A significant portion of the European Commission’s newly introduced defence package had been designed to encourage EU member states to allocate greater financial resources to military expenditures. Rather than introducing fresh EU funds, the plan had focused on reallocating existing financial resources. Proposals advocating joint borrowing for defence grants—rather than loans—had not been included, despite support from countries such as France and the Baltic states. Resistance had been expressed by nations like Germany and the Netherlands, which had opposed such measures.
The belief that grants would serve as a more effective method of supporting defence projects had been expressed by Polish Defence Minister Wladyslaw Kosiniak-Kamysz, who had conveyed his preference for this approach. Meanwhile, the proposals had been regarded as an essential first step by German Foreign Minister Annalena Baerbock. Similar sentiments had been shared by Greek Prime Minister Kyriakos Mitsotakis, who had welcomed the initiative but had also emphasized the necessity of refining the details to ensure that all EU member states, regardless of their existing defence expenditures, would be able to benefit from the measures.
As part of the proposed plan, adjustments to the European Investment Bank’s policies had been announced. The restrictions on financing for defence projects had been loosened, allowing for a broader range of initiatives to qualify for funding. However, the pre-existing prohibition on financing weapons and ammunition had remained in place.
A proposal had also been made by the Commission to exempt defence spending from the limitations traditionally imposed by EU regulations concerning government debt. It had been suggested by European Commission President Ursula von der Leyen that if member states had increased their defence spending by an average of 1.5% of GDP, fiscal space amounting to approximately 650 billion euros could have been created over a four-year period.
The urgency of these measures had been underscored by mounting pressure on European leaders to prioritize defence investment. The possibility of former U.S. President Donald Trump’s return to office had led many European officials to question whether long-standing reliance on NATO for security could continue as it had in previous decades. In response to these concerns, defence spending had already been substantial in 2024, with EU nations collectively allocating 326 billion euros to military expenditures, representing approximately 1.9% of the region’s GDP. A consensus had been reached among European leaders that this figure would need to rise significantly in the years to come.
Calls for an accelerated increase in defence spending had been made by French Finance Minister Eric Lombard, who had stated that greater urgency would be required in Paris’s approach to military investment. In addition to direct military allocations, a proposal had been introduced by the Commission that would permit EU cohesion funds—traditionally intended to balance economic disparities among member states—to be repurposed for defence initiatives.
Following the announcement of the Commission’s defence package, the Stoxx Europe Aerospace and Defence Index had experienced an increase, reflecting market optimism regarding the proposed measures. However, concerns about the long-term sustainability of these policies had been raised by analysts. Lucas Guttenberg, a European economics expert at the Bertelsmann Stiftung think tank, had noted that while the Commission had attempted to prevent fiscal constraints from impeding defence initiatives, the approach had been characterized as short-term in nature. It had been suggested that only minor effects on the underlying issue—the availability of sustained long-term funding—would result from the proposed measures.
Despite the broad recognition of the need for increased defence spending, substantial disagreements had remained over the means of achieving it. While some nations had advocated for direct grants and joint borrowing mechanisms to ensure equitable burden-sharing, others had remained reluctant to support such measures, fearing the financial implications and broader economic consequences. Additionally, concerns had been raised regarding the potential reallocation of cohesion funds, as some member states had questioned whether resources originally intended for economic development should be redirected toward military expenditures.
The broader geopolitical landscape had continued to influence the urgency of these discussions. A shift in U.S. foreign policy had been anticipated by European officials, further reinforcing the argument that greater self-reliance in defence matters would be required. The recognition that security concerns could no longer be addressed solely through NATO commitments had driven policymakers to seek new financial strategies to enhance military preparedness.
In the months ahead, further negotiations had been expected among EU member states regarding the implementation of these proposals. As governments had sought to strike a balance between economic stability and military readiness, debates over funding mechanisms, fiscal exemptions, and the role of European financial institutions in defence investment had continued. While the immediate implementation of joint borrowing had been resisted by some nations, the growing concerns over European security had ensured that discussions regarding long-term defence financing would remain a central issue on the EU’s policy agenda.
