Defence funding in the EU - Related Opinions

The EESC emphasises that peace must remain a core EU priority and cautions against focusing solely on military threats while overlooking other serious risks to human life. It stresses the importance of diplomacy for conflict resolution and crisis prevention wherever possible.The EESC supports a comprehensive, inclusive European defence strategy that supplements military readiness with civil preparedness. It endorses the European Commission’s Joint white Paper for European Defence – Readiness 2030 and calls for a coordinated EU approach that treats defence, peace and security as shared public goods, underpinned by strong legal, institutional and financial frameworks with democratic oversight.

The EESC welcomes the overall positive trade balance of the EU and calls for measures to maintain it, while recommending targeted support for strategically important industries, stronger investment conditions, and effective financing through the Single Market, the Savings and Investments Union, and a more integrated capital market. The EESC also underlines the need to support ambitious companies entering global markets, ensure opportunities for highly skilled professionals, simplify procedures without undermining social and environmental standards, create fiscal space for growth-enhancing investments, and strengthen multilateralism through new trade agreements and WTO reforms.

Given the significance of the provision of public goods for the well-being of the citizens, the EESC believes that particular attention should be paid to providing these European public goods (EPGs) and identifying them in the next multiannual financial framework (MFF) post-2027.

Special attention must be given to ‘functional EPGs’ – those linked to Article 3 TEU – that can ensure the normal functioning of the EU: the completion of the single market; the completion of the economic and monetary union; economic, social and territorial cohesion; EU open strategic autonomy (e.g. the joint EU health policy, food security, the EU energy union); defence and security; EU research and development; and the rule of law.

Climate change is a matter of urgency and demands a green shift in our economies. To achieve the EU's climate targets, a profound modernisation of the capital stock is needed. This entails a massive expansion of public investments. The need for an EU-level investment fund to finance the green transition is also a matter of economic strength and sustainable competitiveness. One central element of closing the financing gap is an investment friendly reform of the EU fiscal rules. While the reform process is still ongoing and is supposed to be finished by the end of this legislature, it is already clear that the fiscal space for public investments at national level will not significantly increase with the reform.

As committed during the negotiations on the long-term EU budget 2021-2027, the European Commission has on 20 June 2023 completed its proposal for a next generation of own resources. The package includes a new temporary statistical own resource based on company profits. The Commission  also proposes to adjust the own resources proposals based on the Emissions Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM) compared to the original proposals from December 2021.  

The EESC welcomes the simpler and more transparent economic governance framework, the reduction of the pro-cyclical bias, the improvement in national ownership and strengthened enforcement, the differentiation and more tailored fiscal adjustment path of each Member State, based on a common-risk framework. However, the Committee proposes replacing the requirement obliging any Member State with a budget deficit of over 3% to cut that deficit by an average of 0.5% of GDP annually, and emphasises that the "technical trajectory" should be first in the hands of national governments and, at a second stage, be the result of a technical dialogue with the European Commission In due course. In due time, but by 2026 at the latest, an EU fiscal capacity should be established to meet at least some of the investment needs for common priorities and to allow Member States the fiscal space to meet the fiscal costs of the multiple transitions.

The EESC has issued key recommendations for the mid-term revision of the Multiannual Financial Framework (MFF) 2021-2027. The Committee calls for a prompt agreement on the MFF revision still this year, to guarantee continued financial backing of Ukraine and financing the EU´s evolving political priorities. However, the EESC criticizes the proposed changes as being too limited and lacking ambition, resembling mere patches. It advocates for long-term strategies centred on fiscal sustainability, efficient resource allocation, and measures to guard against unexpected events. Civil society should be engaged for effective planning and monitoring of MFF programmes.

The EESC emphasises that the designing of proposals for new sources of own revenues should be done in context of the budgetary pressures faced by Member States following the pandemic and the ongoing international tensions. This has become all the more important in the current higher interest rate environment. The EESC also emphasises that the second set of own resources measures should be in line with the proportionality and social fairness principles. An EU-wide tax on digital transactions could be potentially considered to increase own resources in case the agreed rules of the OECD/G20 Inclusive Framework are not respected by other major trading partners.

The EESC considers that it is necessary to add new own resources to cover the debt repayment resulting from borrowing under the NextGenerationEU initiative without jeopardising the budgets of other EU programmes and instruments, or substantially increasing the Gross National Income (GNI)-based resource contribution. Although the Commission proposals as set out in the communication are deemed necessary, EESC believes that the Commission should ensure that the design of the new system is based on achieving equity and fairness, efficiency, transparency, simplicity and stability, with a focus on competitiveness and applying solidarity where necessary.

The Own Resources Decision (ORD) entered into force on 1 June, enabling the Commission to start borrowing resources for the Next Generation EU (NGEU) recovery instrument. For the EESC, a well-functioning funding strategy is key for the smooth implementation of NGEU. Sound and sustainable funding and solid risk management are in the very interests of civil society. Moreover, borrowing and debt management has to be based on democratic control, legitimacy and transparency.

The EESC stresses how important it is that the Commission manage the funding strategy directly and does not outsource this. The massive engagement on capital markets will be accompanied with a broad set of risks. The EESC supports the establishment of solid risk-management systems and the holding of the 'NGEU account' with the ECB.

The EESC strongly supports the Commission's proposal – Next Generation EU – as a specific tool for a quick and effective recovery.

The EESC takes a very positive view of the Commission's two main decisions:

1. to introduce an extraordinary financial recovery instrument as part of the multiannual financial framework
2. to raise common debt, which will be repaid over a long period of time, and prevent the extraordinary financial burden from falling directly on the Member States in the short run.

The EESC strongly welcomes the fact that the newly proposed instrument should be closely coordinated with the European Semester process, and furthermore welcomes the Commission's proposal to introduce additional genuine own resources based on different taxes (revenues from the EU Emissions Trading System, digital taxation, large companies' revenues).