French President Emmanuel Macron backed the issuance of joint European debt to pay for priorities including defense and technology in order to ensure Europe remains sovereign amid increasing competition with China and the US, according to Bloomberg.
“We need more public investment in Europe, so we should open a second phase of reinvestment as we did during the Covid crisis, and maybe daring again to have Eurobonds for priorities,” Macron said, addressing the World Economic Forum in Davos.
He cited Estonian proposals for Eurobonds for the defense industry and Ukraine as examples of such priorities.
Estonia floated the idea of bonds to fund defense spending last year, according to people familiar with the proposal who spoke on the condition of anonymity. European Council President Charles Michel raised the idea of defense bonds in November, saying it was in our “common interest.”
In 2020, the EU agreed to a massive debt-financed €724 billion Covid recovery fund — heralded as a Hamiltonian moment — to limit the severity of the economic downturn. At the time, supporters insisted such a measure would only happen once. Talk of a new program underscores the massive amount of spending Macron and others envision is needed to keep the EU competitive.
The EU is also struggling to strengthen the defense sector and boost arms production as Russia’s war in Ukraine drags on and as questions continue to crop up — particularly ahead of the American elections in November — as to how long the US will continue aiding Kyiv.
Among areas in which Europe needs to push investment are AI, chips, space and defense, Macron said. “I think 2024-2025 will be the years where European countries and the EU as an entity will be in a situation to decide if we want to be sovereign or not,” he added.
He added that Europe needs to create a single capital market to spur more private investment. After years of inertia in talks, Macron said he is willing to make a deal with a smaller group of countries if the whole EU can’t advance.
In his introductory remarks, Macron told the audience that he will reprise his trademark pro-business measures in order to try to boost France’s economy further.
“We need an economic agenda for industry and innovation that is even more ambitious,” Macron said. “Everything we’ve done in recent years and the good results are not sufficient because innovation is accelerating and because there is an acceleration with” the US Inflation Reduction Act.
French unemployment has started to pick up again, and economic growth has slowed markedly, in contrast to a rapid rebound after the pandemic.
At the same time, the French leader has little room to boost public spending after a vast build-up of debt during the Covid and energy crises. Last year, Fitch Ratings downgraded France, and S&P Global has a negative outlook on its assessment of the country’s finances.