The European Union (EU) is grappling with a significant challenge in financing rearmament efforts as it responds to increasing security threats, particularly following Russia’s invasion of Ukraine. The escalating geopolitical tensions, combined with strained national budgets, are prompting the EU to reassess its defense strategies.
Rising Defence Spending in the EU
Since Russia’s full-scale invasion of Ukraine in February 2022, EU member states have significantly increased defence spending. In 2024, the EU-27 spent €326 billion on defence, accounting for 1.9% of the EU’s GDP—an increase of 31% compared to 2021, according to the European Defence Agency (EDA). However, this rapid growth comes with logistical challenges, as the creation of new factories and the training of personnel take time.
Joint Procurement and Production
One potential solution to improve cost efficiency is joint production and arms purchasing. Guntram Wolff of the Bruegel Institute argues that joint spending should be the foundation of European defence efforts, citing hypersonic missiles, air defence systems, satellites, and drones as key areas for collaboration.
However, national differences in defence priorities complicate cooperation. France, for instance, prioritizes nuclear deterrence, while other nations focus on lighter, more transportable equipment for expeditionary missions. Countries anticipating direct conflict in Europe invest more in heavy tanks and artillery.
Joint Borrowing as a Financing Option
Another proposal is joint borrowing through Eurobonds, which would allow the EU to leverage its collective financial power to secure cheaper loans. “Many member states face national budget constraints, and joint borrowing could ease their financial burden,” says Jan Joel Andersson, a senior analyst at the EU Institute for Security Studies.
Despite its potential benefits, this idea faces resistance, particularly from fiscally conservative countries like Germany.
Debate Over ‘Buying European’
French President Emmanuel Macron advocates for prioritizing European-made defence equipment to enhance strategic autonomy. However, some leaders prefer sourcing outside Europe to lower costs and shorten delivery times.
Philippe Perchoc of IRSEM Europe cautions that reliance on non-European suppliers could leave the EU vulnerable during geopolitical crises. “If it’s made outside Europe, we won’t have priority access if global conditions change,” he warns.
Limited EU Role in Defence
Despite these discussions, the EU’s role in defence remains limited, as military matters are still under the exclusive jurisdiction of member states. Coordinating a cohesive rearmament strategy will require balancing national interests with collective security needs.