EU Nations Consider Using ESM to Bolster Defence Funds

The head of the European Stability Mechanism (ESM) expressed readiness to discuss using the fund for increasing defence spending across euro zone countries. This proposal, originally suggested by Italy's Enrico Letta, involves providing loans at favourable rates for defence, amid increased scrutiny of NATO spending commitments.

In a significant development, the head of the eurozone's ESM joint bailout fund has announced openness to discussions on using the fund to enhance defence spending across member countries. This move aligns with a proposal by former Italian Prime Minister Enrico Letta, suggesting the ESM expand its role to provide loans for defence and security.

Pierre Gramegna, the ESM's head, indicated that the institution was subject to the appetites of its member states, expressing willingness to engage in discussions should there be interest. This comes amid rising concerns about defence commitments, prompted in part by U.S. leadership critiques of NATO spending.

Initially established in 2012 as a financial safety net following the eurozone's sovereign debt crisis, the ESM has continuously evolved to stay relevant. Its recent activities include setting up a precautionary credit line during the COVID-19 crisis to support health spending, a precedent for its potential expanded role in defence funding.

(With inputs from agencies.)