“We are going to get serious about defense, and this time, we mean it.”

European Union Considers 800 billion Euro Plan to Jumpstart Defense Spending

Photo by Immo Wegmann on Unsplash

Three years into the Ukraine War, and Europe is now getting serious about defense? The announcement was made by European Commission President Ursula von der Leyen, in sober tones but colorful fanfare, that the European Union is considering, not doing, an 800 billion Euro ($841 billion) fund to boost defense spending for its 27 member states and Ukraine. The announcement was made for the “ReArm Europe” proposal that will be discussed by the 27 EU leaders during an emergency meeting to be held in Brussels on Thursday, March 5, 2025. The stated purpose was due to EU concerns about the prospect of U.S. disengagement from Europe and to provide Ukraine the military strength to contest Russia despite threats to and pauses over U.S. military aid to Ukraine in pursuit of a ceasefire to the three-year war. The question is, why do this now and not in 2022 or 2014? Is it because Europe was willing to outsource its defense to the U.S. and its energy needs to Russia while pontificating to both?

The proposal by Ms. von der Leyen is actually a two-part package. The first is for the EU to borrow 150 billion euros ($158 billion) from its member governments with the priority for it to be used for air defense, missiles, and drones but could be used for other defense spending such as artillery, ammunition, and anti-drone technology. EU members could also use the loan to send weapons to Ukraine. The 150 billion euros are to be distributed over the next five years. The EU, which does not have this level of money available in its coffers, will procure the funds by borrowing and then lend it to member states with the stipulation that they are to pay back the loan. The terms of the loan for the EU or the member states have not been stipulated. President von der Leyen did state that up to 90 billion euros of unused COVID-19 funds could be used to offset the size of the loan. This fund is a significant policy change for the EU to enter into military matters but will not make a serious impact on the European defense spending levels.

The second part of the package is a proposal to pursue up to an additional 650 billion Euro fund (800 billion total between the two programs) that would be created, mostly through the issuance of Euro Bonds or private capital through the EU Savings and Investment Union and the European Investment Bank (EIB). This in turn would be paid back by member states that receive money from the fund. Ms. von der Leyen stated that if EU countries increased their defense spending by 1.5% of GDP, that would generate 650 billion euros of defense spending that could be used to support the fund's repayment. The proposal is to be preceded by a change in the EU Stability and Growth Pact that limits deficit spending of member countries. Countries could avoid EU sanctions for breaking debt limits if the new spending was dedicated to national defense.

This is a significant increase in European defense spending, as the EU member states combined military spending was $312.8 billion in 2023 compared to the U.S. defense budget of $816.7 billion in 2023. European defense spending has already increased from $260.2 billion prior to the Russian invasion of Ukraine in February 2022, with most of it being pushed by NATO for Europe to meet its 2014 agreement to increase defense spending to 2% of GDP, which is an agreement that still has not received 100% compliance from NATO member states.

It can be appreciated that President von der Leyen is looking for serious solutions to increase European defense spending to meet the Russian threat to the continent and to improve EU member states' military capabilities in a way commensurate with the EU’s economic status. The initiative and incentives are much needed to address atrophy in the military capabilities since the end dissolution of the Soviet Union on December 26, 1991.

The underlying initiative and urgency are decisions that are being driven by President Donald Trump and his push, which dates to 2017, for European NATO members to spend more for their own defense. This was soundly ignored and criticized as was President Trump’s warning in 2018 that Europe, and especially Germany, should not be relying on cheap Russian gas, and they do so at their own peril. The German delegation literally laughed at Mr. Trump when he made this point. It was reported this week that the EU spent more on Russian oil and gas in 2024 than it gave Ukraine in aid ($22 billion Euros versus $19 billion Euros).

