The challenge of creating a European ‘Rearmament Bank'

Key Points

• The need to find additional funds in the European Union to purchase military equipment has encouraged various proposals to create a new multilateral financial mechanism.

• The UK Treasury has explicitly drawn on the precedent of the European Bank for Reconstruction and Development (EBRD) as a model for the new mechanism.

• The EBRD precedent also offer lessons in coordination problems with existing public development banks and notably the European Investment Bank.

• The creation of a defence funding mechanism also carries the risk of further undermining parliamentary control of European-level borrowing.