Now that the European Commission has presented its ambitious plan to “Rearm Europe,” aiming for “readiness” against Russia by 2030, roadblocks, doubts, objections and challenges are starting to emerge — particularly from the far right. Meanwhile, one country has made a decision that “deserves to be celebrated”: “Thank God, we’ve finally reached an agreement with Germany.”
Europeans are being forced to take these steps for their own security. But this is one of the few certainties at the moment amid a sea of uncertainty, as the near and distant future faces mounting tensions, with Donald Trump’s United States and Vladimir Putin’s Russia continuing to negotiate the future of Ukraine while keeping the European continent at arm’s length. And now there is a problem within Europe itself.
“With Putin’s allies like Hungary and Slovakia constantly blocking everything at the European level, the first major challenge is how we get everyone on board, for example when it comes to fiscal measures to increase defence spending as a share of GDP,” says Julien Hoez, geopolitics specialist and editor of The French Dispatch. “The second issue,” the French specialist continues, “is that, in this ‘decisive moment’ for the EU, as Kaja Kallas put it, we need to make sure we don’t stop here — that after this €800 billion, we keep investing, keep developing instruments and mechanisms, and return to the EU’s regular framework.”
The Defence plan authorises member states to activate a “national escape clause” that exempts defence spending up to €650 billion from the rules of the Stability Pact — which, in theory, frees them from the bloc’s strict budgetary rules, in order to encourage them to invest in the sector over the next four years.
That same clause also provides for €150 billion in loans to be invested in joint purchases of weapons and military equipment. The European Commission set 30 April as the deadline for member states to activate the clause — and there are already major countries saying they won’t do so. “We are not going to activate the clause because we don’t have the room to manoeuvre to do it,” French Finance Minister Eric Lombard said last week.
Heavily indebted countries such as France, Italy, Greece or Spain cannot keep borrowing indefinitely without risking a spike in interest rates — which is why Julien Hoez believes, like other analysts, that “eurobonds are going to be the next big issue” surrounding the implementation of the White Paper.
Now rebranded as “defence bonds,” the issuance of joint debt instruments is an option the Commission insists will not be on the menu for Europe’s rearmament — but that doesn’t mean several member states won’t end up requesting it, similar to what was done to recover from the Covid pandemic, when the money raised was used to fund the Recovery and Resilience Plans (RRPs).
If requested, the question of joint debt issuance carries the usual challenge: the need for unanimity when not everyone agrees, Hoez notes. “The Dutch don’t want eurobonds, neither do the Slovaks, and the Hungarians would kill that proposal on the spot — although Friedrich Merz [likely future Chancellor of Germany, a country historically opposed to this option] seems to be warming to the idea more.”
With joint debt issuance still off the table, the question of the €150 billion in loans is likely to prove thorny in countries whose ruling coalitions are not aligned on the issue — as is the case with Giorgia Meloni’s government in Italy, or Dick Schoof’s in the Netherlands, where far-right parties argue that the benefits of the Rearm Europe programme are vastly outweighed by its damage to national economies and the eurozone — arguing that it will plunge the EU into further debt.
“These political forces had already said something similar about the response to the coronavirus pandemic, which really only makes it harder to take them seriously,” argues the editor of The French Dispatch. “The reality is that they will say this regardless of what we do, because in their view it’s too European. Whatever the EU does — common debt, eurobonds, whatever it may be — there will be resistance because it’s another step towards federalism. But the EU is more than capable of handling these issues.”
Under the current proposal, the total €150 billion in loans with more favourable terms will finance arms deals that must be made with manufacturers within the EU/EEA or with third countries with which the bloc has security and defence agreements — which, from the outset, excludes Trump’s United States, the United Kingdom, Israel and Turkey.
But, Hoez points out, “there’s an important caveat to the exclusion of these countries, which states that we can’t do business with companies based in those countries unless they sign security and defence pacts with the EU — and I believe that’s what is currently under discussion with the United Kingdom and Canada.”
Talks on this pact between London and Brussels have already begun, but are wrapped up in demands for a broader agreement that includes more contentious issues such as fishing rights and migration. “We are working on creating a defence and security partnership with the United Kingdom,” said Kaja Kallas, the European Union’s High Representative for Foreign Affairs, to reporters. “I hope the EU-UK summit in May can bring results.”
The White Paper for “Rearm Europe” sets out that at least 65% of this money must be spent in the EU, Norway and Ukraine, meaning the remainder can be invested in third countries that sign these pacts — a “buy European” approach long championed by France and other countries, whose importance cannot be underestimated.
“The truth is that this is a European structure, a European financing mechanism, funded by European taxpayers, and it makes sense to limit our spending outside the EU and fund our own companies,” argues Julien Hoez. “Now that we face a huge existential crisis, one from which we could emerge poorer, weaker and more vulnerable, we have an obligation to ensure that we are not only developing a robust defence industry and economy, but also creating jobs, better wages and tax revenue. That is the EU’s duty at this moment.”
The summit of EU leaders at the end of the week marked another confrontation between the majority of member states and Orbán’s Hungary, which remains unaligned with the other states on immediate support for Ukraine — a topic that deserves an exclusive chapter in the Commission’s White Paper. Similarly, Robert Fico’s Slovakia made clear, even before the European Council, that it is ready to veto further sanctions on Russia that could “jeopardise the peace talks process” that Trump is leading.
In the opposite trend, and after decades of underinvestment in the sector while living under budgetary rules even tighter than the bloc’s own, Germany this week approved a “historic” tax reform that will allow the country to exempt defence spending above 1% of GDP from debt restrictions. “Thank God, Germany has finally woken up, we should celebrate,” says Julien Hoez on the significance of this step, after years of warnings from Paris about German dependence on the US.
With this change of regime and the approval of this “spending bazooka,” Berlin is preparing to unlock up to one trillion euros to be invested, in part, in its own arms industry — prompting concerns within the EU about Germany’s potential “unfair competition” with smaller countries. But that, argues Julien Hoez, misses the point.
“You can’t ask countries with greater capabilities to scale them back to favour countries that don’t have them,” argues Hoez. “This isn’t necessarily a moment for fairness, but rather a moment to ensure we have what we need to face potential invaders.” In the current context, “what the EU needs to do is keep developing the historic industries of countries like Germany, France and Italy, which already have their own military-industrial complexes, and make use of the advantage that gives us, while also giving some support to smaller member states so they can start producing [weapons and military equipment] too.”
While Friedrich Merz wraps up negotiations to form a government, France continues moving to strengthen its own defence sector, with the finance minister announcing on Thursday the creation of a €450 million fund in which every citizen of the country can invest, in instalments of €500 — in what Julien Hoez calls “the kind of thing we’re going to see more and more of in Europe at the national level.”
And, with all this said, how feasible is it to talk about the EU as a military superpower, its stated and ultimate goal? The geopolitics specialist answers without hesitation. “It can absolutely become THE military superpower, it undoubtedly has the geopolitical potential to change the world. The problem is that we have to realise this, make the necessary changes to the treaties to avoid deadlock, and implement everything we can, everything within our reach. We have to do the hard work, and it falls to the current generations to do it.”