PM: Europe should reach a joint position on defense funding by summer

Prime Minister Kristen Michal (Reform) believes the European Union should agree on a common position to finance defense readiness by the NATO summit in June. Estonia is ready to discuss all options.
Michal is attending an informal meeting of the European Council on defense policy on Monday in Brussels. He called the gathering "historic" as it is likely the first where the members have met to discuss defense.
Topics of discussion include how to finance defense in Europe. This includes options such as joint procurement, central funding or a potential bond program, Michal said.
All options are on the table for Estonia. "What matters to us is that we can increase our contribution to defense and acquire new capabilities. So we are open to all discussions," the prime minister told ERR.
Another important aspect is budget flexibility for defense spending. Estonia and other member states do not want to be penalized for breaking the rules when making investments.
"We will certainly discuss how to organize this in the future so that when you invest this money in defense, you will not be in a situation where you have to explain where the money went and why your budget is in the red at that moment," he said.
Michal hopes "common positions" can be in place by the summer when the next annual NATO summit takes place in the Netherlands on June 24-25.
"By then, we should have a joint position on how we will further centrally fund defense in Europe. This would also allow us to plan our steps in Estonia for the years 2026, 2027, 2028, 2029, and beyond," he said.
Last month, when Michal proposed spending 5 percent of GDP on defense he said one of the ways to finance the move would be EU funding.
"That Europe is now holding its first-ever defense-focused summit shows that this matter is being taken seriously and actively discussed," Michal told ERR's correspondent in Brussels.
Independent defense bank
Another idea is an independent "defense bank" – not connected to the European Investment Bank – which was raised by "several countries" at the end of 2024, he said.
Countries could contribute money which would then be supplemented with financial capital. This would allow it to provide loans for "all types" of defense-related investments, Michal said, stressing the idea is only in its initial stages.
"However, this requires the agreement of all countries and the completion of a certain process. For example, theoretically — this is a hypothetical discussion, I emphasize — if countries were to contribute €10 billion, it could be leveraged up to €100 billion, which would then be used to fund various projects in countries that need loans for defense capability development" he said.
"This is one option. There is also the possibility of establishing specific lending rules, as I described earlier, so there are quite a few alternatives."
A similar idea has been proposed for the 10-member Joint Expeditionary Force grouping, which includes Estonia.
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Editor: Barbara Oja, Helen Wright