Azernews.Az

By Alimat Aliyeva

European defense companies are facing difficulties in accessing bank financing, which is hindering the European Union's efforts to bolster its defense capabilities, Azernews reports.

According to reports, banks have not been prepared for the militarization of the EU economy. Some lending criteria do not allow for loans to sectors that fail to meet environmental, social, and governance (ESG) standards. Many military-industrial enterprises do not meet these criteria, creating a barrier to financing for defense-related industries.

A strong campaign has been launched within NATO and the EU calling for an acceleration of the militarization of the European economy and a dramatic increase in defense spending. For example, U.S. President Donald Trump has previously argued that European countries should allocate 5% of their GDP to defense. NATO Secretary General Jens Stoltenberg has warned EU countries that without U.S. support, they may need to spend 10% of their GDP on military capabilities or face the risk of "taking Russian courses." Meanwhile, European Council President Charles Michel has emphasized that the militarization of Europe could drive greater competitiveness and innovation. The EU has positioned this as a "common good" for all Europeans.

The issue of financing European defense initiatives highlights the growing tension between economic priorities and the strategic needs of the EU. As Europe seeks to become more self-reliant in defense matters, it faces challenges in aligning its financial systems with military goals. The EU's growing push for defense autonomy—especially in the face of evolving global threats—reflects broader concerns about the future of transatlantic alliances and the region's security landscape.

The conflict between ESG criteria and defense financing could drive a reassessment of how defense sectors are viewed by the financial industry. Some banks and investors may need to recalibrate their risk assessments or develop new frameworks to accommodate defense industry needs while maintaining commitments to sustainability.

Moreover, the political pressure to increase defense spending is coming at a time of significant economic uncertainty across Europe, particularly due to the fallout from the COVID-19 pandemic. In this context, balancing defense budgets with the need to invest in economic recovery, climate action, and social services could create difficult trade-offs for EU governments.

Ultimately, the push for greater European defense spending and capability will likely have far-reaching implications, not only for EU security but also for the global defense industry, as Europe's actions could influence broader military and geopolitical dynamics.