By Guo Bingxin and Huang Jingbo
The photo shows Euro fighter Typhoon jointly developed by various European countries.
On March 6, the European Union (EU) held a special summit in Brussels, where the European Commission President Ursula von der Leyen's ReArm Europe Plan was approved. With a total budget of EUR 800 billion (approximately USD 860 billion), the plan aims to build "a safe and resilient Europe."According to Von der Leyen, the initiative will introduce five key measures to overcome the current limitations of the EU's defense system.
The first measure is to unleash the use of public funding in defense. For the first time, the EU will invoke an exemption under the Stability and Growth Pact, allowing member states to increase significantly their defense expenditures without triggering the Excessive Deficit Procedure. This measure primarily addresses challenges faced by countries like Germany, which have been constrained by debt brake rules in their military expansion efforts. This could create fiscal space of close to EUR 650 billion for member states over four years to boost military spending.
The second measure is the use of special loans to promote joint procurement. The EU plans to establish a "pan-European capability domains" instrument to offer approximately EUR 150 billion in loans to support member states in jointly procuring air defense systems, artillery, drones, and other military equipment. This initiative seeks to end the fragmented approach to defense procurement and promote standardized equipment production and industrial chain integration.
The third measure is restructuring the budget to strengthen investment. Member states will be allowed to direct existing budget allocations, such as the Cohesion Fund, to further investment in defense research and the military-industrial sector. This move aims to bridge the long-standing policy gap between "economic Europe" and "military Europe."
The fourth measure is accelerating the efforts to introduce private capital. The EU will reform financial market rules to guide long-term investment capital such as pension funds and insurance funds to flow into the defense sector, so as to alleviate the problem of insufficient public funding.
The fifth measure involves the financing role of the European Investment Bank. The European Investment Bank will break the traditional restriction of not funding lethal weapons and provide credit support for military infrastructure construction and key technology research and development.
As the largest European defense investment since the Cold War, the Rearm Europe Plan reflects the heightened security concerns of many EU countries amid the Russia-Ukraine conflict. At the same time, it is a significant step in the EU's effort to reduce its dependence on US military support and reshape its global strategic position. The implementation of this plan may trigger a chain reaction. On the one hand, the substantial increase in EU defense spending may lead to overlapping functions with NATO, causing the military cooperation between the US and Europe to shift from the traditional "leader-follower" model to a more competitive and complementary model. On the other hand, the relevant clauses in the plan, such as producing weapons for Ukraine, may further intensify the contradictions between many European countries and Russia and exacerbate regional tensions.
At the same time, the plan faces many challenges in its implementation, including the inherent inadequate EU strategic autonomy and political resistance to industrial integration. In terms of finance, southern European countries are concerned that the EU's relaxation of deficit control may trigger a sovereign debt crisis, while Eastern European countries have criticized the EUR 150 billion loan to be shared by all member states, arguing that it forces financially weaker countries to share the costs of wealthier countries' defense industries. Therefore, whether the Rearm Europe Plan can achieve its expected goals remains to be seen.
