By Nicolas Gros-Verheyde

The ReArm Europe plan was presented by European Commission President Ursula von der Leyen and endorsed by the 27 Member States at a special summit on 6 March. It contains five main proposals; they are certainly interesting, but also worthy of further discussion.

The first proposal is flexibility in the Stability and Growth Pact.

The Commission is proposing to activate the escape clause of the Stability and Growth Pact, which would allow Member States to increase defence spending by 1.5% of GDP without risking the opening of an excessive deficit procedure. The expected savings? ‘Close to EUR 650 billion’ over four years. Europe needs to ‘significantly step up its defence spending’, argues Ursula von der Leyen.

The second proposal is a new defence lending instrument.

This instrument would be worth EUR 150 billion, financed through loans from the EU budget under a system similar to macro-financial assistance. It is intended to be used in priority areas where there are serious shortcomings: air and missile defence (the German European Sky Shield initiative), artillery systems, missiles and ammunition, drones and anti-drone systems, strategic enablers, critical infrastructure protection (including in relation to space), military mobility, cyber, artificial intelligence and electronic warfare.

To speed up the process, the Commission proposes to use Article 122 of the Treaty: used in exceptional circumstances, this simply requires the agreement of the Member States within the Council of the EU, with the European Parliament just being informed. That is a circumvention of the democratic process that could be disputed. The plan to bolster Europe’s defence was endorsed at the Versailles summit in March 2022 – three years ago! It seems difficult to justify calling this ‘urgent’.

The third proposal is to dip into regional funds.

In the short term, the Commission insists, the European Union ‘can do more’ with the European budget by redeploying funds from certain budget headings. It proposes giving the Member States the option ‘to use cohesion policy programmes to increase defence spending’, and wants to ‘facilitate the process for voluntary transfers to other EU funds with a defence objective’.

This represents a major cut in the current multiannual budget plan (2021-2027). The question is: should we sacrifice social or regional cohesion for the sake of defence? It’s up for debate.

At the same time, the STEP platform for strategic technologies could be further mobilised by extending it to all technologies in the defence sector. Another possibility, according to the Commission, is relaxing existing restrictions, such as competition rules or pre-financing and co-financing rules.

The fourth proposal is EIB loans.

The European Investment Bank (EIB) and its shareholders (the Member States) have repeatedly voiced their opposition to any further move towards lending to the purely military sector, preferring the dual sector. The Commission is therefore insisting on changing the EIB’s policy.

The fifth proposal is mobilising private capital.

The aim is to give defence companies ‘the best possible access to capital, to finance’ – a recurring problem for the industry. This idea should be included in the communication on a ‘Savings and Investment Union’.