You recently reported on how the new president of the European Investment Bank had signalled an openness to invest more in defence, and that some EU states had proposed that the EIB should finance weapons purchases (Interview, February 28).

With Russian aggression and doubts about the future reliability of the US as an ally, it may seem sensible to ask whether the EIB mandate should now be expanded to include direct military expenditures? Unfortunately, the answer is likely to be no.

Multilateral development banks such as the EIB perform due diligence to ensure the environmental, social and governance standards of the investments they support. What happens in the case of defence? Even if investors are ready to fund defence and many are not as a matter of principle it is clearly not possible for any third party to take a view on the number of bombs that should be produced, nor how they should be procured. This means the EIB would simply provide its balance sheet as a funding vehicle for the budgets of the governments in question. It becomes nothing more than an indirect government funding agency incidentally competing with similar national agencies.

The balance sheet of the EIB, as other MDBs, is limited. The EIB is lending between 50bn and 100bn annually. The question is not whether increased defence spending is necessary it is but where can that money, combined with the knowledge of the institution, be best deployed to stimulate broader investment that supports its policy goals.

In short, the approach of funding dual use technologies technologies that are justified as commercial propositions in the civilian sector, but also have defence uses, drones being a commonly cited example is as far as the EIB, or any other similar organisation, should go.

Christopher Hurst Senior Visiting Fellow School of Transnational Governance European University Institute, Florence, Italy

More:
Letter: Where the European Investment Bank is on the defensive - Financial Times