ECB’s Šimkus Advocates Joint Borrowing to Finance European Defence

19 June 2025

By David Barwick – KYIV (Econostream) – European Central Bank Governing Council member Gediminas Šimkus on Thursday called for joint European financing of defence.

During a panel discussion at the 9th Annual Research Conference of the National Bank of Ukraine and the Narodowy Bank Polski, Šimkus, who heads the Bank of Lithuania, identified paradoxes of the European economy, including the fact of its being largely bank-based `and yet access to credit is becoming increasingly constrained.´

In this context, he observed that bank lending to corporates `as a share of GDP is either stagnating or in fact declining across many economies.´

Similarly, he criticized the significant barriers, for example a lack of harmonised rules, that impeded intra-EU trade. These obstacles, whose effect was similar to high tariffs, affected financial services in particular, he said.

Moreover, Europe had capital that it systematically fails to channel into public investment, he said. One consequence of this failure was that defence goods had to be imported, he noted.

This amounted to `an important strategic vulnerability in an increasingly harsh geopolitical environment´, he said.

All this called for a changed approach to European financial markets, he said. These were `not just vehicles for growth … but they are also about resilience, about security´, he said.

Šimkus urged that Europe grant itself `the tools to finance its sovereignty´and make its capital markets able `to support critical defence´objectives.

In this connection, he advocated the capacity to `borrow jointly to finance defence´.