EU chief says member countries must use a new defense loan to buy European, not American
European Union countries must purchase military equipment made in Europe under a new loan program meant to help the continent provide for its own security, a top EU official said Tuesday, even though most of its defense materiel currently comes from U.S. suppliers.
At a summit last week, the EU’s 27 leaders weighed a European Commission proposal for a new loan plan worth 150 billion euros ($163 billion). It would be used to buy air defense systems, drones and “strategic enablers” like air transport, as well as to boost cybersecurity.
“These loans should finance purchases from European producers, to help boost our own defense industry,” Commission President Ursula von der Leyen told EU lawmakers.
Von der Leyen said the “contracts should be multiannual, to give the industry the predictability they need” and that the priority should be for countries to buy equipment together in groups “because we have seen how powerful this can be.”
European NATO members have placed about two-thirds of their orders with U.S. companies in recent years, but they are being spurred into action by the Trump administration’s warnings that they will have to provide for their own security, and Ukraine’s, in future.
France wants the commission to put more money into the loan plan and has also insisted that it should only be spent in Europe. Spain, one of five countries using the euro single currency with a debt level of over 100%, wants free grants rather than loans.
EU leaders are due to endorse the loan plan, which the commission believes would benefit around 20 countries whose borrowing costs would be higher than that of the executive branch, at another summit late next week.
It’s part of a package of measures – including an easing of budget rules for defense spending and a reshuffling of EU money – that the commission hopes could generate up to 800 billion euros ($874 billion) for security priorities.
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Facing Trump and Putin, are the EU's defence plans enough?
Caesar gun muzzles stored in the Nexter weapons factory in Bourges, France.
Faced by a menacing Russia and unreliable United States, the EU is pushing a mammoth plan to boost its defences that Brussels says could unlock up to 800 billion euros ($860 billion).
"The time of illusions is now over," European Commission President Ursula von der Leyen said on Tuesday.
"We need a surge in European defence. And we need it now."
But there are major questions over how the European Union will get anywhere near that eye-watering headline figure.
Even if Europe does put its money where its mouth is -- would it be enough to deter Russian President Vladimir Putin and replace America's military might?
- Why now? -
EU countries have upped military spending since Russia's 2022 invasion of Ukraine -- but US President Donald Trump's return has turbocharged the urgency.
Trump has shocked Europe by pulling support for Ukraine and fuelled fears he could impose a peace plan that leaves Moscow emboldened.
Even more unnerving are threats Washington may not stand by its NATO allies and the sense Europe can no longer count on the US protection it has enjoyed for decades.
If the United States withdraws from Europe, it could take with it vast amounts of key weaponry needed to fend off Moscow and crucial manpower.
The Bruegel think tank estimates that for Europe to deter Russia on its own it would need to spend 250 billion euros extra each year on defence and come up with 300,000 more troops.
- What's the plan? -
The EU's proposal, unveiled last week, is based on two main elements.
The first is loosening budget rules to let governments spend more on defence -- a move that doesn't in itself put any more money on the table.
Von der Leyen says, however, that this could generate up to 650 billion euros over the next four years, if EU countries use it to ramp up defence spending by 1.5 percent of GDP.
The second key part of the plan is more concrete in terms of funding, with Brussels proposing to provide member states with EU-backed loans of up to 150 billion euros.
Von der Leyen says that money should be spent together by EU states on key weaponry made by European producers as the continent looks to bolster its own industry.
Beyond this, the plan from Brussels would also allow member states to repurpose funds intended for poorer regions and lift curbs on defence investments by its lending arm.
- Can Europe deliver? -
Given that the vast bulk of the plan relies on EU governments to step up, it will be more down to national capitals than Brussels.
Key European power Germany has already signalled it wants to get serious -- with likely next chancellor Friedrich Merz seeking to splash hundreds of billions on defence and infrastructure.
But that push has already hit political obstacles in Berlin, and other countries such as France and Italy are struggling with high debt levels.
"The big variable here is national decision making -- most of the money is under the control of national governments," said Ian Lesser of the German Marshall Fund think tank.
"That has evolved over the last weeks, and it's becoming clear that governments are more committed."
One hurdle to quick rearmament could be if Europe wants to spend its money only at home, as the perception grows the United States is no longer a trustworthy partner.
"The constraint may not be money, the constraint may be supply, as Europe still lacks the industrial capacity," Lesser said.
"The quickest way to build up capabilities for now is still to buy US equipment off the shelf."
- Is it enough? -
Three years after Russia unleashed Europe's biggest conflict since World War II, Brussels insists it is finally getting serious on defence.
But after numerous false dawns there is still a feeling that the bloc might be falling short of the sea change that is required.
Guntram Wolff from Bruegel called the EU's plan so far "only a first step in the future discussion".
"It goes into the right direction, but it's not enough," he told AFP.
Von der Leyen is set next week to put meat on the bones of her proposal ahead of an EU summit, and unveil further options to "substantially" boost financing.
"For now we only have the contours of an idea," said one EU diplomat. "We're still waiting for the details to pick over."
Some countries are pushing for a more ambitious EU-wide joint borrowing similar to the vast recovery fund set up during the Covid pandemic -- but so far it is a hard no from others.
"A real game changer would be a joint borrowing program focusing on capacities we don't have, to fill the gap with the US," Wolff said.
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European Commission President Ursula von der Leyen bid for support for her ambition to rearm Europe in an address to EU lawmakers on Tuesday.
"After the end of the Cold War, some believed that Russia could be integrated in Europe's economic and security architecture. Others hoped that we could rely indefinitely on America's full protection," von der Leyen said in the French city of Strasbourg.
"The time of illusions is over now," she said.
"Europe is called to take greater charge of its own defence, not in some distant future, but already today, not with incremental steps, but with the courage that the situation requires. We need a surge in European defence, and we need it now."
European Union leaders last week endorsed plans by the European Commission aiming to mobilize staggering amounts for defence investment.
Von der Leyen hopes that a new €150 billion ($163.5 billion) fund paired with temporarily exempting certain defence investments from the bloc's strict debt and deficit limits and other measures could raise up to €800 billion.
The commission president will need the backing of EU lawmakers for some parts of her plans once the legislative proposals are being scrutinized.
Von der Leyen stressed the investments' "positive spillovers" for the EU's economy and competitiveness in her speech.
"It will include new factories and production lines that will be necessary, creating good jobs right here in Europe," she said, adding that the positive effects will be felt beyond the defence sector.
"Together, we have the size to deter any hostile country. We have
the economic power. And now, finally, we have the political will, too," von der Leyen stated.
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