As governments increasingly realize the need to put the continent on a war footing, the plan would offer an outlet for desperate European policymakers who know they have to pay the costs but just don’t want to.
Another option could be for the ESM to pivot to a broader response to Russian aggression, such as helping pay for Ukraine’s reconstruction or offering cheap loans to countries such as the Baltic states where borrowing costs may rise, the four people said.
Russia’s war in Ukraine, which has harboured EU membership ambitions, is entering its third year, and a return to the White House by Donald Trump threatens to push Europe into a corner by demanding that all NATO members meet a target of spending 2% of their gross domestic product on defense.
But soaring debt in the EU’s biggest capitals, domestic political turmoil and tough spending rules enforced by the European Commission limit the bloc’s ability to raise extra funds.
The rescue fund concept is still in its early stages, but it could be more palatable to governments than other proposals for defence financing that have yet to materialise, such as raising funds from the existing EU budget, tapping Russian assets that have been locked up since the start of the war, or jointly issuing joint debt known as Eurobonds.
Officials say France and the Baltic states are likely to be the front-runners in supporting the initiative, but other capitals now argue that the fund should remain an insurance fund for countries facing crises, and not adapt to the EU’s changing priorities.
Any changes would require the consent of the eurozone’s 20 finance ministers.
