Last week, a paper from Von der Leyen’s office talked about a plan to spend 800 billion euros more on defense.
Here’s how they explained it:
1. New Loan Option
They made a new loan option worth 150 billion euros. Countries in the EU can choose to take these loans for defense spending.
2. Special Rule for Defense Spending:
Normally, EU countries must keep their deficit under 3% of their GDP. If their deficit goes over, they can get penalized. But now, if they go over the limit because they are spending more on defense, it won’t count against them.
This means, for example, if countries increase their defense spending by 1.5% of their GDP, it could total 650 billion euros in extra defense funds. Adding this to the 150 billion euros in loans makes the 800 billion euros.
They believe that by not counting extra defense spending in the deficit rule, it creates more financial flexibility for countries. However, some argue this flexibility is more about market conditions than EU rules.
There’s doubt countries will actually use the whole 800 billion euros. The 150 billion euros in loans are just an option, and there’s no guarantee countries will use them. Even if they do, the other 650 billion euros would have to come from elsewhere.
Suppose countries increase defense spending by 800 billion euros over four years. In that case, it would bump up the current EU defense spending by about 60%. This aligns with what some leaders like Macron want, aiming for a 3% GDP increase for defense.
The rest of the document is vague and doesn’t give detailed numbers. Despite talks about the war in Ukraine, it seems nothing major will change with this plan.
