The EU is set to embark on an unprecedented defense spending initiative, with European Commission President Ursula von der Leyen announcing a proposal that could mobilize up to €800 billion. This initiative, named the ReArm Europe Plan, comes in response to growing security threats and the recent U.S. decision to halt military aid to Ukraine.
“We are living in the most momentous and dangerous of times… The question is no longer whether Europe’s security is threatened in a very real way. The real question is whether Europe is prepared to act as decisively as the situation dictates,” Von der Leyen emphasized.
At the core of the plan is a proposed €150 billion borrowing package to provide loans for EU member states to boost military capabilities. Combined with an increase in national defense budgets, the total funding could approach €800 billion. The spending will focus on air and missile defense, artillery systems, missiles and ammunition, as well as drones and anti-drone systems.
“We are in an era of rearmament. And Europe is ready to massively boost its defense spending. Both to respond to the short-term urgency to act and to support Ukraine, but also to address the long-term need to take on much more responsibility for our own European security,” the EC chief noted.
A new financial strategy for European defense
At the heart of the ReArm Europe Plan is a sweeping financial strategy designed to remove barriers to defense spending and create a unified, well-equipped European security framework. To achieve this, the European Commission is introducing a set of measures aimed at unlocking public funds, encouraging joint military procurement, and mobilizing private investment.
One of the most significant changes involves loosening fiscal constraints. The EU plans to activate the national escape clause of the Stability and Growth Pact, allowing member states to significantly increase defense spending without breaching deficit limits. By raising military expenditures by an average of 1.5% of GDP, countries could collectively generate up to €650 billion over four years, giving them the financial flexibility to modernize their armed forces.
In addition to direct national spending, the EU is proposing a €150 billion loan program to help member states invest in defense capabilities. This initiative is intended to promote joint procurement of key military assets, such as air and missile defense systems, artillery, and drones. By pooling resources and purchasing equipment together, European nations can reduce costs, increase interoperability, and bolster their collective security.
The EU budget itself will also be leveraged to direct more funds toward defense. New financial incentives will be introduced to encourage member states to use existing cohesion policy funds for military-related projects, further integrating defense into Europe’s broader economic planning.
Beyond government funding, the plan seeks to tap into private capital. The European Commission aims to accelerate the Savings and Investment Union to attract private investors to the defense sector. At the same time, the European Investment Bank will take on a larger role in financing defense-related projects, reinforcing Europe’s industrial and technological base.
Bogdan Iordache, GP at Romanian VC firm Underline Ventures, emphasized the need to broaden defense investments beyond military hardware.
“It’s absolutely necessary to invest more not only in defense tech solely, but also in all the industries and areas that are connected to defense tech, such as industrial tech and space tech, which are equally important. This is something that will be very high on the priority list of Europe, not only Eastern Europe, for the next 5-10 years,” Iordache explains.
A turning point for Europe’s defense strategy
Von der Leyen added that these efforts are not just about strengthening European defenses but also about sustaining Ukraine’s war effort. “Of course, with this equipment, member states can massively step up their support to Ukraine,” she stated, underlining the immediate and long-term significance of the ReArm Europe Plan.
For some, this represents a long-overdue shift in European defense policy. David Nichols, American entrepreneur and co-founder of Invest in Bravery, a project aimed at helping find investors for tech startups in Ukraine, sees it as a historic necessity.
“Europe is not ready now, but this fund is a great, necessary, and courageous step acknowledging reality – Europe must be ready and willing to fight for its democracies and sovereignty, or Europe will lose them,” Nichols tells IT Logs.
The entrepreneur also highlighted Ukraine’s role in inspiring Europe’s resolve.
“Contrary to all expectations a few years ago, it is Ukraine that has proven to have the character and courage needed to save Europe. This fund is just the first step in a larger struggle to ensure democracy and freedom for all Europeans,” Nichols noted.
