In light of the European Union's call for increased defense spending amid geopolitical tensions, Spanish Prime Minister Pedro Sánchez has faced significant challenges in approving a new budget.

To navigate these hurdles, the government is exploring alternative financing options.

According to sources from Moncloa, the primary solution involves reallocating unspent budget funds from various ministries to bolster the defense budget, a process referred to as 'budgetary availability'.

On Wednesday, Sánchez addressed the Congress of Deputies to clarify the rationale behind the proposed military expenditure increase, citing increased European independence from the United States and the aggressive posture of Russia as key drivers.

However, he did not elaborate on the specific mechanisms for implementing this increased spending.

Sources have indicated that Spain's favorable economic conditions are providing more flexibility within the budget, despite the existing extension of previous budgets.

Another potential source of funding for military expenses is the existing contingency fund, although government officials acknowledge that this fund alone is insufficient for the desired increase.

The prospect of generating new credit was also mentioned, though this would require legislative approval from the Congress of Deputies.

Sánchez is likely to avoid bringing most of the defense funding proposals to the lower house to prevent dependence on opposition parties, particularly the PP. However, he acknowledged that some aspects of the defense budget could be discussed in Parliament.

Further discussing the financial aspects, Sánchez proposed the creation of 'Military Next Generation Funds'.

In his statement, he drew parallels between the current European crisis and the COVID-19 pandemic, expressing Spain's preference for collaborative solutions, although he noted that Eastern European nations close to Russia might absorb a significant portion of any available funds.

Despite acknowledging that there is limited receptiveness to his proposals—both for European defense funding and including related security expenditures in the overall defense budget—officials expressed confidence in Sánchez's ability to pressure European partners into cooperation.

In terms of strategic planning, Sánchez announced that Spain would incorporate all military-related expenditures into a National Plan for the Development and Promotion of Security and Defense Technology and Industry, which will resemble the Recovery, Transformation, and Resilience Plan adopted during the pandemic.

This new plan aims to meld public funding with private sector collaboration, with an emphasis on job creation within the defense industry.

Sánchez also indicated that the plan is expected to be finalized 'before summer', although concrete timelines remain uncertain pending EU requirements.

Notably, the Ministry of Defense has indicated a commitment to reaching a defense spending target of 2% of GDP potentially before the upcoming NATO summit scheduled for June in The Hague.

In addition to funding strategies, Sanchez introduced the proposal for the establishment of a European Army, an idea that has been floated intermittently across the EU for years but had not gained traction from Spain until now.

Moncloa officials stated that the decision to support this initiative was overdue, emphasizing the importance of establishing a coordinated command for European armies rather than creating a new military force from scratch, suggesting that this approach would mitigate national security risks in the event of divergent EU policy directions.