EU rearmament, Italy looks to the NRP but the Mes may be back on the table: here's why

The US ambassador to the Atlantic Alliance Matthew Whitaker put it bluntly: at the upcoming Nato summit on 24 and 25 June, the US will ask the countries that are part of the organisation to increase the threshold of GDP allocated to defence, from the current 2 per cent to 5 per cent. Italy is looking for a solution that would allow it to increase investment in this area without burdening an already considerable public debt. Hence the proposal made by Economy Minister Giancarlo Giorgetti at the Ecofin meeting on Tuesday 13 May: the resources to be used are those of the NRP. It should be extended beyond 2026. 'We support the exploration of further options, including the use of private sector funds and the possibility of extending the Recovery and Resilience Facility beyond 2026, to increase the budgetary margin available to member states to respond to the need to increase defence spending,' Giorgetti explained.

And if this is, as things stand, Italy's line, there is, however, a shadow hovering over the EU rearmament operation: the ESM. Italy is the only country that has not ratified the new treaty on the European Stability Mechanism. Still closing the door in the majority is the League. "I have read the declarations of FdI and Forza Italia: nobody intends to stick their head in the noose of the MES. It is good that the entire majority has decided that the Mes is not the priority and we are not interested in it. Unless we are not going to use it, why keep 14 billion in the drawer?" said Deputy PM Matteo Salvini, during a press conference on the youth employment bill presented by his party. 'We have 14.3 billion stopped under Mes since 2014 in an empty box that no one will ever use,' he continued. 'It's not about being sovereignists. It didn't work, we don't want to end up like Greece, the Italian banks are solid, they are making profits. And we don't want to put Italian pensioners' money to save a German bank. The League's position is not 'no' to the MES because we dislike von der Leyen, who has nothing to do with it and today has other problems to deal with. It would be in the interest of Italy and the Italians that we take back our 14 billion, leaving the others free to activate or not the Mes'.

In the last Eurogroup meeting the Mes dossier was back on the table. For his part Giorgetti again reiterated to his Eurozone colleagues "that the parliament is sovereign and that there are not the numbers" to vote for a ratification. Eurogroup President Paschal Donohoe acknowledged the Italian contribution to the debate but also warned of the risks of deadlock.

But in addition to being a parachute for the European Bank Resolution Fund, the ESM could - the conditional is a must, also because it would first have to be ratified also by Italy - play a role in another equally strategic game, that of EU rearmament. In the White Paper on European defence presented on 19 March by the Commission and the High Representative, in fact, it is clarified that "should the demand by Member States for loan-based financing supported by the EU budget in the framework of the Safe programme exceed the supply, the Commission will continue to assess innovative instruments, for example in relation to the European Stability Mechanism".

Through the new specific instrument for Action for the Security of Europe (Safe), the Commission will raise up to EUR 150 billion on the capital markets, using its consolidated unified funding approach, to help EU Member States rapidly and substantially increase investment in Europe's defence capabilities. Funds will be disbursed, upon request, to interested Member States on the basis of national plans. Disbursements will take the form of competitively priced and attractively structured long-term loans to be repaid by the beneficiary Member States. The loans will be backed by the room for manoeuvre of the EU budget.