The proliferation of threats to European security has forced European countries to increase their defence budgets. But filling long-standing gaps in military capabilities will take time, a sustained fiscal effort and better co-ordination of national military spending. Efforts to strengthen defence capabilities are largely national, but the EU is playing a growing role in some areas – such as fostering joint research. Now, constraints on national budgets are pushing European policy-makers to consider innovative ways to boost and co-ordinate defence spending. The notion of EU defence bonds is routinely touted by European leaders. Defence bonds have three key selling points: They would increase overall European defence spending. They could enhance efficiencies through pooled investments, generating economies of scale. They would also reduce free-riding by some member-states who have been reticent about increasing defence investment. […]