'Rearming' Europe: EU chief unveils 800-billion-euro plan

The move came hours after US President Donald Trump announced the aid freeze, intensifying Washington's push for a peace deal with Russia and confirming its pivot away from Kyiv and its European allies

By AFP

Published: Mar 5, 2025 02:29:32 PM IST

Updated: Mar 5, 2025 02:59:00 PM IST

EU chief Ursula von der Leyen Image: Nicolas Tucat / AFP

EU chief Ursula von der Leyen Tuesday presented a plan to mobilise some 800 billion euros ($843 billion) for Europe's defence—and help provide "immediate" military support for Ukraine after Washington suspended aid.

"Europe faces a clear and present danger on a scale that none of us has seen in our adult lifetime," the European Commission president said in a letter to EU leaders.

"We are ready to step up," she wrote in presenting the plan, to be examined at a Thursday summit on Ukraine and European defence.

Key to the proposals are steps to spur defence investments by the EU's 27 member states by easing the bloc's strict budget rules, as well as a new 150-billion-euro loan facility.

"'ReArm Europe' could mobilise close to 800 billion euros of defence expenditures for a safe and resilient Europe," von der Leyen told reporters.

Five-point plan

The plan includes five points:

It proposes that the EU ease rules obliging countries to keep public deficits below three percent of gross domestic product, to let them ramp up defence spending.

In practice states would be able to spend an additional 1.5 percent of GDP on defence over four years, according to a senior EU official who said this could free up 650 billion euros.

Secondly, a new facility would be created to provide 150 billion euros of loans to member states for targeted defence investment.

The loans would be on an opt-in basis -- circumventing opposition from certain member states, namely the Netherlands, to EU-wide joint borrowing.

"We are talking about pan-European capability domains -- for example: air and missile defence, artillery systems, missiles and ammunition drones and anti-drone systems," said von der Leyen.

"With this equipment, member states can massively step up their support to Ukraine. So, immediate military equipment for Ukraine," she said.

The third component would involve letting member states repurpose so-called "cohesion" funds intended for the development of poorer European countries -- for defence purposes.

The last two areas would involve a savings and investments union to help companies access capital, and lifting curbs on defence investments by the bloc's lending arm, the European Investment Bank.

In a separate letter to EU leaders Tuesday, seen by AFP, the EIB's president Nadia Calvino called for the scope of eligible investments to be "further widened" to align with the EU's "new policy priorities".

An official close to the matter said this would involve making "military and police equipment" eligible, rather than only dual-use civilian and military items at present—though not weapons and ammunition.

Also read: Managing supply chain risks in the age of Trump

'First step'

It was not immediately clear how fast funds could be mobilised under the proposals—which need member states' approval—nor how quickly this could translate into battlefield support for Kyiv.

"It can help finance or accelerate certain purchases," Camille Grand of the European Council on Foreign Relations told AFP.

"The results will be visible more likely in weeks or months rather than 'immediately' but it makes a difference, since that is when the American restrictions will start to bite."

Guntram Wolff of the Brussels-based think tank Bruegel said the measures went in the "right direction" but were "not a game changer"—hoping for a more ambitious debate on joint borrowing once Germany's new government is in place.

But there were positive reactions from multiple European capitals, including in Berlin where Foreign Minister Annalena Baerbock called them "an important first step" towards the "quantum leap to strengthen our EU defence."

Italy, Portugal, Estonia and Greece were similarly upbeat.

Thursday's Brussels summit—after weekend crisis talks also involving Britain—comes as Europe contemplates the stark prospect of the United States withdrawing longer-term support from Ukraine and more broadly from its European allies.

Brussels is pressing member states to agree to urgently deliver a new package of key weaponry, but it was unclear if a deal would be reached on Thursday.

A broad consensus has emerged however on the need to significantly ramp up Europe's military spending to bolster its defences against Russia—a key demand from Trump's administration towards its NATO allies.