European Commission President announces €800 billion defence plan: ‘Europe is ready to step up’

European Commission President Ursula von der Leyen on Tuesday unveiled an €800 billion plan to significantly increase defence spending across the European Union.

She declared the continent has entered “an era of rearmament” in response to escalating security threats.

Von der Leyen, speaking ahead of Thursday’s European Council meeting, emphasised the urgency of strengthening Europe's defence capabilities, citing mounting geopolitical tensions, particularly in light of Russia’s ongoing war in Ukraine and concerns over the future of U.S. support for NATO.

“The question is no longer whether Europe's security is threatened in a very real way,” von der Leyen said. “The real question in front of us is whether Europe is prepared to act as decisively as the situation dictates.”

In a letter to EU leaders, von der Leyen outlined the “ReArm Europe” plan, a comprehensive set of proposals aimed at unlocking financial resources to support national defence investments both in the short term and over the next decade.

The initiative consists of five key measures designed to strengthen Europe’s defence capabilities and bolster military support for Ukraine.

Unlocking fiscal space for defence

A core component of the plan involves adjusting EU fiscal rules to allow member states to ramp up defence spending without triggering budgetary penalties.

Von der Leyen announced that the European Commission will propose activating the national escape clause of the Stability and Growth Pact, enabling governments to expand their military budgets without breaching EU deficit limits.

“If Member States were to increase their defence spending by 1.5% of GDP on average, this could create fiscal space of close to €650 billion over four years,” she said.

New €150 billion defence investment fund

Another key element of the plan is the creation of a €150 billion loan program to help EU countries jointly invest in critical military assets. The initiative aims to enhance collective procurement efforts, reduce costs, and improve interoperability across European armed forces.

“We are talking about pan-European capability domains: air and missile defence, artillery systems, missiles and ammunition, drones and anti-drone systems, as well as cyber defence and military mobility,” von der Leyen said.

Joint procurement efforts under this scheme would not only reinforce EU security but also allow member states to provide Ukraine with additional military aid, she said.

Von der Leyen also proposed leveraging the EU budget to support defence related investments. She announced member states would be given additional incentives to use cohesion policy programmes to boost military spending.

The final two pillars of the ReArm Europe plan focus on attracting private sector investment in defence through initiatives such as the Savings and Investment Union and increased involvement from the European Investment Bank.

“We will continue working closely with our partners in NATO,” von der Leyen said. “This is Europe’s moment, and we are ready to step up.”