History is on the move. In just a couple of weeks, Europe has seen its security architecture tested as never before since World War II. Now, the European Union must demonstrate its ability to take control of its own destiny and turn the vision of a common European defence into reality. After the pledges made by Ursula von der Leyen in London last Sunday, the Commission’s concrete announcements were eagerly awaited. On Tuesday, March 4, just ahead of the European Council meeting scheduled for two days later, the European Commission announced its ReArm Europe plan.
With this plan, the Union wants to “meet the moment” and affirm that it is “ready to assume its responsibilities”. The plan includes proposals to boost the contribution of private capital to the consolidation of European defence capacities. A more important role for the European Investment Bank is envisioned, building on its Security and Defence Action Plan announced in April 2024. Additionally, the Commission reiterates – though without extensive details – the urgency of completing the Capital Markets Union (now relabelled as the Savings and Investments Union).
However, the core of the ReArm Europe plan centres on public funding. Specifically, the Commission hopes to unleash 800 billion euros for extra public investment in defence and military capacities. This contribution presents the core components of the plan and offers a first set of reflections on its structure, ambition, and legal design. In a nutshell, it argues that while the plan represents a crucial first step towards strengthening European defence, it does not introduce any groundbreaking measures. Its predominant reliance on national defence spending constitutes an important limitation. However, it might pave the way for more ambitious supranational initiatives in the future.
Clearing the path: creating fiscal space at the national level
The first and main axis of the plan revolves around national public spending. This focus is perfectly logical as defence and military matters in the EU remain closely tied to national sovereignty and the domaine régalien of Member States. Conscious that the Union’s fiscal policy rules of the Stability and Growth Pact (SGP) could constrain defence spending and investment, the Commission has sought to introduce greater flexibility to ensure that the Union’s debt and deficit limits do not become obstacles to the urgent need for increased military expenditure. This approach aligns with the announcements made earlier in February at the Munich Conference by Ursula von der Leyen.
In practical terms, the Commission will support the activation of the so-called “national escape clause”, enshrined in Article 26 of the new SGP Regulation No 2024/1263. Under this clause, Member States have the option – the initiative rests with them – to request authorization to deviate from their fiscal trajectory in response to “exceptional circumstances outside the[ir] control (…) [which] have a major impact on the[ir] public finances”. Such authorizations are granted by the Council, upon recommendation of the European Commission, following the “comply or explain” rule. This solution is certainly not ideal and presents a number of flaws (as highlighted by Guttenberg and Redeker). Most notably, deviations under the national escape clause can only be allowed on an ad hoc basis and for a limited timeframe (valid for a maximum of one year, though renewable). This structure is not ideally suited to support the long-term planning required for defence investments. However, this was the only realistic option: The general escape clause, enshrined in Article 25 of Regulation No 2024/1263, was deemed inapplicable as the current security crisis does not meet the criteria of “a severe economic downturn in the euro area or the Union as a whole” as was the case during the COVID-19 pandemic. Amending the SGP to fully exempt defence spending from its rules did not seem warranted, given the need for a swift reaction to the rapidly evolving geopolitical developments.
Thus, the temporary relaxation of the EU’s fiscal rules via the national escape clause serves as an important signal, providing Member States with the necessary political and legal support to engage in ambitious defence investment and spending plans. However, significant limitations remain. First, available fiscal space varies greatly across the Member States. After a decade of crises, public debt levels in Europe are high, and some Member States have limited budgetary margins, restricting their ability to radically increase military spending. Second, some Member States face legal constraints, which prevent sudden deficit increases, even for defence purposes. Germany’s Schuldenbremse is a notable example. While the party of Chancellor-designate Friedrich Merz and the likely coalition partner SPD have signalled their intent to overcome this constitutional hurdle to substantially boost German defence spending, legal and political difficulties remain. Lastly, the urgency of strengthening European defence is not felt equally across the EU. As such, reliance on national budgets inevitably entails a certain risk of free riding. Against this background, the Commission’s expectation to create additional national fiscal space of 650 billion euros over the next four years might prove overly optimistic.
