(Bloomberg) -- The European Union must find ways of financing massive investment quickly to catch up with major shifts in the world order, according to Mario Draghi.

“Many profound changes have taken place in the last few years in the global economic order,” he said on Saturday. “These changes have a variety of consequences, one of which is clear is that we’ll have to invest an enormous amount in a relatively short time in Europe.”

The former head of the European Central Bank has been tasked with writing a report on how to make the EU more competitive. He spoke in Ghent, Belgium, where he met the bloc’s finance ministers, with attention focused on the second anniversary of Russia’s invasion of Ukraine.

The war has pushed defense spending to the top of the agenda as Draghi sounds out member states on ways to boost the region’s economy in an increasingly hostile global environment.

During Saturday’s discussion, he underlined the need for bold action to cover the cost of the green and digital transitions, as well as defense, while maintaining Europe’s social models, people familiar with the discussion said.

Among options to mobilize public money at the EU level, Draghi raised the possibility of a dedicated fund, or public and private partnerships, where the European Investment Bank would have a role. He also underlined the need to unlock private savings to a greater extent than in the past, the people added.

One of the ideas put forward by some at the two-day meeting is joint EU borrowing to finance the bloc’s priorities, following similar moves during the Covid pandemic.

EU Economy Commissioner Paolo Gentiloni told reporters that the experience had shown that using common debt is “a sound way” to deal with crises.

“I don’t see any reason not to continue for common targets to have common funding,” he said.

Draghi, a former Italian prime minister, is due to hand in his findings after European Parliament elections in June.

The bloc faces a long list of spending needs, including the green and digital transitions, but the war in Ukraine and the prospect of Donald Trump returning to the White House have focused talks on how to boost European security.

Belgian Finance Minister Vincent Van Peteghem warned that the possible reelection of Trump in November could further shift the world order and impact Europe’s position.

“We need to create momentum now so that we are still in the driver’s seat to make the decisions that are necessary,” he said after the meeting.

European Commission Vice-President Valdis Dombrovskis said it’s clear the EU will need to pay much more attention to its defense capabilities and work jointly. He added that member states must invest more, especially given many have not met a NATO target of spending at least 2% of GDP on defense.

“And certainly it will require discussions on what EU-level instruments we can have,” he said.

EIB’s Role

One option discussed on Friday was to review the EIB’s mandate so the EU’s lender can provide loans to produce arms and ammunition. But while countries including Finland and Lithuania back such an option, others prefer to take more gradual steps, the people familiar with the matter said.

The EIB and the commission, the EU’s executive arm, will explore the scope for defense-industry financing under the EIB’s mandate to fund goods with both civilian and military use, without putting at risk its top credit rating, the people added on condition of anonymity because the discussions were private.

“The EIB has been active for the past eight years in the area of security and defense, we’re ready to do more and better,” EIB President Nadia Calvino told a news conference in Ghent on Friday. “Protecting our AAA and our very solid financial position is obviously a shared priority, which needs to be preserved.”

Still, some ministers underscored the need to explore all available options.

“I would want to emphasize and remind people of a simple truth: if we want to protect ourselves and expand the defense industry, defense spending must be increased,” Estonian Finance Minister Mart Vorklaev told Bloomberg.

He added that the EIB’s legal texts should be changed if needed for it to “fulfill its role even better.”

--With assistance from Sanne Wass and Kamil Kowalcze.

(Updates with details of discussion starting in fifth paragraph, Belgian finance minister comments starting in 12th paragraph.)

©2024 Bloomberg L.P.