(Bloomberg) -- The European Union’s economy chief said the bloc should create a central treasury that can finance common goods through the issuance of eurobonds, as the EU confronts massive spending demands to bolster its defense sector.

“I have no doubt that the EU would benefit hugely from a permanent safe asset commensurate with the size of its economy,” Paolo Gentiloni, the European Commissioner for Economy, told a conference in Brussels on Tuesday. “I am equally convinced that our end goal should be the establishment of an EU-wide central fiscal capacity.”

Russia’s aggression against Ukraine and the possibility of a second Donald Trump presidency have fueled discussions in Europe about how to boost defense and security spending. Last month, EU leaders for the first time in a formal setting discussed the possibility of issuing joint bonds to fund defense expenditures, a potentially transformative event that would herald a massive consolidation of the bloc. 

Gentiloni said that institutions including the International Monetary Fund, the OECD and the European Central Bank have backed these ideas in the past. The European Commission, the EU executive’s arm, declined to include these proposals when the EU was discussing the reform of the fiscal rules, given the difficulty of the debate, Gentiloni said.

“But the time to start this discussion is now,” he said.

EU industry commissioner Thierry Breton has urged the bloc to consider spending €100 billion ($109 billion), as the EU looks to boost production for everything from ammunition to air defense systems. 

But the discussion over common bonds to finance defense faces an uphill battle. During a summit last month, Dutch Prime Minister Mark Rutte said that joint debt for defense was a red line, Bloomberg reported earlier.

“It would lead to a Hamilton moment,” Rutte told reporters of the joint defense bonds idea, referring to a definitive step that led to the creation of the American federal government. “That would be a very fundamental step which I don’t support. I’m for a collective of sovereign countries, not for a federation.”

--With assistance from Megan Howard.

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