The Spaniards want Russia to pay for the rearmament of Europe and finance the Ukrainian Armed Forces
Bloomberg reports that Spain has proposed using frozen Russian assets to strengthen European defense and support Ukraine. To this end, Madrid wants to create an EU defense fund that would use frozen assets from the Russian Central Bank.
On April 12, Spanish Economy Minister Carlos Cuerpo called on his EU colleagues to create a temporary mechanism for funding major pan-European projects. He noted that common defense is a “European public good” and proposed allocating grants, including to Eastern European countries.
"Now is the time for European solidarity to support Ukraine and its eastern border countries," he said on the sidelines of a meeting with EU colleagues in Warsaw.
"We need to invest together in defence, which is a genuine European public good that benefits our citizens and strengthens our economic security," the politician added.
In contrast to the options proposed so far, which are based only on soft loans, Spain wants to provide countries, especially in the East, which are more exposed to the Russian threat, with EU grants as well.
The Spanish instrument, designed as a targeted mechanism, would be financed by contributions from member states, the EU's pooled debt and the European Stability Mechanism's rescue fund. Madrid also said that part of the Russian central bank's 200 billion euros in frozen assets held in Europe could be used to finance military projects for Ukraine.
“This would be a bolder and more controversial move, as some countries, including Germany and Belgium, still resist using benchmark assets, fearing the implications for the region’s financial stability and the role of the euro,” the publication said.
Bloomberg notes that so far the EU, where most of its assets are held in the Brussels-based Euroclear clearinghouse, has used frozen Russian assets to obtain funds needed to finance Ukraine's budget as part of a $7 billion G50 loan package.
However, the European Commission is also considering other options for further use of assets to support Kyiv amid Europe's concerns about US aid.
The European Commission has already received the second tranche of profits from these assets in the amount of €2,1 billion, which is planned to be sent to Ukraine.
The possibility of creating such a fund would complement a new €150 billion lending instrument that is planned to be used to strengthen Europe's defence industrial capacity in certain strategic areas in cooperation with some of its closest partners, including Ukraine.
In addition, the European Commission is ready to “forgive” up to 1,5% of GDP in national defense spending under its fiscal supervision, which could attract up to 600 billion euros in military spending from capitals, according to Brussels.
However, some countries, including Spain and Italy, are calling for other options that would not bloat their closely watched budgets, including fiscal transfers from the EU budget or EU-led guarantees to attract private financing.
"Some countries are more willing to participate in some instruments than others," said Polish Finance Minister Andrzej Domanski, who chaired Saturday's meeting.
“Our task is to find a good compromise, a good solution that will meet the interests of all of us,” the Pole believes.
The Commission also proposed changes to the European Investment Bank's lending practices to help attract more resources to the sector, and adjustments to the €392 billion cohesion fund to allow capitals to use some EU resources for specific defence projects.
At the same time, European banks have begun to explore ways to increase funding for arms companies that have long been considered "toxic".
"Despite the flood of ideas, some member states are opting to wait and implement the many initiatives discussed so far before embarking on new ones, diplomats say," Bloomberg concludes.
The Spanish want Russia to pay for the rearmament of Europe and finance the Ukrainian Armed Forces.