European Union leaders are set to meet on Thursday to discuss potential ways to finance a significant boost in defence readiness, aiming to deter future threats from Russia and reduce reliance on U.S. security support.
With the European Commission proposing funding strategies that could total €800 billion over several years, leaders will debate a range of approaches, including relaxing spending rules, reallocating existing EU budget funds, and introducing new joint borrowing mechanisms.
Relaxing EU Spending Rules
One of the most debated proposals involves exempting defence spending from EU fiscal rules, which limit government deficits and public debt to ensure the stability of the euro currency.
While the Commission argues that increasing defence budgets by 1.5% of GDP on average could create €650 billion in fiscal space over four years, not all EU governments are in favor. Some leaders believe existing spending exemptions for defence are already sufficient and argue that the focus should instead be on broadening the definition of defence investment.
However, economists warn that such borrowing could increase budget deficits, potentially alarming bond investors and impacting financial markets.
Reallocating EU Budget Funds
The EU’s current budget (2021-2027)—worth €1.2 trillion—was drafted before Russia’s invasion of Ukraine and does not include dedicated defence funding. However, a portion of its cohesion funds, designed to bridge economic disparities between EU regions, could be repurposed for defence-related projects.
For example, these funds could support civilian shelters, reinforce roads and bridges for military transport, and improve overall defence infrastructure.
“We will propose additional possibilities and incentives for Member States to use cohesion policy programmes to increase defence spending,” the Commission stated.
Joint EU Borrowing for Defence
Another proposal under discussion is a €150 billion joint borrowing plan, secured against the EU budget, to provide loans to member states for defence-related investments.
This funding would be directed toward pan-European defence projects, including:
Air and missile defence systems
Artillery systems and ammunition
Drones and anti-drone technology
Cybersecurity measures
Military mobility infrastructure
Advocates argue that joint borrowing would pool EU demand, allowing cheaper and more efficient procurement of military equipment.
Key Considerations for EU Leaders
As EU leaders prepare for discussions, the central challenge will be balancing defence priorities with financial sustainability. While boosting military readiness is seen as critical in light of ongoing geopolitical threats, some member states remain cautious about expanding debt or redirecting development funds.
With Russia’s war in Ukraine ongoing and uncertainty over long-term U.S. military support, the EU faces increasing pressure to build a more independent and unified defence strategy—and this week’s talks could be a pivotal step toward that goal.
