State funds will not be enough to complete the “2032+ reconstruction plan” of the Austrian Armed Forces to finance it. However, the capital market is currently still reluctant to invest in armaments. According to Bernhard Müller, Partner for “Security & Defense” at PwC Legal Austria, a paradigm shift is now emerging.
The “EU development bank doubles investments in defense”. In order to make the EU more independent, Nadia Calviño, head of the European Investment Bank (EIB), is focusing on more loans for defense projects. Until now, the EIB was prohibited from financing weapons and ammunition. Now it is at least allowed to invest in drones, border protection systems, satellites, radar systems, mine clearance, military mobility and cyber security.
This is absolutely necessary! Further opening is unavoidable, but is currently still being held back by the resistance of some EU member states.
In this country, people are reluctant to finance armaments, even though there has never been a ban on this in the EU. Reputational damage is feared. Spanish and French banks have no reservations about this. The EIB initiative helps.
Until the “turn of an era”, however, arms financing was not an issue in Austria. Now it is a matter of setting up the Austrian Armed Forces in such a way that they can handle a “protective operation” against a predominantly subconventional attacker – that is the goal of the “2032+ Reconstruction Plan”. It will not be possible to achieve this with the 17 billion euros promised by the National Defense Financing Act. Especially not since the build-up will not end in 2032 and further investments will be needed beyond that. Austria is also threatened with EU deficit proceedings. Even if, as announced by Commission President Ursula von der Leyen, investments in defense are no longer counted towards the EU debt brake in the future, private capital will be needed. And Austrian companies need legal certainty about their financing.
Germany is already several steps ahead: not only is arms financing by banks being openly discussed there, but it has also been made possible for ESG funds, i.e. “green” funds, to invest in armaments. One important signal from Brussels is still missing: armaments investments must be classified as “sustainable” in accordance with the EU Taxonomy Regulation. Public-private partnerships should also be considered.
The infrastructure sector in particular has a lot of catching up to do. Although the army has ordered more than 200 new Pandur Evobut there is a lack of garages for the team transport vehicles. It also needs new hangars, workshops and administration buildings, not to mention crew accommodation. Alternative sources of funding also need to be found for the operation of weapons systems and logistics in particular. Otherwise we will not be “fit for war”.
