Poland and Baltic states form coalition to secure EU defense funding

Poland has moved to establish a joint defense financing coalition alongside Lithuania, Latvia, and Estonia, seeking to coordinate the procurement of additional resources and secure low-cost credit at the European Union level.

Polish Finance Minister Andrzej Domanski told Bloomberg that the four nations have agreed to deepen their cooperation to secure supplementary EU aid and explore diversified financing options, including sources from outside the bloc.

“We are building a broad coalition because we need new money and resources,” Domanski said. “Our defense spending is at an enormous level. Consequently, we require greater European solidarity and new instruments.”

Despite a budget deficit that has climbed to 7.3% of GDP, Warsaw has maintained that military expenditure remains its primary fiscal priority. The minister emphasized that Poland is currently allocating 5% of its GDP to defense, a figure that represents one of the highest levels of military spending within the NATO alliance.

Domanski noted that while Poland is the leading recipient of funds from the EU’s €150 billion Security Action for Europe (SAFE) program, existing mechanisms have proven insufficient to meet current requirements. He added that the surge in military outlays has been accompanied by rising social expenditures, further intensifying pressure on the national budget.

While Polish authorities aim to balance the deficit through projected economic growth of 3.5% to 3.7% in 2026, the country’s fiscal indicators continue to exceed EU-mandated targets. Domanski argued that implementing new financing instruments would reduce borrowing costs, thereby ensuring the long-term sustainability of the nation’s defense programs.

The Finance Minister also addressed domestic political proposals, dismissing a plan by presidential candidate Karol Nawrocki to sell central bank gold reserves to fund the military, describing the suggestion as a “mirage.”

Domanski instead advocated for the utilization of low-cost EU loans. He stated that the government would work to access the €150 billion EU defense fund, even if doing so necessitates a reduction in fiscal flexibility for non-military objectives.

The country’s fiscal trajectory has drawn scrutiny from international observers. According to Reuters, citing data from Fitch, Poland faces the risk of a credit rating downgrade if its public debt situation is not stabilized. Last autumn, the agency revised the country’s credit outlook from “stable” to “negative,” citing the rising costs of defense, social spending, and debt servicing.

Framing the necessity of the build-up, Polish Prime Minister Donald Tusk warned of the risk of an imminent Russian attack on NATO. Tusk described the security environment as critical, stating, “I am talking about short-term perspectives that can be expressed in months rather than years.”

In response, Russian President Vladimir Putin dismissed allegations of plans to attack NATO as an “incredible lie.” However, the Russian leader stated that Moscow remains prepared to respond to the militarization of European nations, noting that any potential response would be “very convincing.”