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ESM May Fund Defence Spending for Eurozone Countries, Says Top Official
The European Stability Mechanism could lend to eurozone countries for defence without strict economic reforms, aiming to support smaller states with stretched budgets amid geopolitical tensions.
ND
by News Desk
2026-01-30
ESM May Fund Defence Spending for Eurozone Countries, Says Top Official

The European Stability Mechanism (ESM), the eurozone’s €430 billion crisis fund, could be used to provide credit lines for defence spending, its managing director, Pierre Gramegna, told Reuters, signaling a potential shift in the bloc’s approach to security financing.

Gramegna said the ESM would offer such loans without demanding stringent economic reforms, partly to avoid any stigma associated with requesting funds. “In these times of geopolitical turmoil, which have triggered higher expenditure, defence costs for all countries, we must use the full potential of the ESM,” he said, emphasizing support for smaller eurozone states whose budgets are stretched.

Repurposing the fund, originally designed to prevent economic collapse during the eurozone debt crisis, would mark a symbolic shift toward reinforcing Europe’s military capabilities amid tensions with Russia and growing friction in transatlantic relations.

While only eurozone members would be eligible, and loans require approval from all 21 member countries backing the ESM, the move could benefit smaller states like Estonia, Latvia, and Lithuania. These countries have significantly increased defence spending since Russia’s invasion of Ukraine, often borrowing heavily to meet budgetary needs.

Gramegna referenced past ESM mechanisms, such as precautionary credit lines and the COVID-era crisis support fund, which could be adapted to create a “defence support line,” providing loans at low interest without economic restructuring conditions. He also suggested that countries could make “collective requests,” reducing any political or reputational stigma.

The proposal highlights the EU’s search for innovative ways to strengthen defence, particularly for countries on the bloc’s eastern frontier, and reflects growing urgency as geopolitical tensions rise in Europe.
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Eurozone

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