EU to allocate hundreds of billions of euros for military spending - Bloomberg
Photo: The EU will finance hundreds of billions of euros in defense funding (Getty Images)
The European Union expects to allocate hundreds of billions of euros in additional defense funding. This will be part of the region's largest security initiative since the Cold War, Bloomberg reports.
According to the agency's sources, these figures include changes in fiscal rules to free up national resources, potential co-financing, and redirection of existing funds. Separate from the EU initiatives, Germany is seeking to accelerate the financing of the defense fund with up to €200 billion in debt.
“What we need in this once-in-a-generation moment is an ‘urgency mindset’ and a strategic plan to rearm Europe,” European Commission President Ursula von der Leyen said after she visited Ukraine.
The new security architecture will begin to take shape at an emergency meeting of leaders on March 6. Then, on March 19, Defense Commissioner Andrius Kubilius and Chief Diplomat Kaja Kallas are to present a new defense industry strategy.
EU plan
Von der Leyen's defense plan will consist of 3 elements. All of them are complex, and it is unclear to what extent they will be implemented, the agency's sources said.
The first initiative is designed to allow member states to increase spending by relaxing fiscal rules. According to some officials, this could help mobilize at least 160 billion euros.
The talks are focused on excluding defense spending from deficit calculations, and it could amount to between 1% and 2% of national GDP in two to four years. Details need to be ironed out, including what counts as defense spending, how long the exemption will last, and whether meeting the NATO 2% target will be a factor.
Source: IISS 2025 Military Balance report
The second part is to ensure spending at the EU level through a new common instrument. This money will be used to invest in joint projects in areas such as air defense, long-range strike capabilities, missiles, drones, and military-grade artificial intelligence.
Some senior EU officials and member states have called for the possibility of joint borrowing, but this idea has always been controversial and divisive.
The third part is to ease investment restrictions for the European Investment Bank. Currently, it is allowed to invest only in dual-use goods. The change will also open the way for additional funding from private banks.
Source: IISS 2025 Military Balance report
Additional sources
According to the sources, in addition to these three components, Von der Leyen put forward the idea of possible reuse of unspent EU funds, including funds raised for recovery from the COVID pandemic, during closed discussions.
According to the Commission, only 6.4% of the 392 billion euros of so-called cohesion funds have been disbursed. This is one of the largest pools of EU money, and while this money can finance some defense projects if they contribute to regional development, the criteria can be expanded.
In addition, there are €93 billion in unclaimed cheap loans from the Pandemic Recovery Fund that EU officials say could be used for defense. Some of the pledged funds could also be reallocated, but time is running out, as the deadline for spending the recovery funds is August 2026.
Another idea that has been put forward is to use the European Stability Mechanism, a €500 billion eurozone rescue fund. But this option remains complicated, as it would exclude non-Eurozone countries such as Poland and would be closed to non-EU allied countries.
Given the complexity associated with any EU decision, countries, including Poland, have proposed cooperating outside the bloc through a special fund or bank. The coalition of the willing could act faster and could be open to non-EU countries such as the UK and Norway, the agency's sources said.
The EU pledges to continue supporting Kyiv and is working on a plan to provide about €20 billion in additional military support to Ukraine.
