Poland backs idea of rearmament bank to pay for EU defence

By Jan Strupczewski

BRUSSELS (Reuters) - Poland supports the idea of creating a "rearmament" bank to help Europe pay for the huge defence investment it needs as result of Russia's invasion of Ukraine, Foreign Minister Radoslaw Sikorski said on Thursday.

Sikorski said he preferred the bank idea to other options under discussion, which included boosting national contributions to the EU budget, re-purposing the existing contributions, using unspent EU funds or raising jointly issued debt.

The European Commission has estimated EU defence financing needs at 500 billion euros over 10 years. European governments sharing a border with Russia say the EU needs to act now to boost its defences.

Poland, which has been the driving force behind EU discussions on joint financing of defence, holds the rotating EU presidency until the end of June and sets the agenda for EU meetings, giving it more clout to push some ideas.

"There is a new idea, which I like, a rearmament bank," Sikorski told reporters, referring to a proposal from mid-January by Britian's former defence chief General Nick Carter, former EBRD Executive Committee member Guy de Selliers, and Senior Adviser at the Center for European Policy Analysis in Washington Edward Lucas.

Under the proposal, the bank would allow the participation of countries from outside the EU like Britain, Norway, Japan or the United States.

Voluntary participation in such a bank would allow neutral EU countries like Austria, Ireland, Malta or Cyprus to avoid involvement, and to avoid opposition from Hungary, which is friendly towards Russia, EU diplomats have said.

"The added advantage would be that it could be open not only to EU member states, but also other like-minded countries," Sikorski said.

It would be financed by the capital subscribed by the member countries, for example 100 billion euros, of which only 10% would be paid in upfront with the rest callable.

It would then be able to borrow the balance in the capital markets with a triple A rating, giving it 100 billion euros of lending power without significantly affecting the member countries’ own borrowing capacity.

EU leaders holding informal talks on Monday in Brussels on how to finance Europe's defence preparations agreed that the 27-nation bloc should spend more on the military, officials said.

(Additional Reporting by Andrew Gray; Reporting by Jan Strupczewski; Editing by Angus MacSwan)