Defence industry to EIB: We don’t need money, we need contracts

With the European Investment Bank (EIB), the EU's lending arm, moving closer to funding defence projects, weapon manufacturers argue that what they need is more contracts, not financing.

Speaking at the three-day EIB Forum event, the EU Council president António Costa called on the institution to increase its role in defence lending.

"It is essential to adapt the EIB’s lending practices to facilitate more loans for the defence sector, making security a new cross-cutting priority in the bank’s public policies," he said on Thursday (6 March).

"I hope this can be taken forward as quickly as possible by the board of directors," he added.

The bank’s president, Nadia Calviño, said in her speech inaugurating the event that the bank stood ready to “remain responsive and relevant” in “turbulent times” and outlined how the EIB had already supported Ukraine.

“We have disbursed more than €2.2bn and agreed to mobilise €1bn in fresh financing” for a variety of projects, including “trolleybuses, trams, restoring hospitals and kindergartens.”

These words may have been welcomed by some of the bank’s employees who are less in favour of the EIB’s new defence focus, but they were not necessarily the main course of the event.

Instead, the EIB forum showcased how the bank intends to improve prosperity—both in Europe and beyond—while also meeting the EU’s defence needs.

The key EIB proposal is that it will no longer impose limits on the amount it spends on defence projects. The current limit is €8bn, and by removing it, defence and security would become a fully-fledged investment goal. 

And in a letter addressed to the EU's 27 national leaders ahead of the defence summit on Thursday, Calviño positioned the measures as part of a wider push to increase defence spending.

“They want defence to become a full priority for the EIB,” said Frank Vanaerschot, director of Counterbalance, an NGO specialised in public banking practices, speaking to EUobserver.

“The EIB won’t finance weapons directly, but they will fund projects that are entirely military—for example, military barracks or anti-jamming technology,” he said.

“The key message that emerged was that public support is needed to create demand [for military kit]," he also said. "There’s a very aggressive war logic behind all of this."

We don’t need your money

However, Stefano Pontecorvo, the chairman of Leonardo, one of Europe’s largest weapons manufacturers, argued in a panel hosted by the EIB that “financing wasn’t the issue.”

“The EIB recently announced a one-billion-euro funding programme. That’s nice. But we don’t need your money,” he told the audience. What he needed, he said, was demand.

And demand, he made clear, came from government, not banks.

“Get us the contracts, and reinvigorate the supply chain,” he added, referring to China’s dominant hold over many of the critical materials needed to produce military equipment.

“The EIB has everything it needs to fund companies, but funding isn’t the cause of Europe’s [defence woes],” said Frank Thiser, chief financial officer of Quantum Systems, a European drone manufacturer.

The problem facing European suppliers, he indicated, is scale and a lack of government demand.

While orders for the Eurofighter, the EU’s main fighter jet, number in the hundreds, the F-16 has sold thousands, creating economies of scale that allow for more standardised and cheaper production.

“Lack of quantity is at the root of everything,” he said. “I mean, we are lucky – nobody wanted the Ukraine war — but it created a lot of demand [for our drones].”

But in general “all those programmes to provide debt or equity funding—they work automatically if there is government demand,” he added, suggesting that the role of the EIB in creating this demand is likely limited.

The EIB's defence and investment plans will be discussed at the next board of directors meeting at 21 March.