The European Commission has proposed a €150 billion plan to increase military spending across the bloc to around €800 billion.
In a speech, EC president Ursula von der Leyen said EU countries should be allowed to access these loans as part of a comprehensive five-part strategy to enhance defence budgets.
The 'Rearm Europe' plan aims to facilitate up to €800 billion in additional defence expenditures over the coming years.
Von der Leyen warned that Europe is facing severe security threats and must act decisively, with European leaders having acknowledged the need for rearmament and significantly increased defence spending at the Ukraine security summit held in the UK over the weekend.
"We are in an era of rearmament. And Europe is ready to massively boost its defence spending," she said.
"This is Europe's moment, and we must live up to it."
The ReArm Europe plan has five key measures to boost defence capabilities:
- Loosening Fiscal Rules – Allowing EU Member States to increase defence spending without triggering financial penalties under the Stability and Growth Pact, potentially creating €650 billion in fiscal space over four years.
- A New Defence Investment Instrument – Providing €150 billion in loans for joint European defence projects, such as missile defence and drones, while also helping Ukraine with immediate military support.
- Using the EU Budget for Defence – Redirecting EU funds towards military investments, including giving Member States incentives to use cohesion policy programmes for defence spending.
- Mobilising Private Capital – Strengthening European defence by accelerating the Savings and Investment Union.
- Leveraging the European Investment Bank – Encouraging greater private-sector involvement in financing defence projects.