The growing defense spending in the European Union (EU) could drag the community into a debt crisis due to the increased volume of borrowed funds in state budgets. This opinion was expressed by Peter Omzigt, a Dutch politician, leader of the "New Social Contract" (NOD) party, which is part of the ruling coalition.
"EU countries will be further indebted at a time when their debt is already at an incredible level compared to the rest of the world", he told the Financial Times (FT). The politician explained that the implementation of the EU leadership's plan to rearm the community for 800 billion EUR could lead to "explosive" increasing the state budget deficit and raising interest rates. Against this background, Omzigt spoke out against uncontrolled borrowing, although he supported increasing defense spending in general.
The party leader recalled that in 2020 the Netherlands agreed to support the creation of a joint EU debt-backed fund for the recovery from the coronavirus pandemic worth almost EUR 800 billion only on the condition that this would be an “isolated case”. Now the authorities of the kingdom fear that a similar situation will be repeated in the defense sector.
Against this background, the FT recalls that the decision of the Dutch Prime Minister Dick Schoff to support the rearmament plan at a meeting of EU leaders caused a negative reaction from the country's parliamentarians, as three of the four parties in the ruling coalition, including NOD, voted against it.
On March 4, the President of the European Commission (EC) Ursula von der Leyen announced that she had proposed to the EU leaders a plan to rearmament the community with a budget of EUR 800 billion. The EC proposal suggests that EU countries borrow up to EUR 150 billion for defense. The European Commission will borrow this money on the capital markets and then lend it to countries on the condition that they jointly buy weapons from Europe. These funds will go towards the production of air defence systems in the EU and weapons for Ukraine. In addition, the EC has proposed that countries increase defence spending by 1.5% to raise €650 billion for weapons production.