The Rasmussen Plan
Former NATO Secretary General’s Defense Spending Plan
"For too long, we have relied on a model that doesn't work any longer, a combination of cheap energy from Russia, cheap goods from China, and cheap security from the US." – Anders Fogh Rasmussen
Anders Fogh Rasmussen, the former Prime Minister of Denmark from 2001 to 2009 and the former Secretary General of NATO from 2009 to 2014, is joining European Commission President Ursula von der Leyen and current NATO Secretary General Mark Rutte in advocating for increased European defense spending, offering his own blueprint for achieving these goals. Unlike Ms. von der Leyen or Mr. Rutte, whose calls for increased defense spending are limited to their respective organizations, Mr. Rasmussen is calling for European countries to join his goal even if they are not in the European Union or NATO. Mr. Rasmussen is making his proposal in a published policy document titled “Freedom Is Not Free: A five-point plan for European Defence” that was produced by his organization called the “Alliance of Democracies”. The policy document calls for Europe to double its average defense spending from around 2% to 4%, with a goal to achieve this goal by 2028. The plan is not necessarily a rival to the NATO and EU's current calls for defense spending and is similar in its targets and approaches, but it stands apart from those two plans with a call for action with its aggressive spending timelines, which make it novel from that perspective, but this and other aspects are unhindered by the reality of European government bureaucracy.
Mr. Rasmussen shares a strong philosophical alignment with President von der Leyen regarding current defense and Russian relation policies. However, it is likely that Mr. Rasmussen feels more at ease in the defense sector than in the EU. He is pro-Europe and EU in his outlook, can be considered in the globalist camp, and generally has an antipathy toward the U.S. in general and a deep antipathy towards President Trump. This feeling is only exacerbated by the public position of President Trump over Greenland, which is governed by Denmark, and Mr. Rasmussen was the one-time Prime Minister. His antipathy toward the U.S. is apparent as he has publicly called for an economic “NATO” by accusing “the Trump administration of declaring a trade war against the entire world except for Russia and North Korea...” in what is hyperbolic language and ignores the current trade sanctions the U.S. maintains on both countries.
Mr. Rasmussen, in an interview with Radio Free Europe, further stated, "I would suggest creating what we call D7, seven democracies in the world: the European Union, the United Kingdom, Canada, Australia, South Korea, Japan, and New Zealand. And I think the backbone of that should be what we would call an economic Article 5. We would consider an attack or coercion against one of those seven countries an attack on all, and we should respond collectively." He stated to the publication that he does not view the U.S. as a leading democracy because, in his view, the U.S. has chosen isolation and does not want to show global leadership for the free world. The suggestion indicates a willingness to replace the G7 with the D7.
Mr. Rasmussen's suggestion to exclude certain elements from a new alignment of the western rules-based order would have implications that extend beyond economics and global trade; it would respond to the U.S. pivot from Europe to Asia not with cooperation, but with geopolitical rivalry and a breakdown of collaboration in both European defense matters and security in Asia regarding the Chinese threat. Peeling Japan and South Korea, and to a lesser extent Australia, the U.K., and New Zealand, from the U.S. would have an impact on security commitments in the region.
For example, the U.S. and Japan would find it difficult to build closer defense ties in the western Pacific to counter China while at the same time the new D7 could intentionally work against U.S. interests. This would increase the chances of a rift in the patchwork of defense agreements that operate in the western and southern Pacific. This new D7 world order would not be able to replace the security of the U.S. in the Pacific and would be incapable to counter China in the region. Since its D7 suggestion could not counter China, would it agree to spheres of influences between the D7 and China or just hope China will stay contained with a lower threshold of deterrence in the region?
Such an arrangement as envisioned by Mr. Rasmussen would be a gift to China by creating a rift between the U.S. and Indo-Pacific members of this proposed D7 and compromise security in the region against an aggressive China. The defense proposal by Mr. Rasmussen should be remembered in the context of an infantile geopolitical worldview and an economic and trade philosophy of a thin-skinned former politician that should know better.
To Mr. Rasmussen’s credit, he was the NATO Secretary General who was able to get member countries to agree to the 2% GDP target for defense spending, which was not a small feat. Then Secretary Rasmussen created this consensus in response to Russia's seizure of Crimea in March 2014. It was Mr. Rasmussen’s legacy within NATO. This was an achievement to get NATO leaders to collectively shake off their atrophy that started at the end of the Cold War in the early 1990s. The mistake that Mr. Rasmussen made in the spending target policy was no enforcement mechanism for countries that failed their spending targets. The result was new targets were ignored by nearly every NATO country until the second year of the Russian invasion of Ukraine, which started in February 2022. Mr. Rasmussen is now proposing that Europe double this commitment from 2% to 4% of GDP, which is not too far removed from the current proposal being lobbied by current NATO Secretary General Mark Rutte.
