Increasing defense spending will weaken the credit profiles of European governments, unless they are able to limit other spending or increase their revenue, Scope rated on Friday.
NATO allies agreed on Wednesday to increase their defense spending to 5% of GDP in the next decade, citing the long -term threat posed by Russia and the need to strengthen political and military resilience.
“The increase in defense spending will lead to increased lending and deterioration of the debt to GDP in most EU member states, and therefore to weakening state credit profiles, unless there is restriction of other spending or increased revenue,” SCOPE analysts said in a report.
The additional fiscal burden, according to Scope, will put significant pressure on countries such as France, Belgium and Italy, which are already under fiscal surveillance by the European Union due to their high deficits.
These restrictions may lead to the transfer of defense spending to the European level, analysts add.
“Common European funding of European defense and security could provide more sustainable and coordinated support between Member States, while creating economies of scale in defense and security supplies,” they add.
The EU It has already begun the creation of a fund of up to 150 billion euros, funded by a joint lending, but economists estimate that further joint funding will be needed.
Source :Skai
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