Uncertainty surrounds Europe’s rearmament plan

In what she termed the “era of rearmament,” European Commission President Ursula von der Leyen last week introduced a “ReArm Europe” plan. The key goal of the scheme is to mobilize close to €800 billion ($867 billion) for European safety. Von der Leyen also expects to work in collaboration with the EU’s NATO partners. The plan emerged at a time of increasing security concerns in Europe, especially given US President Donald Trump’s decision to suspend Washington’s military aid to Ukraine. What is Von der Leyen’s plan about? What are the challenges to its implementation? And what will this suggestion mean for Europe and the rest of the world?

In a press statement, Von der Leyen explained the necessity of the plan: “The question is no longer whether Europe’s security is threatened in a very real way. Or whether Europe should shoulder more of the responsibility for its own security.” She said the real question is “whether Europe is prepared to act as decisively as the situation dictates. And whether Europe is ready and able to act with the speed and the ambition that is needed.”

The European Commission president further stated that “Europe is ready to massively boost its defense spending.” This connects to the short-term urgency to act in response to the Ukraine war, in addition to addressing the long-term necessity to take responsibility for the European security landscape.

The plan is divided into three main themes. The first part involves the application of public funds for defense at the national level. In this regard, Von der Leyen suggested activating “the national escape clause of the Stability and Growth Pact.” According to this suggestion, member states will be able to significantly boost their defense expenditure without initiating the bloc’s Excessive Deficit Procedure. This would allow countries to increase their defense spending by up to 1.5 percent of gross domestic product, which could create fiscal space of close to €650 billion over four years.

Among the criticisms of this step is that it is complicated because a larger deficit does not equal higher defense expenditure. Nonetheless, based on the European Commission’s expectations, if all states were to increase expenditure it would generate €650 billion. However, this does not clearly indicate whether it will concern all member states or only those that spend more than the NATO-mandated 2 percent of GDP on defense.

The second point involves the introduction of a new mechanism. The proposition includes €150 billion of loans to member states for defense investment. Von der Leyen gave a long list of highly expensive and sophisticated equipment and systems that could be financed under this initiative. For example, it relates to European capability involving artillery systems, air and missile defense, missiles and ammunition, and drones and anti-drone systems. She said this technique of joint procurement would decrease costs, reduce fragmentation, increase interoperability and boost the bloc’s defense-industrial foundation.

The third point is to apply the “power” of the EU budget. Von der Leyen insisted “there is a lot that we can do in this domain in the short-term to direct more funds toward defense-related investments.”

This plan echoes Germany’s “Sondervermoegen” (special fund) framework, which offers a roadmap for more money for defense. Under this ongoing German experiment, which was introduced in 2022, the country can bypass its constitutional debt limits to enlarge defense investments. It is currently being revised by Berlin’s political establishment.

The Christian Democratic Union and Social Democratic Party are working on a plan to introduce new exemptions from the debt brake. Based on this plan, any defense expenditure over 1 percent of GDP would be exempt. For example, if NATO increased its goal to 3 percent of GDP, then 2 percent (€88 billion) would be exempt, while 1 percent (€44 billion) would still be affected by the debt brake. The Bundestag could approve this plan shortly, which would underscore the urgency of both the national and EU-wide defense investment attempts.

Member states will be able to significantly boost their defense expenditure without initiating the bloc’s Excessive Deficit Procedure.

Dr. Diana Galeeva

However, the NATO expenditure target remains unclear, while it is somehow the critical point of the plan.

Trump declared that NATO’s European members should spend 5 percent of GDP on defense (none of the countries are currently spending this much). Meanwhile, NATO Secretary-General Mark Rutte has told member states they should reach 3 percent. Consequently, it requires time for further clarifications on how NATO will be involved in the plan.

Another criticism of the plan is that the numbers are based on guesses. Furthermore, it is noted that the plan makes some controversial suggestions, including the right to enlarge national deficit levels and to move money around within EU accounts, rather than coming up with fresh money.

Among other uncertainties, member states will also need to decide from which companies they will purchase weapons.

Moreover, the question about the mechanisms under which the money will flow is important. The plan might involve loans from other funds. For example, the European Commission did not suggest redirecting the €93 billion of leftover money in the COVID-19 pandemic recovery fund.

To sum up, the ReArm Europe plan involves the use of public funds, the introduction of a new funding mechanism and the application of the EU budget. However, the plan has already attracted concerns and remains littered with uncertainties. The question is whether Europe will effectively and swiftly implement the plan and how it will handle the Ukraine question in the near future. Clearly, the future of the European security landscape depends on how the plan is developed and implemented.

• Dr. Diana Galeeva is an academic visitor to Oxford University. X: @Dr_GaleevaDiana