The Rasmussen plan is a combination of the Rutte plan and the von der Leyen plan, but it has one distinct difference. It calls for Europe, specifically the countries willing to sign up to meet his call, to reach these spending targets by 2028, which is a specificity that is missing from the other plans to create European deterrence to Russia with a sense of urgency. His wake-up call to Europe, as stated in his Radio Free Europe interview that “for too long, we have relied on a model that doesn't work any longer, a combination of cheap energy from Russia, cheap goods from China, and cheap security from the US." Europe must face the new reality and be willing to immediately take action at a speed that he admits is not a strength of Europe that spends too much time deliberating and not acting in a sense of urgency.
Mr. Rasmussen, in this effort, has created a five-point plan of how Europe can double its defense spending to 4% by 2028 and create a capability and capacity to maintain the new goal. The five points are:
Surge public spending
Mobilize private capital
Strategic allocation
Create funding vehicles
Foster innovation
The first part, the surge in public spending, is the call for European nations (those nations that make up NATO or are part of the anti-Russia bloc of European countries) to 4% of GDP and is immediately needed to address the capability gaps of Europe’s defenses to create an effective deterrence. The European capability shortfalls that Mr. Rasmussen highlights are in areas where Europe is too reliant on the U.S. This includes:
Air defense systems
Precision strike capabilities
Electronic warfare
Space based intelligence gathering
Surveillance and reconnaissance
However, the priority of Mr. Rasmussen is not to cover the capability gap versus the United States but another set of priorities, which seems like a tacit acknowledgement that the U.S. would still be involved in European defense, through NATO, despite his anti-American headline-grabbing grandstanding. The priorities he lays for Europe with its increased defense budget are the following:
Strategic heavy lift and logistic capabilities
Comprehensive air surveillance systems to monitor European air space
Advance drone and counter drone technologies
Cyber defense capabilities and infrastructure
Intelligence gathering platforms to improve situational awareness
The rapid expansion of spending, especially dependence on European-based producers, will create inflation as demand outstrips the ability of European companies to support new defense spending requests. Anticipate an alarming lengthening of lead times. This is something that Mr. Rasmussen does not address, but he does admit that the fragmentation in Europe and its Purchase Powering Parity of the continent being lower than the U.S. means it will not get the same “bang for the buck” as the United States or China. Basically, a trillion dollars in European-based defense spending will be less, as far as purchasing power, than the U.S. The inflation threat will only further erode the purchasing power until European production capacity increases to meet the new demand.
The second part, mobilizing private capital, is similar to Ms. von der Leyen except that it is not limited to the EU and could include countries like Ukraine, Norway, and the United Kingdom, as an example. Mr. Rasmussen states that private financing institutions' aversion to the defense sector and Europe’s risk-averse capital markets have created a situation in which defense innovations fueled by private investment are woefully behind the U.S. Mr. Rasmussen seeks to have private capital to support defense-related sectors, including:
R&D spending
Europe only spends 45% the level of the U.S.
Defense technology investment
U.S. defense investment has risen from $4 billion in 2014 to $118 billion between 2021 to 2023.
Europe has not significant equivalent investment
Broader investment in venture capital
0.7% of the U.S. GDP is in venture capital in 2021 compared to 0.14% in France and 0.09% in Germany in the same time period
Venture capital investors in defense
Of the top 10 venture capital investors in NATO countries, 8 are in the U.S.
Mr. Rasmussen states that if Europe seeks to change its attitude toward private capital in defense, it would attract U.S., Japanese, Australian, and South Korean investors for venture capital firms to expand their portfolios. What is glaringly obvious is that no European nations are on the list, which can be viewed as a pessimism that European citizens and companies would be too risk-averse and that foreign investment should be sought. This does not bode well for the promotion of an entrepreneurial spirit that is needed, an opinion shared by Mr. Rasmussen, to spur private investment. Entrepreneurialism requires a willingness to take risks.
The third part is strategic allocation, which Europe must have a defense sector that can both create the technological edge of its armed forces and create them at the scale that is needed to create an effective deterrence. The technological edge would require more R&D (stated multiple times throughout his proposal) with a glaring headline that for every $1 of public defense spending leads to $0.52 of R&D investment in the U.S.. Europe, for the same spending, generates only $0.10 of R&D spending. Mr. Rasmussen calls that not only does Europe need to improve private R&D for defense, but it must also create its own version of the U.S. DARPA. He also suggests that Europe must recruit defense talent from the U.S. and fast-track residency for these recruited workers.
