Wars, even defensive or supportive, are expensive. Putin’s will cost the European Union a lot of money: to finance arms and rearmament; to replace Russian oil and gas; to welcome refugees. And we Europeans still do not know how we will pay for it.
At the Versailles summit a week ago, the current president, Emmanuel Macron, postponed that calculation and his political debate. His thesis: since this bothers us and even divides us, let’s start by setting the necessary expenses and investments, and then we’ll see how we pay for them.
It is a good trick, even reasoned, because it is better to have a solid plan in a few weeks, than a weak one on the first day. But trick at last, because there are already sensible previous calculations. Especially that of the great French economist and almost eternal adviser to the last tenants of the Elysee, including Macron, Jean Pisani-Ferry.
Pisani estimates that the cost (budgetary; others are excluded) will reach 175,000 million euros this year, “between 1.1% and 1.4% of community GDP”; and even more so in 2023: “at least half a percentage point a year” (The economic policy consequences of the war; Brueghel, March 8). Figures that take up, sharp, Federico Steinberg (Eurobonds for war, ExpansionMarch 9).
The breakdown of this amount attributes 50,000 million to the effort —in addition to the current one— to alleviate the price of energy for families and companies; another 75 billion to finance supply independence (replace Russian supply); 30,000 to the reception of refugees and humanitarian aid; and 20,000 (initially; it will be doubled) in security, to reach 2% of defense spending over GDP.
A higher estimate is that of the Italian leader, Mario Draghi: “Between 1.5 and 2 billion euros in the next five years”. An amount that would double the Recovery Plan Next Generation-EU (NGEU).
He knows in depth all the sides of the coin.
The few northern responses to the problem are for the ignorant: “Perhaps we can redirect or rechannel or refocus more [los fondos NGEU] to these urgent matters,” says Dutch Prime Minister Mark Rutte.
It’s a silly global recipe. Because the amount that comes from the Russian cold will be high: Pisani and Draghi estimate only short-term budget expenses. And because it goes beyond the limits and purposes of the NGEU: to new needs, additional investments. True, you can go to its loan chapter – to which only Italy has appealed – and certain items and projects can be reperiodified or reprioritized. As in the Green Agenda. Yes. But to speed it up.
Luckily, in the Commission, Vice President Frans Timmermans, a good Dutchman, has finally assumed the energy responsibility that corresponded, in theory, to the inane Estonian Commissioner, Kadri Simson. This file, seasoned by initiatives such as the Mediterranean ones or the —unprecedented— tour of capitals by the Spaniard Pedro Sánchez, finally points to ways.
The point is that the EU will have to take the lead in financing the response to Putin: by expanding the NGEU; making it permanent; with a new fund and new Eurobonds… Because “there is no longer room in the national budget, we need a European response”, adds Draghi.
Exclusive content for subscribers
read without limits