The European Council has endorsed a proposal by European Commission President Ursula von der Leyen to significantly increase the EU’s defence capabilities under the ReArm Europe initiative.
The plan includes a €150 billion loan scheme for defence procurement and additional financial mechanisms that could mobilise close to €800 billion over the coming years.
A New Era of European Defence Investment
Speaking on the proposed defence package, von der Leyen described the current security environment as one of the “most momentous and dangerous of times,” stressing that Europe must take greater responsibility for its own security. She noted that EU capitals have expressed strong support for increasing defence spending both in response to immediate threats and to ensure Europe’s long-term security.
The ReArm Europe initiative outlines a multi-pronged financial strategy to accelerate and enhance defence investment across the EU. The European Council’s conclusions on European security, dated 6 March 2025, acknowledge the urgency of this approach and invite the EU Council to swiftly review the financing proposal.
Key Measures of the ReArm Europe Plan
The plan focuses on five key areas:
Greater Fiscal Flexibility for Defence Spending
- The European Commission plans to propose activating the national escape clause in the Stability and Growth Pact. This measure would allow member states to increase defence spending without triggering the Excessive Deficit Procedure.
- If EU countries were to increase defence budgets by an average of 1.5% of GDP, this could generate fiscal space of up to €650 billion over four years.
€150 Billion in EU-Backed Loans for Defence Procurement
- The plan introduces a new EU instrument offering up to €150 billion in loans for defence investment.
- The funding is intended to improve pan-European military capabilities, including air and missile defence, artillery systems, ammunition, drones, and cyber defence.
- This joint procurement approach aims to enhance interoperability, reduce costs, and strengthen the European defence industrial base.
- Equipment acquired under this scheme will also contribute to increasing military support for Ukraine.
Using the EU Budget to Support Defence Investments
- The Commission will propose new mechanisms for directing more EU funds towards defence-related expenditures.
- Member states will be able to utilise cohesion policy funds to support defence procurement.
Mobilising Private Capital
- The plan includes measures to accelerate the Savings and Investment Union to encourage private-sector investment in defence.
- The European Investment Bank (EIB) will play a role in financing projects that contribute to Europe’s defence and security needs.
Strengthening Partnerships with NATO
- While reinforcing the EU’s own defence capabilities, the initiative will complement NATO’s efforts to ensure European security.
Next Steps
The European Council has urged the EU Council to prioritise discussions on the financing mechanisms outlined in ReArm Europe. EU leaders will revisit the issue at their next meetings in March and June 2025 to assess progress.
Von der Leyen emphasised that this initiative represents a turning point for European defence, stating, “This is Europe’s moment, and we must live up to it.”
The ReArm Europe strategy signals a major shift in EU defence policy, aiming to provide member states with the financial tools necessary to respond to emerging threats and enhance the continent’s security posture for the long term.
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