On Thursday, European Union (EU) leaders will convene in Brussels for an extraordinary summit focused on defense and Ukraine, amid growing concerns over Europe’s security architecture and its financial underpinnings. The summit takes place in the wake of Washington’s abrupt suspension of military aid to Ukraine, placing increased pressure on the bloc to enhance its own defense commitments.
Ahead of the summit, European Commission President Ursula von der Leyen outlined a new proposal for EU defense financing, unveiling the ReArm Europe Plan on Monday. If enacted, this plan could see member states mobilize up to 800 billion euros in increased defense spending.
Financing a European defense renaissance
Von der Leyen’s proposal revolves around five measures, chief among them a “new instrument” that would provide 150 billion euros in loans to finance joint European defense investments. These funds would be directed toward critical capabilities, including missile defense, drones, artillery systems, and ammunition.
The plan’s funding mechanism is still a contentious issue. EU member states remain divided on the prospect of issuing euro bonds to cover defense expenditures, and so-called “frugal” states have historically opposed common debt issuance. This stance is unlikely to shift without significant political maneuvering. Moreover, von der Leyen did not provide specifics on whether, for example, unused post-COVID-19 pandemic recovery funds would contribute to the new package.
Importantly, von der Leyen did say that the proposed mechanism would be created under Article 122 of the EU Treaty. This provision enables the bloc to provide financial support to member states experiencing “severe difficulties caused by natural disasters or exceptional occurrences beyond their control,” bypassing the need for European Parliament approval. This was used, for example, during the COVID-19 pandemic to establish the 100-billion-euro Support to mitigate Unemployment Risks in an Emergency (SURE) program.
Additional proposals in the ReArm Europe Plan include expanding the European Investment Bank’s role in defense financing, leveraging cohesion policy funds for military expenditure, and accelerating the Savings and Investment Union to encourage private-sector capital inflows into the defense industry.
Germany’s Sondervermögen as a blueprint?
Even as the EU debates new financial instruments, Germany’s ongoing experiment with Sondervermögen, or special funds, has emerged as a potential template. The concept was introduced in 2022 to bypass Germany’s constitutional debt limits to increase military investment, and it is now being revisited by Berlin’s political establishment. So far, Germany has allocated 100 billion euros for defense investment that was excluded from the country’s constitutional debt brake accounting.
On Tuesday, Germany’s Christian Democratic Union (CDU) and Social Democratic Party (SPD) announced a plan that would introduce new exemptions from the debt brake. Under the plan, any defense expenditure exceeding 1 percent of gross domestic product (GDP) would be exempt. For example, if NATO were to raise its target to 3 percent of GDP, then 2 percent (88 billion euros of German defense spending) would be exempt, while 1 percent (44 billion euros) would still count toward the debt brake.
The CDU and SPD also announced a plan for a special fund for infrastructure, totaling 500 billion euros, that would also be exempt from the debt brake. This fund would be put toward modernizing education, transport, healthcare, and energy infrastructure over the next decade. At the state level, Germany’s sixteen federal states—responsible for much of the country’s infrastructure—will receive an additional exemption of 0.35 percent of GDP (which amounts to 15.4 billion euros based on Germany’s current GDP).
The Bundestag could approve the initiative before the end of the month, which would underscore the urgency of both national and EU-wide defense and investment efforts.
During this year’s Munich Security Conference, von der Leyen proposed that a national escape clause of the Stability and Growth Pact on defense could be activated. This would enable member states to exclude defense spending from their national expenditures. States that increased their defense spending would thus not run the risk of falling afoul of the bloc’s fiscal policy, which mandates that government deficit and debt must remain under 3 percent and 60 percent of GDP, respectively.
According to von der Leyen, if fiscal rules are adjusted, EU countries could free up around 1.5 percent of GDP, amounting to 650 billion euros over the next four years.
A summit fraught with divisions
The Brussels summit arrives at a moment of heightened geopolitical uncertainty. EU leaders must grapple not only with financing defense but also with internal divisions over Ukraine. Hungarian Prime Minister Viktor Orbán and Slovakian Prime Minister Robert Fico have signaled their intent to veto any increase in military assistance to Kyiv, potentially derailing a unified European response.
Compounding the uncertainty is the evolving dynamic with Washington. The summit was originally scheduled in response to US President Donald Trump’s negotiations with Russia, but tensions escalated further this past week after a disastrous meeting between Ukrainian President Volodymyr Zelenskyy and Trump. The fallout continued with the US administration announcing that it was suspending military aid to Ukraine on Monday, further underscoring Europe’s need to assume greater strategic responsibility.
Media reports on the draft conclusions from the summit on Thursday indicate that immediate decisions on defense financing are unlikely. Instead, leaders are expected to defer substantial commitments until a follow-up meeting after the presentation of a white paper on the future of European defense by the bloc’s new defense commissioner, Andrius Kubilius, which is due this month.
The strategic crossroads
The fundamental question remains: Will Europe act with the urgency and seriousness that the situation demands? Von der Leyen’s ReArm Europe Plan, coupled with Germany’s evolving Sondervermögen framework, provides a roadmap for more money for defense. However, the political and financial obstacles are formidable.
In an era when security threats are multiplying and transatlantic reliability is being tested, the EU cannot afford complacency. Whether through national initiatives or collective action—and ideally through both—Europe must confront the reality that its security now rests firmly in its own hands.
Piotr Arak is an assistant professor of economic sciences at the University of Warsaw and chief economist at VeloBank Poland.
Further reading
Thu, Feb 20, 2025
What Europeans think of Trump’s approach to Ukraine (and what they might do next)
New Atlanticist By
European leaders are waking up to calls from the Trump administration to take the lead on security for Ukraine. Atlantic Council experts share what that might look like from Berlin to Vilnius.
Sun, Mar 2, 2025
Zelenskyy and Europe confront the first contours of the Trump World Order
Inflection Points By Frederick Kempe
The Ukrainian president’s tempestuous recent meeting at the White House was a window into a larger transformation of global order by the US president.
Mon, Mar 3, 2025
The art of the transatlantic deal
Report By Frances Burwell
The transatlantic relationship is shifting with US president Donald Trump's return to the White House. Nevertheless, discreet deals across the US-EU trade, energy, and defense sectors are possible.
Image: Ukrainian President Volodymyr Zelenskiy interacts with soldiers during his visit to a military training area to find out about the training of Ukrainian soldiers on the ?Patriot? anti-aircraft missile system, at an undisclosed location, in Germany, June 11, 2024. Jens Buttner/Pool via REUTERS/File Photo