This attitude is shocking in that despite all the European leadership preening over the moral superiority of their policies when compared to the U.S. policies of both Trump administrations, they have been, in effect, helping fund the Russian war against Ukraine and doing the minimum for its own defense. It is only now, with President Trump’s threats to withdraw support to Ukraine and reduction in U.S. commitments to NATO to complete the Asian Pivot, first proposed by President Obama (which the European leaders largely did not protest), and three years into the war with a push for peace that Europe is finally getting around to comprehensive military spending and expected reform due to capability increases brought on by increased spending. The realpolitik and brutal truth is that despite all the words and talk, Europe was more than content to have the U.S. provide for its defense and have Russia provide it energy, and all this even while the largest land war in Europe since World War II was being fought. Such things are not discussed in polite company, but it is hard to explain the actions of the continent.

The EU typically stays out of military affairs, and it's debatable whether all member states need to give their unanimous consent to engage in such matters. This has been a touchy subject for member states in the past, so it has been largely avoided, but now the prospect of a U.S.-brokered peace and defense pivot has forced the issue. The concern is that during the meeting on Thursday, Hungary’s prime minister, Viktor Orban, who has maintained close ties to Russia, will use his veto power to stop von der Leyen’s ReArm Europe proposal. The EU has often vilified Mr. Orban and has financially punished his country for resisting EU immigration policy. The EU also censured Mr. Orban for his visit to Russia during his tenure as the six-month rotating EU President. That very same Mr. Orban has publicly stated he is against the Thursday summit and wants direct talks with Russia, and it is feared that he could use his veto power to stop any changes proposed by Ms. von der Leyen.

More foresighted European leadership should have anticipated that their decisions could lead them down this path. When given warnings to change their behavior and avoid the consequences, they have ignored those warnings in the certitude of a pompous leadership class that sees their decisions as moral and above reproach, and like a bad partner in a bad relationship, they can never admit they were wrong. Only when faced by the prospect of being responsible for their own security do they get serious, but their grandiose plans are reliant on unanimous consent, including a leader they have vilified. Maybe they should have thought about that ahead of time, that they may need unanimity when it was important. Who knows what they will have to offer Mr. Orban for his consent, which would call into question the correctness of past actions against Hungary and Prime Minister Orban? Or, did they create this entire scheme and media show knowing it was going to fail, but the show was more important than the substance?

If you like my content, please consider becoming a Substack subscriber to Pegasus Research or support me through Patreon, Buy Me A Coffee or Ko-Fi.

Patreon

Buy Me A Coffee

Ko-Fi

References:

https://www.reuters.com/world/europe/eu-defence-plans-could-mobilise-800-billion-euros-von-der-leyen-says-2025-03-04/

https://www.npr.org/2025/03/04/nx-s1-5317453/europe-defense-trump-ukraine-russia

https://www.newsweek.com/eu-rearm-europe-plan-billions-2039139

https://apnews.com/article/europe-defense-ukraine-united-states-trump-c1f12e685afc3e2ca94c9a15ea28d8bb

https://www.theguardian.com/world/2025/feb/24/eu-spends-more-russian-oil-gas-than-financial-aid-ukraine-report

https://www.euronews.com/my-europe/2025/03/04/von-der-leyen-pitches-800bn-defence-package-ahead-of-eu-leaders-summit

https://www.defensenews.com/global/europe/2025/03/04/eu-pitches-plan-to-free-up-800-billion-for-defense-spending/

https://www.euractiv.com/section/defence/news/eu-outlines-e800-billion-in-defence-funding-options-after-trump-pulls-ukraine-military-aid/

https://data.worldbank.org/indicator/MS.MIL.XPND.CD?locations=EU

https://www.defense.gov/Spotlights/FY2023-Defense-Budget/

https://www.bloomberg.com/news/articles/2024-07-11/eu-nations-push-to-censure-hungary-s-orban-over-putin-meeting

https://www.reuters.com/world/europe/hungarys-orban-pushes-direct-russia-talks-opposes-eu-summit-declaration-2025-03-01/