EU Defense Loans of €150 Billion Must Be Spent in Europe, Says von der Leyen

EU member states will not be able to spend €150 billion from new defense funding on American arms as Brussels seeks to rapidly boost European security while developing its domestic arms industry. The European Commission proposed loans worth €150 billion against the EU budget for member states to spend on weapons as part of efforts to enhance their defense capabilities quickly in response to Donald Trump’s potential return to the U.S. presidency. Ursula von der Leyen, President of the European Commission, stated that these loans should fund purchases from European producers to strengthen the bloc’s own defense industry. This means the funds could only be spent on weapons from EU countries and other aligned European nations like the UK, Norway, and Switzerland. The ‘loans-for-arms’ idea gained political support last week, with von der Leyen planning to present a full legal proposal before another EU summit. Implementation requires support from a qualified majority representing 55% of EU countries and 65% of the population. While it is unclear which countries will access the funding, it aims to benefit those with higher borrowing costs than the EU. Threats from Trump to end U.S. security protection for NATO members have alarmed allies fearing reliance on Washington. Von der Leyen’s ‘buy European’ stance comes amid disputes between France and Germany over spending EU budget funds on defense. France supports limiting spending outside the bloc, emphasizing reducing arms purchases from the U.S., while Germany seeks more flexibility. Nearly two-thirds of NATO-Europe’s arms imports over the past five years came from the U.S. Von der Leyen emphasized focusing loans on strategic capabilities like air defense and unmanned aircraft, promoting multi-year contracts for industrial predictability. A separate Commission proposal allows capitals to increase defense spending up to 1.5% of GDP without breaching EU debt rules, potentially boosting total EU defense spending by around €650 billion. Additionally, Italian Finance Minister Giancarlo Giorgetti proposed an EU guarantee system for investments to catalyze private defense investments.