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The option involving the EU budget would present more difficulties, because <br>
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it would require unanimity of all 27 EU countries, limit participants to EU members <br>
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and put the European Commission in charge - a prospect <br>
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some countries do not relish in the context of defence policy.<br>
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Creating an SPV would let the EU invite other <br>
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nations like Britain and Norway, keep the scheme under control of governments rather than the Commission, and keep the debt raised off the balance sheet of governments.<br>
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"From my talks with other ministers of finance, there is a broad support for the view that we need to do way more as Europe," Domanski said.<br>
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"There are a couple of solutions on the table. I think it's way premature to decide which of them would be chosen."<br>
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The size of the EU's financing needs will be better understood after the publication of a report by new EU Defence Commissioner Andrius Kubilius,<br>
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due by early March, spelling out what defence efforts should focus on.<br>
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For now, discussions on financing options are at an early stage.<br>
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"We may be starting to tie our shoes before going to the starting blocks," one EU <br>
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diplomat said.<br>
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($1 = 0.9519 euros) (Reporting by Jan Strupczewski; Editing by Andrew <br>
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Cawthorne)<br>
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Poland will prioritise EU