Acting together – finding new sources of European funding
Against this backdrop, it is crucial to complement national public spending with transnational European funding initiatives. The Commission’s ReArm Europe plan contains two important proposals in this regard. First, the Commission aims to identify room within the EU budget to redirect some funding programmes towards defence-related investments. Cohesion policy programmes have been highlighted as the most promising avenue for such reallocation. Although interesting, this approach is far from uncontroversial as it would involve sensitive political trade-offs and raise legal questions about the extent to which cohesion policy can be repurposed for defence objectives.
Second, the Commission proposes to set up a new EU financial instrument designed to support Member States in boosting their defence capabilities. This new programme, endowed with 150 billion euros, would provide Member States with loans backed by the EU budget to be invested in critical defence domains, such as air and missile defence, artillery systems, strategic enablers, and critical infrastructure protection. These funds would be mobilized through collective procurement mechanisms, ensuring, among other things, interoperability and contributing to the consolidation of the European defence industrial base. Given the back-to-back lending structure this instrument relies upon, it would primarily benefit Member States with higher borrowing costs than the EU, such as France, Italy, Poland, Spain or Belgium.
Interestingly, this instrument would closely mirror SURE, which was established in April 2020 to support national unemployment and social protection schemes through EU-backed loans during the COVID-19 crisis. Like SURE, it would be based on Article 122 TFEU, the much-debated ‘emergency clause’ of the EU Treaties. If it were to be adopted on that basis, this instrument would further magnify the rise of Article 122 TFEU over the past decade, and confirm its all-encompassing nature, far beyond the realm of economic policy, to which it formally belongs. If previous Article 122-based initiatives, such as the EFSM, SURE, the EU Recovery Instrument, or the Gas Demand-Reduction and Emergency Intervention regulations adopted during the energy crisis, could all, in a more or less convincing way, be linked to economic policy, such connection is far less obvious for a defence initiative such as the one at stake. Should this approach materialize, the mobilisation of Article 122 TFEU for defence purposes will inevitably spark heated legal debates regarding its constitutionality and compatibility with the Common Foreign and Security Policy (CFSP), in particular with Article 41(2) TEU, which bars the Union budget from covering expenditures with defence implications.
ReArm Europe – a crucial yet not ground-breaking roadmap
The ReArm Europe plan presented by the European Commission on March 4 marks an important and symbolic first step. It sends a powerful signal that the EU is ready to intensify its defence efforts and translate the commitments made at the London Summit into concrete policy proposals. It is to be hoped, therefore, that the European Council will endorse the Commission’s proposals.
Institutionally, the plan is designed smartly, with all proposals fitting within the EU’s legal framework, allowing for swift implementation. Most notably, the activation of the national escape clause and the adoption of the new funding instrument under Article 122 TFEU would be subject to qualified majority voting, thereby avoiding unanimity and reducing the likelihood of vetoes from Member States, such as Hungary or Slovakia. Additionally, the plan would put the Commission at the centre of the EU’s reinvigorated defence initiative.
However, one should also note that despite attempts to encourage joint initiatives and inter-state cooperation, the plan remains primarily focused on national defence spending and financing national defence capacities rather than shared European military assets. As such, the plan does not directly address the issues of fragmentation and limited interoperability of the European defence base.
While the ReArm Europe plan is politically, symbolically, and financially important, it is not revolutionary. As discussed, its real financial impact might be more limited than the 800 billion euros announced by Ursula von der Leyen. Bolder policy options which were being discussed have not (yet) been taken over by the Commission. One can think of the possible mobilisation of the ESM’s borrowing capacity for defence purposes, the use of the remaining lending space under the RRF, or the creation of a debt-based military facility – against the model of NGEU – to finance grants instead of loans, either within or outside the Treaties. However, recent experience suggests that such measures might be considered later if the security crisis continues to escalate. The ReArm Europe plan signals an awakening, but bolder actions may follow in the near future.
