Government considering bid for portion of €21bn EU ‘defence’ loans

Government departments are planning to take another look at whether the Republic should apply for part of a leftover pot of €21 billion in European Union-backed loans, intended to boost national defence budgets.

The Department of Finance last year vetoed plans for the Republic to borrow up to €100 million to upgrade Defence Forces equipment, in the initial round of new EU Safe [Security Action for Europe] loans on offer from Brussels, to push governments to spend more on their defence.

The European Commission, the EU’s executive body in Brussels, has this week invited member states to apply to borrow leftover funds from the programme that still has to be spent.

[ Donohoe vetoed proposal to borrow €100m for military equipment under EU planOpens in new window ]

Earlier this year, Minister for Defence Helen McEntee said she would be open to availing of the loans in any second round of the scheme.

In response to concerns about the growing threat posed by Russia, the commission drew up a plan to raise €150 billion, borrowed against the EU’s common budget, to dole out in loans to member states to spend on defence and security.

In total, 19 of the union’s 27 states availed of the loans. After assessing and approving all the various defence spending plans for the funds over the last year, about €21 billion remained.

The commission this week put out a new call, looking for a second round of bids for the residual cash.

The Department of Defence, then led by Simon Harris, had looked to draw down up to €100 million last year, but the plan was blocked by then finance minister Paschal Donohoe.

[ Irish people understand need for more defence spending, claims HarrisOpens in new window ]

Defence officials had suggested the loans could be used to replace part of the Air Corps fleet, or purchase new armoured vehicles for the Army. The money would be repaid over 45 years.

The business case for the EU loans makes less sense for the Republic, given the Government can already borrow funds on the financial markets at rates much cheaper than most European countries. However, drawing down the Safe facility would be viewed as a signal Dublin is keen to do more on defence in step with other EU states.

The Government has said it would participate in the joint procurement element of European Union defence plans, where several countries combine to buy weapons or hardware.

[ Ireland should avail of EU loans for defence if scheme reopens, says HarrisOpens in new window ]

A Department of Defence spokesman said any decision to seek the loans would be part of a “broader assessment” of the State’s defence priorities.

Sign-off would be needed from the departments of Finance and Public Expenditure. “While Ireland previously decided not to draw down a loan under the Security Action for Europe instrument, the department keeps developments in EU defence and funding initiatives under constant review,” said the spokesman.

The Government has increased the budget for defence in recent years. Moreover, the State is planning to acquire hundreds of armoured vehicles for the Defence Forces and long-range radar systems, as part of a supply arrangement with the French defence industry.