To meet the mass part, and to a lesser extent, technological edge, Europe needs to secure access to raw materials, energy, and critical minerals. The suggestion that Europe must seek raw materials, at least much of it, and critical minerals through trade agreements, though there are indications that some minerals would be sought from Ukraine (European sourced). Energy is critical to domestic manufacturing, and though Mr. Rasmussen does not address specifics, he does state that Europe must find diverse energy sources, which is a statement of not being reliant on Russia or the U.S. for its energy needs.
The fourth point is to create funding vehicles, which is related to the seeking private funding point of his plan. Mr. Rasmussen suggests that four funding initiatives be created to incentivize private funding in four key initiatives to raise 350 billion euros ($398 billion) over the next five years to balance close to U.S. investment:
European Defense Investment and Innovation Fund – Raise 10 billion ($11 billion) fund to reduce risk of private defense investment
Defense Capability Contract – Use the COVID vaccine development model for private defense investment to raise 50 billion Euros ($57 billion) to create scale of production through guaranteed purchase commitments. Could potentially be increased to 150-200 billion Euros ($170 - $227 billion).
Secured EU Defense Innovation Bonds – EU backed bonds (30% - 40% of principal) for institutional investors, pension funds, and sovereign wealth funds portfolios to raise 50 billion ($57 billion) over 20 to 30 years.
Def-Tech Venture “Fund of Funds” – 2 billon Euros ($2.3 billion) of public capital to attract 3 billion Euros ($3.4 billion) for dual use civil-defense technologies such as AI and quantum computing
The final point of the plan is to foster innovation through what is called “innovation hubs”. This is not really a creation of innovative new processes but the idea of embracing the lessons of the Ukraine War and leveraging Ukraine’s battlefield experience in weapons and technology production it has learned in the war against Russia. The idea is to leverage the lessons of Ukraine into weapons that can be adopted by Europe that have proven value and largely skip the costly development process. This is a factor of the largest land war in Europe since World War II; many military technologies, new and old, can be tested for their worth on an actual modern battlefield.
The points made by Mr. Rasmussen are valuable, but like the 2% GDP policy achievement while he was NATO Secretary General, he makes no suggestion of compliance from those who make up the countries willing to create a European deterrence. It also shows that Europe, even with the defense spending increase, is in no position anytime in the foreseeable future to match the capabilities of the U.S. or China, even with attempts to develop U.S. private funding of defense. However, it would increase European deterrence against Russian intimidation.
Interestingly, the proposal makes it very clear that the regulatory environment and the capital investment risk adversity are significant hurdles to overcome and at points states that capital investment in defense from the private sector would most likely be sought outside of Europe. If the business and investment climate is a problem for defense investment, what does that say about the rest of the economy? If regulatory attitudes are needed to be changed for defense spending, doesn’t that mean the same issue exists in the broader economy of Europe?
As stated earlier, the proposal is based on existing proposals from the European Commission and NATO ahead of the national leader meeting in The Hague in June 2025. In addition it accepts proposals the RAND Corporation and Bruegel think tanks. The reliance on the proposal is creating a sense of urgency in Europe due to the Ukraine War, which is in its third year and has not motivated European NATO to change significantly, so it uses the anxiety of peace and the use of European countries to maintain the peace in Ukraine and the election of President Trump to feed off the fears of Europeans of the Trump bogeyman.
Mr. Rasmussen has no authority and has been out of relevant power in Europe since 2014, so this mashup policy that he created, which is not without merit as it goes beyond just simple calls to increase spending but creates a roadmap of how to get there and sustain it. Despite Mr. Rasmussen's suggested plan, including a suggestion to create a wedge between the U.S. and its western and southern Pacific allies as stated in his Radio Free Europe interview to promote his plan, he has no real ability to influence the capitals of Europe or its centers of power. This is because he is outside of European political institutions, which is probably for the best because of his emotional disdain for the U.S. leadership clouding his judgment.
The document is largely for public consumption to attempt to change minds and perceptions of the European populace through the use of hyperbolic rhetoric and a semi-detailed five-point plan that does not broad-brush the issue, which is to his credit, but in its totality, his recommendations to reach and sustain increased European defense spending expose many of the weaknesses of the experiment of a “united Europe” currently led by the EU.
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References:
https://www.nato.int/cps/en/natohq/opinions_112891.htm
https://allianceofdemocracies.org/initiatives/the-copenhagen-democracy-summit/5point-plan
https://www.rferl.org/a/nato-rasmussen--denmark-europe-ukraine-defense/33415781.html
The 4% target is bold, but without hard compliance mechanisms or production scaling solutions, isn’t it more of a signal than a roadmap? Curious how Europe plans to close the industrial gap without U.S. support while keeping inflation in check