Ahead of the European Council’s special summit on Thursday, where EU leaders will discuss the future of European defense and their continued support for Ukraine, Ursula von der Leyen, president of the European Commission, outlined a five-point plan to strengthen European defense and reduce the dependency on the United States.
At the heart of the plan called ReArm Europe is a provision that would allow member states to increase defense spending significantly without triggering the Excessive Deficit Procedure (EDP) outlined in the EU’s Stability and Growth Pact. The purpose of the pact outlined in 1997 was to ensure and enforce fiscal discipline within the EU, by requiring each member state to stay within certain limits of government debt (60 percent of GDP) and deficit (3 percent of GDP). By making an exemption for additional defense spending, the European Commission aims to create up to €650 billion in additional fiscal space over the next four years, assuming that member states increase their defense spending by 1.5 percent of GDP on average.
Secondly the EU will provide €150 billion in loans to member states for defense investments, aiming to exercise a certain control over these investments and better coordinate them. This joint procurement approach is expected to reduce costs and fragmentation, increase interoperability and strengthen Europe’s defense industry. The other proposals in the Rearm Europe plan include using the EU budget to direct more funds towards defense investments for example by creating incentives for member states to do so. Finally, the European Commission’s proposal aims to mobilize private capital by accelerating the Savings and Investment Union and utilizing the European Investment Bank. In total, the package could mobilize up to €800 billion for “a safe and resilient Europe,” von der Leyen said, before concluding that “Europe is ready to step up.”
