The Government is set to join talks with the EU this week about signing up to a new Europe-wide defence funding scheme amid fears about US support.
Chancellor Rachel Reeves will join talks with European finance ministers in South Africa this week at the G20, coinciding with the three-year anniversary of the war.
Ahead of the groundbreaking negotiations, Polish finance minister Andrzej Domanski revealed that talks had already been taking place with the UK months before ’s most recent remarks about the future of US involvement in European security.
Mr Domanski explained: “It could be a fund or a bank. For example there is the concept of the Rearmament Bank, which we are also considering”.
A rearmament bank, backed by former Chief of the Defence Staff Sir Nick Carter, would create a new financing institution that could lend money to members for the purchasing of military hardware such as ammunition.
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Rachel Reeves will join discussions at the G20 this week (Image: Getty)
In a letter in the Financial Times last month, Sir Nick suggested member countries would pay a subscription fee to the fund, which could provide up to €100 billion in lending power.
Tonight the Treasury confirmed that Ms Reeves will “raise defence financing proposals with her European counterparts”.
On Sunday, the incoming German Chancellor Friedrich Merz said Germany would begin major changes to its security policy and end its reliance on the United States.
He warned that is “largely indifferent to the fate of Europe”.
He added: “I never thought I would have to say something like this on a television program. But after ‘s statements last week at the latest, it is clear that the Americans, at least this part of the Americans, this administration, are largely indifferent to the fate of Europe.”
Mr Merz also suggested NATO may have to be radically reformed, or alternatively Europe will need to establish its own defence capability without US involvement.
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“I am very curious to see how we are heading toward the Nato summit at the end of June,” he said. “Whether we will still be talking about Nato in its current form or whether we will have to establish an independent European defence capability much more quickly.”
The UK Government is also scrambling to put together proposals to increase defence spending to 2.5% of GDP, which will cost at least £5 billion a year, in order to meet ’s demands that NATO members contribute more to their own security.
Experts have told the FT that the proposed European defence fund could help Ms Reeves out of the tight hole she’s in trying to stump up extra cash for military spending.
Andy King, a former senior staff member at the Ministry of Defence, explained that the defence bank could raise “significant resources for defence without materially impacting the fiscal rules”.
“That’s not a certain outcome: the detail would matter in terms of how the entity was structured and how it used its lending capacity.”
This means the UK could boost its defence capabilities without the need for spending cuts, tax rises of borrowing.
Earlier this month the European Commission said it would partially lift EU fiscal rules to allow countries to invest in defence with borrowing without facing sanctions.
EU chief Ursula von der Leyen has said she will set out further detail on European defence financing in March.