European Commission President Ursula von der Leyen just launched the largest military investment program in European Union history. Following the Tuesday, March 4th presentation, her five-point plan, dubbed “ReArm Europe,” is meant to allow EU member states to “massively” boost their defense spending both in the immediate future and over the next decade.
In total, von der Leyen is hoping to mobilize “close to €800 billion” for defense investment through ReArm Europe from multiple sources: joint loans, national budget increases, and private capital investment. However, every proposal comes down to one thing: debt, both at the EU and national level. The Commission chief has stated this is necessary in the current “era of rearmament.”
I do not need to describe the grave nature of the threats we face or the devastating consequences that we will have to endure if those threats will come to pass.
Von der Leyen added that the question is no longer whether Europe needs to shoulder more responsibility for its own defense, but whether it is prepared to “act as decisively as the situation dictates.”
We are living in dangerous times.
— Ursula von der Leyen (@vonderleyen) March 4, 2025
Europe‘s security is threatened in a very real way.
Today I present ReArm Europe.
A plan for a safer and more resilient Europe ↓ https://t.co/CYTytB5ZMk
The Commission’s five-point ReArm Europe strategy was sent to all member states ahead of Thursday’s emergency European Council summit, where leaders are expected to adopt a joint position agreeing to at least the broad outlines of the plan.
The five points include:
- Activating the ‘national escape clause’ to allow member states to run 1.5% higher budget deficits than what’s permitted by EU rules to drastically boost their defense spending.
- A €150 billion worth of joint loan for “pan-European” military procurement, under which member states can pool demand and buy weapons together cheaper.
- This includes air and missile defense systems; artillery, missiles, and ammunition; drones and counter-drone systems; as well as cyber- and mobility equipment such as armored vehicles.
- This could also be used by member states to buy military equipment for Ukraine (there might even be an additional clause that 20% of every procurement should be invested in Ukraine).
- Allowing for more “flexible” use of existing EU funding for defense purposes, including diverting a portion of cohesion funds and remaining pandemic relief funds.
- Accelerating the implementation of the Savings and Investment Union (SIU) to attract private capital investment by increasing returns on savings from Europeans’ household wealth.
- Securing more private capital through the European Investment Bank (EIB).
According to the European Council President António Costa, there is a “broad agreement” among all member states that a massive boost to the EU’s defense spending is the way to go forward, and the only thing that needs to be discussed on Thursday are the details of the Commission’s plan.
The idea of joint debt has always been a very contentious issue among member states, and particularly opposed by north-western countries, such as Germany, the Netherlands, and the Scandinavians, who don’t like the idea of subsidizing others with more ‘reckless’ fiscal policies.
These countries agreed to the pandemic relief funds being raised through a joint loan in late 2020 after being reassured that it was a “one-time thing” only, a point they referred to frequently over the past two years when the EU began floating a €100 billion loan idea for defense.
Yet, now it seems that even the most frugal countries are on board with taking out a much bigger joint loan for defense. Nothing illustrates the change of heart better than the fact that Germany—the country historically most opposed to becoming a ‘debt union’ while insisting on its rigid national rules—is now moving to circumvent its ‘debt brake’ to raise a proposed €900 billion defense cash pot alone under incoming Chancellor Friedrich Merz.
The initial draft resolution for Thursday’s emergency summit also included an immediate €20 billion military aid package to Ukraine from the EU budget, but this instrument was reportedly put on hold and scrapped from a newer version due to fears of Hungarian and Slovak vetoes.
However, insider sources suggested that many other countries are also against this new tranche on top of the €60 billion the EU has already pledged to deliver to Ukraine this year, but—afraid of raising their own voice in opposition—they are happy for Budapest and Bratislava to take the blame.
