4 March 2025
European Commission (EC) President Ursula von der Leyen has today proposed a five-part plan to mobilise some 800bn euros to strengthen Europe’s defence and provide “immediate” military support to Ukraine. She did not give a detailed timeframe, but said spending needed to be increased “urgently now but also over a longer period of time over this decade”.
The announcement came hours after the United States suspended all military aid to Ukraine. Donald Trump piles pressure on Kyiv to agree a peace deal with Russia. The US president’s announcement came after heated exchanges in the White House on 28 February between Donald Trump and his Ukrainian counterpart, Volodymyr Zelenskyy, and a crisis meeting in London on 2 March at which European leaders rallied round Kyiv a number of countries committed to providing peacekeeping troops.
“A new era is upon us” and “we are ready to step up”, the president said in a statement presenting the plan to 27 European Union (EU) leaders on 4 March, two days before a Brussels summit (European Council meeting) aimed at buttressing joint action on Ukraine and Europe’s long-term security. “Europe faces a clear and present danger on a scale that none of us has seen in our adult lifetime,” she added.
The first part of this ReArm Europe plan is to loosen the fiscal constraints the EU puts on government spending to “allow member states to significantly increase their defence expenditures” without triggering punishing budget deficit rules. By activating “the national escape clause of the Stability and Growth Pact” this will allow “Member States to increase significantly their defence expenditures without triggering the Excessive Deficit Procedure”. Ursula von der Leyen predicts that an increase in member states’ defence spending of 1.5% of GDP on average could create “fiscal space of close to EUR 650 billion over a period of four years”.
The second proposal is a new instrument that will provide €150 billion of loans to Member States for pooled defence investment in air and missile defence, artillery systems, missiles and ammunition, drones and anti-drone systems, or to address other needs from cyber- to military mobility. “With this equipment, member states can massively step up their support to Ukraine. So, immediate military equipment for Ukraine,” she added.
The third part of the plan is to use the “power of the EU budget” and “cohesion policy programmes” (initiatives designed to reduce economic and social disparities between different regions within the EU) to direct more funds towards defence-related investments. The last two areas of action aim at mobilising private capital by accelerating the Savings and Investment Union and through the European Investment Bank (by dropping limits on lending to defence firms).
European leaders are under pressure to increase defence spending as US President Donald Trump’s return to power has delivered a wake-up call that they cannot blindly rely on Washington. “Europe is ready to assume its responsibilities,” von der Leyen wrote. “We will continue working closely with our partners in NATO. This is a moment for Europe. And we are ready to step up.”
Trump has also said NATO’s European members should spend 5% of their GDP on defence – a figure no NATO member, including the US, currently reaches. NATO Secretary General Mark Rutte has told the NATO member states they need to move to more than 3% as quickly as possible.
This set of proposals from the EC focuses on how to use all of the EU’s financial levers to help Member States to quickly and significantly increase expenditures in military capabilities. However, there is no indication that the costly decade-long European policy on non-engagement with Russia is up for discussion or that any new ideas on foreign policy are being considered. At a time when Europe is facing significant economic and political challenges caused by the war, this one-dimensional approach to the issue is unlikely to be effective or transformative.
One area that will suffer will be development assistance, with the UK having already announced it will reduce foreign aid to fund an increase to its defence budget. That will worsen the economic effect the war in Ukraine has already had on Global South states, at a time when many of them are also grappling with the freeze in US foreign aid. China may well fill that void.