The European Union is preparing to launch its most ambitious security initiative since the Cold War, aiming to secure hundreds of billions of euros in additional defence funding. The plan, which will be discussed in the coming weeks, is structured around three key elements.
According to Bloomberg, EU leaders will begin formal discussions on the new security architecture at an emergency summit on 6 March. This will be followed by the unveiling of a new defence-industrial strategy on 19 March by EU Defence Commissioner Andrius Kubilius and the EU’s High Representative for Foreign Affairs Kaja Kallas.
A Strategic Reinvestment in Defence
European Commission President Ursula von der Leyen has described the moment as a generational turning point, calling for “urgent thinking” and a strategic rearmament plan to bolster Europe’s military capabilities. The financing proposal under discussion consists of three main components:
1. Relaxing Fiscal Rules for Defence Spending
One of the central aspects of the proposal is allowing EU member states to increase defence spending by loosening existing fiscal constraints. This would mean exempting certain military expenditures from the EU’s budget deficit calculations, potentially freeing up at least €160 billion for defence.
Current negotiations focus on defining what qualifies as defence spending, how long the exemption would apply, and whether it would contribute to meeting NATO’s 2% GDP target. Some member states support this measure, arguing that greater flexibility is needed to ensure Europe’s security.
2. Establishing an EU-Level Defence Investment Instrument
The second pillar of the plan involves creating a new EU-wide financing mechanism to fund joint military projects. This funding would be directed towards key defence technologies, including air defence systems, long-range strike capabilities, missile systems, drones, and artificial intelligence for military applications.
A particularly contentious issue is the possibility of joint borrowing to fund these projects. While some EU officials and member states advocate for this approach, it remains divisive within the bloc. Previous debates on joint borrowing, particularly during the COVID-19 recovery fund negotiations, highlighted the challenges of reaching consensus on shared debt obligations.
3. Expanding Investment Capabilities of the European Investment Bank
The third component focuses on lifting restrictions on the European Investment Bank (EIB), which currently limits its funding to dual-use (civilian and military) technologies. Under the new proposal, the EIB would be able to finance purely defence-related projects, opening the door to additional investment from private financial institutions.
Further Discussions on EU Budget Reallocation
Beyond these three main elements, von der Leyen has also raised the possibility of redirecting unspent EU funds. According to sources, this could include unused resources from the EU’s post-pandemic recovery funds. However, any reallocation would require agreement from member states, many of whom have already earmarked these funds for domestic economic projects.
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