EU dedicates €150 billion loan to strengthen European security

Department of Research, Studies and International News 20-03-2025

The European Union has announced an ambitious plan to bolster its defense capabilities by 2030, introducing a massive €150 billion loan program to fund military expenditures and reduce dependence on external allies, particularly the United States. The initiative comes amid growing concerns over Russia’s long-term threat to European security and calls for the bloc to develop independent deterrence capabilities.

Under the new scheme, EU member states will be eligible for defense loans, provided that at least 65% of the funded equipment is sourced from suppliers within the EU, Norway, or Ukraine. The remaining portion can be allocated to suppliers in other non-EU countries, but only if they have signed security agreements with the bloc. Notably, the United Kingdom, the United States, and Turkey will be excluded from these contracts unless they formalize security and defense partnerships with the EU.

The urgency behind this initiative was highlighted by the EU’s foreign policy chief, Kaja Kallas, who described the current geopolitical landscape as precarious. “We are facing a real and existential threat. While this is not a cold war, there is an active conflict on European soil that requires immediate and strategic preparation,” she stated.

Preparing for a Future of Heightened Military Readiness

The push for increased military spending aligns with recent warnings from Danish intelligence, which suggested that if NATO is perceived as weak, Russia could launch a large-scale war in Europe within the next five years. Danish Prime Minister Mette Frederiksen has urged EU leaders to establish a clear rearmament strategy, setting 2030 as a deadline for achieving credible deterrence.

European Commission President Ursula von der Leyen, speaking at the Royal Danish Military Academy, emphasized the need for rapid and strategic rearmament. “By 2030, we must have reinforced our defense capabilities to ensure credible deterrence. This includes developing a robust industrial base that serves as a strategic advantage,” she said.

While the UK remains a key European ally, the EU has prioritized strengthening its defense collaborations with Australia, Canada, Japan, New Zealand, and South Korea. Talks are underway for a defense partnership with the UK, with potential progress expected at the upcoming EU-UK summit in May.

Resistance and Strategic Challenges

The EU’s new “Buy European” defense policy has received strong backing from France, but it has also met resistance from several member states, including the Netherlands and Poland. While there is broad agreement on the need for a stronger European defense industry, many countries are wary of restrictions on military procurement.

A senior EU diplomat voiced concerns over excluding non-EU allies from defense contracts, stating, “The British defense industry is deeply integrated with ours. Cutting off key partners in the West could be geopolitically and economically counterproductive.” Additionally, rising military cooperation between China, Iran, and Russia has raised questions about whether limiting non-European suppliers is a prudent strategy.

The debate extends to Europe’s relationship with the United States. Some EU officials caution against distancing the bloc from Washington, with a senior German government official emphasizing, “We do not want to give the impression that we are seeking to decouple ourselves from the U.S.” However, growing uncertainty regarding U.S. foreign policy, particularly under former President Donald Trump’s administration, has led to calls for greater European military self-reliance.

Financing the European Defense Build-Up

The European Commission estimates that the EU could raise up to €800 billion in new defense spending. This includes €150 billion from EU-backed loans and an additional €650 billion from fiscal adjustments that would allow member states to increase military expenditures without breaching EU budgetary rules.

However, financial experts remain skeptical that the full €800 billion will materialize. Wealthier member states, such as Germany and the Netherlands, are unlikely to take out EU-backed loans, while southern European nations remain hesitant to deepen their national debt for defense purposes.

One proposed solution involves allowing the European Commission to act as a central purchasing body, streamlining the procurement of drones, missiles, and other military equipment on behalf of member states. This model mirrors the EU’s previous joint purchasing efforts for ammunition supplies to Ukraine and vaccines during the COVID-19 pandemic.

Since Russia’s full-scale invasion of Ukraine in February 2022, European defense spending has risen significantly, reaching 1.9% of GDP across the 27 EU member states in 2024. Despite this, concerns remain over whether the bloc can sustain its long-term security needs without greater strategic autonomy.

The shifting global landscape, combined with the unpredictability of future U.S. administrations, has made it imperative for the EU to reassess its military readiness. As EU Defense Commissioner Andrius Kubilius put it, “Europe’s 450 million citizens should not have to rely on 340 million Americans to defend them against 140 million Russians. Ukraine, with a population of just 38 million, has shown resilience against Russia—we must do better.”

With the new loan scheme and rearmament strategy in motion, the EU is taking decisive steps to reinforce its security infrastructure. However, the road ahead is fraught with political, financial, and strategic challenges. Whether the bloc can achieve its goal of a self-sufficient defense system by 2030 remains to be seen.