Has the time come to move from the green transaction to the green-mimetic agenda? Today we meet college of commissioners Ue, which will take stock of the strategy for the manufacturing industry defense and on the European Defense Investment Program (EDIP) and could be a turning point compared to the past: the circulation of money funds could change, some strategies could be modified. Naturally, one of the issues that hinges on all this is raising funds. As? With joint procurement, more funding and more coordinated, an ad hoc commissioner for defense, an Office of Innovation in Kiev and the use of frozen Russian assets to support Ukraine's armed struggle. While it is worth keeping an eye on the stock market sectors of the arms industry.
Ursula von der Leyen had anticipated this to the MEPs last February 28 when she opened the debate on European security and defense at the plenary session of Parliament: she intends to create the founding pillars of a strategy that should changing the future of security throughout the European Union. “Europe has begun to understand the urgency and scale of the challenge that awaits us” said von der Leyen on that occasion, “but there is still much to do and we must move quickly, the threat of war can not be imminent but it is not impossible." In essence, underlines the number one of the Commission, "there is an urgent need to rebuild, replenish and modernize the armed forces of the member statesthe".
Biden already intends to use Russian reserves: a total of 300 billion dollars
Joe Biden is also insisting on the use of frozen Russian reserves. “It's about 300 billion dollars which were frozen immediately after the start of the war” observes Antonio Cesarano, Intermonte strategist. “These are not gold reserves, which Russia has at its disposal anyway, but those frozen in those countries that have declared themselves in favor of Ukraine, therefore the USA and Europe above all, but also Canada and Japan”.
Biden asks that these reserves, which for the US amount to around 50 billion dollars, be used. Indeed, he has already done so by moving forward and presenting a bill to plead the cause: it is the Repo Act (Rebuilding Economic Prosperity and Opportunity for Ukrainians Act) drawn up after the US president was unable to obtain from Congress that 60 billion aid package. With the new Act, Biden suggests putting Russian reserves in a fund that Ukraine could use for both weapons and reconstruction.
In Europe, Russian reserves amount to around 200 billion
Of these 300 billion, approximately 200 would be in Europe, at Euroclear, so these are financial assets. Which? According to Cesarano, “it is probably not US Treasuries, according to the data provided before the war, when Russia had eliminated investments in T-bonds, moving to gold. Instead, these will be other types of bond assets that produce coupons."
Tomorrow at the EU too one of the topics will be just like make the best use of the funds of Russian reserves. For this purpose, for example, as von der Leyen anticipated, the establishment of a will be announced Office of Innovation defense in Kiev." “One of the hypotheses on the table is that of placing Russian reserves as a bond guarantee that Ukraine could issue and that the countries of the European Union could subscribe to: in case Ukraine could not pay, Russian reserves would be used” says Cesarano, “but not everyone agrees”. France opposes it, pointing out that there is no legal basis for doing so. And then a precedent would be created whereby countries would no longer feel like putting dollars or euros in reserve for fear that these funds could then be seized or even used against them.
The hypothesis of joint purchases and the creation of a fund
The discussion continues, the pressure is strong. Tomorrow the commissioners could give more details on how to move the defense players in the European Union. “According to some rumors, a plan will be proposed joint purchases, as was done during the Pandemic” says Intermonte. “Which would have economic advantages, exemption from VAT, the possibility of having a subsidized loan from the EIB”, the European investment bank. But even in this case a change of direction would be necessary: the EIB itself would be forced to review its statute which currently prohibits financing of the arms industry.
“There is also the idea of creating a fund of 100 billion of euros which could also be used immediately as a guarantee, so that individual states can issue bonds aimed at military spending" says the Intermonte strategist with the possibility of a discussion in this sense at the next European Council on 21 and 22 March which in fact security and defense are on the agenda.
The first change of strategy in Germany with Scholz's Zeitenwende
Defense spending is therefore starting to come into focus. In truth, she was the first to think about it Germany, when, shortly after the start of the war, Olaf Scholz had spoken of an epochal turning point (Zeitenwende) of the fact that we need to start arming ourselves again", with a notable change of pace compared to the entire post-World War II phase. “For this reason he has allocated a 100 billion fund which he is using year after year” says Intermonte.
Today Germany itself, although in "crisis mode" (according to the term Krisenmodus declared word of the year 2023) is finding support in its defense minister Boris Pistorius: who arrived almost silently in January 2023, he is now acquiring notoriety so much so that around 65% of Germans would now see him favorably in place of Scholz who is instead losing support. “Certainly the Germans now have to review the assets of their economy” says Cesarano.
